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A profitable fourth quarter in a challenging environment 15.2.2019 Topi Manner 2
Q4 2018: we continued to grow • 3.2 million passengers carried • RPK up by 4.4 % and ASK up by 9.0% • We added capacity especially to European destinations, also to Lapland • More flights to Japan, China and United States • 101 weekly flights to Asia • Now twelve A350 aircraft 3
Growth continued in Q4 – challenging market conditions reflected in our result Revenue Comparable Passengers NPS operating result 683 M€ 9.2 M€ 3.2 mill 46 22.9 M€ +5.8% +6.7% +1 NPS = Net Promoter Score 4
Comparable operating result close to last year’s level M€ Comparable operating result, 12 months rolling 194 200 183 183 170 169 149 150 96 100 61 55 54 53 50 37 24 14 0 -24 -31 -50 -36 -48 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 % of revenue -2.1 -1.6 -1.4 -1.1 0.6 1.1 1.6 2.3 2.3 2.4 2.6 4.0 6.0 6.6 6.9 7.1 6.5 6.0 5
Revenue increased in the main market areas Revenue, M€ Capacity (ASK), Mill. km Passenger Load Factor, % 295 5 156 82 5 039 80 300 79 79 79 79 279 77 272 76 263 67 250 4 036 64 3 385 200 150 100 51 51 762 722 36 39 50 518 461 25 16 0 Asia North- Europe Domestic Un- Asia North- Europe Domestic Asia North- Europe Domestic Total Atlantic allocated Atlantic Atlantic • • • Asia +5.8% Asia +2.3% Asia -3.5%-p • • • North-Atlantic +7.2% North-Atlantic +5.5% North-Atlantic -0.3%-p • • • Europe +3.6% Europe +19.3% Europe -3.6%-p • • • Domestic -0.2% Domestic +12.5% Domestic -3.1%-p • • Unallocated +60.4% Total -3.4%-p Q4 2017 Q4 2018 6
2018 was a year of growth and transformation • The year begun in a favorable environment but got more challenging towards the end of the year • We continued to grow and invest in the future • New passenger record 13.3 million • The COOL Nordic Cargo Hub • Wi-Fi connection on European flights • Five star APEX rating • New destinations Nanjing, Lisbon, Stuttgart and Lyon 7
Exploiting new technologies • 25 % ticket sales and over 50% of our ancillaries are bought through Finnair’s digital channels • Fast Wi-Fi on our Narrow-body fleet • iPhones and new applications for personnel • Exploiting artificial intelligence 8
Competition increased in 2018 - Competition tightened especially on European routes - Travel services competition increased towards end of the year - Cancellations due to weather and shortage of spare narrow-body engines - Currency movements unfavorable + Asian traffic remained robust + Finnair's new COOL terminal strengthened our cargo operations + Rising fuel price pressure eased during Q4 9
Full year 2018: Development of key indicators reflect growth Revenue Comparable EBIT Passengers 13 281 2 835 170 169 11 905 2 568 10 867 2 317 10 294 2 284 2 255 9 630 6,0 % 6,6 % -1,6 % 1,1 % 2,4 % 55 24 80,2% 80,4% 79,8% 83,3% 81,8% 16.8 % 17.0 % 11.7 % 10.2 % 7.7 % M€ M€ -36 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Revenue, M€ Comparable EBIT, M€ Passengers, 1 000 Passenger load factor (PLF), % Comparable EBIT, % of revenue Comparable EBITDAR, % of revenue Financial target : Comparable EBITDAR of Financial target : Comparable EBIT of revenue, 17 % revenue, 6 % 10
Aiming for sustainable profitable growth Capacity growth continues - new destinations and frequencies in 2019 • Hannover, Bologna, Bordeaux, Porto • Los Angeles, Sapporo, Punta Cana • Hong Kong and Osaka Economic, social and environmental responsibility is in our focus in all operational development We utilize the potential of technology to improve productivity and customer experience Long-term investment to develop customer experience and people experience continues 11
Outlook and dividend proposal 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. The Board of Directors proposes to the Annual General Meeting that a dividend of 0.274 euros per share be distributed for 2018. 12
Finance Pekka Vähähyyppä 14
Fuel cost the most significant driver for EBIT decline compared to Q4/2017 ASK, mill RASK FLIGHTS -13.7 37.7 +7.3% +9.0% Passenger39.4 -2.9% Ancillary& retail1.9 Cargo 2.8 Travel services-6.4 31,089 28,969 6.72 6.52 10,473 9,607 -23.1 Q4 PY Q4 Q4 PY Q4 Q4 PY Q4 22.9 Avg. fare 1 PLF, % PAX, 1000 -10.2 10.7 9.2 +6.7% +1.2% -16.1 -3.4pp -3.5 -9.3 168 EUR / 3,155 80.3 Q4 PY EBIT Revenue Fuel Traffic Aircraft Other exp. Staff Other (NET) Q4 EBIT 2,956 166 PAX charges & EUR / Ground PAX 76.9 handling Q4 PY Q4 Q4 PY Q4 Q4 PY Q4 • Operating expenses excluding fuel +5.2% (ASKs +9.0%) Ancillary REV Cargo, mill Cargo yield • Fuel costs including hedging results and emissions trading cost +8.8% -1.4% -3.6% +18.9% 1.40 44.5 EUR / 40.9 12.6 12.4 KG • KG KG Unit cost (CASK) -0.7%, CASK ex fuel at constant currency 1.35 EUR / EUR / EUR / PAX PAX KG -4.3% Q4 PY Q4 Q4 PY Q4 Q4 PY Q4 1) Avg. fare = Passenger revenue per revenue passengers. 15
Higher price of jet fuel and Finnair’s growing volume increased fuel costs in Q4 Fuel costs Q4/17 vs. Q4/18 Fuel hedges 31 December 2018 Q4/17 hedging gain 6.9 M€ Q4/18 hedging gain 27.7 M€ 16
REVENUE COSTS +10.7% 10.4% Full year EBIT -1 mEUR below previous 2,835 2,739 2,475 2,568 year 2017 2018 2017 2018 RASK FLIGHTS ASK, mill -1.0 266.2 +14.8% +9,7% -3.9% Passenger 223.5 Ancillary & retail 16.2 125,848 42,386 Cargo 9.5 6.96 6.69 114,718 36,922 Travel services16.9 2017 2018 2017 2018 2017 2018 -10.1 Avg. fare 1 PAX, 1000 PLF, % +11.6% -0.5% -1.5pp -108.9 -4.7 -12.9 83.3 170 -34.4 169 EUR / 13,281 11,905 EUR / PAX 81.8 PAX -45.9 170.4 169.4 2017 2018 2017 2018 2017 2018 -40.2 -10.2 Ancillary REV Cargo, mill Cargo yield -0.3% +0.7% +4.1% 12.1 12.1 1.31 157.0 158.2 1.26 EUR / EUR / EUR / KG EUR / KG PAX PAX 2017 Revenue Staff Fuel Tour Ground Traffic Other Leases& Other 2018 KG KG operator handling charges exp. depreciation (NET) 2017 2018 2017 2018 2017 2018 17 1) Avg. fare = Passenger revenue per revenue passengers
Healthy balance sheet supports future investments 3 076 3 076 Adjusted net debt 2 887 2 947 2 947 2 887 15 10 17 11 678 7x aircraft 669 719 Adjusted leases + 1 073 983 1 119 interest-bearing currency Adjusted 466 445 385 liabilities hedges Cash net debt 435 -2,000 327 450 664 699 171 656 170 167 104 -1,500 112 100 -1,085 1,073 1 376 1 336 1 271 1 154 -1,000 1 022 1 016 -687 -675 -500 31.12.2017 30.9.2018 30.12.2018 31.12.2018 30.9.2018 31.12.2017 0 Assets HFS I-B debt Cash Tickets • Equity ratio 34.7% Other assets Other liabilities Other fixed assets Provisions Fleet Equity • Adjusted gearing 67.2% Liabilities HFS 18 1) HFS = Held-for-Sale. 2) I-B = Interest-bearing
One new A350 aircraft and one A350 SLB main drivers for cash flow changes Cash funds -45.6 M€ Change in cash flows -46.4 M€ 1,119 Operating 1,073 +37.5mEUR -15.1 Investing 417 -45.6 -49.5mEUR 417 98.2 Financing 702 702.2 -34.4mEUR 656 -2.3 -14.9 -15.8 655.8 -161.4 -3.7 505 475 114.2 198 181 EBITDA Working Investments Other Loan Hybrid Purchase Liquid Other Liquid capital Disposals payments bond of own 30 Sep 2018 31 Dec 2018 funds funds interests shares Q3 Q4 Commercial paper, deposits and funds > 3 months Commercial paper, deposits and funds < 3 months Cash and bank deposits 19 Liquid funds in cash flow
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