1
A seasonally weak first quarter 24.4.2019 Topi Manner 2
Growth in passenger demand varied between areas • Uncertainty in the global economy affected the market conditions • Easter moved from Q1 to Q2 • Japanese and North-American routes performing well • In China, the year started slowly • Competition remains tight in Europe • Overcapacity in the package holiday market • Fuel costs have increased during Q1, including hedges 3
Revenue increased by 5 per cent year-on-year and number of passengers reached a new Q1 record Capacity Comparable Revenue NPS operating result +10.4% +5.0% 37* 13 th A350 - 16.2 M€ Operational Aircraft cost (14.6 M€) +8.9% NPS = Net Promoter Score * New Customer satisfaction survey was launched in beginning of January 2019. In the new survey NPS is calculated based on responses from all customers starting from beginning of 2019, including Finnair Plus and non-members. In 2018 NPS was calculated based on responses from Finnair Plus members only and therefore these results are not comparable. In Q1 2018 NPS was 43. 4
Strong Japanese market supported passenger and cargo demand Revenue by product 5.0% • The growth in passenger traffic was driven by Japan 673 641 and supported the North Atlantic 68 71 47 41 41 • 39 Ancillary sales grew most on European and domestic routes • Cargo growth was supported by good demand on 517 490 the routes between Japan and the Nordic countries and rather weak comparison period due to the ramp up phase of the new Cargo terminal Q1 2018 Q1 2019 • +5.5% Passenger revenue Market overcapacity weakened travel service +3.9% Ancillary revenue growth +16.8% Cargo -4.9% Travel services 5 5
Traffic between Asia and Europe is the foundation of Finnair’s revenue growth Passenger Load Factor by area, % Passenger revenue Q1/18 vs Q1/19 +5.5% 89 83 83 2.2 517.2 81 81 78 78 75 -1.3 10.8 65 2.4 61 12.8 490.2 Asia Atlantic Europe Domestic Total Q1/2018 Asia Atlantic Europe Unallo- Q1/2019 Domestic cated Q1 2018 Q1 2019 ➢ ➢ Traffic from Asia to Europe remains the source of the majority of Passenger load factor 78,3% Finnair’s passenger revenue ➢ Comparison period historically high ➢ In long haul traffic performance between routes varied 6
Operating costs increased slower than capacity Operating costs (€703.7 million in total +8.9%) The new more transparent cost structure Q1/2019 Change Fuel costs 145.2 +14.0 % Fuel costs 5% 5% Staff costs 21% 129.7 +5.2 % Staff costs 6% Passenger and handling services 127.5 +6.5 % Passenger and handling services 7% Depreciation and impairment 75.9 +5.5 % Depreciation and impairment Traffic charges 72.1 +10.8 % 10% Traffic charges Aircraft materials and overhaul 18% 46.3 +21.1 % Aircraft materials and overhaul Sales, marketing and distribution 41.6 +2.1 % 11% costs Sales, marketing and distribution costs Property, IT and other expenses 18% 33.3 +5.5 % Property, IT and other expenses Capacity rents 32.1 +13.9 % Capacity rents • Capacity growth 10.4% • Operating costs 8.9% • Operating costs excluding fuel 7.6% 7
We are constantly renewing us People experience Customer experience Responsibility Digitalization • • • 170 new employees and New menu 13th A350 aircraft • Aurinkomatkat Own some 280 summer workers Vacation -App • • New Marimekko-textiles Push for change • Continuous development ja Amenity kits • Finnair.com renewal • Carbon offsetting of new ways of working: • WiFi instalments projects • 2.5 million customers / Agile and Lean culture • • month using our digital ATR- aircraft renewal Reduce the use of • Developing occupational channels plastic safety and well-being at • AIG's insurance products work 8 on Finnair's website
Our target: sustainable, profitable growth Sustainable Profitable Growth Two new EB members starting from 1.5. • We will continue to focus • Yield mix New destinations and more • Ole Orvér, Chief on sustainability by frequencies • Continuous Commercial Officer updating our strategy • improvement of Sapporo, Hong Kong and (CCO) • Push for change productivity Osaka, Tokio and • Nicklas Ilebrand as SVP expansion Guangzhou Strategy • Capital efficiency • Punta Cana • Hanover, Bologna, 9 Bordeaux, Porto, Trondheim and Tromso
Outlook Global airline traffic is expected to continue growing in 2019. Finnair expects increased competition as capacity is added, particularly on routes linking Europe with Asia as well as in short-haul traffic. The slowdown in the economy of Finnair ´ s key markets and the continued uncertainties surrounding global trade, including from Brexit, could impact the demand for air travel and cargo. Finnair plans to increase its capacity by approximately 10 per cent in 2019, down from its 14.8 per cent capacity growth in 2018. This growth is mainly focused on the Asian market. Revenue is expected to grow at a somewhat slower pace than capacity in 2019. In line with its disclosure policy, Finnair will issue guidance on its full-year comparable operating result as part of its half-year report in July. 10
Finance Pekka Vähähyyppä 12
Capacity growth driving revenue growth Passenger revenue Q1/2018 vs Q1/2019, Meur Other revenue Q1/2018 vs Q1/2019, Meur +26.9 +4.9 6.8 -3.5 2.2 155.7 517.2 56.1 -26.4 1.5 -4.9 150.9 40.7 Ancillary 490.2 39.1 Cargo Travel services 40.5 47.4 71.2 67.7 Q1 PY ASK PLF (load) FX Yield, Q1 Q1 PY Ancillary Cargo Travel services Q1 mix, other • • In other revenue areas, cargo development was strong, rising Strong capacity growth drove passenger revenue growth by almost EUR 7 million vs. last year • Demand growth was insufficient compared to capacity growth, ➢ Although in general cargo market growth have shown which had a negative impact on the passenger revenue some signs of slowing down development compared to last year 13
Fuel costs rose faster than capacity growth, weakening comparable EBIT -30.8 M€ 31.8 Passenger revenue 26.9 Ancillary1.5 Cargo 6.8 Travel services-3.5 -6.4 -17.8 14.6 -3.9 -8.1 -7.0 -7.7 -4.0 -7.7 -16.2 Other (NET) Q1 2018 Revenue Staff Fuel Rents Mainte- Traffic Passenger Depreciation Q1 EBIT nance charges services • Operating expenses excluding fuel +7.6% (ASKs +10.4%) • Fuel costs including hedging results cost increased +14.0% • Unit cost (CASK) -0.4%, CASK ex fuel at constant currency -2.8% 14
Changes in EUR/USD and volume growth impacted fuel costs Fuel costs Q1/18 vs. Q1/19 Fuel hedges 31 March 2019 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1/18 hedging gain 9.2 M€ Hedging ratios 2019: 71 % Q1/19 hedging gain 8.0 M€ H1: 76 % H2: 69 % 15
Development of unit revenue and unit cost RASK development CASK development 6.48 6.15 5.97 6.27 6.46 7 8 6 7 1.32 1.36 1.39 1.36 1.41 6 5 5 4 4 3 7.00 6.70 6.63 6.53 6.31 5.16 5.10 3 4.88 4.79 4.56 2 2 1 1 0 0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 CASK ex fuel Fuel • • Unit cost (CASK) decreased by 0.4%. Unit cost at constant Unit revenue (RASK) decreased by 4.9%. Unit revenue at currency excluding fuel decreased by 2.8%. constant currency decreased by 5.3%. (Q1/2019 vs Q1/2018) (Q1/2019 vs Q1/2018) 16
Healthy balance sheet supports future investments • Equity ratio 22.2% (23.4%) 3 965 4 052 4 052 3 965 3 944 3 944 17 11 1 062 987 • Gearing 75.9% (80.4%) 1 073 1 746 1 709 1 774 461 508 378 321 337 351 603 524 445 673 661 675 2 208 2 155 2 103 133 117 143 918 929 899 31.3.2018 31.12.2018 31.3.2019 31.3.2019 31.12.2018 31.3.2018 Assets HFS I-B debt Cash Tickets Cash flow investments for the financial year Other assets Other liabilities 2019 relate mainly to fleet and are Other fixed assets Provisions expected to total approximately 440 million Fleet Equity Liabilities HFS euros, including advance payments. 17 1) HFS = Held-for-Sale. 2) I-B = Interest-bearing
Operating cash flow positive during Q1 Cash funds -11.2 M€ Cash flow +40.9mEUR Operating 1,073 1,062 +148.3mEUR 114.1 Investing -70.2mEUR 365 417 -25.5 697 656 Finance -37.1mEUR 56.6 59.7 475 564 696.7 -0.5 -36.6 -126.8 655.8 181 133 31.12.2018 31.3.2019 2018 Comparable Other Investments Loan Purchase Cash Commercial paper, deposits and funds > 3 months EBITDA Other payments of own Q1 Working shares Commercial paper, deposits and funds < 3 months capital Cash and bank deposits 18 Liquid funds in cash flow
THANK YOU Contact us: Finnair IR / financial communications mari.reponen@finnair.com kasper.joukama@finnair.com
Appendix 20
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