finnair ir q4 fy en/media/files/f/finnair-ir/...source: airbus global market forecast september...

1

2012 Result

Mika VehviläinenCEO

Agenda

• Market environment in Q4

• Business performance and strategy execution

• Outlook

• Financials

Finnair FY 2012 Result, 8 February 20132

Market Environment

According to IATA,

• Global air travel continues to increase, but the rate of growth has slowed over the year

• Air freight demand showed year-on-year improvement in Q4 after being down in previous quarters

• Growth in international passenger travel was driven by emerging regions

• Airline capacity management has allowed load factor to remain solid, helping financial performance

• Given the weakness in global economic growth, the demand environment for air transport remains fragile


Air traffic remains a growth market


Source: Airbus Global market forecast September 2012.

20-year world annual traffic growth

4.7%

Growth is highest in emerging regions



ChinaIndiaMiddle EastAsiaAfricaCISLatin AmericaEastern EuropeE

MER

GIN

G R

EG

ION

S

6billion people

2012

Yearly RPK growth 2012 -2031

Western EuropeJapanNorth America

1billion people 2012

Billions of people want to travel by air

China is forecasted to continue as the fastest growing market in 2012-2013



Main drivers for traffic growth in Asia

• More people, bigger cities, more wealth

• Emerging markets, more first time flyers and growing middle class

• Growing tourism and internationalisation will stimulate demand

• China average propensity to travel x4.6 in 2031 vs. 2011



Change in the industry continues

• Alliance landscape is changing– Qatar to join oneworld alliance, Middle-Eastern airlines active in

partnering with network carriers– Malaysia Airlines became a full member of the oneworld alliance in

January

• Market exits in short haul traffic

• Network carriers continue to restructure their loss-making short haul operations


9

Solid business performancestrengthens Finnair’s position in

the market


Full year 2012 back in profit

• Q4 and FY Operational EBIT in profit• Over €100 million result improvement while the fuel bill

grew by €115 million– Q4 Turnover 612.9 M€, Operational EBIT 6.3 M€– FY Turnover all time high 2449.4 M€, Operational EBIT 44.9 M€

• Stable financial position– Net cash flow from operations 17.9 M€ in Q4, 154.7 M€ FY– 430.5 M€ short-term cash and cash equivalents as per 31 Dec 2012

(approx. 17.6% of FY turnover)

• Notable improvements in traffic performance trough out the year:– Load factor +4.3%-p– RASK +7.7%


Turnover growth continued, EBIT* back in profit

Quarterly turnover, € million

11 Finnair FY 2012 Result, 8 February 2013

Quarterly Operational EBIT, € million

-60

-40

-20

0

20

40

60

2008 2009 2010 2011 2012

Q1 Q2 Q3 Q4

0

100

200

300

400

500

600

700

2008 2009 2010 2011 2012

Q1 Q2 Q3 Q4

*Operational result (EBIT), excluding non-recurring items, capital gains and changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves

Operational EBIT build-up in Q4 2012


-31,6

6,3

11,7

16,7

10,5

-16,9

3,6 -1,9

-18,7

31,6

17,3

-6,8-9,3

-40,0

-20,0

0,0

20,0

40,0

60,0

80,0

Mill. Eur

Operational EBIT build-up in FY 2012


-60,9

44,9

34,4

37,0

21,4

-38,2

-14,4-3,6

-115,0

179,4

28,6

4,8

-28,6

-100,0

-50,0

0,0

50,0

100,0

150,0

200,0

250,0

300,0Mill. Eur

14

Unit revenue improvement continues

RASK+7.7%

PLF +4.3%-p

RPK yield+0.9%


• Unit revenue per available seat kilometre (RASK) up by 7.7% in 2012 as both passenger load factor (PLF, +4.3%-p) and yield per revenue passenger kilometre (RPK yield, +0.9%) improved y-o-y

Strong traffic performance in Q4 2012

North America

ASK -2,5 %

RPK 3,7 %

PLF 4,9 %-p

Traffic revenue* -3,2 %

Leisure traffic

ASK -7,8 %

RPK 1,9 %

PLF 8,3 %-p

Traffic revenue* -1,9 %

Europe

ASK 7,5 %

RPK 11,7 %

PLF 2,6 %-p

Traffic revenue* 11,7 %

Total traffic

ASK 3,8 %

RPK 9,6 %

PLF 4,0 %-p


Asia

ASK 7,0 %

RPK 12,3 %

PLF 3,6 %-p


Domestic

ASK -7,9 %

RPK 0,8 %

PLF 5,3 %-p


Cargo

ATK -45,2 %

RTK -36,9 %

OLF 10,9 %-p

Traffic revenue -37,3 %

Asian share 49.8% of the total capacity

* passenger revenue

15Finnair FY 2012 Result, 8 February 2013

Passenger revenue split

44%

34%

11%

8% 3%

Asia

Europe

Charter

Domestic

North Atlantic

*Passenger revenue

16

Strategy implementation yielding results


Finnair today

• Focus on core Airline business– Scheduled long and short haul traffic– Leisure traffic– Cargo traffic

• Partnerships in both core business and in airline support services


We are committed to adding value and improving our profitability

• Service development:– Customer Service quality– Product renewal and new ticket types– More rewarding Finnair Plus Program– Marimekko partnership

• Cost efficiency and flexible cost structure• Operational efficiency• Increasing revenues


Implementation of cost savings program ahead of schedule, €100 million of realised savings in 2012

25%

24%

14%

10%

9%

8%

8% 3%

Target €140 million

maintenance staff

other lease

sales catering

ground handling fuel


138%

41%

98%

97%

161%

102%

50%

30%

73%

28%

50%

12%

18%

8%

8%

0% 100%

fuel

ground handling

catering

sales

lease

other

staff

maintenance

TOTAL

Achieved savings to target

achieved

implemented

to target

€40 million€100 million

New €60 million savings programme will ensure reaching our target of 6% operational EBIT margin

• The aim is to achieve a permanent reduction in costs of €60 million by the end of 2014

• The new programme complements the existing €140 million programme launched in 2011


€60 million

2014 201520132012

Savings timeline for in total €200 million sustainable savings from 2010 cost level

Finnair has strong presence in Asian key economies, weekly frequencies in Q4*


24

4034

2427

Finnair Lufthansa Air France KLM IAG

China Japan

Republic of Korea

5

12

7 7

Finnair Lufthansa Air France KLM

19

27

2116


6

87 7


Singapore

• *Finnair was the 3rd largest carrier in its destinations, estimated market share of 5.4% in 2012.• Market size of 20 million transfer passengers annually, globally one of the fastest growing traffic areas. • Traffic between Europe and China forecasted to triple during the next 30 years.


Adding value to our customers

Outlook for 2013

• The uncertain economic outlook in Europe, together with weakened consumer demand and slower growth in Asia, make it difficult to assess how air traffic will continue to develop. Fuel costs are expected to remain high in 2013, and the demand for air traffic is estimated to grow in moderation.

• Finnair estimates that its turnover will grow in 2013. The airline unit costs excluding fuel (CASK excl. fuel) are expected to decrease compared with 2012, and operational result is expected to show a profit in 2013.


Financials


Key figures Q4 & FY 2012

Key Figures Oct-Dec 2012

Oct-Dec 2011

Change %

FY 2012

FY 2011

Change %

Turnover and result

Turnover EUR million

612.9 577.4 6.1 2 449.4 2 257.7 8.5

Operational result, EBIT EUR million

6.3 -31.6 44.9 -60.9

Operational result, % turnover % 1.0 -5.5 6.5 %-p 1.8 -2.7 4.5 %-p

Operating result, EBIT EUR million

2.7 -30.1 35.5 -87.8

EBITDAR EUR million

55.0 26.4 108.3 241.9 139.6 73.3

Result before taxes EUR million

0.9 -38.2 16.5 -111.5

Net result EUR million

1.2 -32.6 11.8 -87.5

Balance sheet and cash flow

Capital expenditure, CAPEX EUR million

23.7 31.9 -25.7 41.4 203.9 -79.7

Net cash flow from operating activities EUR million

17.9 -1.2 >200 % 154.7 50.8 >200 %

Share

Share price at end of quarter EUR 2.38 2.3 3.5 2.38 2.30 3.5

Earnings per share, from the result of the period* EUR 0.01 -0.25 104.0 0.09 -0.69 113.0

Earnings per share EUR -0.06 -0.27 77.8 0.02 -0.75 102.7

25 Finnair FY 2012 Result, 8 February 2013* Before Hybrid Bond interest

Airline business: RASK & CASK development Q4 2012

4,8 %

-2,9 %

-8,6 %

11,8 %

-11,4 %

-11,5 %

-7,0 %

19,9 %

-14,6 %

-16,8 %

-15,8 %

-20% -15% -10% -5% 0% 5% 10% 15% 20%

RASK, unit revenue

CASK, unit cost

CASK, excl. Fuel

Fuel cost

Personnel

Depreciation & leasing

Traffic charges

Maintenance

Ground handling

Catering

Other costs

Change, y-o-y, %


• Unit revenue per available seat kilometre (RASK) up by 4.8%• Unit cost per available seat kilometre excluding fuel (CASK, excl. fuel) down

by 8.6%

Airline business: RASK & CASK development FY 2012

7,7 %

2,3 %

-3,6 %

18,1 %

-1,2 %

-7,9 %

4,1 %

3,8 %

-4,5 %

-11,0 %

-9,2 %

-20% -15% -10% -5% 0% 5% 10% 15% 20%

RASK, unit revenue

CASK, unit cost

CASK, excl. Fuel

Fuel cost

Personnel

Depreciation & leasing

Traffic charges

Maintenance

Ground handling

Catering

Other costs

Change, y-o-y, %


• Unit revenue per available seat kilometre (RASK) up by 7.7%• Unit cost per available seat kilometre excluding fuel (CASK, excl. fuel) down

by 3.6%

Operational costs flat, fuel costs continued to climb in Q4 2012

Operational costs

580,8 621,7

557,2 586,1

584,2603,5

613,4615,7

0

500

1000

1500

2000

2500

3000

2011 2012

Q1 Q2 Q3 Q4

2,427.0

Mill. Eur

132,8 167,6131,7 157,9144,3

179,6146,4

165,2

0

500

1000

2011 2012Q1 Q2 Q3 Q4

670.3

Mill. Eur

2,335.6

555.2

+0.4%

+20.7%

* Hedging taken into account

Fuel cost +12.8 % y-o-y*• The share of fuel costs 27%


Fuel and personnel biggest cost items in Operational costs Q4 2012, total of 615.7 Mill. Eur


Change, y-o-y, %

-15,9 %

-24,1 %

-33,8 %

-16,1 %

21,3 %

-6,6 %

17,7 %

-2,6 %

-14,8 %

12,8 %

0,4 %

-40% -20% 0% 20% 40%

Aircraft leasing

Sales and marketing

Tour operations

Depreciation

Other rental payments

Maintenance

Traffic charges

Ground handling and catering

Other costs

Staff

Fuel

Total

55,6 %

26,8 %

16,3 %

10,2 %9,9 %

8,4 %

7,7 %

6,2 %

5,5 %

3,7 %2,8 % 2,4 %

Fuel Staff

Other costs Ground handling and catering

Traffic charges Maintenance

Other rental payments Depreciation

Tour operations Sales and marketing

Aircraft leasing

Our financial targets

• Operational profit (EBIT) margin 6%

• EBITDAR margin 17%

• Economic profit

– To create positive value over pretax WACC of 8%

• Adjusted gearing <140%

• Dividend policy pay-out ratio minimum one third of the EPS


Strong financial position supports business development and future investments

-20

0

20

40

60

80

100

120

2008 2009 2010 2011 2012

Strong balance sheet

Equity ratio Gearing Adjusted gearing

%


-150

0

150

300

450

600

750

2008 2009 2010 2011 2012

Good cash position over years despite significant investments

Net cash flow from operations

Investment, gross

Short term cash and cash equivalents

M€

Fuel, spot-price development


Hedging profit of €10 million in Q4


146*165**

6 -4 710

0

50

100

150

200

Q4/2011 Volume Price Currency HedgingDeviation

Q4/2012

Mill. €

*Incl. Hedging profit of 20 Mill. EUR

**Incl. Hedging profit of 10 Mill. EUR

555*670**

31 554 25

0

100

200

300

400

500

600

700

800

2011 Volume Price Currency HedgingDeviation

2012

Mill. EUR

Hedging profit of €51 million in 2012

*Incl. Hedging profit of 76 Mill. Eur

**Incl. Hedging profit of 51 Mill. Eur

Fuel cost build up LTM

Rolling hedging policy

Hedging positions, 31 December 2012 Hedge ratio H1 2013: 75%


• Finnair hedges jet fuel positions 24 months ahead within the limits defined in the hedging policy

• Finnair is 75 % hedged for the first 6 months and 67% for the first 12 months

• The company protects itself against the risks of currency, interest rate and jet fuel positions by using different derivative instruments, such as forward contracts, swaps and options

finnair ir q4 fy en/media/files/f/finnair-ir/...source: airbus global market forecast september...

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