2017 – A year of strong growth Finnair Q4 and FY 2017 result 16.2.2018 Pekka Vauramo 1
A record Q4 concluded a strong year 2017 • Comparable operating result at record level, 22.9 million euro (Q4 2016: 1.6) • Fastest growth in Finnair history, ASK +17% • Four new long-haul routes opened • Added capacity to Lapland • Passenger revenue +12%, ancillary sales +17% • Almost 3 million passengers, up +14% • Cargo revenue up +24% • Travel services revenue up +14%, Aurinkomatkat Suntours is the market leader 2
Favourable market environment – also challenges towards the year end • Demand for flights between Asia and Europe increased across the Finnair network to almost every destination. Strong demand from Japan. • Lapland was again the #1 destination for Finnair’s Chinese customers in the winter season. • The air cargo market continued to grow, and cargo load factors and yields increased. • Severe winter and wind condictions and overtime ban by IAU affected Finnair traffic in December. • Industry consolidation continues in Europe. 3
Q4: Comparable operating result has improved for 13 consecutive quarters Comparable operating result, 12 months rolling Revenue 180 NPS 45 170 645.3 M€ 160 149 (43*) +13 % 140 (569.9 M€*) 120 96 100 80 61 55 54 53 Comparable 60 37 40 operating result 24 RASK -3.4 % 14 20 22.9 M€ CASK -6.6 % 0 >200 % -20 -24 (1.6 M€*) -40 -31 -36 -48 -60 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 Comparable operating -2.1% -1.6% -1.4% -1.1% 0.6% 1.1% 1.6% 2.3% 2.3% 2.4% 2.6% 4.0% 6.0% 6.6% result, % of revenue 4 * Q4 2016. NPS = Net Promoter Score. 4
Q4 revenue and capacity increased across all areas, passenger load factor improved in total traffic Revenue, M€ Capacity (ASK), M km Passenger Load Factor, % 82 5 039 81 80 79 79 78 300 77 77 279 263 69 67 4 011 233 250 231 3 385 3 179 200 150 100 51 48 36 722 50 590 30 461 415 0 Asia North- Europe Domestic Asia North Europe Domestic Total Asia North- Europe Domestic Atlantic Atlantic Atlantic • Asia +19.8% • Asia +25.7% • Asia +1.7%-p • North-Atlantic +22.9% • North-Atlantic +22.4% • North-Atlantic +2.1%-p • Europe +13.6% • Europe +6.5% • Europe +2.5%-p • Domestic +6.7% • Domestic +11.0% • Domestic -2.1%-p • Total. +2.0%-p Q4 2016 Q4 2017 5
Year 2017 was very successful for Finnair Comparable operating Record number of Revenue growth exceeded result at its all-time high passengers, passenger capacity growth load factor improved +9.6 % +11% 170 11 905 2 568 10 867 2 400 2 317 10 294 2 284 2 255 9 630 9 270 1.1% 2.4% 6.6% 0.5% -1.6% 55 24 12 79.8% 83.3% 79.5% 80.2% 80.4% 17.0% 11.7% 10.2% 8.8% 7.7% M€ M€ -36 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Revenue Comparable operating result, M€ Number of passengers, ASK, 1 000 Comparable operating result, % of Comparable EBITDAR, % of revenue Passenger load factor, % revenue Finnair restructured its operations in 2011-2014, and divestment made during this period show in the revenue development. 6
Major steps forward in sustainability in 2017 • A350 aircraft have reduced our CO2 emissions considerably: • Emissions/RTK decreased by 6.7% • Emissions/ ASK decreased by 3.2% • Total emissions grew clearly less (+5.4%) than ATK (+9.9%). • Finnair published its commitment to sustainability (Commitment 2050) and is committed to promote equality and non-discrimination in its own activities and in customer services • We Together@Finnair survey also included the questions about non-discrimination. The result was 3.98/5. • Inflight videos in sign-language and more accessible booking process. 7
A great people experience builds a great customer experience • Employee satisfaction up year-on-year • Investments in wellbeing are seen in lower sickness and lower injury rates, LTIF (Lost Time Injury Frequency) • 10 million euro training investment , a total of 370,000 training hours • Customer experience • Digital competencies Personnel was • Leadership rewarded for €6.7 million • Finnair recruited 1,000 new employees Finnair turnaround to Finnair’s in 2017, and has recruited a total of 1 with up to €2,000 personnel fund 800 new employees since beginning of 2016 special reward 8
Positive developments in customer experience • Investments into personal service • NPS 47 for the full year 2017 (43 in 2016), high point of 52 in Q3 • 2018 updates • Services and meals targeted at families with children • New menus on board NPS • Ancillary products, such as Seat & meal 47 • New elements in long-haul business class in 2017 • Wi-Fi for European Airbus fleet 9
Digital developments support growth Finnair equips all personnel with • Digital channels generate 24% of ticket sales, iPhones during up +18% year-on-year 2018 • 30% of ancillary sales through digital channels • Our webstore had on average 1.8 million monthly visitors in 2017, up +17% year-on-year • 210,000 active users for Finnair mobile app • New sales channels and mobile payments: • WeChat • Finnair flagship stores on partner platforms (Alitrip, JD.com) • Alipay, WeChatPay, ApplePay • Digitools for personnel • SkyPay • Mobile apps in Technical Services • iPhones and apps for Finnair personnel 10
2018/2019: more flights than ever before New long-haul routes Summer 2018 More Asian traffic Summer 2018 new Winter 2018/2019 W17/18 additions destinations Goa, India Nanjing three times a Berlin, Tallinn, Moscow, Stuttgart, Lisbon, Bergen Over 230 new flights to week as of May 2018, and Tromsø Gdansk, Edinburgh, Lapland Puerto Vallarta, Mexico year-round destination Barcelona, Madrid, Non-stop flights to Lapland Puerto Plata, Dominican Reykjavik 38 weekly frequencies to from Paris, London, Zürich republic both China and Japan. Tokyo, Bangkok, Delhi Additional frequencies to Havana, Cuba 97 weekly flights to Asia in Chicago, San Francisco Hongkong, Osaka, Phuket summer 2018 Kuusamo New W17/18 destinations continue 11
Share price development past 12 months (15 Feb 2017 – 14 Feb 2018) Closing 14 Feb 018 8.70 euros, Market cap 1,117.35 million euros 12
Strategy 2018−2020 • The growth plan and the four previous focus areas were reviewed and confirmed: Customer People Transfor- Growth Experience Experience mation Financial targets unchanged: • Doubling of Asian traffic in 2018 versus • EBIT margin 6% over cycle 2010 (two years ahead of original schedule) • EBITDAR margin minimum of • Doubling of ancillary revenues in 2020 17% over cycle versus 2016 • Adjusted gearing maximum of • New target for the number of passengers, 175% 20 million in 2030 • Return on capital employed (ROCE) minimum of 7% 13
Dividend proposal • The Board of Directors proposes to the Annual general Meeting that a dividend of 0.30 euros per share be distributed for 2017. • EPS 1.23 euros in 2017 (0.55). • Annual General Meeting 2018 will be held in Helsinki on 20 March 2018. 14
Outlook • Global airline traffic is expected to grow strongly in 2018. Finnair expects increased competition as existing and new operators increase capacity, particularly on routes linking Europe with Asia and with North America. • Finnair plans on increasing its capacity by more than 15 per cent in 2018, with most of this growth coming in the first half of the year. Passenger volume is expected to grow broadly in line with capacity while revenue growth is expected to be slightly lower. • 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. 15
Finance CFO Pekka Vähähyyppä 16
Q4: Good performance in all areas was reflected in revenue growth and improved comparable operating result Comparable revenue* Comparable operating result Capacity and traffic +17 % +13.6% ASK, mill. Pax, mill. 1,300% 9,607 645 10,000 3,500 23 568 8,194 3,000 7,718 8,000 2,500 6,420 6,000 2,000 PLF PLF 1,500 4,000 78.3% 80.3% 1,000 2,000 500 2 0 0 Q4 2016 Q4 2017 Q4 2016 Q4 2017 Q4 2016 Q4 2017 Q4 comparable operating result Passenger revenue Capacity (ASK) Ancillary sales Traffic (RPK) over 10 times higher than in Cargo Passengers 2016 Travel services 17 * excl. SMT
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