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TRANSCRIPT
9.2.2012
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FinnairFull year result 2011
9 February 2012Mika Vehviläinen
Content
• Main events of 2011 • Business performance in
Q4 / FY 2011• Transformation and cost saving
programme• Domestic and European traffic
• Outlook
• Appendices
Finnair - Full year result 2011 9 Feb 2012
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Main events 2011Market environment Strategy implementation Structural change• Rapid growth of capacity
in the markets in H1
• Natural catastrophe in Japan
• Arabic spring
• Growing uncertainty in global economy in H2
• High price of oil
Aasia• Singapore route launch• Chongqing preparations• Aasian corporate sales growth
nearly 50 %
Partnership strategy• Flybe Nordic, NGA, Swissport
Smooth travel experience• Customer satisfaction,
punctuality and speed of baggage handling among the best network carriers
Significant improvement in cost efficiency: • Unit cost excl. fuel (CASK)
down by 6.1 % in 2011
• Target of 140 M€ annual savings by 2014
• Transformation and cost saving programme on track:
• 10 M€ of realisedsavings during 2011
• To improve cost efficiency Finnair will focus on core business and building a stronger partnership network around its business
Finnair - Full year result 2011 9 Feb 2012
Business performancein Q4 / FY 2011
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Financial performance
Turnover, M€2,257.7
2,023.3Turnover growth*+11.7% October–December+11.6% Full Year 2011
Asian passanger traffic revenue* +29.3% October–December+25.7% Full Year 2011
* Change year-on-year
Finnair - Full year result 2011 9 Feb 2012
Operating costsOperating costs, M€+15.8% October–December+13.9% Full year 2011
Fuel cost, M€ **+37.3% October–December+28.6% Full year 2011
105,3 132,8
103,1131,7
116,7
144,3106,6
146,4
0
100
200
300
400
500
600
2010 2011
Q1 Q2 Q3 Q4
** Incl. hedging
511,1 580,8
495,8 557,2
513,9584,2
529,9613,4
0
500
1 000
1 500
2 000
2 500
2010 2011
Q1 Q2 Q3 Q4
* Change year-on-year
2,335.6
2,050.7555.2
431.7
Finnair - Full year result 2011 9 Feb 2012
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Cost structure
19 %
24 %
3 %5 %5 %9 %
8 %
6 %
4 %
7 %
10 %
Q4 2011
19 %
24 %
3 %5 %5 %9 %
8 %
6 %
4 %6 %
11 %
2011
Finnair - Full year result 2011 9 Feb 2012
Finnair traffic in 2011
• Available Seat Kilometers (ASK) grew mainly as a result of growth in Asian traffic• Revenue Passenger Kilometers (RPK) grew• Passenger Load Factor (PLF) fell• Passenger and cargo revenues increased
Q4 /11 vs Q4/10* 2011 vs.2010ASK 20.5% 16.8%- Asian share of ASK:s 48.0% 49.0%RPK 16.9% 11.8%PLF% -2.2%-p -3.2%-pPassenger revenues 18.3% 13.9%
* Cabin crew strike in December 2010.
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Traffic structure 2011
49 %
29 %
5 %
5 %
12 %
ASK
Asia Europe DomesticNorth America Leisure
50 %
35 %
8 %5 % 2 %
Passenger revenues
Asia Europe DomesticNorth America Leisure
Finnair - Full year result 2011 9 Feb 2012
Transformation and cost saving programme
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The Future FinnairCost competitiveness
140 M€ permanent reduction in cost level
Service excellenceFinnair designed for you
Partnership strategyPartner network and
alliances
Profitable growthStrengthening Asian
presence, business travel and tailored ancillary
services
Focus on core businessStructural solutions and
ongoing business improvement
Number 1 in the Nordic countries
Among the top three in Asian traffic
Doubling of Asian turnoverby 2020
Finnair - Full year result 2011 9 Feb 2012
Targeting 80 M€ savings by end of 2012
Administration, marketing and
salesMaintenanceSupport Services Fleet and network Productivity of
flying personnel
10M€ 70 M€
2011 2012
60 M€
2013
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Finnair transformation progresses
Streamline administration, purchasing, sales and distribution
Personnel negotiations completed, headcount to be reduced by 150.
Cost savings in engine and component maintenance
Structural solutions and partnership alternatives under evaluation
In-flight services and support services Apron services to Swissport
Optimising fleet size and route networkFleet reduction of 9 aircraft during 2012; new cabin design for A32S fleet; unprofitable routes discontinued
Improving productivity of flying personnel
Significant improvements in productivity in CLAs, work continues to reach further improvements
Administration, Marketing and sales
Maintenance
Support Services
Fleet and network
Personnel productivity
Categories Objectives Status
Finnair - Full year result 2011 9 Feb 2012
Network optimisation enabled reduction in fleet size
Leases of 4 Airbus A320 Seriesaircraft discontinued in 2012
4 Embraer 170 aircraft sub-leased to Estonian Air
Finnair - Full year result 2011 9 Feb 2012
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We have two targets
1. Growth in Asia and in the Nordiccountries
2. Improve competitiveness of our European traffic
Finnair - Full year result 2011 9 Feb 2012
Finnair targets to strengthen its position in the Nordic countries
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Market size and players –heavy competition in the Nordic countries
Finnair - Full year result 2011 9 Feb 2012
Cost competitive ownnarrow-body traffic
JV operates a part of Finnairs current narrow-body traffic
JV operates Finnair entirenarrow-body traffic
We are assessing the possibilities to transfer a partor all our narrow-body fleet to the future JV
1 2 3
JV = joint venture
Alternatives:
JV to expand our footprint in Nordic Countries
Target is to return European traffic to black and form a costcompetitive JV
Finnair - Full year result 2011 9 Feb 2012
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JOINT VENTURE
=
=
=
In the future we have three distinct products, each with their own purpose
*
* Finnair owns 40% of Flybe Nordic.
Finnair - Full year result 2011 9 Feb 2012
NEGOTIATIONS WITH PERSONNEL
NEGOTIATIONS WITH PARTNERS
IMPLEMENTATIONPLANNING
FINNAIR OPERATIONS
JV OPERATIONS
CURRENT FLYBE OPERATION CONTINUES
Timeline
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Other actions in narrow-body traffic
• We optimise the size and utilisation of our narrow-body fleet
• A32S fleet’s capacity increased with new cabin versions
• New competitive pricing for domestic and Scandinavian routes
Finnair - Full year result 2011 9 Feb 2012
Outlook
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Asia drives growth
• Increasing presence in high growth markets: POS shifting more towards Asia– Huge market potential: 2.8 billion people*, average GDP per capita $8,269* in Finnair’s
destination countries in Asia.– Finnair’s focus on business and corporate travel.– Asian traffic to be doubled by 2020.– Chongqing route to be opened in 2012.– In 2011, Asia accounted for 50% of Finnair’s passenger revenue.
• Heavy competition in European markets– Overcapacity with several players struggling.
*The World Factbook 2009. Washington, DC: Central Intelligence Agency, 2009.
Finnair - Full year result 2011 9 Feb 2012
Outlook for 2012
• Operational result in the first half of 2012 is estimated to be clearly loss-making.
• Passenger traffic capacity in its current structure and form is estimated to grow by around 5% in 2012.
• Fuel costs are estimated to be significantly higher in 2012 compared to the previous year.
• Costs reductions of 80 M€ out of the total of 140 M€ are estimated to be achieved by the end of 2012.
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2011 figures
Key figuresOct-Dec
2011Oct-Dec
2010 Change % Jan-Dec2011
Jan-Dec2010 Change %
Turnover and result
Turnover € million 577,4 516,9 11,7 2 257,7 2 023,3 11,6
Operational result, EBIT € million -31,6 -6,7 - -60,9 -4,7 -
Operational result, % turnover % -5,5 -1,3 -2,7 -0,2
Operating result, EBIT € million -30,1 -4,7 - -87,8 -13,3 -
EBITDAR € million 26,4 38,0 -30,5 139,6 176,6 -21,0
Result before taxes € million -38,2 -9,6 - -111,5 -33,0 -
Net result € million -32,6 -5,7 - -87,5 -22,8 -
Balance sheet and cash flow
Equity ratio % 32,6 36,2 -3,6 %-p
Gearing % 43,3 27,8 15,5 %-p
Adjusted gearing % 108,4 79,6 28,8 %-p
Capital expenditure, CAPEX € million 21,1 27,1 -22,1 203,9 183,5 11,1
Return on capital employed, ROCE 12 months rolling % - -5,2 -0,4 -4,8 %-p
Return on equity, ROE , 12 months rolling % - -10,9 -2,7 -8,2 %-p
Net cash flow from operating activities € million 8,5 16,4 -48,2 50,8 76,0 -33,2
Share
Share price at end of quarter € 2,30 5,04 -54,4 2,30 5,04 -54,4
Earnings per share € -0,27 -0,06 - -0,75 -0,24 -
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Operational EBIT build-up in Q4 2011(IFRS)
Finnair - Full year result 2011 9 Feb 2012
Operational EBIT build-up in 2011 (IFRS)
-39,9
-50,5
Finnair - Full year result 2011 9 Feb 2012
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Change in operating expenses in Q4 2011 vs. Q4 2010
4,5 %
29,8 %
0,3 %
21,8 %
24,1 %
3,3 %
37,3 %
10,3 %
15,8 %
0% 10% 20% 30% 40%
Other expenses
Depreciation and lease payment for aircraft
Expenses for tour operations
Ground handling and catering expenses
Traffic charges
Staff costs
Fuel
Operating expenses excl. Fuel
Total operating expenses
Finnair - Full year result 2011 9 Feb 2012
Change in operating expenses in 2011 vs. 2010
9,6 %
10,6 %
9,3 %
13,2 %
12,3 %
3,8 %
28,6 %
10,0 %
13,9 %
0% 10% 20% 30% 40%
Other expenses
Depreciation and lease payment for aircraft
Expenses for tour operations
Ground handling and catering expenses
Traffic charges
Staff costs
Fuel
Operating expenses excl. Fuel
Total operating expenses
Finnair - Full year result 2011 9 Feb 2012
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Airline Business:RASK and CASK in 2011 vs. 2010
% change FY 2011 vs FY 2011Finnair - Full year result 2011 9 Feb 2012
Airline Business: RASK and CASK in Q4 2011 vs. Q4 2010
% change Q4 2011 vs. Q4 2011Finnair - Full year result 2011 9 Feb 2012
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Jet fuel spot price development
Finnair - Full year result 2011 9 Feb 2012
Change in fuel costs FY 2011 vs. FY 2010
Incl. hedging loss of
-24 mEUR
Incl. hedging profit of
77 mEUR
176
555
432
-101
-25
73
0
100
200
300
400
500
600
700
2011 Volume Price Currency HedgingDeviation
2012
mEUR
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Change in fuel costs Q4-11 vs. Q4-10
Incl. hedging loss of
-3 mEUR
Incl. Hedging profit of
19 mEUR
147
107
39-22
1
22
0
50
100
150
200
Q4/2010 Volume Price Currency HedgingDeviation
Q4/2011
MEUR
Finnair - Full year result 2011 9 Feb 2012
Hedge positions as of 31.12.2011
0%
20%
40%
60%
80%
100%hedge ratioupperlower
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Traffic Region Development 2011 vs. 2010 (note: Cabin att. strike Q410)
• Asia traffic share 49 % of total ASK
ASK 28,8 % ASK 14,6 % ASK 27,8 %
RPK 29,5 % RPK 16,2 % RPK 17,6 %
PLF% 0,4 %-p PLF% 0,9 %-p PLF% -6,5 %-p
Traffic revenue * 20,0 % Traffic revenue * 11,1 % Traffic revenue * 25,7 %
ASK -13,8 % ASK 20,5 % ASK 16,8 %
RPK -14,5 % RPK 15,2 % RPK 11,8 %
PLF% -0,7 %-p PLF% -2,5 %-p PLF% -3,2 %-p
Traffic revenue * -13,2 % Traffic revenue * 10,4 % Traffic revenue * 13,9 %
ATK 87,8 %
RTK 78,6 %
CLF% -3,4 %-p
* passenger revenue Traffic revenue 74,6 %
Cargo
Europe North Atlantic
Leisure traffic Domestic
Asia
Total
Finnair - Full year result 2011 9 Feb 2012
Traffic Region Development Q4 2011 vs. Q4 2010 (note: Cabin att. strike Q410)
• Asia traffic share 48 % of total ASK
ASK 30,5 % ASK 15,4 % ASK 34,6 %
RPK 25,7 % RPK 25,4 % RPK 22,6 %
PLF% -2,9 %-p PLF% 5,3 %-p PLF% -7,1 %-p
Traffic revenue * 21,3 % Traffic revenue * 19,3 % Traffic revenue * 29,3 %
ASK -3,4 % ASK 7,5 % ASK 20,5 %
RPK -8,2 % RPK 16,9 % RPK 16,9 %
PLF% -4,2 %-p PLF% 4,5 %-p PLF% -2,2 %-p
Traffic revenue * -4,3 % Traffic revenue * 2,9 % Traffic revenue * 18,3 %
ATK 21,1 %
RTK 21,7 %
CLF% 0,3 %-p
* passenger revenue Traffic revenue 21,2 %
Cargo
Europe North Atlantic
Leisure traffic Domestic
Asia
Total
Finnair - Full year result 2011 9 Feb 2012
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Thank you!