FINNAIR GROUP FINANCIAL STATEMENT JANUARY 1 - MARCH 31, 2006 First Quarter Weak, As Expected Summary of first quarter key figures - Turnover rose 8.3% to 480.3 million euros - Traffic grew 4.2% on the previous year, passenger load factor rose 1.3 percentage points to 74.6% - Unit revenues from flight operations grew by 4.2%, unit costs by 10.2% - Operating profit excluding depreciation and aircraft leasing payments (EBITDAR) was 40.9 million euros (59.7 million) - Operating loss was -5.2 million euros (18.7 million profit) - Operating loss excluding capital gains and changes in the fair value of derivatives, i.e. operating loss on operations, fell to –5.1 million euros (14.0 million profit) - The result after financial items was a loss of -5.2 million euros (17.4 million profit) - At the end of March, Finnair was debt-free and liquid assets totalled 306.7 million euros - Equity ratio 40.7% (39.1%) - Equity per share 7.39 euros (7.13) - Earnings per share (undiluted) –0.05 euros (0.14) and earnings per share (with dilution) –0.05 euros (0.13) - Return on capital employed 8.3% (7.0%) productivity and lower the load factors owing to re- General Review training of staff. The long-term savings generated by the new type of aircraft will be based on more effi- Air transport at the beginning of the year was cient capacity utilisation and lower operating costs. marked by a growing demand for flight travel but Embraer’s modern technology will also reduce main- also by higher fuel prices. tenance costs. The Boeing MD-80 aircraft will be The strong rise in fuel prices that began early in decommissioned from the parent company’s fleet in 2005 halted the decline in average flight and cargo July 2006. prices of recent years. The average price of Finnair European airlines’ traffic between Europe and tickets rose last year by 3.6 per cent. Tighter compe- Asia grew by more than ten per cent. Finnair’s Asian tition dampened the rise in the average price from traffic grew in January-March by more than 24 per the end of the year, and in the first quarter it was not cent, increasing Finnair’s market share in traffic be- possible to pass on the rise in fuel prices completely tween Europe and Asia. Capacity increases in traffic into ticket prices. between Europe and Asia will continue. In Decem- Finnair’s unit revenues have declined by a third in ber 2005, Finnair announced that it would acquire five years. At the same time the fuel price has tripled, 12 new long-haul aircraft by 2014. as a result of which Finnair has improved the effi- Passenger numbers carried by the Finnair-owned ciency of its operations in several ways in recent budget airline FlyNordic grew at the beginning of the years. year by a third compared to the previous year. Price To safeguard profitable business operations, the development in the Swedish market, however, has Finnair Group will begin a structural reform process. been weaker than expected and the price of fuel has Due to increases in Asian traffic, additional re- risen sharply, which means that FlyNordic is still sources and personnel will be channelled in the operating at a loss. coming years into flight operations, for example. Correspondingly, support functions which are no Financial Result, longer commercially viable because of technical ad- vances will be cut. A further aim of the structural 1 January – 31 March 2006 change is to increase transparency and to ensure the competitiveness of all of Finnair’s operations. Turnover rose 8.3 per cent and was The transition from Boeing MD-80 aircraft to 480.3 million euros. The Group’s operating loss new Embraer aircraft will cause a temporary drop in excluding capital gains and changes in the fair value 1
of derivatives fell to –5.1 million euros (14.0 million company has hedged 55 per cent of scheduled traf- profit). Adjusted operating profit margin fic’s aviation fuel purchases during the next six was –1.1 per cent (3.2%). The result after financial months and thereafter for the following 18 months items was –5.2 million euros (17.4 million). with a decreasing level of hedging. Passenger traffic capacity grew in January-March A weakening of the US dollar against the euro by 2.3 per cent and demand by 4.2 per cent. Load has a positive impact on Finnair’s operational result factor rose from the previous year by 1.3 percentage and strengthening has a negative impact, because points to 74.6 per cent. The quantity of cargo car- the company has more dollar-linked costs than ried grew by 3.6 per cent. revenues. In scheduled passenger and leisure traffic, total unit revenues per passenger kilometre rose by Shares and Share Capital 4.7 per cent. Unit revenues for cargo traffic rose by In January-March 2006 the highest rate for the 6.3 per cent. Weighted unit revenues for passenger Finnair Plc share on the Helsinki Exchanges was and cargo traffic rose by 4.2 per cent. 15.00 euros, while the lowest rate was 11.50 euros Euro-denominated operating costs rose during and the average rate 13.22 euros. The market value the period by 13.2 per cent. Unit costs of flight of the company’s shares was 1,131.9 million euros operations rose by 10.2 per cent. With fuel costs on 31 March 2006. At the beginning of the financial eliminated, unit costs rose by 3.0 per cent. year the market value was 1,039.9 million euros. Fuel costs increased in the first quarter by During the first quarter, some 15.3 million of the around 30 million euros compared to the previous company’s shares were traded on the Helsinki year, i.e. by 49.6 per cent. Relative to flight Exchanges. On 31 March 2006 the Finnish Govern- performance (euros per available tonne kilometre) ment owned 56.56 per cent of the company’s the increase was 46.4 per cent. A 16.7 per cent rise shares, while 34.3 per cent were held by foreign in- in fleet material purchase and maintenance costs re- vestors or in the name of a nominee. sulted primarily from the start-up costs of the se- At the beginning of the financial period the venth MD-11 as well as refurbishment costs of long- company held 535,000 of its own shares. On haul fleet cabins. 23 March 2006 the Annual General Meeting Capital gains on asset sales totalled 0.0 million authorised the Board of Directors for a period of euros (0.0 million). one year to purchase the company’s own shares up Earnings per share for the financial period were – to a maximum of 3,500,000 shares and dispose of 0.05 euros (0.14). At the end of March, equity per the company’s own shares up to a maximum of share was 7.39 euros (7.13). 3,650,000 shares. The authorisation applies to shares amounting to less than five per cent of the Investment, financing and risk company’s share capital. During the first quarter, management the company has not exercised its authorisation to acquire or dispose of its own shares. On 31 March First-quarter investments totalled 48.7 million 2006 the company held a total of 535,000 own euros (10.3 million). The cash-flow impact of in- shares, i.e. 0.6 per cent of all shares. vestments in the first quarter, including advance Two series of Finnair Plc option rights are traded payments, was 69.5 million euros. on the Main List of the Helsinki Stock Exchange. At The Group’s liquid assets have declined in the the beginning of the financial period 396,394 Series early part of the year by around one hundred million A options and 816,150 Series B options were in cir- euros, mainly due to fleet modernisation invest- culation. In December 2005, option rights were ments and advance payments on future investments exercised to make share subscriptions, as a conse- as well as pension contributions. Pension contribu- quence of which the share capital increased by tions paid in the first quarter, around 26 million eu- 629,047.60 euros, which was entered in the Trade ros, cover payments due for the entire first half of Register on 19 January 2006. In the first quarter, no the year. At the end of March, the Group had liquid share subscriptions were made with options. Finnair cash reserves of 306.7 million euros, in addition to Plc’s registered share capital on 31 March 2006 was which there was a total of 200 million euros in un- 74,412,543.65 euros and the total number of sha- used committed loan facilities. res was 87,544,169. Operational net cash flow was –32.9 million eu- If all the share options in circulation on ros, compared with 24.4 million euros a year earlier. 31 March 2006 were exchanged for Finnair Plc At the end of March the Group’s financial assets ex- shares, the Finnish Government’s holding would be ceeded its interest-bearing debt by 50.3 million eu- 55.8 per cent. On the basis of share options that ros. Gearing has declined from –5.5 per cent at the remain unexercised, the company’s share capital can end of March 2005 to –10.6 per cent at the same rise by a maximum of 1,030,662.40 euros, corre- date this year. Gearing adjusted for leasing liabilities sponding to 1,212,544 shares, which is 1.4 per cent was 85.0 per cent (98.5%). The equity ratio rose of the company’s shares. from the previous year by 1.6 percentage points to stand at 40.7 per cent. The key figures are better than the targets set by the Board of Directors. According to the financial risk management pol- icy approved by Finnair’s Board of Directors, the 2
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