Finnair Plc Press release Cost-cutting measures and Asian traffic dampened Finnair's loss
29.10.2009
Cost-cutting measures and Asian traffic dampened Finnair's loss
The Finnair Group's turnover fell by 22 per cent in July-September. The main
reasons for this were a fall in demand and the average price. The operational
result was a loss of EUR 36.4 million, because costs declined less than the
turnover, by 15 per cent. The loss was dampened, however, compared with
previous quarters.
The third quarter result was in line with our expectations, even though it
naturally does not in any way correspond with our goals. Aircraft are flying
with fairly reasonable passenger load factors, but a steep fall in the average
price is eroding profitability, says Finnair's President & CEO Jukka Heinonen.
In July-September, Finnair carried two million passengers. Passenger traffic
demand fell by 11 per cent and capacity was cut to the same extent. The
capacity cuts kept aircraft load factors at the previous year's level, 80 per
cent. The amount of cargo carried fell by more than 8 per cent.
In the economic downturn, Finnair's Asian strategy has proved to be
particularly important. The domestic market suffered from weak demand and price
levels. It is satisfying to note that new corporate agreements in other markets
have offset to some extent the decline in domestic demand. Europe-Asia traffic
already accounts for over 50 per cent of Finnair's scheduled traffic revenue.
Finnair has under way an efficiency programme totalling 200 million euros, the
impact of which on the third quarter result was around 30 million euros.
Cumulatively, the cost-cutting programs have yielded around 70 million euros in
January-September. A savings target of 120 million euros is allocated to
personnel costs.
The weakening of profitability has been slowed through energetic cost-cutting
measures. Stabilisation agreements covering Technical Services, Cabin Service
and Catering have played a key role. We have adjusted to falling demand by
cutting capacity. Adjustment to the fall in price level, in contrast, has been
less effective, says Hienonen.
Finnair improved financial solidity through a 120 million euro hybrid bond
issued in September. Furthermore, Finnair has at its disposal sources of
finance with a total value of 700 million euros, which will safeguard the fleet
modernisation currently under way.
Finnair's prospects for recovering from the economic downturn are better than
those of many of its competitors, but a small domestic market requires the
purposeful implementation of the company's chosen Europe-Asia strategy. The
cost level must be lowered to correspond with the price level available in an
internationally competitive market.
Finnair Plc
Communications
