finnair second quarter result 2012 · pdf file21 finnair q2 result, 10 august 2012. outlook...
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Finnair Second Quarter Result 2012
Mika Vehviläinen 10 August 2012
Content
• Market environment• Main events in Q2 2012• Business performance • Restructuring and
cost savings programme• Outlook
• Key figures
Finnair Q2 Result, 10 August 20122
Market Environment
• Initial Q2 industry profits positive, but down more than 20% y-o-y
• Several industry indicators threaten airline performance
• Crude oil prices rebounded in July
• The trend in global passenger traffic growth has lost pace to 2% annualized rate
• Worldwide airline fares continue to show weakness, signs of softening demand
Finnair Q2 Result, 10 August 20123
Restructuring continues in the industry
• Bankruptcies and restructuring programs
• Consolidation continues
• Legacy carriers are restructuring their loss-making short haul operations
Finnair Q2 Result, 10 August 20124
Strategy implementation
Traffic development:• Chongqing route opening in May• Good performance in European traffic
Partnership strategy• Catering and Technical services agreements• Plan to outsource EMJ traffic to Flybe• Continued search for solutions to cost challenges in short haul traffic
Smooth travel experience• Customer satisfaction continued to improve, the best Nordic Airline
Notable improvement in network efficiency:• Load factor +5.9%• RASK +9.7%
Finnair Q2 Result, 10 August 20125
Restructuring and cost savings program in track
• Target of 140 M€ annual savings by 2014 and 80 M€ of cumulative realised savings during 2012
• To improve cost efficiency Finnair will focus on core business and continues to build a stronger partnership network around its business
Finnair Q2 Result, 10 August 20126
Q2 Business performance
Finnair Q2 Result, 10 August 20127
Strong traffic performance in Q2 2012
North America
ASK -2.4%
RPK 6.2%
PLF 7.2%-p
Traffic revenue* 10.1%
Leisure traffic
ASK 10.2%
RPK 13.7%
PLF 2.7%-p
Traffic revenue* 10.6%
Europe
ASK -2.3%
RPK 11.9%
PLF 10.0%-p
Traffic revenue* 17.8%
Total traffic
ASK 2.7%
RPK 11.3%
PLF 5.9%-p
Traffic revenue* 13.7%
Asia
ASK 7.5%
RPK 11.6%
PLF 2.8%-p
Traffic revenue* 15.8%
Domestic
ASK -18.1%
RPK 3.6%
PLF 13.8%-p
Traffic revenue* -10.0%
Cargo
ATK 6.8%
RTK 28.6%
OLF 13.2%-p
Traffic revenue 30.1%
Asian share 51.1% of the total capacity
* passenger revenue
Finnair Q2 Result, 10 August 20128
Traffic structure in Q2 2012
51 %
31 %
4 %
5 %9 %
43 %
38 %
7 %
4 %8 %
Passenger revenuesAvailable seat kilometres, ASK
Finnair Q2 Result, 10 August 20129
Turnover* grew by 10.2 % in April-June 2012
533,7 591,8
539,4594,4
607,2
577,4
0
500
1000
1500
2000
2500
2011 2012
Q1 Q2 Q3 Q4
2 257.7
€ million
+10.2%
* The comparison period was affected by the tsunami in Japan and the events of Arabic spring
Finnair Q2 Result, 10 August 201210
Operational costs increased at a lower pace than turnover in Q2 2012
Operational costs
580,8 621,7
557,2 586,1
584,2
613,4
0
500
1000
1500
2000
2500
2011 2012
Q1 Q2 Q3 Q4
Mill. Eur
132,8 167,6131,7 157,9144,3146,4
0
500
1000
2011 2012
Q1 Q2 Q3 Q4
Mill. Eur
2.335.6
555.2
+5.2%
+19.9%
* Hedging taken into account
Fuel cost +19.9 % y-o-y*• The share of fuel cost 27 %
Finnair Q2 Result, 10 August 201211
Cost structure Q2 2012
27 %
19 %
10 %
10 %
9 %
6 %
5 %
5 %3 %
3 %3 %
Fuel
Staff costs
Traffic charges
Other costs
Ground handling and catering
Depreciation
Fleet materials and maintenance
Other rental payments
Sales and marketing
Tour operations costs
Lease payment for aircraft
Operational costs Q2 2012, total of 586.1 Mill. Eur
Finnair Q2 Result, 10 August 201212
Airline business: RASK & CASK development Q2 2012
9,7 %
4,5 %
0,2 %
15,7 %
7,4 %
-7,3 %
14,1 %
3,4 %
-0,8 %
-7,0 %
-7,8 %
-18% -14% -10% -6% -2% 2% 6% 10% 14% 18% 22%
RASK, unit revenue
CASK, unit cost
CASK, excl. Fuel
Fuel cost
Staff cost
Depreciation & lease costs
Traffic charges
Maintenance
Ground handling
Catering
Other expenses
Change, y-o-y, %
Finnair Q2 Result, 10 August 201213
Restructuring and cost savings programme
Finnair Q2 Result, 10 August 201214
Targeting permanent cost reduction of €140 million by 2014
• Appr. €10 million reached in 2011 • Targeted savings of €70 million in 2012 well on track
– Unit cost excluding fuel (CASK) is estimated to decrease in H2
Savings timeline
€10million
€70million
2011 2012
€60 million
2013
Finnair Q2 Result, 10 August 201215
Several restructuring measures implemented in 2012 ytd
• Fleet optimisation in European traffic – discontinuation of 4 A320 series aircraft lease agreements and subleasing 5 E170 aircraft
• Improved route planning and aircraft utilisation
• Memorandum of Understanding with Flybe on European Embraer traffic• JV analysis to improve the profitability of European Airbus traffic• Agreement with SR Technics on outsourcing engine and component
services• Agreement on Catering business with LSG Sky Chefs
• Streamlining support functions • Numerous other savings measures throughout the company• Check-in automation in May 2012
Finnair Q2 Result, 10 August 201216
Partnership strategy
To improve cost efficiency Finnair will focus on core business and continues to build a stronger partnership network around
its business
Finnair Q2 Result, 10 August 201217
Operation Partner Status
European Airbus traffic Analysis on-going
European Embraer traffic MoU
Domestic traffic October 2011
Engine and component maintenance
July 2012
Ground handling November 2011
Catering August 2012
Partnerships an integral part of restoring profitability
Finnair Q2 Result, 10 August 201218
The analysis of opportunities to improve efficiency of the European Airbus traffic continues
• A suitable partnership solution could not be found within our original target schedule
• Radically changing competitive environment, numerous bankruptcies and challenging market conditions have made it more difficult to find the right solution
• The company is still committed to identifying any and all means to significantly reduce the cost level of European traffic and seeks different alternatives with potential partners and its own labour groups
Finnair Q2 Result, 10 August 201219
Catering agreement with LSG
• Finnair and LSG Sky Chefs Group (LSG) signed a partnership agreement based on which the operational responsibility for and decision making power in Finnair Catering will fully transfer to LSG.
• The agreement is estimated to result in sustainable annual savings of approximately 9 million euros starting from the third year of the cooperation.
• According to IFRS, the arrangement is treated as an acquisition in accounting, and consequently, Finnair will cease to include Finnair Catering Oy's operations in its consolidated financial statements from August 1, 2012 onwards. The changes in reporting will be visible from Q3 2012 onwards and show in full from Q4 2012 onwards.
Finnair Q2 Result, 10 August 201220
Several steps taken for top-line growth and revenue enhancement
Asia• New route to Chongqing opened on 9 May• Corporate sales growth outside Finland 6% y-o-y in Q2 2012
Revenue enhancement • 9.7% RASK improvement y-o-y in Q2 2012 through improved load
factors and yield enhancement • Enhanced competitiveness in European traffic
– Several successful marketing campaigns and new attractive price categories – Web sales growth 27% y-o-y
– New ancillary services
Continued improvement in customer satisfaction, among the best network carriers: The best Nordic Airline, Skytrax 4 stars
Finnair Q2 Result, 10 August 201221
Outlook for 2012
• Finnair estimates that the operational result for the second half of the year, which is stronger than the first half of the year due to seasonal variations, will reflect improved profitability compared to the first half of the year.
• The outlook for the world economy is still uncertain, and Finnair will adjust its passenger traffic capacity with its current structure according to demand, if necessary. Finnair estimates that this capacity will increase on last year but less than the 5 per cent level given in the earlier estimate. The growth will mainly come from Asian traffic, where Finnair increased capacity in May by opening a new flight route to Chongqing, China.
• Finnair’s fuel costs are estimated to be significantly higher in 2012 compared to the previous year due to increased capacity and high fuel prices.
• Cost reductions of approximately 80 million euros out of the structural change and cost reduction programme’s total target of 140 million euros are expected to be achieved by the end of 2012. The realisation of the cost reductions will mainly take place during the second half of the year. Finnair estimates that unit cost (CASK) excluding fuel will decrease year-on-year in the second half of the year.
Finnair Q2 Result, 10 August 201222
Q2 Key figures
Finnair Q2 Result, 10 August 201223
Key figures Q2
Key Figures Apr-Jun 2012
Apr-Jun 2011 Change % Jan-Dec
2011
Turnover and result
Turnover EUR million 594,4 539,4 10,2 2257,7
Operational result, EBIT EUR million 14,7 -13,8 > 200 % -60,9
Operational result, % turnover % 2,5 -2,6 -2,7
Operating result, EBIT EUR million -18,1 -25,2 28,2 -87,8
EBITDAR EUR million 64,2 33,8 89,9 139,6
Result before taxes EUR million -25,5 -30,2 15,6 -111,5
Net result EUR million -19,8 -23 13,9 -87,5
Balance sheet and cash flow
Equity ratio % 32,6
Gearing % 43,3
Adjusted gearing % 108,4
Capital expenditure, CAPEX EUR million 2,9 30,9 -90,6 203,9
Return on capital employed, ROCE 12 months rolling % -5,2
Return on equity, ROE , 12 months rolling % -10,9
Net cash flow from operating activities EUR million 100,2 94,5 6,0 50,8
Share
Share price at end of quarter EUR 2,30
Earnings per share EUR -0,17 -0,20 15,0 -0,75
Finnair Q2 Result, 10 August 201224
Airline business: RASK & CASK development Q2 2012
9,7 %
4,5 %
0,2 %
15,7 %
7,4 %
-7,3 %
14,1 %
3,4 %
-0,8 %
-7,0 %
-7,8 %
-18% -14% -10% -6% -2% 2% 6% 10% 14% 18% 22%
RASK, unit revenue
CASK, unit cost
CASK, excl. Fuel
Fuel cost
Staff cost
Depreciation & lease costs
Traffic charges
Maintenance
Ground handling
Catering
Other expenses
Change, y-o-y, %
Finnair Q2 Result, 10 August 201225
Change in operational costs Q2 2012
3,2 %
4,0 %
17,9 %
26,1 %
7,0 %
-14,9 %
-20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
Staff
Leasing and depreciation
Traffic charges
Maintenance
Ground handling and catering
Other costs*
Change, y-o-y, %
*Incl. Leased capacity, sales and marketing, costs of tour operations etc.
Finnair Q2 Result, 10 August 201226
Operational EBIT build-up in Q2 2012 (IFRS)
-13,9
14,7
5,3
1,3 1,2 -3,4
-3,5-6,5
-26,455,1
9,4
5,1
-8,9
‐20,0
‐10,0
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
Mill. EUR
Finnair Q2 Result, 10 August 201227
Fuel, spot-price development
Finnair Q2 Result, 10 August 201228
Fuel cost build-upQ2 2012 vs. Q2 2011
132 158
6 -6 20 6
0
50
100
150
200
Q2/2011 Volume Price Currency HedgingDeviation
Q2/2012 *)
Mill. EUR
*Incl. Hedging profit of 18 Mill. EUR *) and emission trading cost of 2 Mill. EUR
Finnair Q2 Result, 10 August 201229
Hedging, 30.6.2012
Hedge ratio H2 2012: 76 %
Finnair Q2 Result, 10 August 201230
Key figures H1 2012
Key Figures Jan-Jun 2012
Jan-Jun 2011 Change % Jan-Dec
2011
Turnover and result
Turnover EUR million 1186,2 1073,1 10,5 2257,7
Operational result, EBIT EUR million -10,3 -56,9 81,9 -60,9
Operational result, % turnover % -0,9 -5,3 -2,7
Operating result, EBIT EUR million -38,3 -68,3 43,9 -87,8
EBITDAR EUR million 89,1 37,4 138,2 139,6
Result before taxes EUR million -51,7 -76,4 32,3 -111,5
Net result EUR million -40,2 -56,8 29,2 -87,5
Balance sheet and cash flow
Equity ratio % 29,2 32,9 -3,7 %-p 32,6
Gearing % 35,5 24 11,5 %-p 43,3
Adjusted gearing % 107,5 78,7 28,8 %-p 108,4
Capital expenditure, CAPEX EUR million 10,3 61,8 -83,3 203,9Return on capital employed, ROCE 12 months rolling % -3,1 -3,4 0,3 %-p -5,2
Return on equity, ROE , 12 months rolling % -7,8 -7,9 0,1 %-p -10,9
Net cash flow from operating activities EUR million 92,3 60,6 52,3 50,8
Share
Share price at end of quarter EUR 1,75 3,57 -51,0 2,30
Earnings per share EUR -0,35 -0,48 27,1 -0,75
Finnair Q2 Result, 10 August 201231
Thank you!