Coronavirus impact on Finnair Finnair has cancelled approximately - - PowerPoint PPT Presentation

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Coronavirus impact on Finnair Finnair has cancelled approximately - - PowerPoint PPT Presentation

Oct 20, 2023 387 likes •668 views

Coronavirus impact on Finnair Finnair has cancelled approximately 200 flights between 5 February and 29 March All flights to China between 6 and 29 February Guangzhou, Beijing Daxing and Nanjing cancelled also during March

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SLIDE 1
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SLIDE 2
  • Finnair has cancelled approximately 200 flights between

5 February and 29 March

  • All flights to China between 6 and 29 February
  • Guangzhou, Beijing Daxing and Nanjing cancelled also during

March

  • Direct financial impact is relatively limited in Q1
  • We are preparing for different scenarios as it is difficult to

estimate the length of coronavirus impact

  • One A350 delivery has been delayed from April to June
  • We are committed to the Chinese market on a long-term basis

– some tactical changes to flight frequencies may be done

Coronavirus impact on Finnair

2
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SLIDE 3

Outlook and guidance

Guidance on 7 February 2020: We are currently seeing strong performance continuing in Europe. As stated earlier, the direct financial impact of coronavirus during Q1 2020 is relatively limited, even if the mainland China cancellations continued until end of Q1 2020. We currently forecast our capacity to increase by approximately 4 per cent in 2020. Due to the situation with coronavirus, we do not provide a full year revenue estimate at this time. The guidance will be updated in connection to Q1 2020 interim report.

3
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SLIDE 4

2019: Volatile year ended with a strong quarter

Q4 2020 Topi Manner, Finnair

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SLIDE 5

A volatile year for aviation

  • Global uncertainties impacted aviation
  • Trade war
  • Brexit
  • Boeing MAX8 issue decreased capacity
  • Industrial action
  • Air space restrictions (Pakistan, Iran)
  • Sustainability took center stage
  • Finnair continued strong growth
  • ASK +11.3%
  • New long-haul destinations: Los Angeles, Daxing, Sapporo
  • Almost 1,000 new people joined Finnair
  • Strong focus on distribution and digital services
5
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SLIDE 6

Full year 2019: costs excl. fuel increased in line with revenue

6

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 2018, NPS was 47. **Finnair carried in total of 14.7 million passengers in 2019 and 13.3 million passenger in 2018.

Capacity

+11.3%

Revenue

+9.2%

Comparable operating result

162.8 M€

(218.4 M€)

NPS

38*

PLF

  • 0.1%-points

Operating cost

+11.1%

Passenger volume

+10.3%**

Operating cost (Excl. fuel)

+9.2%

(In fuel combined effect of price paid, currency and hedges totaled 42 million euros)

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SLIDE 7

Strong Q4 ended the year

  • Revenue increased by 13.4% (774.9 M€)
  • Over 3.5 million passengers, up to 104 weekly flights to

Asia

  • Increased market share in Asia and in Europe
  • New routes to Beijing Daxing and Sapporo in Japan
  • Unit revenues increased in Europe
  • Double digit growth in Asian capacity with flat unit revenues

despite Hongkong unrest

  • Global operating environment in cargo weak as expected
  • Aurinkomatkat was again Finland’s largest tour operator,

with increased market share

7
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SLIDE 8

Q4: Strong revenue growth while costs in check

8

NPS = Net Promoter Score *Pilot long-term incentive scheme cancelled in 2018 caused a positive one-off item of c. 11 M€ in Q4 2018. **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 Q4 2018, NPS was 45. ***Finnair carried in total of 3.5 million passengers in Q4/2019 and 3.2 million passenger in Q4/2018.

Capacity

+10.6%

Revenue

+13.4%

Comparable operating result

31.2 M€

(26.5 M€)*

NPS

41**

PLF

+2.1%- points

Operating cost

+12.4%

Passenger volume

+11.0%***

Operating cost (Excl. fuel)

+10.9%

(In fuel combined effect of price paid, currency and hedges totaled 12 million euros)

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SLIDE 9

Finnair market share and ASK development – Europe to Asia

Note: 2019/Q4 market shares are only including 2019/October and 2019/November

Finnair market share and ASK development – Helsinki to Europe (incl. domestic Finland)

9

Finnair market shares (rolling 12 months) have increased in both Asian and European traffic

Note: 2019/Q4 market shares are only including 2019/October and 2019/November

5,000 10,000 15,000 20,000 25,000 0% 10% 20% 30% 40% 50% 60% 70% 2014/Q4 2015/Q1 2015/Q2 2015/Q3 2015/Q4 2016/Q1 2016/Q2 2016/Q3 2016/Q4 2017/Q1 2017/Q2 2017/Q3 2017/Q4 2018/Q1 2018/Q2 2018/Q3 2018/Q4 2019/Q1 2019/Q2 2019/Q3 2019/Q4 ASK, Millions Finnair market share [%] Departure Periods Finnair market share (rolling 12 months) Finnair ASK (rolling 12 months) 5,000 10,000 15,000 20,000 25,000 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2014/Q4 2015/Q1 2015/Q2 2015/Q3 2015/Q4 2016/Q1 2016/Q2 2016/Q3 2016/Q4 2017/Q1 2017/Q2 2017/Q3 2017/Q4 2018/Q1 2018/Q2 2018/Q3 2018/Q4 2019/Q1 2019/Q2 2019/Q3 2019/Q4 ASK, Millions Finnair market share [%] Departure Periods Finnair market share (rolling 12 months) Finnair ASK (rolling 12 months)

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SLIDE 10

Revenue by product

10

Passenger revenue driving the growth

53 45 531

Q4 2018

39 616 60 57 57

Q4 2019 683 775 13.4%

Passenger revenue Ancillary Cargo Travel services

+16.0% +13.6%

  • 4.6%

+7.5%

  • European traffic performed strongly, positive

development also in North American routes.

  • Hong Kong impact in revenue less than expected.
  • Ancillary revenue per passenger grew to 12.72€

(12.42).

  • Soft global cargo demand environment, especially in

Asia, impacted cargo revenue.

  • Decreased market supply of package holidays

together with the growing customer demand positively affected travel services result.

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SLIDE 11

We succeeded in increasing both passenger load factors and unit revenues across all market areas, especially in Europe and North America

11

*PLF=Passenger load factor

Total traffic

Total % Change

ASK (million) 11,587.4 10.6% Revenue (Million) 615.9 16.0% RASK (Cents/ASK) 5.32 4.8% PLF % 79.0% 2.1pp

North America

Total % Change ASK (million)

1,012.0 32.8%

Revenue (Million)

42.3 38.5%

RASK (Cents/ASK)

4.18 4.3%

PLF %

79.9% 1.2pp

Europe

Total % Change

ASK (million) 4,313.1 6.9% Revenue (Million) 249.1 17.3% RASK (Cents/ASK) 5.78 9.8% PLF % 79.2% 3.4pp

Domestic

Total % Change

ASK (million) 520.0 0.3% Revenue (Million) 52.8 8.6% RASK (Cents/ASK) 10.16 8.2% PLF % 67.4% 3.5pp

Asia

Total % Change

ASK (million) 5,742.4 11.4% Revenue (Million) 255.4 12.0% RASK (Cents/ASK) 4.45 0.5% PLF % 79.7% 0.8pp

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SLIDE 12
  • Increased competition on routes between China and Finland, and

softened demand to Hong Kong weighted down Asia.

  • Capacity additions to North Atlantic were well received.
  • Competitors’ capacity reductions and Finland’s Council of the EU

presidency had a beneficial effect on the European traffic.

Other revenue Q4/18 vs Q4/19

12

Q4 revenue growth was driven by strong performance in Europe

Passenger revenue Q4/18 vs Q4/19

Q4 2019 57.2 53.3 152.5 60.0 5.3 39.2 159.0 Travel services Q4 2018 Ancillary 44.6 4.0

  • 2.8

57.3 Cargo

  • 2.8

+4.3% 615.9 27.3 Europe Asia Q4 2018 North Atlantic Domestic Unallo- cated Q4 2019 11.8 4.9 530.9 36.8 4.2 +16.0% Cargo Ancillary and retail revenue Travel services

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SLIDE 13
  • Unit cost at constant currency excluding fuel

increased by 1.3% (Q4/2019 vs Q4/2018)

  • Capacity growth 10.6%
  • Operating costs 12.4%
  • OPEX excluding fuel 10.9%

Increasing unit cost puts focus on efficiency

13

OPEX, 759.2M€ in total +12.4% Comparable EBIT Q4/18 vs Q4/19

Combined effect of price paid, currency and hedges totaled approx. 12 million euros

OPEX = operating expenses.

22% 18% 16% 10% 12% 7% 6% 4% 5%

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

  • 3.6
  • 4.3

Travel services4.0 Revenue

  • 1.2

Other

  • perating

income

  • 12.0

Fuel costs Capacity rents Aircraft materials and

  • verhaul

Q4 2018 Q4 2019

Traffic charges Sales, marketing and distribution costs

  • 12.0

Property, IT and

  • ther

expenses

  • 26.0
  • 17.1

Ancillarysales5.3 Passenger revenue 84.9 Passenger and handling services Depreciation and impairment Staff costs

26.5

Cargo -2.8

91.5

  • 3.2
  • 10.5
  • 1.4

31.2

  • 7.6

+4.6M€

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SLIDE 14

Fuel costs increased with volume growth and the USD effect

14
  • Q4/18 hedging gain 27.7 M€
  • Q4/19 hedging gain 0.4 M€

CO2 emissions trading fees:

  • Q4/18: 3.9 M€
  • Q4/19: 4.0 M€

Fuel costs Q4/19 vs. Q4/18 Fuel hedges 31 December 2019

Period Hedging ratio Average price of the hedged position Q1 2020 69 % 686 USD/tons* Q2 2020 67 % 681 USD/tons* Q3 2020 57 % 665 USD/tons* Q4 2020 46 % 640 USD/tons*

* Average of swaps and bought call options strikes.

~12 M€

6 145 Q4 2018 27 171 14 Volume Price Currency Hedging deviation Q4 2019

  • 21

+26M€

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% hedge ratio upper lower

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SLIDE 15 15

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

Healthy balance sheet and cash flow support future investments

  • Equity ratio 24.9% (23.3%)
  • Gearing 64.3% (76.9%)
  • Cash investments for the financial year

2020 relate mainly to fleet and are expected to total approximately 432 million euros, including advance payments.

503 31 Dec 2019 378 3 878 1 073 966 337 2 155 4 037 314 31 Dec 2018 1 021 440 2 262 918 1 774 336 30 Sep 2019 133 742 320 2 270 31 Dec 2019 1 575 451 716 169 1 707 165 921 30 Sep 2019 445 673 31 Dec 2018 3 944 4 037 3 878 3 944 953

Other fixed assets Assets HFS Cash Other assets Fleet Liabilities HFS I-B debt Tickets Other liabilities Provisions Equity

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SLIDE 16

Customer satisfaction up

  • NPS increased to 41
  • New extended lounge facilities at the Non-

Schengen part of Helsinki Airport

  • Signature menus by Chinese top chef DeAille

Tamin in business class on flights from Greater China

  • Investments into customer communications and

disruption management

  • Finnair.com development continued
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SLIDE 17
  • NPS for Finnair mobile app 68
  • New functionalities in mobile app
  • New content in Nordic Sky portal
  • Renewed Finnair.com rolled out in 35 markets in 16

languages

  • New apps used by personnel to improve situational

awareness and improve efficiency

  • AI used to improve process and decision making

Digital services improve customer experience and efficiency

17
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SLIDE 18

We continue to implement our strategy

  • Growth in line with market growth
  • Strengthened customer offer
  • Increased efficiency
  • Improved market position in Asia
  • Sustainability as a key driver
18
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SLIDE 19

Outlook and guidance

Guidance on 7 February 2020: We are currently seeing strong performance continuing in Europe. As stated earlier, the direct financial impact of coronavirus during Q1 2020 is relatively limited, even if the mainland China cancellations continued until end of Q1 2020. We currently forecast our capacity to increase by approximately 4 per cent in 2020. Due to the situation with coronavirus, we do not provide a full year revenue estimate at this time. The guidance will be updated in connection to Q1 2020 interim report.

19
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SLIDE 20 20
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SLIDE 21 21

Appendix

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SLIDE 22

Capacity growth driving revenue growth

22

Passenger revenue Q4/2018 vs Q4/2019, M€

  • Strong capacity growth drove the increase in passenger
  • revenue. Capacity increase was well received.
  • Finland’s EU Council Presidency and decreased competition in

Europe improved the unit revenue. Increased competition, especially on routes between China and Finland, and increased capacity to Hong Kong put pressure on yields. 530.9 Q4 2018 ASK PLF (load) FX 53.1 Yield, mix,

  • ther

Q4 2019 16.5 3.8 11.6 615.9 +84.9 176 EUR/ PAX 168 EUR/ PAX Q4 2018 Q4 2019 +4.5%

  • Avg. fare1

Q4 2019 Q4 2018 79.0 76.9 +2.1pp

PLF, %

Q4 2019 10,473 Q4 2018 11,587 +10.6%

ASK, mill

1)

  • Avg. fare = Passenger revenue per revenue passengers
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SLIDE 23 23

RASK trending down whereas CASK trending up

CASK development, € cents RASK development, € cents

  • Unit cost (CASK) increased by 2.3%. Unit cost at constant

currency excluding fuel increased by 1.3%. (Q4/2019 vs Q4/2018)

  • Unit revenue (RASK) increased by 2.5%. Unit revenue at

constant currency increased by 1.8%. (Q4/2019 vs Q4/2018)

3 1 5 2 4 6 7 6.86 6.96 Q4 2019 Q1 2018 Q2 2018 6.41 Q3 2018 Q3 2019 Q4 2018 6.26 Q1 2019 6.58 Q2 2019 6.67 6.53 6.69 1 3 7 2 5 6 4 5.05 4.55 6.42 1.41 Q3 2018 Q1 2018 Q4 2018 Q2 2018 Q1 2019 Q2 2019 1.48 6.06 Q3 2019 Q4 2019 6.12 5.93 6.27 6.41 6.03 4.88 6.42 5.11 1.32 4.77 4.52 1.36 1.39 1.36 4.56 1.47 1.51 4.94 CASK excl fuel Fuel

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SLIDE 24

Steady operating cash flow in Q4

24

471 412 415 194 30 Sep 2019 609 330 152 482 31 Dec 2019 1,021 953 Cash funds

  • 68.2M€

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

  • 131.4

609.0 Loan repayments Hybrid bond interests Cash Q3

  • 15.8

Cash Q4 120.7 481.7 Comparable EBITDA 8.1 Working capital Investments

  • 8.7

Other

  • 46.0
  • 54.2

Other Operating +120.1M€ Cash flow

  • 127.3M€

Investing

  • 185.7M€

Financing

  • 61.7M€
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SLIDE 25

Income statement

in mill, EUR

Q4 2019 Q4 2018 Change % 2019 2018 Change % Revenue 774.9 683.4 13.4 3,097.7 2,836.1 9.2 Other operating income 15.4 18.6

  • 17.3

56.4 73.7

  • 23.5

Operating expenses Staff costs

  • 136.3
  • 119.2

14.4

  • 534.7
  • 499.6

7.0 Fuel costs

  • 171.4
  • 145.4

17.9

  • 687.3
  • 581.0

18.3 Capacity rents

  • 32.1
  • 30.9

3.9

  • 130.2
  • 122.4

6.4 Aircraft materials and overhaul

  • 53.4
  • 42.9

24.5

  • 201.2
  • 162.9

23.5 Traffic charges

  • 78.7
  • 74.4

5.7

  • 331.3
  • 300.8

10.1 Sales, marketing and distribution costs

  • 44.5
  • 40.9

8.9

  • 172.1
  • 159.0

8.2 Passenger and handling services

  • 118.3
  • 110.7

6.8

  • 476.7
  • 440.3

8.3 Property, IT and other expenses

  • 35.0
  • 33.6

4.1

  • 132.4
  • 131.3

0.9 Comparable EBITDA 120.7 104.1 16.0 488.3 512.6

  • 4.7

Depreciation and impairment

  • 89.5
  • 77.5

15.5

  • 325.4
  • 294.2

10.6 Comparable operating result 31.2 26.5 17.5 162.8 218.4

  • 25.4

Operating result 34.7 73.1

  • 52.5

160.0 256.3

  • 37.6

Financial income 2.1

  • 1.0

> 200 % 4.8

  • 2.2

> 200 % Financial expenses

  • 20.4
  • 21.5

5.3

  • 83.6
  • 84.6

1.1 Exchange rate gains and losses 14.9

  • 8.6

> 200 % 12.7

  • 42.3

> 200 % Share of results in associates and joint ventures

  • 0.9

0.0

  • 0.9

0.0

  • Result before taxes

30.4 42.0

  • 27.7

93.0 127.2

  • 26.9

Income taxes

  • 5.9
  • 8.6

31.1

  • 18.4
  • 25.6

27.8 Result for the period 24.5 33.4

  • 26.8

74.5 101.6

  • 26.7
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SLIDE 26

Hedging currencies and sensitivities

26

* 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.

Fuel sensitivities 10% change without hedging 10% change, taking hedging into account (rolling 12 months from date of financial statements) Fuel EUR 65 million EUR 32 million Currency distribution, % Q4 2019 Q4 2018 2019 2018 Currency sensitivities USD and JPY (rolling 12 months from date of financial statements for operational 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

55 56 53 55

  • USD*

5 4 5 4

see below see below see below JPY

9 10 11 10

EUR 36 million EUR 16 million 65 % CNY

6 6 7 7

  • KRW

2 3 3 3

  • SEK

3 4 3 3

  • Other

19 18 19 17

  • Purchase currencies

EUR

57 59 57 60

  • USD*

36 33 36 32

EUR 84 million EUR 26 million 66 % Other

8 7 7 7

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SLIDE 27

THANK YOU

Contact us: Finnair IR and financial communications Investor.relations@finnair.com