Finnair GroupInterim Report

1 January – 31 March 2006

Industry bracing for tightening competition

• Competition remained tough, especially in Nordic countries

• All airlines have strict efficiency programmes• US airlines are shifting capacity to international

traffic• Record high volume of orders for new aircraft• Many airlines still in shaky financial shape

Finnair’s fuel bill grew 30 MEUR in first quarter

• Fuel price remained high• Average price of tickets still at last year’s level• Good development in demand and turnover• Asian demand engine for growth• Introduction of new aircraft will temporarily

weaken productivity during first part of year

Slow quarter as predictedQ1/2006 Q1/2005 Change %

Turnover mill. € 480.3 443.4 8.3

EBITDAR 40.9 59.7 -31.5

EBIT excl. capital gains and fair values changes of derivatives -5.1 14.0 -

Capital gains 0.0 0.0 ‘-

Fair value changes of derivatives -0.1 4.7 -

Operating profit/loss (EBIT) -5.2 18.7 - Profit after financial items -5.2 17.4 -

Group continues to have strong liquidity

Cash flow January-March

CASH FLOW STATEMENT (EUR mill.) 2006 2005

Cash flow from operations -33 24

Investments and sale of assets -20 -20

Cash flow from financing -6 22

Change in liquid funds -59 26

Liquid funds at the beginning 339 251

Liquid funds at the end 280 277

Strong balance sheetEquity ratio and adjusted gearing

%

-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

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

Unit costs +10.2%,without fuel +3.0%

Change YoY

%

2004 2005 200620032002

Expensive fuel raises unit costs

* excluding fair value changes of derivatives ATK = Available Tonne Kilometre

Q1/2006

Unit costs of flight operations* c/ATK +10,2 %

Unit costs of flight operations excl. fuel* c/ATK +3,0 %

Personnel expenses c/ATK +2,4 %

Fuel costs c/ATK +46,4 %

Traffic charges c/ATK +5,4 %

Ground handling and catering €/passenger -2,0 %

Sales and marketing €/passenger -6,4 %

Purchases and maintenance of equipment c/ATK +13,7 %

Aircraft lease payments and depreciation c/ATK -1,3 %

Other costs c/ATK +8,3 %

Asian success story continues• Demand grew by 21.8%, passenger numbers by

26.5% and load factors by 1.5%• Amount of cargo grew by 20.4%• New route to Nagoya (Japan) in June and Delhi

(India) in November. Next year Kuala Lumpur (Malesia) which is 11th Asian destination.

• 1-2 new Asian destinations per year, more frequencies to existing destinations

• New Asian feeder routes to Edinburgh, Pisa, Kiev, Krakow, and Geneva, more flights to St Petersburg and Warsaw

• Lie-flat bed seats installed in long-haul business class

Share of Asian traffic growingScheduled traffic passenger and cargo revenues Q1/2006

Domestic20 %

Europe46 %

Asia30 %

America4 %

Modern fleet

• Finnair Scheduled Traffic will have one of most modern fleets in Europe by summer

• Very popular new Embraer 170/190 aircraft increase flexibility, decrease costs and are eco-efficient

• Remaining Boeing MD-80 aircraft retired at quickened pace, last flight on 3 July

• Eighth wide-body aircraft, Finnair’s first Airbus 340 takes flight in July

• New Airbus A340/350 aircraft replace current wide-body fleet by 2012

• 2003: 10.2% of turnover

• 2004: 12.5% of turnover

• 2005: 15.6% of turnover

• 2006: >20.0% of turnover at current price level and planned traffic growth

Finnair has hedged 55% of its fuel purchases for the next six months, thereafter for the following 18 months with a decreasing level.

Fuel costs increasing

Realized prices and swap prices

Development of average flight and fuel price 2001 - 2006

6,00

7,00

8,00

9,00

10,00

11,00

12,00

2001 2002 2003 2004 2005 2006 Q1

Ave

rage

price

/ R

PK

200

250

300

350

400

450

500

550

€/to

nne

Finnair average priceFuel tonne price

120 million euro challenges

• Fuel prices remain high• Fuel bill grew by 100 million euros last year, 120

million euros this year• Ticket prices still at low level• Focus on improving competitiveness without

sacrificing service level• Internal services to work according to market rules• Streamline hierarchy, improve flexibility

Personnel cuts of 670…

• New allocation of jobs• Statutory employer-employee negotiations

beginning to cut 670 jobs in 2006-2007• Planned efficiency measures to bring 80 MEUR

annual cost benefits• Efficiency measures everywhere in organisation• Emphasis on Finnair Technical Services and

support functions

…and increases of over 1000

• Strong growth in traffic between Asia and Europe has already ensured 3000 jobs

• This year 350 persons will be recruited to flight operations

• If competitive cost level is met, at best over 1000 will be recruited during next 5 years to operational functions

• Growth from traffic between Europe and Asia as well as from near-by areas

• Most desired airline by customers

• Increased flexibility

• Cost efficiency vs. competitors

Strategic cornerstones

SUSTAINABLE, PROFITABLE GROWTH

Assesments for future development

• Focus on traffic expansion between Asia and Europe will continue with additional aircraft

• Load factors will improve with more flexible capacity

• Strong booking situation• Continuing improvement of profitability• Fuel expenses will continue to be high• Price development continues poor due to tight

competition• 2006 result clearly profitable

Appendices

-50

-40

-30

-20

-10

0

10

20

30

40

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

MEUR

2003

Slow fourth quarter as predicted

Change in EBIT per quarter (Excluding capital gains and fair value changes of

derivatives)

2004 20052002 2006

40

50

60

70

80

90

100

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

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

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

2004 2005 200620032002

Development of Group Business Areas

Excluding capital gains and fair value changes of derivatives

  2006 2005

  Q1 Q1

MEUR    

Scheduled Passenger Traffic -4.5 9.7

Leisure Traffic 5.9 4.9

Aviation Services -3.5 5.2

Travel Services 0.3 1.3

Unallocated items -3.3 -7.1

Total -5.1 14.0

Investments and cash flow from operations

-50

0

50

100

150

200

250

2002 2003 2004 2005 Q1 2006

Operational net cash flow Investments

MEUR

Aircraft operating lease liabilities have grown in line with strategy

Flexibility, costs, risk management

0

50

100

150

200

250

300

350

400

450

500

MEUR

2002 2003 2004 2005 Q1 2006

On 31 March all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 31 March 2006 would have been85,0%

ROE and ROCE Rolling 12 months

-6

-3

0

3

6

9

12

15

Q1

2002

Q2

2002

Q3

2002

Q4

2002

Q1

2003

Q2

2003

Q3

2003

Q4

2003

Q1

2004

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

ROE ROCE

%

Finnair share price beats industry index

Index of share price of Finnair vs. Index of major European carriers 31.12.1998 - 31.3.2006

0

50

100

150

200

250

300

12.98 12.99 12.00 12.01 12.02 12.03 12.04 12.05

Bloomberg EuropeAirlines IndexFinnair

Superiority of product• Direct to 50 international destinations

– No time-consuming transfers at crowded airports

• Best schedules– Morning-evening concept

• Most punctual in Europe with least cancellations

• Top class service in Europe• oneworld – alliance with best quality and

coverage• New aircraft in European traffic

Operations systematically rationalised

Personnel

7 000

8 000

9 000

10 000

11 000

12 000

2002 2003 2004 2005 Q1 2006

Personnel on average

Finnair Financial Targets”Sustainable value creation”

Operating profit (EBIT)

EBIT margin at least 6% => 110-120 mill. € in the coming few years

EBITDAR EBITDAR margin at least 17% => over 300 mill. € in the coming few years

Economic profit To create positive value over pretax WACC of 8.5%

Pay out ratio Minimum one third of the EPS

Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 %

Total Shareholder Return (TSR)

On average 15% annual TSR => to double the value for shareholders in five years

Finnair’s Financial Targets Description of targets

Operating profit (EBIT)

Turnover + other operating revenues – operating costs

EBITDAR Result before depreciation, aircraft lease payments and capital gains

Economic profit Operating profit EBIT – Weighted Average Cost of Capital

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

Pay out ratio Dividend per share / Earnings per share

Total shareholder return (TSR)

Total return for shareholders including dividend paid out during certain period. Expects that dividend is invested back into Finnair shares immediately.

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Finnair Group Investor Relationsemail: investor.relations@finnair.com

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