Published on March 26, 2008
Finnair Group: Finnair Group Interim Report 1 January – 30 September 2007 Finnair meeting expectations: Finnair meeting expectations Strong demand in scheduled traffic continues In addition to Asia, European traffic is also growing Finnair’s market share growing in international traffic departing from Finland Unit revenues decreased due to new launches, price level improving towards end of year Unit costs have fallen thanks to efficiency measures FlyNordic sold to Norwegian Air Shuttle, 14 million euro sales profit Improved results by efficiency programme : Improved results by efficiency programme Scheduled Passenger Traffic and Aviation Services improved: Scheduled Passenger Traffic and Aviation Services improved Profitability of scheduled traffic improved clearly, even as unit revenues decreased Unit costs have fallen Finnair Technical Services efficiency project is bearing fruit Average prices for cargo have fallen due to tighter competition, but demand is picking up Catering profitability improved Northport still loss-making: Sweden ja Norway operations to be sold to Menzies Aviation Aurinkomatkat-Suntours expands: Aurinkomatkat-Suntours expands Finland’s leading tour operator, strategy to expand in neighbouring areas Acquired Estonia’s second largest tour operator Horizon Travel at start of year… and St Petersburg area tour operator and travel agency Calypso in October Growing target group increasingly wealthy middle class in Russia Winglets installed on Leisure Traffic fleet (seven Boeing 757-200s), decreasing fuel consumption by five per cent Unit costs decreased more than yield Change YoY: Unit costs decreased more than yield Change YoY % Yield (EUR/RTK) Unit costs (EUR/ATK) 2004 2005 2006 2003 2002 2007 Efficiency programme yielding results: Efficiency programme yielding results 80 million euro efficiency programme completed by end of year Effect felt strongest in the second half of the year Profit impact for 2007 over EUR 40 million Full financial impact will begin in 2008 Jobs cut by around 600 in 2006-07 Business growing, number of staff stable: Business growing, number of staff stable Personnel on average Personnel Unit costs dropping: Unit costs dropping * excluding fair value changes of derivatives ATK = Available Tonne Kilometre Productivity improved: Productivity improved Jet fuel prices going up: Jet fuel prices going up Jet fuel price risk hedging (Scheduled traffic, 30.9.2007): Jet fuel price risk hedging (Scheduled traffic, 30.9.2007) Fuel costs a fifth of turnover: Fuel costs a fifth of turnover 2003: 10.2% of turnover 2004: 12.5% of turnover 2005: 15.6% of turnover 2006: 19.4% of turnover 2007: ~20% of turnover (approx. 450 MEUR) Finnair scheduled traffic has hedged 66% of its fuel purchases for the next six months, thereafter for the following 24 months with a decreasing level. Finnair leisure flights hedged 60% of summer traffic programme’s consumption. Improved cash flow used for investments: Improved cash flow used for investments Cash flow January-September Strengthening of capital structure by share offering Equity ratio and adjusted gearing: Strengthening of capital structure by share offering Equity ratio and adjusted gearing Equity ratio Adjusted Gearing % Asia growth continues on good level: Asia growth continues on good level Demand grew during January-September by 30.9%, passenger numbers 25.8%, cargo 18.9% Passenger load factor 78.5% Business Class selling well 59 flights a week to Asia Non-stop flights to 10 destinations, daily to six Growth in different markets in Asia diversifies risk End of year capacity will grow by over 30% Seoul new destination in 2008 Capacity in Asia has grown rapidly: Capacity in Asia has grown rapidly China 2001: 3 flights/week 2007: 25 flights/week Japan 2001: 2 flights/week 2007: 15 flights/week India 2006: 3 flights/week 2007: 12 flights/week Long-haul network 2007: Long-haul network 2007 7 New York Tokyo 4 Nagoya 4 Osaka 7 Beijing 7 Shanghai 7 Guangzhou 4 Hong Kong 7 Bangkok 7 Delhi 7 Mumbai 5 Helsinki Over third of revenue from Asia: Over third of revenue from Asia Asia US Domestic Europe Scheduled traffic passenger and cargo revenue January-September Asia-Europe gateway 50% New planes enable future growth: In 2007-14 A330/A340 fleet of maximum 15 planes in total In 2014-16 A350 fleet of maximum 15 planes in total New planes enable future growth Most modern European fleet: Most modern European fleet Average age of European fleet four years 29 Airbus A320 family aircraft A total of ten smaller Embraer 170s and five larger Embraer 190s in fleet, five larger aircraft arriving later New aircraft increase flexibility and improve load factors, decrease costs and are eco-efficient Planned share offering part of investment financing: Planned share offering part of investment financing Renewal and expansion of long-haul fleet part of Finnair strategy Aircraft acquisitions in 2007-2016 amount to almost two billion euros Extraordinary General Meeting 21.11.2007 Size of offering up to 250 million euros, existing shareholders would have a pre-emptive right to subscribe Finnair’s vision 2017: Finnair’s vision 2017 Take further advantage of Helsinki’s geographical position Via Helsinki a travel concept The airline of choice for quality and environmentally conscious air travellers in intercontinental traffic in the Northern Hemisphere A reliable and safe option in an uncertain world As large European airports become increasingly congested, Helsinki-Vantaa Airport has plenty of room for construction and possibilities for development Sustainable, profitable growth, an attractive investment Slide24: Finnair 2017 – ”On top of the World” India opens up new opportunities: India opens up new opportunities Indian traffic makes it possible to open the fastest connections between North America and India Finland is situated along the shortest route Demand expected to grow significantly Russia’s air traffic markets expected to open up in the future, offering opportunities to complement network Success factors : Success factors Safe Expert, professional people doing quality work Modern fleet Sound finances Trust Caring for customers and personnel Finnish Reliable, responsible, punctual, professional Creative Modern, developing, innovative Fresh Clean, stylish, refreshing, uncomplicated Future outlook: Future outlook Asian demand remains strong Average price fall leveling out even though average route length increasing Unit costs still decreasing Cooperation with Norwegian continues Expensive fuel will not increase costs significantly at the end of year because of hedging Five collective agreements renewed The operational result for the full year is expected to exceed 70 million euros, last quarter profitable Appendices: Appendices Profitability development: Profitability development MEUR 2003 2004 2005 2002 2006 2007 Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and reorganization expenses) Average yield and costs EUR c/RTK & EUR c/ATK: Average yield and costs EUR c/RTK & EUR c/ATK Yield (EUR/RTK) Unit costs (EUR/ATK) 2004 2005 2006 2003 2002 2007 Segment results: Segment results Excluding capital gains, fair value changes of Derivatives and reorganization expenses Investments and cash flowfrom operations: Investments and cash flow from operations Operational net cash flow Investments MEUR Aircraft operating lease liabilities: Aircraft operating lease liabilities MEUR Flexibility, costs, risk management On 30 September all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 30 September 2007 would have been 103,3% ROE and ROCE Rolling 12 months: ROE and ROCE Rolling 12 months % ROE ROCE Emissions trading for air traffic: Emissions trading for air traffic EU air traffic accounts for only 0.5% of all CO2 emissions in the world Finnair in favour of emissions trading principles Should be global Competitively neutral Investments already made in new technology should be taken into account Open emissions trading Customers can make environmental choices when flying: Customers can make environmental choices when flying Choose an airline with a modern fleet Fly in the right direction all the way, without unnecessary stopovers shorter flight routes result in less emissions Avoid large, congested airports By making these choices, fuel consumption and emissions can drop by at best 30%! Finnair Financial Targets: Finnair Financial Targets ”Sustainable value creation” Operating profit (EBIT) EBIT margin at least 6% => over 120 mill. € in the coming few years EBITDAR EBITDAR margin at least 17% => over 350 mill. € in the coming few years Economic profit Pay out ratio Minimum one third of the EPS Adjusted Gearing 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: Finnair’s Financial Targets Description of targets Operating profit (EBIT) EBITDAR Economic profit Pay out ratio Adjusted Gearing Turnover + other operating revenues – operating costs Result before depreciation, aircraft lease payments and 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.com: www.finnair.com Finnair Group Investor Relations email: email@example.com tel: +358-9-818 4951 fax: +358-9-818 4092
Title: Finnair PowerPoint Title Verdana 32pt Bold Author: leena.loytomaki Last modified by: Lasse Heinonen Created Date: 5/2/2007 7:32:26 AM Document ...