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1 08/08/2008 Presentation name / Author

Finnair GroupInterim Report1 January – 30 June 2008


Airline industry at a historical turning point

Fuel price has a stranglehold on the businessAverage ticket prices have not kept up with costsMore efficiency required from airlinesWeak companies are dumping prices to ensure short-term cash flow, weakening the profitability of the industryMore bankruptcies and mergersRisk of new subsidy interferences


Cold winter ahead

Lufthansa – result drop 29%Ryanair – result drop 85%British Airways – result drop 90%Air France-KLM – result drop 53%Iberia – result drop 85%Cathay Pacific – result drop into the redFinnair – result drop 81%All airlines are cutting capacityPersonnel cuts all aroundCapacity decrease also from bankruptcies


Expensive fuel and low load factorsspoiled the quarter

Finnair’s operational result clearly weakened from lastyear’s second quarterPoor load factorsUnit revenues for flight operations down 2.2 per centper tonne kilometreFuel costs up by 37.6 per centUnit costs were clearly down despite expensive fuel50 million euro efficiency programmeDemand for cargo remains strongPunctuality improved significantly in April-June


Finnair’s second quarter clearly weaker than previous year

Q2/2008 Q2/2007 Change%

1.5

-27.0

-80.9

-

-

-44.2

-46.1

Turnover mill. € 546.1 538.1

One off items/ capital gains 2.9 5.0

Fair value changes of derivatives 12.6 4.9

Operating profit/loss (EBIT) 20.7 37.1

Profit for period 13.9 25.8

Adjusted EBITDAR* 54.0 74.0

Adjusted EBIT* 5.2 27.2

*excl. capital gains, fair values changes of derivatives and non recurring items


Strong cash balance, weakened cash flow

Cash flow statement (EUR mill.) Q2/2008 Q2/2007

Cash flow from operations 87 114

Liquid funds at the beginning 540 294

Change in liquid funds -103 -44

Investments and sale of assets -109 -204Investments -145 -245Change of advances and others 36 41

Cash flow from financing -81 46

Liquid funds at the end with financial interestbearing assets at fair value 437 250

Cash flow January-June


Strong balance sheet

0

20

40

60

80

100

120

2002 2003 2004 2005 2006 2007 Q2 2008

Equity ratio Adjusted Gearing%


Unit costs dropped

Q2/08 Q2/07

Unit costs of flight operations* c/ATK -4,6% -3,8 %Unit costs of flight operations excl. fuel* c/ATK

-12,9% -5,3 %

Personnel expenses c/ATK -8,7% -5,0 %Fuel costs c/ATK +22,5% +1,3 %Traffic charges c/ATK -5,5% -3,1 %Ground handling and catering €/passenger

+21,2% +3,3 %

Sales and marketing €/passenger +3,9% +7,3 %Aircraft lease payments and depreciation c/ATK

-13,6% -14,4 %

Other costs c/ATK -20,5% -2,9 %* excluding fair value changes of derivatives and non-recurring itemsATK = Available Tonne Kilometre


Unit costs decreased still more than yieldChange YoY

-20

-15

-10

-5

0

5

10

15

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

% Yield (EUR/RTK) Unit costs (EUR/ATK)

2004 2005 200620032002 2007 2008


Productivity improvedProductivity (incl. Aero) (ATK/person) 12 m rolling sum

240

290

340

390

440

490

540

590

01.0

2

04.0

2

07.0

2

10.0

2

01.0

3

04.0

3

07.0

3

10.0

3

01.0

4

04.0

4

07.0

4

10.0

4

01.0

5

04.0

5

07.0

5

10.0

5

01.0

6

04.0

6

07.0

6

10.0

6

01.0

7

04.0

7

07.0

7

10.0

7

01.0

8

ATK1000/person


Despite business growth, number of staff stable

0

2000

4000

6000

8000

10000

12000

14000

1999 2000 2001 2002 2003 2004 2005 2006 2007 Q2 2008

Personnel on averagePersonnel


Challenges have been metin difficult conditionsPeriod Issue Change Level of

challenge

H107 Telephone serviceCustomer feedback

Over 90% answered in under1 minute

1

H207 Baggage delays Number of delayscut to a third

2

Q208 Passenger loadfactors down

62% => 79% 3

H108 Flight delays From 18th position to 5th position

4

H208 Fuel price vs. ticketprices

5


Efficiency programme underway

Decision made on 50 million euro efficiencyprogrammeResult effect visible next yearPersonnel cuts at most 500 peopleMain efficiency improvement areas:• Capacity adjustment / discontinuing unprofitable

flights– Effect on staff and variable costs

• Partners’ pricing and deepening cooperation• Fuel burn / flight procedures• Support functions and business unit interfaces


Load factors back to normal levels

July traffic performanceScheduled traffic increased 6%Scheduled traffic passenger load factor 79%Leisure traffic passenger load factor 90%Asian demand grew by 12% in July, load factor 80%, cargo 20%


Growth in Asian traffic continues

Seoul launched as new destination in June

Asian demand grew 18.8% in January- July, cargo loads by 31.6%, despite travel restrictions in China

65 flights a week to Asia in the summer

Non-stop flights to 11 destinations, daily to sixIndia up to 13 flights per

weekGuangzhou on winter break


42%

41%

4%13%

Aasia-Eurooppa

Via Helsinki>50 %

More revenues from Asian trafficDistribution of passenger and cargo revenues in scheduled traffic

Asia USDomestic Europe

Asia-Europegateway

>50%


Long-haul network in summer 2008

7 New York

Tokyo 4Nagoya 4

Osaka 7Beijing 7

Shanghai 7

Hong Kong 7Guangzhou 4

Bangkok 7

Delhi 7Mumbai 6

Seoul 5


Fuel price still on a high level


Fuel costs H1/2007 vs. H1/2008

Fuel hedging outside hedging calculations: H1/Y2007 -5 MEUR ja H1/Y2008 +13,5

33

111

207

278

-24-38-11

0

100

200

300

400

H1/2007 Volume Price Flynordic Currency Hedging H1/2008

MEUR


Fuel costs clearly over a quarter of turnover

2003: 10.2% of turnover2004: 12.5% of turnover2005: 15.6% of turnover2006: 19.4% of turnover2007: 20,2% of turnover2008: >27% of turnover

Finnair scheduled traffic has hedged 70% of its fuel purchases for the next six months, thereafter for the following 24 months at a decreasing level.

A change of 10 per cent in fuel price between August-December will affect Finnair’s 2008 result by over 10 million euros at the current hedging rate.


Fuel hedging rates (Scheduled Passenger Traffic, 30 June 2008)

70% 71%

0%

25%

50%

75%

100%

2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2


Outlook

Outlook weakened by volatility of oil price and shortbooking horizonDramatically increased fuel costs cannot be added on ticket prices for nowAnnounced industry capacity cuts approximately 7%, surplus capacity will also disappear with bankruptciesFinnair Scheduled Passenger Traffic capacity willincrease by approximately 5% in H2 (H1 > 10%)At current expectations latter part of year operatingresult may be loss-making


Appendices


Quarterly change in profitability

-50

-40

-30

-20

-10

0

10

20

30

40

50

60


MEUR

2003 2004 20052002 2006 2007

Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and non recurring items)

2008


Average yield and costs EUR c/RTK & EUR c/ATK

0

20

40

60

80

100

120


Yield (EUR/RTK) Unit costs (EUR/ATK)

2004 2005 200620032002 2007 2008


Segment results

2008 2007Q2 Q2

MEUR

Leisure Traffic -2.5 1.1

Total 5.2 27.2

Scheduled Passenger Traffic 1.9 27.7

Aviation Services 4.4 1.3Travel Services 1.4 1.2Unallocated items 0.0 -4.1

Excluding capital gains, fair value changes of Derivatives and non restructuring items


Segment results

2008 2007Q1-Q2 Q1-Q2

MEUR

Leisure Traffic 8.6 6.7

Total 16.3 33.0

Scheduled Passenger Traffic 1.5 27.4

Aviation Services 6.9 4.6Travel Services 1.8 2.5Unallocated items -2.5 -8.2

Excluding capital gains, fair value changes of Derivatives and non restructuring items


ROE and ROCERolling 12 months

-4

-2

0

2

4

6

8

10

12

14

16

Q1 20

02Q2

2002

Q3 20

02Q4

2002

Q1 20

03Q2

2003

Q3 20

03Q4

2003

Q1 20

04Q2

2004

Q3 20

04Q4

2004

Q1 20

05Q2

2005

Q3 20

05Q4

2005

Q1 20

06Q2

2006

Q3 20

06Q4

2006

Q1 20

07Q2

2007

Q3 20

07Q4

2007

Q1 20

08Q2

2008

% ROE ROCE


In 2007-14 a fleet of up to 15 Airbus A330/A340 aircraft• Boeing MD-11 fleet will be phased out by March 2010

In 2014-16 a fleet of up to 15 new technologyAirbus A350XWB aircraft

New aircraft enable future growth


Most modern European fleet

Average age of Finnair’s European fleet approximatelyfive years29 Airbus A320 family aircraftTen smaller Embraer 170- eight larger 190 modelaircraft already in the fleet, three arriving 2009-2011New aircraft have increased flexibility, improved loadfactors, reduced costs and are eco-efficient


Investments and cash flowfrom operations

0

50

100

150

200

250

300

350

2002 2003 2004 2005 2006 2007 Q1-Q2 2008

Operational net cash flow InvestmentsMEUR


Aircraft operating lease liabilities

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 2007 Q2 2008

MEUR Flexibility, costs, risk management

On 30 June all leases were operating leases. If capitalised usingthe common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 30 June 2008 would have been38,8%


Finnair Financial Targets

”Sustainable value creation”

Operatingprofit (EBIT)

EBIT margin at least 6% => over 120 mill. € in the coming few years

EBITDAREBITDAR margin at least 17% => over 350 mill. € in the coming few years

Economicprofit

Pay out ratio Minimum one third of the EPS

AdjustedGearing

Gearing adjusted for aircraft lease liabilities not to exceed 140 %

To create positive value over pretax WACC of 9,5%


Finnair’s Financial Targets

Description of targets

Operatingprofit (EBIT)

EBITDAR

Economicprofit

Pay out ratio

AdjustedGearing

Turnover + other operating revenues – operating costs

Result before depreciation, aircraft lease paymentsand capital gains

Operating profit EBIT – Weighted Average Cost of Capital

Interest bearing debt + 7*Aircraft lease payments– liquid funds) / (Equity + minority interests)

Dividend per share / Earnings per share


www.finnair.comFinnair Group Investor Relationsemail: [email protected]

tel: +358-9-818 4951fax: +358-9-818 4092

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