FINN FINNAIR AIR CAPIT CAPITAL AL MARKETS MARKETS DAY 12 NOVEMBER 2019
Agenda Finnair strategy update – CEO Topi Manner Network and fleet – CCO Ole Orvér Break Operational excellence – COO Jaakko Schildt Modern Premium Airline – SVP Customer Experience Piia Karhu and CCO Ole Orvér Break Creating value for shareholders – CFO Mika Stirkkinen Closing words – CEO Topi Manner Cocktails and networking 2 Finnair Capital Markets Day 2019
Disclaimer By attending Finnair Capital Markets Day 2019 or by reading this presentation, you acknowledge and agree that the information provided orally or in this presentation (i) is provided in summary form; (ii) is not intended to contain all the information that is or may be material to investors or potential investors; (iii) may be amended and supplemented as Finnair sees fit; (iv) may not be relied upon for the purpose of entering into any transaction and should not be construed as, nor be relied on in connection with, any offer, invitation or recommendation to purchase or subscribe for, underwrite or otherwise acquire, hold or dispose of any securities of Finnair. Any investor or prospective investor considering the purchase, disposal or holding of any securities of Finnair should consult with its own counsel and advisers as to all legal, tax, regulatory, financial and related aspect thereof. This presentation contains forward ‐ looking statements. These statements may include the words “believe”, “expect”, “anticipate”, “foresee”, “intend”, “plan”, “estimate”, “focus”, “continue”, “will”, “may”, “targeting” and similar expressions as well as statements other than statements of historical facts including, without limitation, those regarding the financial position, business strategy, development plans, objectives and targets of Finnair. Such forward ‐ looking statements involve known and unknown risks, uncertainties and other important factors which may affect Finnair’s ability to implement and achieve the economic and monetary policies, budgetary plans, fiscal guidelines and other development benchmarks set out in such forward ‐ looking statements. Risks related to Finnair’s operations are discussed in the company’s financial disclosures and on the company’s website at https://investors.finnair.com/en/governance/risk-management. Actual results, performance or achievements may be materially different from future results, performance or achievements expressed or implied by the forward ‐ looking statements. Such forward ‐ looking statements are based on numerous assumptions regarding Finnair’s present and future policies and plans and the environment in which Finnair will operate in the future. Furthermore, certain forward ‐ looking statements are based on assumptions or future events which may not prove to be accurate, and no reliance whatsoever should be placed on any forward- looking statements in this presentation. The forward ‐ looking statements in this presentation speak only as of the date of this presentation, and Finnair expressly disclaims to the fullest extent permitted by law any obligation or undertaking to disseminate any updates or revisions to any forward ‐ looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Nothing in the foregoing is intended to or shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation. The information in this presentation has not been independently verified. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the presentation and the information contained herein. Information in this presentation has been obtained from various sources and Finnair does not guarantee the accuracy or completeness of such information. All projections, valuations and statistical analyses are provided for information purposes only and should not be relied upon as an accurate prediction of future performance. 3 Finnair Capital Markets Day 2019
FINN FINNAIR AIR STRA STRATEGY UPD TEGY UPDATE TE Topi Manner, CEO Capital Markets Day 2019
New phase: sustainable, profitable growth Sustainable, profitable growth Accelerated growth • Potential to capture 2018 economies of scale Renewal Disruption • One of the most modern 2015 – 2017 long-haul fleets 2008 – 2010 • Stronger brand and customer experience • Improved digital Restructuring capabilities 2011 – 2014 • Modernised culture 5 Finnair Capital Markets Day 2019
We have unique strengths and are winning market share Successful Unrivalled local Strong operational High customer Solid financial strategy network and performance and satisfaction and situation with leveraging unique attractive market safety valued by people experience healthy balance geographical for incoming our customers sheet location tourism 6 Finnair Capital Markets Day 2019
We have achieved our previous targets on growth - need to improve profitability Delivery on targets Strong growth in EBIT and cash flow 7.7% 6.6% Gearing well below 175% 5.2% 2.4% ROCE at 12.7% average last two years > 7% 1.0% -1.6% ASK Asia more than double 2014 2015 2016 2017 2018* LTM** EBIT Margin EBIT 20 million passengers by 2030 ahead (13.3 mEur 513 504 2018) 282 220 171 OP profit 6% (average 6.3% last two years) 24 2014 2015 2016 2017 2018* LTM** Net operating cash flow * IFRS16 Adjusted ** Last 12 months (2018 Q4 – 2019 Q3) Source: Finnair 2018 Annual report, Finnair restatements 2018, Finnair Interim report for 1 January – 30 September 2019 7 Finnair Capital Markets Day 2019
Roadmap to sustainable, profitable growth Growth in line with market growth Strengthened customer offer Increased efficiency Improved market position in Asia 8 Finnair Capital Markets Day 2019
We leverage our strong hub and focus on the most profitable Asian cities EU – Asia estimated growth > 4% CAGR* Long history, strong partnerships Strengthening position > 6%** Most environmentally sound Shortest route 24hr rotation * Boeing commercial market outlook ** Market share on our relevant market 9 Finnair Capital Markets Day 2019
We focus on the core; growth through transfer Focused strategy Integrated business One culture COMMITMENT TO CARE 7% 7% 6% COURAGE Revenue 50% share SIMPLICITY 30% Transfer Passengers Travel Services Local Passengers Cargo Ancillaries Source: Finnair Interim report for 1 January – 30 September 2019 and Finnair Internal data 10 Finnair Capital Markets Day 2019
Opportunity to improve our productivity ASKs CAGR +8% 8% OPEX has Revenue CAGR increased 5.5% faster than revenues OPEX ex Fuel CAGR +6.1% 6.1% 2014 2015 2016 2017 2018* LTM** ASK Fuel OPEX ex fuel Revenue * IFRS16 Adjusted ** Last 12 months (2018 Q4 – 2019 Q3) Source: Finnair 2018 Annual report, Finnair restatements 2018, Finnair Interim report for 1 January – 30 September 2019 11 Finnair Capital Markets Day 2019
There are also opportunities to improve our revenues ASK growth vs RASK development Growth in ancillary revenues per passenger Cents (€) € +7.8% 12.15 € 12.11 € 11.95 € 11.55 € +8.3% 10.02 € 8.22 € 7.4 7.08 6.96 6.83 6.72 6.55 - 2.4% CAGR 2014 2015 2016 2017 2018* LTM** 2014 2015 2016 2017 2018* LTM** ASK RASK Ancillary Revenues per passenger More stable RASK development moving forward as growth moderates We are taking a step-change in retailing to improve on revenues * IFRS16 Adjusted ** Last 12 months (2018 Q4 – 2019 Q3) Source: Finnair 2018 Annual report, Finnair restatements 2018, Finnair Interim report for 1 January – 30 September 2019 12 Finnair Capital Markets Day 2019
Fleet investments to boost efficiency and reduce carbon footprint 3.5 – 4 billion • Modern Premium Experience • Carbon footprint euros* • Fuel efficiency 1/3 • Growth Cost savings 2/3 Replacement / • Enabling growth Renewal Investments predominantly funded through cash flow * Estimated investments including already announced commitments 13 Finnair Capital Markets Day 2019
Sustainability is a natural part of everything we do 27% CO2/RTK since 2005 Biofuel We want to be Biofuel flights since 2011 a frontrunner in sustainability 1/2 Single-use plastics (end 2022) 0 Our detailed sustainability plan to Zero landfill waste at HEL be published in early 2020 14 Finnair Capital Markets Day 2019
Long-term roadmap for carbon reduction Fleet investments to reduce carbon footprint and boost efficiency Sustainable aviation fuels Voluntary and non-voluntary (Bio and Synthetic) offsetting (including CORSIA) Operational improvements Intermodality Emissions trading 15 Finnair Capital Markets Day 2019
Our refined strategy and ambitious new targets Continued growth In line with market growth • Comparable EBIT > 7.5%* • Return on Capital Employed (ROCE) > 10%* Strengthened customer offer Leading to stabilised unit revenue • On-time performance (OTP) > 85% Increased efficiency • NPS positive development Leading to continually decreasing unit cost • eNPS positive development Improved market position in Asia * Over the cycle (at constant fuel and f/x), 12 – 18 month build-up period 16 Finnair Capital Markets Day 2019
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