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Finnair Group

Finnair Group. Interim Report 1 January – 30 September 2009. Sector crisis continues. Decline in passenger demand slower than before? Fall in cargo demand levelled off, but on a clearly lower price level than before No significant improvement in business travel Leisure travel post-cyclical

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Finnair Group

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  1. Finnair Group Interim Report 1 January – 30 September 2009

  2. Sector crisis continues • Decline in passenger demand slower than before? • Fall in cargo demand levelled off, but on a clearly lower price level than before • No significant improvement in business travel • Leisure travel post-cyclical • Yields down due to industry over-capacity • Poor utilisation of capacity increases relative capital costs • IATA has doubled its loss forecast for this year to over 11 billion dollars from original forecast • Only the best low-cost carriers have succeeded

  3. Effiency programme improved the result • Net sales declined in the third quarter by more than 20 per cent • Operational loss 36.4 million euros, result before taxes -28.0 million euros • Price level weakened in July-September by more than 12 per cent • Passenger load factor remained reasonable • Capacity adjusted in line with falling volume, no ability so far to compensate lower price level • Efficiency programme improved Q3 result by 30 mill. euro, in January-September by 70 mill. euro • Market share in Asian traffic has grown • Balance sheet position strengthened • Punctuality and customer satisfaction are on a high level

  4. Weak operational result *excl. capital gains, fair values changes of derivatives and non recurring items

  5. Negative trend in profitability levelled off due to cost cutting EBIT* per quarter MEUR 2005 2006 2007 2009 2008 *excl. capital gains, fair value changes of derivatives and non recurring items

  6. Unit costs and revenues far from each other Change YoY Yield (EUR/RTK) Unit costs (EUR/ATK) % 2008 2007 2009 2005 2006 2004

  7. Savings materialise slowly in unit costs * excluding fair value changes of derivatives and restructuring items ** includes realized fuel and currency hedging outside hedge accounting ASK = Available Seat Kilometre

  8. 200 million euro efficiency program • Aim is to reach 200 million euro savings in 2010 • Savings in personnel costs totalling 120 million euros • Targets of more than 130 mill. euro identified or agreed • Fuel efficiency • Structural and operational changes • Temporary lay-offs 2008-09 • Number of staff decreased by one thousand • Stabilisation agreements in Technical Services, Catering and cabin service • Negotiations on stabilisation agreements for others in progress • Among others, 20 mill. euro share of savings by the pilots • 100 mill. euro impact on profitability already this year • Structural impact of the program per annum ~ 80 mill. euro

  9. Finnair Group’s previous structure Aviation Services Finnair Technical ServicesNorthport Oy (ground handling) Finnair Catering Oy Finncatering Oy Finnair Facilities Management Oy Airline Finnair Scheduled PassengerTraffic Finnair Cargo Oy Finnair Aircraft Finance Oy Finnair Group Travel Services Finland Travel Bureau Estravel Area Travel Agency Amadeus Finland Leisure Traffic Finnair Leirure Flights Aurinkomatkat – Suntours Horizon Travel Calypso Takeoff/Matkayhtymä Oy

  10. Simplifying organisation • Centralising scheduled and leisure traffic operations • Resource Management to optimise the use of the assets • Change to improve management of the service product • Reinforcing sales organisation to boost Europe-Asia traffic • Avoiding overlapping, clarifying responsibilities • Reducing 200 jobs in back office functions • Eliminating one reporting segment

  11. Finnair Group’s new structure As of 1 Oct 09 Aviation Services Finnair Technical ServicesNorthport Oy (ground handling) Finnair Catering Oy Finncatering Oy Finnair Facilities Management Oy Airline Finnair Scheduled PassengerTraffic Finnair Cargo Oy Finnair Aircraft Finance Oy Finnair Group Travel Services Finland Travel Bureau Estravel Area Travel Agency Amadeus Finland Aurinkomatkat – Suntours Horizon Travel Calypso Takeoff/Matkayhtymä Oy

  12. Finnair’s new management As of 1 Oct 2009 *)Member of the Executive Board

  13. Number of staff declined in 2009 Personnel Personnel on average

  14. Swap prices anticipate higher spot price

  15. Change in fuel costs in Q3

  16. Finnair continues its hedging policy

  17. Fuel costs one fourth of turnover • 2004: 12.6% of turnover • 2005: 15.6% of turnover • 2006: 19.4% of turnover • 2007: 20.3% of turnover • 2008: 24.6% of turnover • 2009: ~24% of turnover Finnair scheduled traffic has hedged 71% of its fuel purchases for the next six months, thereafter for the following 24 months with a decreasing level.

  18. Strengtened cash in Q3 Cash flow statement *incl. financial interest bearing assets at fair value

  19. Balance sheet made strongerEquity ratio and adjusted gearing % Equity ratio Adjusted Gearing

  20. Changes simplify fleet structure • Three Boeing 757 aircraft out of current seven will be faced out in next spring, the rest probably in 2011-2012 • Boeing MD-11 planes being faced out during Q1/2010 • Two Embraer 170 aircraft will be leased out, two for sale • In November, one more Airbus A330 aircraft, three new A330 planes in 2010

  21. Fleet renewal programme • 6 E170 • 1* E190 • 1 A340 2006 2007 • 5* E190 • 2 A340 2008 • 2 A340 • 2* E190 2009 • 5 A330 • 2 E190 2010 • 3 A330 • Total capex of over €400m in 2009 and less than €300m in 2010 *) Sale-and-lease-back of totally four E190 aircraft

  22. Funding secured until spring 2011 • Funding of Finnair investment programme ensured until 2011 • Investment schedule relaxed • Cash reserves more than 300 mill. euros • Sale and lease-back of properties and a spare engine, 90 mill. euros • An emitted hybrid bond of 120 mill. euros lowers gearing • Funding sources totalling more than 700 mill. euros • European Investment Bank, 250 mill. euros • Export Credit Agencies, 160 mill. euros • Loan-back of TyEL pension fund reserves, 330 mill. euros remaining • Liquidity reserve unused credit facility, 200 mill. euros • 200 million euro commercial paper programme

  23. Finnair's full year clearly loss-making • Visibility in passenger and cargo demand will remain foggy, winter will be challenging in leisure based travel • Capacity change in 2009 in scheduled passenger traffic -10% vs. 2008 • Efficiency programme and structural change will be implemented • Funding for investments arranged • The entire year clearly loss-making • The second half less loss-making than the first half due to cost cutting measures

  24. Appendices

  25. Segment results* * Operating profit, excluding capital gains, fair value changes of derivatives and non restructuring items

  26. Segment results* * Operating profit, excluding capital gains, fair value changes of derivatives and non restructuring items

  27. Negative trend in profitability levelled off Change in EBIT* per quarter MEUR 2009 2004 2005 2008 2006 2007 *excl. capital gains, fair value changes of derivatives and non recurring items

  28. ROE and ROCERolling 12 months % ROE ROCE

  29. Average yield and costsEUR c/RTK & EUR c/ATK Yield (EUR/RTK) Unit costs (EUR/ATK) 2009 2008 2005 2007 2006 2004

  30. Unit costs by cost components * excluding fair value changes of derivatives and restructuring items ** includes realized fuel and currency hedging outside hedge accounting ATK = Available Tonne Kilometre

  31. Investments and cash flowfrom operations MEUR Operational net cash flow Investments

  32. Aircraft operating lease liabilities Flexibility, costs, risk management MEUR On 30 September all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 30 September 2009 would have been 97,1%

  33. Finnair Financial Targets ”Sustainable value creation” EBIT margin at least 6% => over 120 mill. € in the coming few years Operating profit (EBIT) EBITDAR margin at least 17% => over 350 mill. € in the coming few years EBITDAR To create positive value over pretax WACC of 9,5% Economic profit Gearing adjusted for aircraft lease liabilities not to exceed 140 % Adjusted Gearing Minimum one third of the EPS Pay out ratio

  34. Finnair’s Financial Targets Description of targets Operating profit (EBIT) Turnover + other operating revenues – operating costs Result before depreciation, aircraft lease payments and capital gains EBITDAR Economic profit Operating profit EBIT – Weighted Average Cost of Capital Interest bearing debt + 7*Aircraft lease payments – liquid funds) / (Equity + minority interests) Adjusted Gearing Pay out ratio Dividend per share / Earnings per share

  35. www.finnair.com/group Finnair Group Investor Relations email: investor.relations@finnair.com tel: +358-9-818 4951 fax: +358-9-818 4092

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