1 A seasonally weak first quarter 24.4.2019 Topi Manner 2 Growth - - PowerPoint PPT Presentation

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24.4.2019 Topi Manner

A seasonally weak first quarter

• Uncertainty in the global economy affected the market conditions
• Easter moved from Q1 to Q2
• Japanese and North-American routes performing well
• In China, the year started slowly
• Competition remains tight in Europe
• Overcapacity in the package holiday market
• Fuel costs have increased during Q1, including hedges

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Growth in passenger demand varied between areas

Capacity

+10.4%

13th A350 Aircraft

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Revenue increased by 5 per cent year-on-year and number of passengers reached a new Q1 record

Revenue

+5.0%

Operational cost

+8.9%

Comparable

• perating result
• 16.2 M€

(14.6 M€)

NPS

37*

NPS = Net Promoter Score

*New Customer satisfaction survey was launched in beginning of January 2019. In the new survey NPS is calculated based on

responses from all customers starting from beginning of 2019, including Finnair Plus and non-members. In 2018 NPS was calculated based on responses from Finnair Plus members only and therefore these results are not comparable. In Q1 2018 NPS was 43.

Revenue by product

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Strong Japanese market supported passenger and cargo demand

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41 39

Q1 2018

490 47 71

673

41 517 68

Q1 2019 641

5.0% Passenger revenue Travel services Ancillary Cargo

+5.5% +3.9% +16.8%

• 4.9%
• The growth in passenger traffic was driven by Japan

and supported the North Atlantic

• Ancillary sales grew most on European and

domestic routes

• Cargo growth was supported by good demand on

the routes between Japan and the Nordic countries and rather weak comparison period due to the ramp up phase of the new Cargo terminal

• Market overcapacity weakened travel service

revenue growth

Passenger Load Factor by area, %

➢ Passenger load factor 78,3% ➢ Comparison period historically high ➢ In long haul traffic performance between routes varied

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Traffic between Asia and Europe is the foundation of Finnair’s revenue growth

➢ Traffic from Asia to Europe remains the source of the majority of Finnair’s passenger revenue

89 81 78 65 83 83 81 75 61 78

Asia Atlantic Europe Domestic Total

Q1 2018 Q1 2019

Q1/2019

2.2

Europe Q1/2018 Asia Unallo- cated

2.4 490.2

Atlantic

10.8 517.2 12.8

Domestic

• 1.3

+5.5%

Passenger revenue Q1/18 vs Q1/19

Q1/2019 Change Fuel costs 145.2 +14.0 % Staff costs 129.7 +5.2 % Passenger and handling services 127.5 +6.5 % Depreciation and impairment 75.9 +5.5 % Traffic charges 72.1 +10.8 % Aircraft materials and overhaul 46.3 +21.1 % Sales, marketing and distribution costs 41.6 +2.1 % Property, IT and other expenses 33.3 +5.5 % Capacity rents 32.1 +13.9 %

Operating costs (€703.7 million in total +8.9%)

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Operating costs increased slower than capacity

• Capacity growth 10.4%
• Operating costs 8.9%
• Operating costs excluding fuel 7.6%

21% 18% 18% 11% 10% 7% 6% 5% 5%

Fuel costs Staff costs Passenger and handling services Depreciation and impairment Traffic charges Aircraft materials and overhaul Sales, marketing and distribution costs Property, IT and other expenses Capacity rents

The new more transparent cost structure

We are constantly renewing us

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Customer experience

• New menu
• New Marimekko-textiles

ja Amenity kits

• WiFi instalments
• ATR- aircraft renewal

Responsibility

• 13th A350 aircraft
• Push for change
• Carbon offsetting

projects

• Reduce the use of

plastic People experience

• 170 new employees and

some 280 summer workers

• Continuous development
• f new ways of working:

Agile and Lean culture

• Developing occupational

safety and well-being at work Digitalization

• Aurinkomatkat Own

Vacation -App

• Finnair.com renewal
• 2.5 million customers /

month using our digital channels

• AIG's insurance products
• n Finnair's website

Our target: sustainable, profitable growth

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Sustainable

• We will continue to focus
• n sustainability by

updating our strategy

• Push for change

expansion Growth New destinations and more frequencies

• Sapporo, Hong Kong and

Osaka, Tokio and Guangzhou

• Punta Cana
• Hanover, Bologna,

Bordeaux, Porto, Trondheim and Tromso Profitable

• Yield mix
• Continuous

improvement of productivity

• Capital efficiency

Two new EB members starting from 1.5.

• Ole Orvér, Chief

Commercial Officer (CCO)

• Nicklas Ilebrand as SVP

Strategy

Outlook

Global airline traffic is expected to continue growing in 2019. Finnair expects increased competition as capacity is added, particularly on routes linking Europe with Asia as well as in short-haul traffic. The slowdown in the economy of Finnair´s key markets and the continued uncertainties surrounding global trade, including from Brexit, could impact the demand for air travel and cargo. Finnair plans to increase its capacity by approximately 10 per cent in 2019, down from its 14.8 per cent capacity growth in

• 2018. This growth is mainly focused on the Asian market.

Revenue is expected to grow at a somewhat slower pace than capacity in 2019. In line with its disclosure policy, Finnair will issue guidance on its full-year comparable operating result as part of its half-year report in July.

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Finance

Pekka Vähähyyppä

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Capacity growth driving revenue growth

Passenger revenue Q1/2018 vs Q1/2019, Meur

• Strong capacity growth drove passenger revenue growth
• Demand growth was insufficient compared to capacity growth,

which had a negative impact on the passenger revenue development compared to last year

ASK

• 4.9

Q1 PY

56.1

• 26.4

PLF (load)

2.2

FX Yield, mix,

• ther

Q1

490.2 517.2

+26.9

Q1 PY

6.8 47.4

• 3.5

39.1 1.5 71.2 40.5 155.7

Travel services Cargo Ancillary

40.7 67.7

Q1

150.9

+4.9

Ancillary Cargo Travel services

Other revenue Q1/2018 vs Q1/2019, Meur

• In other revenue areas, cargo development was strong, rising

by almost EUR 7 million vs. last year ➢ Although in general cargo market growth have shown some signs of slowing down

• Operating expenses excluding fuel +7.6% (ASKs +10.4%)
• Fuel costs including hedging results cost increased +14.0%
• Unit cost (CASK) -0.4%, CASK ex fuel at constant currency -2.8%

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Fuel costs rose faster than capacity growth, weakening comparable EBIT

Cargo 6.8

• 8.1

Revenue Mainte- nance

• 3.9
• 6.4
• 7.0

Traffic charges

14.6

Rents Passenger services Fuel

• 17.8
• 4.0
• 7.7

Other (NET) Q1 EBIT Staff

• 16.2

Depreciation

• 7.7

Travel services-3.5 Ancillary1.5 Q1 2018 Passenger revenue 26.9 31.8

• 30.8 M€

Q1/18 hedging gain 9.2 M€ Q1/19 hedging gain 8.0 M€

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Hedging ratios 2019: 71 % H1: 76 % H2: 69 %

Fuel costs Q1/18 vs. Q1/19 Fuel hedges 31 March 2019

Changes in EUR/USD and volume growth impacted fuel costs

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Development of unit revenue and unit cost

6.46 6.48

CASK development RASK development

• Unit cost (CASK) decreased by 0.4%. Unit cost at constant

currency excluding fuel decreased by 2.8%. (Q1/2019 vs Q1/2018)

• Unit revenue (RASK) decreased by 4.9%. Unit revenue at

constant currency decreased by 5.3%. (Q1/2019 vs Q1/2018)

5.16 4.79 4.56 4.88 5.10 1.32 1.36 1.41 1.39 1.36 1 2 3 4 5 6 7 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 CASK ex fuel Fuel

6.15 5.97 6.27

6.63 6.70 7.00 6.53 6.31 1 2 3 4 5 6 7 8 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

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1) HFS = Held-for-Sale. 2) I-B = Interest-bearing

Healthy balance sheet supports future investments

• Equity ratio 22.2% (23.4%)
• Gearing 75.9% (80.4%)

2 103 11 351 508 445 2 155 17 133

31.3.2018

929 987 1 709 378 1 073 1 746 337

31.12.2018

1 062 461 321 2 208

31.3.2019

603 661 143 899

31.3.2019

673 918

31.12.2018

1 774 675 3 944 117

31.3.2018

524 4 052 4 052 3 944 3 965 3 965 Assets HFS Cash Provisions Fleet Other assets Other fixed assets Liabilities HFS I-B debt Tickets Other liabilities Equity

Cash flow investments for the financial year 2019 relate mainly to fleet and are expected to total approximately 440 million euros, including advance payments.

Operating cash flow positive during Q1

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564 181 31.12.2018 417 133 365 1,062 475 656 697 31.3.2019 1,073 Cash funds

• 11.2 M€

Commercial paper, deposits and funds > 3 months Commercial paper, deposits and funds < 3 months Cash and bank deposits Liquid funds in cash flow

• 36.6

655.8

2018

59.7

Comparable EBITDA Purchase

• f own

shares Loan payments

56.6

Other

• 0.5

Investments

696.7

• 25.5

Working capital Other

• 126.8

114.1 Cash Q1

Operating +148.3mEUR

Cash flow +40.9mEUR

Investing

• 70.2mEUR

Finance

• 37.1mEUR

THANK YOU

Contact us: Finnair IR / financial communications mari.reponen@finnair.com kasper.joukama@finnair.com

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Appendix

Income statement

in mill. EUR Q1 2019 Q1 2018 Change % 2018 LTM

Revenue 672.9 641.1 5.0 2 849.7 2 881.5 Other operating income 14.6 19.8

• 26.1

73.7 68.6 Operating expenses Staff costs

• 129.7
• 123.3

5.2

• 499.6
• 506.0

Fuel costs

• 145.2
• 127.4

14.0

• 581.0
• 598.8

Capacity rents

• 32.1
• 28.2

13.9

• 122.4
• 126.3

Aircraft materials and overhaul

• 46.3
• 38.2

21.1

• 162.9
• 171.0

Traffic charges

• 72.1
• 65.1

10.8

• 300.8
• 307.9

Sales, marketing and distribution costs

• 41.6
• 40.8

2.1

• 159.0
• 159.8

Passenger and handling services

• 127.5
• 119.7

6.5

• 453.9
• 461.6

Property, IT and other expenses

• 33.3
• 31.6

5.5

• 131.3
• 133.0

Comparable EBITDA 59.7 86.5

• 31.0

512.6 485.7 Depreciation and impairment

• 75.9
• 72.0

5.5

• 294.2
• 298.1

Comparable operating result

• 16.2

14.6 218.4 187.6

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Hedging currencies and sensitivities 31 March 2019

Fuel sensitivities 10% change without hedging 10% change. taking hedging into account Hedging ratio (rolling 12 months from date of financial statements) H1/2019 H2/2019 Fuel EUR 67 million EUR 29 million 76% 69% Currency distribution % 1-3 2019 1-3 2018 2018 Currency sensitivities USD and JPY (rolling 12 months from date of financial statements for

• perational cash flows)

Hedging ratio for

• perational cash

flows (rolling next 12 months) Sales currencies 10% change without hedging 10% change. taking hedging into account EUR 59 63 55

• USD*

3 2 4 see below see below see below JPY 8 6 10 EUR 33m EUR 14m 67% CNY 5 5 7

• KRW

3 2 3

• SEK

4 5 3

• Other

18 17 17

• Purchase currencies

EUR 59 63 61

• USD*

33 29 32 EUR 83m EUR 35m 63% Other 8 8 7

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* Hedging ratio for USD-basket, which consists of USD- and HKD net cash flows. The sensitivity analysis assumes that the Hong Kong dollar continues to correlate strongly with the US dollar.