2006 Senior Vice President and CFO Lasse Heinonen Telephone +358 9 - - PowerPoint PPT Presentation

SLIDE 1

CONTACT INFORMATION Finnair Plc Helsinki-Vantaa Airport Tietotie 11 A FI-01053 FINNAIR Switchboard +358 9 818 81 www.finnair.com www.finnair.com/group Senior Vice President Communications Christer Haglund Telephone +358 9 818 4007 Fax +358 9 818 4092 christer.haglund@finnair.com Senior Vice President and CFO Lasse Heinonen Telephone +358 9 818 4950 Fax +358 9 818 4092 lasse.heinonen@finnair.com Director, Investor Relations Taneli Hassinen Telephone +358 9 818 4976 Fax +358 9 818 4092 taneli.hassinen@finnair.com Investor Relations Telephone +358 9 818 4951 Fax +358 9 818 4092 investor.relations@finnair.com

2006

SLIDE 2 Christer Haglund, SVP Communications and Jukka Hienonen, President and CEO

We realised in time the growth potential of Asian traffi c and got down to work in the company. We could tell people how good our connections are via Helsinki from Europe to Asia and vice versa. A map of Asia and new

• aircraft. This is good material for

a travel guide. Shall we continue with these themes? The 2006 annual report is intended to be a travel guide into

the world of Finnair.

We are a reliable airline, we have a comprehensive route network and we provide fi rst class service. Our customers are satisfi ed.

SLIDE 3

CONTENTS

Information for Shareholders .......................................4 Key Figures 2006 .........................................................4 Invest in Finnair ...........................................................6 Traffj c Information and Fleet ........................................7 Review by the President & CEO .....................................9 On Finnish Wings to the Ends of the Earth .................10 Europe’s Fastest Link to India .....................................13 The Welcoming Warmth of Thailand ..........................15 Nagoya – A Third Destination in Japan ........................17 Daily to Exhilarating Shanghai ....................................19 Finnair’s Success Factors............................................20 Finnair and Society ...................................................22 Scheduled Passenger Traffj c ........................................24 Leisure Traffj c ............................................................25 Travel Services ...........................................................26 Aviation Services ........................................................27 Board of Directors and Auditors.................................28 Group Management ..................................................30 The Financial Report 2006 is published separately

2006

• Indeed. We have already

achieved our vision “Best in Northern Skies, European Excellence”. Now we will empha- sise our role in traffi c between Europe and Asia.

• Absolutely. We have a story
• f strong growth to tell.

We must remember to mention that we are in strong shape fi nancially, as we start to invest in a new Asian fl eet. Let’s do that. I, for one, have complete faith in this.

SLIDE 4 The Annual General Meeting of Finnair Plc will be held on 22 March 2007 at 3 pm at the Helsinki Fair Centre, Messuaukio 1, Congress Wing Entrance, Hall C1. Notice of attendance at the Annual General Meet- ing (AGM) must be given at the latest by 4 pm on 20 March 2007. Notice of attendance can be given by post to the address Finnair Plc, Share Register HEL-AAC/5, FI-01053 FINNAIR, by fax to +358 9 818 1662, by telephone from Monday to Friday 9 am–4 pm to +358 9 818 7637, or by e-mail to yhtiokokous@fjnnair.fj. Letters, faxes or e-mails regarding notice of attend- ance must have arrived before the period of notice

• f attendance ends.

Shareholders who are entered at the latest by 12 March 2007 in the Company’s register of share- holders maintained by the Finnish Central Securities Depository Ltd, or who are holders of nominee-reg- istered shares and who on 12 March 2007 are tem- porarily entered in the register of shareholders in the manner specifjed in Chapter 4 Article 2 of the Companies Act, are entitled to attend the AGM. Shareholders whose shares have not been trans- ferred to the book-entry system are not entitled to attend the AGM. BOARD OF DIRECTORS’ PROPOSAL ON THE DIVIDEND According to the fjnancial statements on 31 Decem- ber 2006, the distributable equity of Finnair Plc amounts to 270.8 million euros. The Board of Directors proposes to the Annual General Meet- ing that a dividend of 0.10 euros per share be dis- tributed, a total of 8.9 million euros, and that the remainder of the distributable equity be carried

• ver as retained earnings.

INFORMATION FOR SHAREHOLDERS

FINANCIAL INFORMATION In the fjnancial year 2007, interim reports will be pub- lished in Finnish, Swedish and English: Q1 (1 January – 31 March 2007) 4 May 2007 at 9 am Q2 (1 January – 30 June 2007) 9 August 2007 at 9 am Q3 (1 January – 30 September 2007) 1 November 2007 at 9 am ORDERING THE ANNUAL REPORT The Annual Report 2006 will be published in print in Finnish, Swedish and English in week 9. Orders:

• tel. +358 9 818 4904, fax. +358 9 818 4401, e-mail:

post@fjnnair.fj ELECTRONIC ANNUAL REPORT The electronic Annual Report will be published on the internet in Finnish, Swedish and English at the address www.fjnnair.com/2006. CHANGES OF ADDRESS Shareholders are kindly requested to notify any changes of address to the custodian of their book- entry account.

FINNAIR GROUP KEY FIGURES

2006 2005 2004 2003 2002 Net sales EUR million 1,990 1,871 1,683 1,558 1,656 Operating profjt (adjusted), EBIT* EUR million 11 70 25

• 41

24 Operating profjt (adjusted)*, % turnover % 0.6 3.7 1.5

• 2.6

1.5 Operating profjt, EBIT EUR million

• 11

82 31

• 19

60 Result before taxes EUR million

• 15

88 31

• 22

54 Unit revenues on fmight operations cents/RTK 74.0 73.7 71.0 80.1 88.1 Unit costs on fmight operations cents/ATK 46.1 45.3 50.7 58.7 63.1 Earnings per share EUR

• 0.16

0.73 0.30

• 0.19

0.43 Equity per share EUR 6.77 7.73 6.97 7.24 7.58 Gross investment EUR million 252 58 115 82 102 Interest-bearing net debt EUR million 43

• 155
• 24
• 18

20 Equity ratio % 37.2 42.2 40.2 44.4 44.3 Gearing % 7.1

• 25.1
• 3.1
• 2.9

3.1 Adjusted gearing % 112.8 66.8 102.5 102.7 82.0 Return on capital employed (ROCE) %

• 0.1

11.1 6.1 0.0 7.6 Average number of employees 9,598 9,447 9,522 9,981 10,476 * excluding capital gains, arrangement expenses and changes in fair value of derivatives

KEY FIGURES 2006

SLIDE 5 Key F i g u r e s 2 0 0 6 PVG = Shanghai, Pudong Airport AY057 = Finnair fmight number PNR = booking reference TAG:3105717966 = baggage tag number PRT:0892 = tells which printer has printed the tag

5

TURNOVER EUR mill. 1,600 1,200 800 400 2,000 02 03 04 05 06 00 ADJUSTED EBIT* EUR mill. 60 40 20

• 20

80

• 40
• 60

4 3 2 1 5

• 1
• 2
• 3

RESULT BEFORE TAXES EUR mill. 100 80 60 40

• 40

20

• 20

RETURN ON CAPITAL EMPLOYED % % of turnover ADJUSTED GEARING % 120 100 80 60 40 20 NUMBER OF PASSENGERS mill. passengers 8 7 6 5 4 9 3 2 1 REVENUE TONNE KILOMETRES

• mill. tnkm

1,500 1,000 2,000 500 2,500 Domestic International Domestic International PASSENGER LOAD FACTOR % * excluding capital gains, fair value changes of derivatives and arrangement expenses % 02 03 04 05 06 100 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 UNIT REVENUES AND COSTS 10 8 12 6 4 2

• 2

70 65 60 55 50 75 80 4 2

• 2
• 4
• 6
• 8

02 03 04 05 06 Unit costs, c/ATK Unit revenues, c/RTK

• 10
• 12
• 14
• 16

Change %

SLIDE 6 I n ve st i n F i n n a i r

CAPITALISING ON E-BUSINESS

Finnair is improving its competitiveness and cost effeciency by taking advantage of opportunities provided by e-business in sales and cus- tomer service.

TOP SERVICE QUALITY IN EUROPE

Finnair’s service quality has been rated high and the company is ope- rationally one of the best in Europe. Finnar’s goal is to be the most desirable option as a provider of travel services. A customer loyalty scheme enables us to provide an increasingly personal and comprehen- sive service to customers. Finnair systematically develops its services

• n the basis of feedback gathered from customers.

STRONG GROWTH

Air transport is a growth sector. Finnair’s business objective is sustai- nable, profjtable growth in the rapidly expanding Asian travel market. Helsinki is located on the main fmight path between Europe and Asia, which means that Finnair has Europe’s largest natural market area in Asian traffjc. Finnair’s Asian services have tripled in fjve years, and growth in 2007 will be 30 per cent. Finnair’s modern fmeet enables it to realise this growth.

BRAND

The Finnair brand is strong in the company’s main market areas. The brand values have been extended into dimensions that communicate the kind of airline that Finnair wishes to be and for what it wishes to be known. Finnair’s brand values are safety, Finnishness, freshness and developing. They are timeless and distinguish Finnair from com-

• petitors. Finnair is known as one of the most punctual and reliable

airlines in the industry.

MARKET LEADER

Finnair is the market leader in air transport to and from Finland as well as in gateway traffjc passing through Finland. Finnair has a growing role in passenger and cargo traffjc between Europe and Asia.

SUCCEEDING IN COMPETITION

Finnair’s success in a competitive environment is based on an excellent network, pricing on market terms and high quality service. Finnair is strengthening its competitive position by making effective use of various distribution channels and by continually developing new services and travel products.

SUPERBLY NETWORKED

Finnair belongs to the alliance of quality airlines, oneworld. Cooperation brings Finnair worldwide visibility as well as extra revenue and cost savings. Finnair also has bilateral agreements that extend its network.

MANAGEMENT CULTURE AND VALUES

Finnair is managed by values. Finnair’s values are a functioning working community, continuous development, customer orientation and profitability. The values support and aid Finnair employees in the choices and decisions they make in their daily work.

PROFESSIONAL PERSONNEL

A professionally skilled, motivated and committed work force is an asset that Finnair values highly. Finnair actively works to promote the job satisfaction and competence of staff in a rapidly changing operating

• environment. Personnel structure is developed in accordance with

business objectives. Incentive schemes support the implementation

• f Finnair Group’s strategy.

CORPORATE SOCIAL RESPONSIBILITY

Finnair recognises its responsibility as part of the structures of society and as a long-term actor in Finland and its main market areas. An

• pen, responsible and active environmental policy is a permanent

feature of the company’s way of doing business – which is evident, for example, in our environmentally positive aircraft acquisitions. Finnair also participates in social responsibility projects.

FINNAIR GROUP

SCHEDULED PASSENGER TRAFFIC

Finnair Scheduled Passenger Traffic Aero FlyNordic Finnair Cargo Oy Finnair Aircraft Finance Oy

LEISURE TRAFFIC

Finnair Leisure Traffic Oy Aurinkomatkat – Suntours Ltd Ab

AVIATION SERVICES

Finnair Technical Services Northport Oy (ground handling) Finnair Catering Oy Finncatering Oy Finnair Facilities Management Oy

TRAVEL SERVICES

Finland Travel Bureau Ltd (SMT) A/S Estravel Ltd Mikkelin Matkatoimisto Area Travel Agency Ltd Amadeus Finland Oy Finnair Travel Services Oy

INVEST IN FINNAIR

FINANCIAL TARGETS

The setting of fjnancial targets is based on the company’s intention to generate economic added value. The target is reached if a six per cent operating profjt margin, namely an operating profjt level of more than one hundred million euros is achieved.

6

SLIDE 7 Tr a f f i c I n f o r m a t i o n a n d F l e e t

Boeing MD-11 Boeing 757 Airbus A321 Airbus A320 Airbus A319 Embraer 170 Embraer 190 Airbus A340 ATR 72 (Aero) Boeing MD-80 (FlyNordic)

TRAFFIC INFORMATION AND FLEET

FINNAIR TRAFFIC PERFORMANCE

2006 2005 2004 2003 2002 Flight hours 211,813 202,070 196,795 172,884 172,681 Flight kilometres (1,000) 133,890 125,410 121,027 113,892 104,838 Available seat kilometres. mill. 23,846 23,038 21,907 18,644 17,785 Revenue passenger kilometres. mill. 17,923 16,735 15,604 12,971 12,793 Passenger load factor % 75.2 72.6 71.2 69.6 71.9 Available tonne kilometres. mill. 3,602 3,400 3,162 2,636 2,491 Revenue tonne kilometres. mill. 2,100 1,940 1,791 1,470 1,439 Overall load factor % 58.3 57.0 56.6 55.8 57.8 Passengers (1,000) 8,792 8,517 8,149 6,849 7,037 Cargo and mail (1,000 kg) 93,807 90,242 86,245 73,416 72,084

FINNAIR GROUP FLEET 31 DECEMBER 2006

Seats Number Owned Leased Average age Airbus A319 123 11 7 4 5.2 Airbus A320 125–144 12 6 6 4.4 Airbus A321 178–181 6 4 2 5.9 Airbus A340 295 1 1 12.2 Boeing MD-11 282–286 7 2 5 12.5 Boeing B757 224–227 7 7 7.6 Embraer 170 76 10 6 4 0.7 Embraer 190 100 1 1 0.0 ATR 72* 68 7 7 15.7 Boeing MD-82/83** 149–164 10 6 4 18.4 Total 72 40 32 8.3 * The ATR 72 aircraft are operated by Aero Airlines ** The Boeing MD-80 series aircraft are operated by FlyNordic The average age of the fmeet operated by the parent company’s Scheduled Passenger Traffjc was 5.6 years on 31 December 2006

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SLIDE 8

SLIDE 9 R e v i e w by t h e P r e s i d e n t & C E O

E N R O U T E T O A S I A

Just over a year ago I stepped into the captain’s shoes at Finnair. 2006 proved to be a transition year in Finnair’s earnings development, and in many ways it repre- sented a preparation for a new departure. W e a r e p u r p

• s

e f u l l y b u i l d i n g F i n n a i r i n t

• a

n a i r l i n e f

• c

u s e d

• n

E u r

• p

e

• A

s i a t r a f fi c . I n t h i s e n d e a v

• u

r w e h a v e t h e k e y s t

• s

u c c e s s . O u r

• r

g a n i s a t i

• n

, fl e e t a n d a b

• v

e a l l

• ur way of thinking are directed to fulfilling this objective.

The location of our home base on the flight path between Europe and Asia is the best place in Europe for implementing our chosen strategy. For onward connections, our Asian flights need an extensive route network in Europe. And this we have. Finnair is the best option for the traveller who has no direct flight connection between Europe and Asia. Welcome to Helsinki, where you can change aircraft without pointless delays. The expanding Helsinki-Vantaa Airport is a pleasant place to make

• nward connections. Whether you are travelling from west to east or vice versa.

The year 2007 is looking good. This year we expect to increase our Asian traffic by a third. We are preparing ourselves for strong growth with a massive fleet mod-

• ernisation. This spring we will acquire two new wide-bodied aircraft, and next

year two more. At the beginning of the next decade we will have a completely new long-haul fleet. Our European fleet is already the most modern and efficient on the continent. Big investments require resources. For this reason we are now concentrating prin- cipally on profitability and financial performance. As we embark on these large projects, we aim to maintain our financial health and an ability to steer an inde- pendent course. F

• r

a c a p t a i n t

• s

u c c e e d i n h i s l e a d e r s h i p t a s k s , h e n e e d s a n e x p e r t c r e w a n d a s t u r d y

• vessel. Success in changing conditions requires a steady nerve, but I believe there to

b e n

• l

a c k

• f

t h i s a m

• n

g F i n n a i r s t a f f . I w

• u

l d l i k e t

• t

h a n k t h e G r

• u

p ’ s p e r s

• n

n e l for the contribution they have made in what have been difficult conditions for the airline industry. My gratitude is also due to customers and shareholders for the trust they shown in us to date. Join us on a new voyage! Jukka Hienonen President and CEO

>> Capitalising on the

• pportunities in traffic

between Europe and Asia drives decision-making in

• Finnair. Growth must be

tapped into now. >> Massive investments require resources. We are securing

• ur ability to grow by

improving our profitability. >> Focusing on core business changes

• structures. 2006 proved

to be a transition year in Finnair’s earnings development – a year

• f structural change.

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SLIDE 10

The well-known Finnair brand creates positive images. In Finnair, safety is a fundamental

• utlook. The customer can relax.

Reliability is the best Finnish quality. Promises are kept.

ON FINNISH WINGS TO THE ENDS OF THE EARTH

>> Brand values represent the compa- ny’s strategic intent. It’s important to set targets and to work purposefully to fulfil them. Finnair’s brand values

are safety, Finnishness, freshness and developing. Finnair is a strong

Finnish brand that increasingly arous- es positive thoughts elsewhere in the world, too. >> Safety, the most important criterion of Finnair’s operations, is apparent in the Group’s system- atic and consistent way of working.

Sound finances facilitate invest- ments in up-to-date aircraft and keep them in good condition.

Personnel look after the customers at every stage of their journey – also in exceptional circumstances. >> A timetable is a commitment made to the customer. Punctuality

is one of the best Finnish virtues.

Finnair’s service means warm friend- liness, genuine care and attention, and acting effectively for the best of the customer. Finnish straight for- wardness and good commonsense help in a wide range of situations.

10

SLIDE 11 O n F i n n i s h W i n g s t o t h e E n d s o f t h e E a r t h

The Finnair brand is strong. One senses it everywhere. Service is refreshingly different - of quality and with perspective. New services are developed to make the customer’s journey easier.

>> Finnair’s service environment is updated continually to ensure that it is

up-to-date, fresh and a delight for the eye. Customer areas and tools are

stylish, neat and tidy. Customers are approached in an uncomplicated and

• friendly. Finnair’s service is

genuine and clear. >> Finnair’s new aircraft provide the most comfortable and efficient air travel

• experience. Modern, technical innova-

tions facilitate the customer’s life, and

the path travelled by the customer is made as easy and carefree as pos-

• sible. Operations are examined continu-

ally for new development opportunities – it is in these that the innovations of tomorrow are found. >> Finnair is one of the best known brands in the company’s home market, but recognition of the airline is also growing rapidly elsewhere. Blue-and- white Finnair is quickly being con-

firmed as a synonym for quality in new markets. More and more people in

Asia know who has the best connection to Europe – not only the fastest, but also the most comfortable.

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SLIDE 12

SLIDE 13 Finnair opened its route to Delhi in October

• 2006. Interest in the route has been great from

the very start. Initially, Finnair has been fmying to Delhi three times a week, but on account of strong demand the number of weekly fmights will rise to seven in spring 2007. At the same time, a new route to Mumbai will be launched with fjve weekly fmights. The fast Delhi link serves Nordic companies, which already have many factories, sales companies and joint ventures in

• India. There is also great demand for the route from further

afjeld in Europe, because only a few European capitals have a direct connection to Delhi. For example, there is no connection from the EU capital Brussels. India is actually more a continent than a country; it has as many states and offjcial languages as Western Europe. The whole of India can’t be conquered in an instant, but Finnair fmies to Delhi and Mumbai, from where good connections radiate to every corner of the country. India is the world’s second most populous country and a growing economic giant whose gross national product is expanding at around eight per cent per year. Indian business and leisure travel is growing in double-digit fjgures. Business relations with Europe are tightening and the country’s 300 million-strong middle class are constantly looking for new travel destinations. India’s developing economy is also having a strong impact

• n demand for air freight. Cargo traffjc from India to Europe

is growing strongly.

EUROPE’S FASTEST LINK TO INDIA

Finnair has the fastest link between the world’s two largest democracies, the EU and

• India. Thanks to Helsinki’s geographical location, the flight time to Delhi is only 6 hours

and 30 minutes. Finnair is the only airline in Northern Europe offering a route to India. The new connection is of particular interest to Indian travellers.

Delhi captivates with its smiles. India is a land of

• pportunity for travellers and business life alike.

“When I travel from Stockholm to Delhi, Finnair is absolutely the best option. The connection through Helsinki saves me nearly one and a half hours in travel time compared to other airlines. Changing aircraft at Helsinki-Vantaa Airport is a pleasant experience, because the distances between terminals are short. The lounge services are also excellent.” Tina Engström, Sales Director, Stockholm

HELSINKI DELHI

STOCKHOLM - HELSINKI - DELHI 9 h 10 min

E u r o p e ’s Fa st e st L i n k t o I n d i a STOCKHOLM

Finnair has a fast link between Europe and wonderful India.

We invest in service. There are also Indian cabin staff on our flights.

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SLIDE 14

SLIDE 15 HELSINKI BANGKOK T h e We l c o m i n g Wa r m t h o f T h a i l a n d

The warm climate and Thai friendliness attract travellers to the country all year round.

Finnair’s fjrst destination in Asia was Bangkok. Initially, the route was operated only in the win- ter season, once a week with a DC-8 aircraft. Now Finnair has scheduled fmights to Thailand daily throughout the year. During the high sea- son, from December to March, Finnair fmies to Bangkok up to twice a day. The fmights arrive at Bangkok’s new, modern Suvarnabhumi Airport, which opened in September 2006. The number of passengers between Finland and Thailand has grown steadily. In the fjrst year, fewer than 3,500 pas- sengers travelled on the Bangkok route, while in 2006 nearly 60 times that number, over 200,000 people, were carried for both leisure and business. Of the European airlines fmying to Bangkok, Finnair is the second largest. Finnair’s Bangkok route differs from its other Asia routes in that demand for the fmights comes principally from Finland and Scandinavia. Thailand is above all a holiday destination, because its climate, developed services and reasonable prices are attractive to tourists. The growth of the tourist industry in Thailand has also increased business travel from Bangkok to European destinations. As well as city holidays, travellers are also interested in Thailand’s beach resorts, to which there are excellent connec- tions from Bangkok. Finnair also fmies leisure fmights direct to Thailand’s holiday paradises.

THE WELCOMING WARMTH OF THAIL AND

Finnair’s Asian traffic began with the Bangkok route 30 years ago. Since then, Thailand has become overwhelmingly the most popular long-haul destination for Nordic holidaymakers. Finnair flies to Bangkok up to twice a day.The Bangkok flights are also increasingly popular among business travellers.

“Our family goes every year to Thailand at the darkest time of winter to seek light therapy and relaxation away from the pressures of work. We have always flown with Finnair, because we know that the company will take care of its customers in all circumstances. In our opinion, Finnair is particularly good at looking after child passengers.” Reija and Kari Tanskanen and their children Tino and Essi, Lahti HELSINKI – BANGKOK 9 h 45 min

Bangkok was Finnair’s first long-haul destination; the route

• pened in 1976.

Finnair flies to Bangkok up to twice a day.

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SLIDE 16

SLIDE 17 N a g oy a – a T h i r d D e st i n a t i o n i n J a p a n

Japan has many faces. Under the modern surface, centuries-old traditions are cherished.

HELSINKI

Nagoya, which has a population of around two million, is situated on the east coast of Japan between Tokyo and Osaka. In terms of income levels it is one of Japan’s most affmuent

• cities. Nagoya is known as the headquarters
• f the car manufacturer Toyota. The Finnair route serves the

cluster of vehicle and electronics manufacturers that has grown up around Toyota, both in terms passengers and air cargo. In addition to the automotive industry, Nagoya is also renowned for its textile industry and ceramics. Finnair’s Nagoya fmights account for around 20 per cent

• f fmight capacity between Nagoya and Europe. Four fjfths of

passengers on the route are Japanese. Finnair is the only airline that fmies from Northern Europe to all three of Japan’s most important cities – Tokyo, Osaka and Nagoya. Connections to Japan improved further when in December Finnair doubled its number of fmights to Tokyo from two to four a week. With additional frequencies planned for spring 2007, Finnair will become the third largest western airline operating between Europe and Japan. Japanese travellers chose Finnair as their favourite west- ern airline in a survey conducted by AB-ROAD Magazine, the country’s best known travel magazine. Finnair’s meals and drinks were the world’s best in the opinion of the Japanese, as were the other aspects of its cabin service. The survey found that Finnair is an airline on which Japanese would also like to travel again. Finnair has fmown to Japan since 1983 – fjrst over the North Pole, and now three hours faster along the northern Siberia fmight path. The fmights have had Japanese-speaking cabin service staff from the very beginning.

NAGOYA – A THIRD DESTINATION IN JAPAN

Nagoya is Finnair’s latest launch in Japan. The service to the main hub of central Japan, an economic area of 20 million people, began in June 2006 with a schedule of three flights a week. Thanks to excellent transit connections, Finnair offers the fastest link between Nagoya and over 20 European capitals.

“I often fly between Nagoya and St. Petersburg on busi-

• ness. The new Helsinki-Nagoya connection means that

the flight time is four hours less than before. Finnair has excellent links not only to St. Petersburg, but also to the rest of Europe. I value the business class lie-flat seats, because they allow me to use the air journey for

• rest. In this way I am in good shape for work after the

flight.” Akinobu Sato, automation specialist, Nagoya NAGOYA - HELSINKI - ST PETERSBURG 12 h 15 min

NAGOYA ST PETERSBURG

Finnair is the only airline that flies from Northern Europe to all three of Japan’s most important cities: Tokyo, Osaka and Nagoya.

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SLIDE 18

SLIDE 19 HELSINKI SHANGHAI BARCELONA D a i l y t o E x h i l a r a t i n g S h a n g h a i

Shanghai is China’s leading centre of business

• life. It has grown at a stunning rate. China has

the world’s fastest growing market, and Shang- hai is becoming a fjnancial hub for the whole of

• Asia. Foreign investment is streaming into the

city at a rate of 10 billion euros a year. The fjnancial and bank- ing world as well as technology companies are among those to favour Shanghai. Shanghai is also one of China’s most popular tourist cit- ies, receiving more than seven million visitors every year. The city provides an excellent window on to the modern Chinese way of life. Finnair was the fjrst oneworld airline to begin a service to Shanghai, with a weekly schedule of three fmights in 2003. Now daily Shanghai fmights serve the travel needs of many Finnish and European companies, and provide direct cargo links to

• ne of China’s most important economic areas.

Like most Asian connections, the Shanghai fmight departs from Helsinki late in the afternoon. This ensures that fmights arriving from Europe enjoy good onward connections to the Shanghai

• service. Correspondingly, passengers on the return fmight can

connect smoothly with Finnair’s European departures. Finnair’s China service began in 1988 with a one fmight a week schedule to Beijing. Now, during the high season, the airline operates more than one hundred fmights a month, to Guangzhou, Beijing and Hong Kong, in addition to Shanghai. Excluding Guangzhou, Finnair has connections every day to its Chinese destinations.

DAILY TO EXHIL ARATING SHANGHAI

In the last ten years, on the east coast of China midway between Beijing and Hong Kong, a new Shanghai has risen, with lights and skyscraper silhouettes that leave Manhattan in the shade. Finnair flies every day of the week to China’s biggest city – exhilarating, pulsating Shanghai.

The skyscrapers of the Pudong area symbolise Shanghai’s rapid development as a hub of Asia’s financial life. “For Spaniards, Finnair is an excellent option when they are travelling to China, as a flight connection is necessary somewhere in Europe. Helsinki may at first glance seem rather remote, but the direction is right, because all European airlines fly to China over Helsinki. For me, Finnair is the number one choice.” Nuria Lopez Romero, Product Manager, Madrid BARCELONA-HELSINKI –SHANGHAI 14 h 55min

In China, Finnair flies to Beijing, Guangzhou and Hong Kong, in addition to Shanghai. In the high season there are one hundred flights a month to China.

19

SLIDE 20 The starting point for good service is to offer customers the best connections. Finnair’s route network and fmight frequency give customers the opportunity to plan jour- neys according to their individual needs. Cooperation with the oneworld alliance and other airlines extends the customer’s

• ptions further.

A key factor in good service is keeping

• promises. As Europe’s most punctu-

al airline, Finnair carries its customers

• n schedule. Finnair’s Network Cont-

rol Centre looks after customers in va- rious situations, including exceptional circumstances, as they travel across the route network. Finnair’s in-flight service is highly valued. Finnair pays attention to its customers’ opi- nions when developing its service. The Finnair Plus frequent-flyer scheme has more than 550,000 active members, who are taken into account in Finnair’s service

• chain. Frequent fmyers value services that

make travelling easier. Loyalty customers who travel most can enjoy the company’s lounge services. Finnair leads the field in the development

• f electronic services. The use of the elec-

tronic fmight ticket, or e-ticket, means that it is quick and easy both to purchase a ticket and check in for a fmight on the internet.

Success in competition between airlines is to a large extent based

• n service quality and the added value experienced by the customer.

That’s why service development plays a central role in Finnair.

FINNAIR DELIVERS SERVICE

FINNAIR’S SUCCESS FACTORS

Finnair’s in-flight service is rated

• ne of the best in Europe.

Finnair’s Asia strategy is based on the Helsinki Gateway concept, which delivers the fastest connections between Asia and Europe. The route network is developing in both Asia and Europe.

LOCATED ON A STREAM OF PASSENGERS

FINNAIR SERVICE STANDS OUT Top punctuality in Europe Lie-fmat seats in business class on all long-haul fmights Prize-winning wine cellar Service developed according to customers’ wishes Advanced electronic services

• Finnair’s route network is a mesh of hun-

dreds of pairs of cities, connecting Asia and

• Europe. Every new Asian route opens up

40 new connections between Asian and European destinations. At the same time, a vast number of direct links are created for Finnish customers. Most people travelling between Europe and Asia need to make at least one fmight change, because the majority of travellers have no direct connection available to them. The shortest route from Central Euro- pe to Asia runs over Helsinki. An atlas is misleading, but this can be seen easily on a globe. Helsinki is the fjrst European capital when fmying from Asia to Europe. And Helsinki opens up the whole of Europe. Compared with the giant airports of Euro- pe, making a fmight transfer at Helsinki-Van- taa is easily accomplished, in a little more than half an hour. Finnair’s objective is to fmy daily to as many destinations as possible. Travel planning becomes easier when there is a fmight con- nection every day. Such destinations in 2007 are Bangkok, Delhi, Hong Kong, Osaka, Beijing and Shanghai. A new Asian des- tination, Mumbai in India, will open in spring 2007. On account of growing Asi- an traffjc, Finnair is also opening new ro- utes in Europe. A flight transfer at Helsinki-Vantaa Airport is fast and efficient. CONNECTING ASIA AND EUROPE More than 50 international and 15 domestic route destinations At Helsinki, the shortest transfer time between international fmights is only 35 minutes One new Asian route creates 40 new connections between Asia and Europe. Daily non-stop connections to most Asian destinations

• 20

SLIDE 21

Finnair has purposefully modernised its fleet in recent years. The company has one of the most modern fleets in European

• traffic. New aircraft are being acquired for long-haul traffic.

A MODERN FLEET BRINGS SAVINGS

The demands of air transport require strong expertise. Finnair develops its personnel structure to meet the changing needs of flight operations. Development in the technical sphere also shapes job descriptions.

PERSONNEL STRUCTURE CHANGES ACCORDING TO NEED

F i n n a i r ’s S u c c e s s Fa c t o r s Finnair has ordered Airbus A340 and A350 aircraft for Asian traffic. Cabin service staff are an important part of the Finnair brand. In terms of cost-effectiveness, it is impor- tant for an airline to have aircraft that are suitable for each type of route. The objec- tive is to have a spectrum of aircraft ty- pes that is as narrow as possible, because training crew and keeping up maintenan- ce preparedness for many types of aircraft generates extra costs. The goal of Finnair’s fleet modernisation is to have the aircraft of only two manu- facturers in scheduled passenger traffjc. After the fmeet modernisation, long-haul traffjc will be served by 250-350-seat Airbus A340 and A350 aircraft. European and do- mestic traffjc are operated by Airbus A320 and Embraer aircraft, whose seat numbers vary from 76 to 181. This brings fmexibility to the management of capacity. Passenger load factors will remain high, because the fmexible fmeet will provide a sui- table size of aircraft for each route and

• fmight. Crew utilisation will be effjcient, as

the same crew can fmy both the long-haul and the shorter-haul Airbuses. Finnair owns more than half of its fmeet. Versatile fjnancing options improve the company’s risk management. A modern fleet is economic on fuel and loads the environment less. The new air- craft and their modern technology reduce maintenance costs. FLEET RENEWAL UNDERWAY Finnair Group has 72 aircraft Orders for nine Airbus A350 and three Airbus A340 aircraft, four options for both Embraer fmeet will grow to 20 in the coming years ATR 72 turbo-proportion aircraft to be discontinued Age of European fmeet less than four years

• Finnair’s objective of focusing on its core

business areas, scheduled passenger and leisure traffjc, is shaping the company’s or- ganisation and personnel structure. In terms

• f functions that support fmight operations,

the aim is to create new ownership and part- nership arrangements to produce services cost-effectively and competitively. Through arrangements carried out in 2006, 670 jobs are being cut from Finnair Techni- cal Services and the Group’s administrative support functions. The personnel reductions, mainly based on retirement solutions, will be implemented by the end of 2007. Simultaneously, additional staff will be rec- ruited into fmight operations for the needs of expanding Asian traffjc. Flexibilities, which will enable more effjcient crew utilisation as long-haul traffjc increases, have been agreed in the employment conditions of fmight staff. Target setting and performance measu- rement within the Group’s different units and workplaces will be effected using the Balanced Scorecard, supported by one of the incentive schemes. The other incentive scheme covering all personnel produces a profjt bonus for the Personnel Fund if the company’s fjnancial performance fulfjls certain conditions de- fjned in advance. Key individuals are also covered by a share bonus scheme. FINNAIR EMPLOYS 9,700 employees Traffjc growth is creating more jobs Finnair is one of Finland’s most attractive employers Focusing on core business is changing structures

• 21

SLIDE 22

RESPONSIBILITY BEGINS FROM SOUND FINANCES INVESTMENTS IN THE ENVIRONMENT

FINNAIR AND SOCIET Y

Corporate social responsibility is a fundamental attitude and way of operating. Taking sustainable development into account in air transport and more widely in the travel business is a guid- ing principle in Finnair’s decision-making. Air transport is a very competitive sector that has a predis- position to continuous and rapid change. By pursuing respon- sible profjtability and a sustainable growth strategy, Finnair has created the fjnancial health that enables future investments to be made. A large-scale environmentally positive fmeet moderni- sation programme began in 1999 and will continue into the next decade. Effjcient transport links and services are a prerequisite of modern western society. Finnair and its extensive route network are an important part of the structure and competitiveness of Finnish society. Air transport in Finland is the only form of public transport that does not need taxpayers’ support. Finnair, indeed, fjnances a signifjcant part of Finland’s air transport infrastructure and generates for society tax revenues as well as paying dividend. Finnair directly employs more than 9,000 people, and indi- rectly thousands more, in different parts of Finland and the world. Rapidly growing Asian traffjc has provided work for thousands

• f Finnair employees.

The consumer can make environmentally friendly choices by favouring airlines that have modern fmeets and the most direct fmight connections. Finnair has direct connections to nearly 70 scheduled destinations in Finland and abroad. Finnair’s European traffjc fmeet consists of modern Airbus and Embraer aircraft, whose average age is less than four years. The fmexible use of these aircraft on different routes improves load factors. They are also signifjcantly more environmentally friendly and economic than their predecessors, because their nitrogen oxide and carbon dioxide emissions are lower and their engines quieter. Owing to the new aircraft, the Finnair fmeet’s key fjgures describing environmental effjciency, such as fuel consumption and carbon dioxide emissions per passenger kilometre, have improved. A modernisation of the long-haul fmeet is also proceed-

• ing. The delivery of the fjrst Airbus A340 in June 2006 was

the beginning of the renewal of Finnair’s long-haul fmeet. The present Boeing MD-11s will be replaced with Airbus aircraft which have lower emissions rates. The EU’s proposed emissions trading policy is, in principal,

• n the right lines in taking into account the benefjt produced

for the fuel consumed. The scheme should, however, be world- wide, so that it does not distort competition between different countries’ airlines.

Bearing social responsibility requires a company to deliver long-term profitability and competitive-

• ness. Finnair is part of Finnish society, but to

an increasing extent it also has a role as a builder

• f connections between Europe and Asia.

The biggest environmental step that an airline can take is to invest in a modern fleet. Finnair has systematically modernised its fleet by investing in efficient, environmentally positive aircraft.

>>On the way to a better tomorrow. Finnair participates in the Change for Good campaign, which collects donations for work against AIDS to help Vietnamese children.

SLIDE 23

SUSTAINABLE TOURISM FOR A BETTER TOMORROW

Tourism generates revenue for travel destinations and employs huge numbers of people. The future of the entire tourism indus- try worldwide is dependent on the state of the environment, culture and society at holiday destinations. Finnish travellers are continually seeking out new holiday destinations, and more and more Finns are aware of, and wish to act according to, the principles of sustainable tourism. Since 1999 Aurinkomatkat-Suntours has been operating a sustainable tourism programme. For tour operators this is a sensible investment, because no-one wants to travel to a spoiled environment or witness a myriad of social prob-

• lems. Aurinkomatkat-Suntours’ staff are trained to take the

challenges of sustainable tourism into account. Contractual partners in destination countries are also offered training and information. Aurinkomatkat-Suntours is actively involved in establishing the Tour Operator Initiative for Sustainable Tourism Develop- ment (TOI), a joint project of tour operators, UNESCO, the UN’s Environment Project UNEP and the WTO (World Tourism Organisation). Aurinkomatkat-Suntours is committed to fjghting against the sexual abuse of children. The company has a clause in all of its hotel agreements stating that an agreement can be terminated if the hotel permits child sex trade in its area. Aurinkomatkat-Suntours also employs a 35-point sustainable tourism check-list when making agreements with hotels. Finnair also wants to make a concrete impact where the pre- requisites for a decent life are not automatically within hand’s reach. Finnair has engaged in charity work with UNICEF for 12 years

• now. Finnair’s and UNICEF’s traditional Christmas Change for

Good campaign has collected money for children in Rwanda, Kaliningrad, Kosovo, Ethiopia and Nepal. Starting from 2006 the campaign proceeds are donated to work against AIDS for the good of Vietnamese children. Finnair wants to be involved in helping where the company itself operates, namely in Asia. The Baltic Sea region is Finnair’s home. It is also a signifj- cant market area, because we want to attract travellers from Asia to an unspoilt natural environment. That’s why Finnair participates in supporting work done to help the Baltic Sea in a waterways protection project of the Finnish Association for Nature Conservation. The primary aim of the project is to reduce the eutrophication of Baltic Sea and the waterways that fmow into it. A further objective is to inspire people to engage in waterways protection work and to produce teach- ing material for schoolchildren. Finnair understands that only through cooperation can environmental issues be steered in a better direction. Finnair is also involved in the work of the Association of Friends of the University Children’s Hospitals in Finland. Through the association, Finnair helps the everyday lives of children and their relatives by supporting their travel within Finland.

Aurinkomatkat-Suntours is a good choice when cus- tomers wish to travel in accordance with the princi- ples of sustainable tourism. Operations are guided by the ethical aide-mémoire: “We don’t inherit the world from our parents; we borrow it from our children.” Finnair wishes to bear its responsibility and to act as a good example. Cooperating on envi- ronmental issues and supporting the everyday lives of children near and far will bring a better tomorrow closer.

F i n n a i r a n d S o c i e t y

23

FUEL BURN (KG) PER PASSENGER PER 100 KM 4.0 3.0 2.0 1.0 5.0 MD-83 Embraer 170 Embraer 170 Helsinki-Manchester MD-83 Helsinki-Manchester Burn calculated for 76 passengers in both aircraft types. NITROGEN OXIDE AND CARBON DIOXIDE EMISSIONS NoX NOISE LEVELS EPNdb Carbone dioxide g/RTK Nitrogen Oxiden g/RTK CO2 Nitrogen oxide (NOx) and carbon dioxide (CO2) emissi-

• ns in air traffic in relation to tonne kilometres (RTK).

Margin of Finnair aircraft types measured at three different points to ICAO Chapter 3 noise certification limits. Noise levels of all Finnair aircraft types are lower than ICAO limits. 04 05 06 0.0 MD-11 B757-200 A319 A320 A321 Embraer 170 A340

• 2
• 4
• 6
• 8
• 10
• 18
• 12
• 14
• 16
• 24
• 20
• 22

6.0 5.0 4.0 3.0 2.0 7.0 1.0 0.0 1,400 1,200 1,000 800 600 1,600 400 200

SLIDE 24 The Asia strategy of Finnair Scheduled Passenger Traffjc is based on Helsinki’s excellent location, precisely on the shortest fmight route between Central Europe and Asia. In addition to fast connections, the popularity of Finnair’s fmights is also based on the company’s top quality business class with its lie-fmat seats and superb food and drinks service. The passengers on Finnair’s Asia fmights are mostly Asian, but many customers also come from various countries in Europe, particularly from Scandinavia. The number of Swedish passengers on Finnair’s Asian fmights grew last year by over 70 per cent. Finnish customers account for less than a fjfth of passengers. Air freight also constitutes a signifjcant proportion of revenue from Asian and North American traffjc. A FLEXIBLE FLEET INCREASES PROFITABILITY European traffjc is based on the Airbus A320 fmeet, which Finnair has modernised in recent years. The start-up of profjtable traffjc to smaller destinations is possible with the aid of Embraer aircraft, which repre- sent the latest technology. The Embraers, which are smaller than the Airbuses, are economic on routes where demand does not require a large aircraft. The modernisation of the long-haul fmeet began in summer 2006 when the fjrst Airbus A340 wide-bodied aircraft was taken into serv-

• ice. By the middle of the next decade, new Airbus A350 aircraft will

form the backbone of the long-haul fmeet. A fmeet consisting of Airbus and Embraer aircraft is fmexible and effjcient in terms of the use of both aircraft and crew. EFFICIENTLY IN SHORT RANGE TRAFFIC Finnair’s domestic traffic comprehensively serves the needs of busi- ness and leisure traffic. The busiest routes are flown with Airbus and Embraer jets. Turbo-prop traffic on southern Finland and Baltic country routes is handled by Finnair’s Estonian subsidiary

• Aero. Finnair operates in the Swedish market with the FlyNordic

airline, whose home base is Stockholm. FlyNordic provides inex- pensive flight services on Sweden’s most important domestic and Scandinavian routes as well as in leisure traffic. When fmying via Helsinki from Europe to Asian, you are travelling in the right direction

all the time. Finnair has Europe’s largest natural market area. When customers are com- ing from Asia, Helsinki is an excellent place to change aircraft, because Finnair’s range

• f routes opens up the whole of Europe to Asian passengers. Finnair’s timetables have

been built to ensure fast connections between Asian and European fmights. Finnair’s Asian network, combined with its wide spectrum of European onward connections, provides the best links from European cities that have no direct fmight connection to Asia. The growing Asian traffjc, therefore, also increases travel on Fin- nair’s European fmights.

A BRIDGE BUILDER BET WEEN EUROPE AND ASIA

With many European airlines looking for new business amid intense competition, Finnair’s success factor has been passenger and cargo traffic between Europe and Asia. Every third euro comes directly from Asian traffic. Nearly half of Finnair’s revenue from scheduled passenger traffic is derived from its Asia-Europe routes, if one includes the European transit connections of Asian flights. The Asian travel market is growing now at a stunning rate and it will continue to do so in the years to come.

S c h e d u l e d Pa s s e n ge r Tr a f f i c SCHEDULED PASSENGER TRAFFIC STATISTICS 2006 Scheduled Passenger Traffjc turnover (million euros): 1,522 Number of employees: 4,114 Passengers on scheduled fmights: 7.5 million Total number of fmights: 98,468 Growth of Asian traffjc: 27.3% Cargo carried: 93.8 million kilos

• THE BEST CONNECTIONS TO EVERYWHERE IN EUROPE

24

DISTRIBUTION OF SCHEDULED TRAFFIC AND CARGO REVENUES America 4% Asia 33% Finland 15% Europe 48% DISTRIBUTION OF PASSENGER SALES IN SCHEDULED TRAFFIC Finland 49% America 4% Europe 32% Asia 15% DISTRIBUTION OF CARGO SALES Asia 52% America 6% Europe 19% Finland 23% 1,000 kg 90,000 80,000 70,000 60,000 50,000 40,000 100,000 02 03 04 05 06 Domestic International 30,000 20,000 10,000 CARGO

SLIDE 25 For leisure travellers who have become familiar with European destinations

• ver the years, Asian holiday oases have new sights and experiences to offer.

Aurinkomatkat-Suntours capacity towards Asia is growing and the spectrum of choice is widening. Thailand is not new as a holiday country, but its popularity just grows and grows. Alongside Thailand, China’s new leisure destinations have joined the Asian holiday resorts. Aurinkomatkat-Suntours offers a combined city and beach vacation in China. At the end of Finnair’s direct fmight, the city of Guangzhou with its inexpensive marketplaces exudes authentic Chinese atmosphere. After a few days in the city, relaxing in the beach resort of Hainan is just the ticket. LEISURE TRAFFIC STATISTICS 2006 A u r i n k

• m

a t k a t

• S

u n t

• u

r s ’ t u r n

• v

e r ( m i l l i

• n

e u r

• s

) : 2 6 1 T r i p s s

• l

d b y A u r i n k

• m

a t k a t

• S

u n t

• u

r s : 3 4 4 , 2 2 7 L e i s u r e F l i g h t s ’ t u r n

• v

e r ( m i l l i

• n

e u r

• s

) : 2 3 8 L e i s u r e F l i g h t s ’ p a s s e n g e r n u m b e r s : 1 , 2 4 1 , 5

• Leisure Traffic is the second of Finnair Group’s core businesses.

Aurinkomatkat-Suntours is Finland’s leading package tour operator, with a market share of 37 per cent. Finnair Leisure Flights is the most signifjcant provider of fmight services to package tour operators, with a market share of around 70 per cent. Leisure Flights’ services are used by ten different tour operators. Around one million package tours are made from Finland each year. DEMAND FOR LONG-HAUL DESTINATIONS GROWING Leisure Traffjc’s main market area is Finland, but an increasing number

• f customers come from neighbouring countries. To expand its opera-

tions into Baltic states, Aurinkomatkat-Suntours acquired Estonia’s second largest tour operator, Horizon Travel, at the end of 2006. Demand for Asian destinations, particularly Thailand, is growing

• steadily. After the Canary Islands, Thailand is becoming the Finns’ second

most popular holiday destination. Finnair Leisure Flights fmies to a total

• f 66 holiday destinations, in more than 30 countries. There is growing

demand for various independent travel options and active holidays. COMPETITIVENESS DECISIVE IN LEISURE FLIGHT BUSINESS Finnair has been carrying tourists to holiday destinations for decades. Finnish customers trust in Finnair’s services. Finnair Leisure Flights fmies in the summer to Mediterranean beach resorts, and in the winter to holiday destinations in, among other places, Asia, Brazil and the Caribbean. The seven-aircraft Boeing 757 fmeet is ideal for all holiday traffjc needs and the daily utilisation rate of the aircraft is the best in the world. All

• f Leisure Traffjc’s aircraft are being fjtted with winglets, which reduce

air resistance. The change means that fuel consumption is cut by fjve per cent and the fmying range of the aircraft extended by 370 kilometres. Leisure Traffjc’s own fmeet is supplemented by capacity leased from Scheduled Passenger Traffjc, which boosts aircraft utilisation. Leisure Flights’ customer service is enhanced by chargeable extra

• services. A business class meal option and a more spacious seating

place, for example, can be ordered on the internet. Onboard, children are served their own children’s meals fjrst. The travel experience of youngsters is also improved with entertainment electronics. L e i s u r e Tr a f f i c

FULFILLING FINNISH DREAMS

Aurinkomatkat-Suntours is a pioneer of Finnish leisure travel and is the number one brand in its field in Finland. In cooperation with Finnair Leisure Flights, Aurinkomatkat-Suntours takes more than 350,000 Finns every year to fulfil their holiday dreams in different parts of the world. Alongside the traditional European beach resorts, long-haul destinations as well as theme and activity trips are also increasingly popular.

In 2006 Aurinkomatkat-Suntours had nearly 350,000 customers. A LEISURE FLIGHT TO CHINA

25

DISTRIBUTION OF AURINKOMATKAT-SUNTOURS PRODUCTION WINTER SEASON 2006/2007 DISTRIBUTION OF AURINKOMATKAT-SUNTOURS PRODUCTION SUMMER SEASON 2007 Spain 10% Italy 11% Long-haul destination 5% Greece 39% Other 20% Bulgaria 7% Turkey 8% SunSki 5% Long-haul destination 30% Other 11% Spain 48% Portugal 3% Middle East 3%

SLIDE 26

Travel agency services focused more on the management of corporate travel. E-business creates new opportunities for travel agencies.

A TRAVEL DEPARTMENT STORE AMID FIERCE COMPETITION

The widespread use of the electronic ticket and the rapid development

• f internet services have had a significant impact on consumers’

purchasing behaviour in a short space of time. Individual journeys are increasingly obtained via the internet, either direct from airlines

• r by using travel agencies’ electronic services.

NEW OPPORTUNITIES Last autumn, Finnair’s travel agencies opened a leisure travel electronic service that helps customers build, book and pay for trips themselves

• n the travel agencies’ websites. Flights and hotel accommodation can

be combined in the package and the service will be gradually expanded to car hire and other services. The development of information technology has also enabled the introduction of new, user-friendly corporate applications. Amadeus Finland and travel agencies have brought to the market diverse appli- cations for companies’ travel management needs. FINNAIR’S TRAVEL AGENCIES SPECIALISES The division of work between Finland Travel Bureau Ltd (FTB) and Area Travel Agency Ltd, the travel agencies belonging to the Finnair Group, was adjusted during 2006. Area sold its leisure travel offjces to FTB. Overlaps in the travel agency network resulted in about 70 job cuts. Area now focuses on business travel and on developing travel man- agement services for corporate customers. As far as leisure trips are concerned, Area will concentrate in the future on electronic channels and telephone service. FTB, on the other hand, alongside its business travel service, is being developed into a comprehensive travel department store, utilising an extensive offjce network, electronic business and a telephone service. FTB’s city-break package tour business transferred to Aurinkomatkat-Suntours last year. The travel agencies are two of the three largest travel agency groups in

• Finland. FTB’s Estonian subsidiary, Estravel, is the leading travel agency

in its market area. Estravel operates in each of the three Baltic states.

The travel agency sector has been in a state of change since the turn of the millennium. A transformation in customer and consumer behaviour as well as airlines’ and tour operators’ abandonment of sales commission payments has changed the travel agencies’ earnings model. Instead of sales commissions, revenue is generated from service fees charged from customers. The Finnair Group travel agencies and Amadeus Finland, which sells travel agency systems and integration services, have been pioneers in the development of new business models.

Tr ave l S e r v i c e s

IMPROVED EFFICIENCY IN E-BUSINESS PAYMENTS

In recent years, Finnair Group’s Amadeus Finland Oy has developed solutions that travel agencies and companies providing travel services can utilise in their e-business activities and operational management. The focus of development work has shifted to the processes that lie behind e-business operations. One of the major projects in 2006 was an e-business pay- ments system, Amadeus e-Payment, which connects journey bookings with real- time payment and ticket delivery. The new system is particularly evident as a reduction of work behind the scenes in e-business and as increased speed and reliability in the fmow of information. To customers the innovation gives more payment options as well as allowing last- minute travel purchases. TRAVEL SERVICES STATISTICS 2006 Area Group, turnover (million euros): 18.7 Area Group, fmight tickets sold: 320,272 FTB Group, turnover (million euros): 60.1 FTB Group, fmight tickets sold: 460,491 Amadeus Finland, turnover (million euros): 11

• 26

SLIDE 27

PROFITABILITY IMPROVING AT FINNAIR TECHNICAL SERVICES

At the beginning of 2006 a competitiveness project was initiated in Finnair Tech- nical Services with the aim of improving the unit’s profjtability by merging and developing operations. Productivity has been boosted with the aid of a new com- prehensive ERP system. In connection with the maintenance of the new Embraer aircraft, Finnair Technical Services has applied a new model based on the LEAN concept, by which the whole of line maintenance will be developed. The technical development of the fmeet has lengthened maintenance intervals, which reduces the amount of labour required for maintenance activities. Mainte- nance preparedness for types of aircraft withdrawn from the Finnair fmeet will be cut and expertise focused on fewer types of aircraft. The change process at Finnair Technical Services requires an open-minded ap- proach in which all functions are evaluated on both an operational and fjnancial ba-

• sis. Operations for which there is no commercial justifjcation will be discontinued.

AVIATION SERVICES STATISTICS 2006 F i n n a i r T e c h n i c a l S e r v i c e s ’ t u r n

• v

e r ( m i l l i

• n

e u r

• s

) : 1 9 8 N

• r

t h p

• r

t ’ s t u r n

• v

e r ( m i l l i

• n

e u r

• s

) : 7 3 F i n n a i r C a t e r i n g ’ s t u r n

• v

e r ( m i l l i

• n

e u r

• s

) : 1 3 F i n n a i r T e c h n i c a l S e r v i c e s ’ e m p l

• y

e e s : 1 , 9 4 4 N

• r

t h p

• r

t ’ s e m p l

• y

e e s : 8 6 3 F i n n a i r C a t e r i n g ’ s e m p l

• y

e e s : 8 9 9

• Quality catering services are part
• f Finnair’s service chain.

Av i a t i o n S e r v i c e s

SUPPORT SERVICES GO INDEPENDENT

The biggest customers of the units belonging to the Aviation Services business area are the Finnair Group airlines, but the proportion of turnover accounted for by customers from outside the Group is growing. Business units that support fmight operations have assumed an active role in creating new forms of service and customer relationships. The demerger and outsourcing of support services have become commonplace in the airline industry. In Finnair, too, some support functions – the latest being real-estate and facilities services – have been transferred for partners to handle, and new cooperation models are being investigated all the time. Finnair Technical Services is currently going through a major change process in order to improve profjtability. PARTNERSHIP ARRANGEMENTS IN GROUND HANDLING As far as ground handling subsidiary Northport Oy is concerned, various

• wnership and partnership options for the company or parts thereof

are being explored. Northport’s operating model has undergone major development in recent years. Owing to the cyclical nature of traffjc, the use of a traditional labour force and declining price levels, operations have not achieved profjtability, however. Ground handling operations at domestic airports are already com- pletely handled by companies outside the Group. In Sweden and Norway, Northport itself has founded subsidiaries that provide airport ground handling services on a new business model in Stockholm and Oslo. CATERING OPERATIONS PROFITABLE Finnair Catering produces meal services for airlines and is also respon- sible for sales that take place in airports and on aircraft, namely travel retail operations. A subsidiary, Finncatering Oy, prepares meals for economy class and leisure traffjc fmights. Finnair Catering’s operations are profjtable. The success factor of catering production is logistics, as a result of which attention has been focused on material streams, product manufacturing processes and transportation, in order to improve cost-effectiveness.

Aviation Services – ground handling, catering operations and technical services – are an important part of air transport

• logistics. Structural change in the industry is also influencing the development of support services. In recent years Finnair

has guided its support services in the direction of greater independence. This will allow them to be developed better on the basis of their own business models and according to the conditions of each particular sector.

27

AVIATION SERVICES PERSONNEL Ground handling 23% Catering 24% Facility services 2% Technical services 51% AVIATION SERVICES TURNOVER Technical services 43% Ground handling 16% Facility services 13% Catering 28%

SLIDE 28

BOARD OF DIRECTORS 2006

1. 2. 3. 4. 5. 6. 7. 8.

SLIDE 29

FAVOURITE TRAVEL DESTINATION: Finnish Archipelago FAVOURITE TRAVEL DESTINATION: Sydney FAVOURITE TRAVEL DESTINATION: Thailand FAVOURITE TRAVEL DESTINATION: Paris FAVOURITE TRAVEL DESTINATION: Scotland FAVOURITE TRAVEL DESTINATION: Shanghai

• 1. Christoffer Taxell, b. 1948, LLM, Ministeri (Finnish honorary

title), Chancellor of Åbo Akademi University; Chairman of the Board of the organisation Föreningen Konstsamfundet and Åbo Akademi University Foundation; Member of the Board of Sampo Plc, Stockmann Plc, Nordkalk Corporation, Luvata International Oy, the Finnish Business and Policy Forum (EVA) and the Research Institute of Finnish Economy (ETLA); Member of the Investment Committee of the Society of Swedish Literature in Finland. Chair- man of the Board of Finnair Plc since 2003.

• 5. Kari Jordan, b. 1956, BSc(Econ), President and CEO of Metsäliit-

to Group; Member of the Board of Neste Oil Plc and Julius Tallberg

• Kiinteistöt Oyj; Member of Board of the Confederation of Finnish

Industries; Member of the Working Committee and Vice Chairman

• f the Board of the Finnish Forest Industries Association; Member
• f the Supervisory Board of the Finnish Business and Policy Forum

(EVA) and the Research Institute of Finnish Economy (ETLA). Vice Chairman of the Board of Finnair Plc since 2003.

FAVOURITE TRAVEL DESTINATION: Venice FAVOURITE TRAVEL DESTINATION: London

B o a r d o f D i r e c t o r s a n d A u d i t o r s 2 0 0 6

AUDITORS Regular auditors Authorised Public Accountants Pri- cewaterhouseCoopers Oy, Principal

Auditor APA Eero Suomela, and APA Jyri Heikkinen Deputy Auditors APA Matti Nykänen and APA Tuo- mas Honkamäki, Pricewaterhouse- Coopers Oy

• 4. Markku Hyvärinen, b. 1948, Deputy CEO of Varma Mutual

Pension Insurance Company; Vice Chairman of the Board of Mu- tual Insurance Company Kaleva; Member of the Board of If Ska- deförsäkring Holding AB; Member of Finnair Supervisory Board 1992–1997 and Chairman 1997–2003. Member of the Board of Finnair Plc since 2003.

• 2. Kalevi Alestalo, b. 1947, MSc(Pol), Finance Counsellor, Direc-

tor of the Corporate and Ownership Policy Unit of the Ministry of Transport and Communications since 2000. Member of the Board

• f Finland Post Corporation and Vice Chairman of Raskone Oy.

Member of the Board of Finnair Plc since 2006.

• 8. Helena Terho, b. 1948, MSc(Eng), eMBA, Vice President, Competen-

ce Development, Kone Corporation. Member of the Board of Kemira GrowHow since 2005; Member of the Board of Miinan-Hoitolat Oy since 2006. Member of the Board of Finnair Plc since 1997.

• 6. Ursula Ranin, b. 1953, MSc(Econ), LLM, in the service of Nokia

Corporation 1984-2005, General Counsel 1994–2005, Secretary

• f the Group Executive Board 1992–2005, Secretary of the Board
• f Directors 1996–2005; Chair of the Committee for Competition,

Consumer and Corporate Legal Affairs of the Confederation of Fin- nish Industries 2005; Member of the Board of UPM-Kymmene since

• 2006. Member of the Board of Finnair Plc since 2006.
• 3. Satu Huber, b. 1958, MSc(Econ), Managing Director of the Fede-

ration of Finnish Financial Services; Member of the Board of Metso Plc and Ekonomiska Samfundet i Finland rf; Deputy Member of the Board of Svenska Handelshögskolan i Helsingfors; Member of the Board of the Finnish Cultural Foundation’s Support Association. Member of the Board of Finnair Plc since 2006.

• 7. Veli Sundbäck, b. 1946, LLM, Member of Group Executive Board

and Executive Vice President, Corporate Relations and Responsibili- ty, Nokia Corporation. Secretary of State at the Ministry for Foreign Affairs 1993-1995; Member of the Executive Committee of the Board

• f the Confederation of Finnish Industries, Vice Chairman of the

Board of the Technology Industries of Finland; Vice Chairman of the Board of the International Chamber of Commerce (ICC), Fin- nish Section; Chairman of the Board of the Finland-China Trade Association; Member of the Board of the Finnish National Theatre; Chairman of Board of Huhtamäki Plc 1999–2005. Member of the Board of Finnair Plc since 2004. Information on share ownership can be found in the fj nancial report and at the address www.fj nnair.fj /group

29

SLIDE 30

GROUP MANAGEMENT

A n s s i J u k k a H e n r i k H a n n e s C h r i s t e r L a s s e K r i s t i n a A n t e r

• M

i k a K a i s a K i m m

• T

e r

SLIDE 31

FAVOURITE TRAVEL DESTINATION: Maui

Anssi Komulainen, b. 1964, BA, SVP Human Resources, member of the Bo- ard of Management. In Finnair’s service 1989–1999 and since 2001.

FAVOURITE TRAVEL DESTINATION: Munich FAVOURITE TRAVEL DESTINATION: Algarve, Portugal FAVOURITE TRAVEL DESTINATION: Kuusamo FAVOURITE TRAVEL DESTINATION: Irish countryside FAVOURITE TRAVEL DESTINATION: Greek Islands FAVOURITE TRAVEL DESTINATION: Australia FAVOURITE TRAVEL DESTINATION: New York FAVOURITE TRAVEL DESTINATION: Japan FAVOURITE TRAVEL DESTINATION: Singapore FAVOURITE TRAVEL DESTINATION: Italy FAVOURITE TRAVEL DESTINATION: : Thailand

G r o u p M a n a ge m e n t Kristina Inkiläinen, b. 1964, BA, MBA, SVP Catering. Managing Director of Fin- nair Catering Oy. In Finnair’s service since 2007. Jukka Hienonen, b. 1961, MSc(Econ), Finnair Plc’s President and CEO. In Finnair’s service since 2005. Antero Lahtinen, b. 1949, SVP Cargo, Mana- ging Director of Finnair Cargo Oy. In Finnair’s service since 1973. Hannes Bjurström, b. 1950, Colonel (retired), SVP Flight Operations, in Finnair’s service since 1999. Henrik Arle, b. 1948, LLM, Deputy CEO, EVP Scheduled Passenger Traffj c, member

• f the Board of Management. In Finnair’s

service since 1979. Christer Haglund, b. 1959, BA, SVP

• Communications. In Finnair’s service

since 2000. Lasse Heinonen, b. 1968, MSc(Econ), SVP and CFO, member of the Board of Mana-

• gement. In Finnair’s service since 2004.

Mika Perho, b. 1959, BBA, SVP Commercial Division, member of the Board of Manage-

• ment. In Finnair’s service since 1985.

Kaisa Vikkula, b. 1960, DSc(Econ), SVP Leisure Traffj c and Travel Services, member

• f the Board of Management. In Finnair’s

service since 2006. Tero Vauraste, b. 1967, Lieutenant-Commander (ret.), MSc, SVP Ground Handling, Mana- ging Director of Northport Oy. In Finnair’s service since 2001. Kimmo Soini, b. 1958, MSc(Eng), SVP Technical Services, member of the Board of Manage-

• ment. In Finnair’s service since 1985.

Information on share ownership can be found in the fj nancial report and at the address www.fj nnair.fj /group

31

SLIDE 32