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					Finnair Group
Interim Report 1 January – 30 September 2007
Finnair meeting expectations

Strong demand in scheduled traffic continues
In addition to Asia, European traffic is also growing
Finnair’s market share growing in international
traffic departing from Finland
Unit revenues decreased due to new launches, price
level improving towards end of year
Unit costs have fallen thanks to efficiency measures
FlyNordic sold to Norwegian Air Shuttle, 14 million
euro sales profit
Improved results by efficiency programme

                                                 Q3/2007   Q3/2006   Change %

 Turnover mill. €                                  545.2     515.4        5.8

 EBITDAR excl. capital gains, fair values
 changes of derivatives and reorganization          88.0      69.8       26.1
 expenses


 EBIT excl. capital gains, fair values changes
                                                    39.2      22.5       74.2
 of derivatives and reorganization expenses

 One off items/ capital gains                       17.3       0.1          -

 Fair value changes of derivatives                   3.4      -7.9          -

 Operating profit/loss (EBIT)                       59.9      14.7          -

 Profit after financial items                       55.9      13.5          -
Scheduled Passenger Traffic
and Aviation Services improved

 Profitability of scheduled traffic improved clearly,
 even as unit revenues decreased
 Unit costs have fallen
 Finnair Technical Services efficiency project is
 bearing fruit
 Average prices for cargo have fallen due to tighter
 competition, but demand is picking up
 Catering profitability improved
 Northport still loss-making: Sweden ja Norway
 operations to be sold to Menzies Aviation
Aurinkomatkat-Suntours expands
 Finland’s leading tour operator, strategy to expand in
 neighbouring areas
 Acquired Estonia’s second largest tour operator
 Horizon Travel at start of year…
 and St Petersburg area tour operator and travel
 agency Calypso in October
 Growing target group increasingly wealthy middle class
 in Russia
 Winglets installed on Leisure Traffic fleet (seven Boeing
 757-200s), decreasing fuel consumption by five per
 cent
Unit costs decreased more than yield
Change YoY

      %                      Yield (EUR/RTK)          Unit costs (EUR/ATK)
 15


 10


  5


  0


 -5


-10


-15


-20
      Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

      2002         2003           2004         2005             2006         2007
Efficiency programme yielding results

   80 million euro efficiency programme completed
   by end of year
   Effect felt strongest in the second half of the year
   Profit impact for 2007 over EUR 40 million
   Full financial impact will begin in 2008
   Jobs cut by around 600 in 2006-07
Business growing,
number of staff stable
Personnel                        Personnel on average
14000


12000


10000


 8000


 6000


 4000


 2000


     0
            1999   2000   2001     2002      2003       2004   2005   2006   Q3 2007
Unit costs dropping
                                                Q3/2007      2006


Unit costs of flight operations* c/ATK            -7.7%   +1.8 %
Unit costs of flight operations excl. fuel*
                                                  -9.5%    -3.5 %
c/ATK
Personnel expenses c/ATK                          -7.2%    -4.1 %
Fuel costs c/ATK                                  -2.0%   +24.1 %
Traffic charges c/ATK                             -7.3%    -3.9 %
Ground handling and catering €/passenger        +18.7%     -1.0 %
Sales and marketing €/passenger                  -12.3%    -7.9 %
Aircraft lease payments and depreciation
                                                  -1.7%   +1.9 %
c/ATK
Other costs c/ATK                                -15.3%    -3.1 %
* excluding fair value changes of derivatives
ATK = Available Tonne Kilometre
        240
              290
                    340
                          390
                                440
                                      490
                                            540
01/01
04/01                                                 ATK
07/01                                             1000/person

10/01
01/02
04/02
07/02
10/02
01/03
04/03
07/03
10/03
01/04
04/04
                                                                                                                              Productivity improved




07/04
10/04
01/05
04/05
                                                    (ATK/person) 12 m rolling sum




07/05
                                                                                    Productivity (incl. Aero and FlyNordic)




10/05
01/06
04/06
07/06
10/06
01/07
Jet fuel prices going up
Jet fuel price risk hedging
(Scheduled traffic, 30.9.2007)




     70%
              62%




     2007Q4   2008Q1   2008Q2   2008Q3   2008Q4   2009Q1   2009Q2   2009Q3   2009Q4   2010Q1   2010Q2
Fuel costs a fifth of turnover
 2003:   10.2% of turnover
 2004:   12.5% of turnover
 2005:   15.6% of turnover
 2006:   19.4% of turnover
 2007:   ~20% of turnover (approx. 450 MEUR)
 Finnair scheduled traffic has hedged 66% of its
 fuel purchases for the next six months, thereafter
 for the following 24 months with a decreasing
 level. Finnair leisure flights hedged 60% of
 summer traffic programme’s consumption.
Improved cash flow used for
investments
Cash flow January-September

 Cash flow statement (EUR mill.)   Q1-Q3/2007   Q1-Q3/2006

 Cash flow from operations                169           23

 Investments and sale of assets          -226         -149
 Investments                             -264         -195
 Change of advances and others            +38          +46

 Cash flow from financing                  32           73

 Change in liquid funds                   -25          -53

 Liquid funds at the beginning            273          339

 Liquid funds at the end                  248          286
Strengthening of capital structure
by share offering
Equity ratio and adjusted gearing
%
               Equity ratio          Adjusted Gearing
120



100



 80



 60



 40



 20



 0
      2002      2003          2004           2005       2006   Q3 2007
Asia growth continues on good level
 Demand grew during January-September by
 30.9%, passenger numbers 25.8%, cargo 18.9%
 Passenger load factor 78.5%
 Business Class selling well
 59 flights a week to Asia
 Non-stop flights to 10 destinations, daily to six
 Growth in different markets in Asia diversifies risk
 End of year capacity will grow by over 30%
 Seoul new destination in 2008
Capacity in Asia has grown rapidly
China
2001:
3 flights/week
2007:
25 flights/week

Japan
2001:
2 flights/week
2007:
15 flights/week

India
2006:
3 flights/week
2007:
12 flights/week
Long-haul network 2007



                                  Tokyo 4
                                    Nagoya 4
        7 New York                    Osaka 7
                                        Beijing 7
                                        Shanghai 7
                                         Guangzhou 4
                                          Hong Kong 7
                     Helsinki             Bangkok 7
                                   Delhi 7
                                Mumbai 5
Over third of revenue from Asia
Scheduled traffic passenger and cargo revenue January-
September
                                   Domestic   Europe   Asia   US

                         4%
                                     12 %




             38 %
                     Asia-Europe
                      gateway
                         50%



                                              46 %
New planes enable future growth

 In 2007-14
  • A330/A340 fleet of maximum 15 planes in
    total

 In 2014-16
  • A350 fleet of maximum 15 planes in total
Most modern European fleet

 Average age of European fleet four years
 29 Airbus A320 family aircraft
 A total of ten smaller Embraer 170s and five
 larger Embraer 190s in fleet, five larger aircraft
 arriving later
 New aircraft increase flexibility and improve load
 factors, decrease costs and are eco-efficient
Planned share offering
part of investment financing

 Renewal and expansion of long-haul fleet part of
 Finnair strategy
 Aircraft acquisitions in 2007-2016 amount to almost
 two billion euros
 Extraordinary General Meeting 21.11.2007
 Size of offering up to 250 million euros, existing
 shareholders would have a pre-emptive right to
 subscribe
Finnair’s vision 2017
 Take further advantage of Helsinki’s geographical
 position
 Via Helsinki a travel concept
 The airline of choice for quality and environmentally
 conscious air travellers in intercontinental traffic in the
 Northern Hemisphere
 A reliable and safe option in an uncertain world
 As large European airports become increasingly
 congested, Helsinki-Vantaa Airport has plenty of room
 for construction and possibilities for development
 Sustainable, profitable growth, an attractive
 investment
Finnair 2017 – ”On top of the World”
India opens up new opportunities

 Indian traffic makes it possible to open the fastest
 connections between North America and India
 Finland is situated along the shortest route
 Demand expected to grow significantly
 Russia’s air traffic markets expected to open up in the
 future, offering opportunities to complement network
Success factors
 Safe
  • Expert, professional people doing quality work
  • Modern fleet
  • Sound finances
  • Trust
  • Caring for customers and personnel
 Finnish
  • Reliable, responsible, punctual, professional
 Creative
  • Modern, developing, innovative
 Fresh
  • Clean, stylish, refreshing, uncomplicated
Future outlook
 Asian demand remains strong
 Average price fall leveling out even though average
 route length increasing
 Unit costs still decreasing
 Cooperation with Norwegian continues
 Expensive fuel will not increase costs significantly at the
 end of year because of hedging
 Five collective agreements renewed
 The operational result for the full year is expected to
 exceed 70 million euros, last quarter profitable
Appendices
Profitability development
                  Change in EBIT per quarter (Excluding capital gains, fair value
MEUR              changes of derivatives and reorganization expenses)

 40

 30

 20

 10

  0
       Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
 -10

 -20

 -30

 -40

 -50
           2002        2003            2004            2005          2006           2007
Average yield and costs
EUR c/RTK & EUR c/ATK

                           Yield (EUR/RTK)          Unit costs (EUR/ATK)
120



100



 80



 60



 40



 20



  0
      Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

      2002        2003           2004        2005              2006        2007
Segment results
Excluding capital gains, fair value changes of
Derivatives and reorganization expenses

                                                 2007    2006
                                                   Q3      Q3
 MEUR
 Scheduled Passenger Traffic                     28.8    20.3
 Leisure Traffic                                   7.8     8.2
 Aviation Services                                 2.7    -4.6
 Travel Services                                   1.3     0.9
 Unallocated items                                -1.4    -2.3
 Total                                           39.2    22.5
Investments and cash flow
from operations
MEUR                        Operational net cash flow          Investments
 300



 250



 200



 150



 100



  50



   0
       2002   2003   2004           2005                2006       Q3 2007
Aircraft operating lease liabilities
   MEUR          Flexibility, costs, risk management
   600



   500



   400



   300



   200



   100



    0
          2002      2003        2004        2005       2006   Q3 2007


 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 2007 would have been
 103,3%
Q
    1




                                                         %




           -4
                -2
                                         10
                                              12
                                                   14




                     0
                         2
                             4
                                 6
                                     8
    20
Q
  2 02
    2
Q 00
  3    2
    20
Q
  4 02
    2
Q 00
  1    2
    20
Q     03
  2
    2
Q 00
  3    3
    20
Q
                                                               Rolling 12 months




  4 03
    2
Q 00
  1    3
    20
Q
                                                        ROE
                                                                               ROE and ROCE




      04
  2
    2
Q 00
  3    4
    20
Q
  4 04
    2
Q 00
  1    4
    20
Q
  2 05
    2
Q 005
  3
    2
Q 00
  4    5
    20
Q
  1 05
                                                        ROCE




    2
Q 00
  2    6
    20
Q     06
  3
    2
Q 00
  4    6
    20
Q
  1 06
    2
Q 00
  2    7
    20
Q
  3 07
    20
      07
Emissions trading for air traffic
 EU air traffic accounts for only 0.5% of all CO2
 emissions in the world
 Finnair in favour of emissions trading principles
 Should be global
 Competitively neutral
 Investments already made in new technology
 should be taken into account
 Open emissions trading
Customers can make
environmental choices when flying
 Choose an airline with a modern fleet
 Fly in the right direction all the way, without
 unnecessary stopovers
  • shorter flight routes result in less emissions
 Avoid large, congested airports

 By making these choices, fuel consumption
 and emissions can drop by at best 30%!
Finnair Financial Targets
”Sustainable value creation”



Operating          EBIT margin at least 6% => over 120 mill. € in the coming
profit (EBIT)      few years

                   EBITDAR margin at least 17% => over 350 mill. € in the
EBITDAR            coming few years

Economic           To create positive value over pretax WACC of 9,5%
profit

Adjusted Gearing   Gearing adjusted for aircraft lease liabilities not to exceed 140 %


Pay out ratio      Minimum one third of the EPS
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


Adjusted Gearing   Interest bearing debt + 7*Aircraft lease payments – liquid funds)
                     / (Equity + minority interests)


Pay out ratio      Dividend per share / Earnings per share
www.finnair.com
Finnair Group Investor Relations
email: investor.relations@finnair.com

tel: +358-9-818 4951
fax: +358-9-818 4092

				
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