Q3 2019: Revenue and number of passengers up, comparable operating - - PowerPoint PPT Presentation

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Q3 2019: Revenue and number of passengers up, comparable operating - - PowerPoint PPT Presentation

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Q3 2019: Revenue and number of passengers up, comparable operating profit down on costs, primarily driven by currencies and fuel cost 22 October 2019 Topi Manner 1 Our growth continued and market shares increased Revenue increased by

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SLIDE 1

1

Q3 2019: Revenue and number of passengers up, comparable operating profit down on costs, primarily driven by currencies and fuel cost

22 October 2019 Topi Manner

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SLIDE 2
  • Revenue increased by 7.9% to EUR 870.3

million

  • Record summer: over 4 million passengers, at

maximum 104 weekly flights to Asia

  • Market shares in Asia and Europe increased
  • Strong performance in European traffic
  • Demand from Japan to Europe at good level;

demand from Europe to Asia, especially Hong Kong, declined

  • Global operating environment in cargo weak as

expected

  • Travel services revenue and number of

passengers developed well

2

Our growth continued and market shares increased

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SLIDE 3

Revenue was up by 7.9%, costs and capacity increased more

3

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 Q3 2018, NPS was 49. **Finnair carried in total of 4.1 million passengers in Q3/2019 and 3.7 million passenger in Q3/2018.

Capacity

+9.5%

Revenue

+7.9%

Comparable operating result

100.7 M€

(118.2 M€)

NPS

38*

PLF

+1.7%- points

Operating cost

+10.9%

Passenger volume

+11.9%**

Operating cost (Excl. fuel)

+9.1%

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

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SLIDE 4

Finnair market share and ASK development in AY Europe – AY Asia traffic

Note: 2019/Q3 market shares are only including 2019/Jul and 2019/Aug

Finnair market share and ASK development from/to Helsinki and Europe (including domestic)

4

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

5 000 10 000 15 000 20 000 25 000 3,0% 4,0% 5,0% 6,0% 7,0% 8,0%

ASK, millions 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 40% 45% 50% 55% 60% 65%

ASK, millions market share % Departure Periods

Finnair market share (rolling 12 months) Finnair ASK (rolling 12 months)

Note: 2019/Q3 market shares are only including 2019/Jul and 2019/Aug

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SLIDE 5

Revenue by product

5

On the whole, Q3 developed according to our expectations

5

53 46 657 53 42 55

Q3 2018

715 57

807 Q3 2019 870

7.9% Passenger revenue Travel services Ancillary Cargo

+8.7% +8.8%

  • 3.9%

+8.6%

  • Our European traffic performed strongly and new

North American routes have been well-received. In selected Asian routes, most notably Hong Kong, lower demand was experienced.

  • Ancillary sales grew slightly faster than passenger

revenues.

  • Cargo revenue was impacted by weaker demand

across the industry.

  • The demand for travel services picked up after a

challenging first half of the year, signalling more positive development for the rest of the year.

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SLIDE 6

Strong performance in Europe, North Atlantic +28% ASK growth and softness in selected Asian routes drove Group passenger RASK development

6

*PLF=Passenger load factor

Total traffic

Total %Change

ASK (million) 12,623.6 9.5% Revenue (Million) 714.7 8.7% RASK (Cents/ASK) 5.66

  • 0.7%

PLF % 86.2% 1.7pp

North America

Total %Change ASK (million)

1,153.8 28.2%

Revenue (Million)

58.5 26.0%

RASK (Cents/ASK)

5.07

  • 1.7%

PLF %

90.8% 3.7pp

Europe

Total %Change

ASK (million) 5,021.2 4.9% Revenue (Million) 284.6 10.1% RASK (Cents/ASK) 5.67 5.0% PLF % 85.0% 5.3pp

Domestic

Total %Change

ASK (million) 335.0

  • 0.9%

Revenue (Million) 32.8 0.2% RASK (Cents/ASK) 9.78 1.1% PLF % 68.9% 4.7pp

Asia

Total %Change

ASK (million) 6,113.6 11.1% Revenue (Million) 324.8 4.5% RASK (Cents/ASK) 5.31

  • 6.0%

PLF % 87.2%

  • 2.3pp
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SLIDE 7

Other revenue Q3/18 vs Q3/19

7

Q3 revenue growth was driven by strong performance in Europe

  • Traffic from Asia to Europe remained at good level, whereas

demand from Europe to Asia was softer. In selected Asian routes, most notably Hong Kong, lower demand was experienced.

  • North American capacity growth is also reflected in passenger

revenue.

Passenger revenue Q3/18 vs Q3/19

57.0 3.7 155.5

Q3 PY

42.0

  • 2.2

149.5

Ancillary

  • 2.2

Cargo

45.7 52.8 55.0 52.5

Q3/2019 Travel services

4.5

+4.1%

Ancillary Travel services Cargo 12.1

Atlantic Q3 PY Asia Europe Domestic Unallocated Q3/2019

657.4 14.0 26.1 0.1 5.1 714.7

+8.7%

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SLIDE 8

Increased OPEX calls for more attention on efficiency

8

OPEX, €782.9 million in total +10.9%

  • Capacity growth 9.5%
  • Operating costs 10.9%
  • OPEX excluding fuel 9.1%
  • Unit cost at constant currency excluding fuel decreased by

0.8%. (Q3/2019 vs Q3/2018)

Q3/2018 Comp. EBIT

  • 4.1

Other (NET)

100.7

  • 8.1

Q3/2019 Comp. EBIT Depreciation Sales& Marketing Passenger services Traffic charges Mainte- nance 63.4 Revenue Cargo -2.2 Ancillarysales3.7

  • 5.5
  • 7.4

118.2

  • 27.4
  • 10.0

Staff

  • 6.4
  • 1.7

Property, IT & co. Fuel Passengerrevenue57.3 Travel services4.5

  • 10.3
  • 17.5

24% 17% 16% 12% 10% 6% 6% 4% 4%

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

Comparable EBIT Q3/18 vs Q3/19

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

OPEX = operating expenses.

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SLIDE 9

Fuel costs increased with volume growth and the USD effect

9

  • Q3/18 hedging gain 27.1 M€
  • Q3/19 hedging gain 0.0 M€

CO2 emissions trading fees have increased with capacity increases and contribute to fuel cost growth

  • Q3/18: 4.2 M€
  • Q3/19: 6.4 M€

Fuel costs Q3/19 vs. Q3/18 Fuel hedges 30 September 2019

Period Hedging ratio Average price of the hedged position Q4 2019 73% 681 USD/tons* Q1 2020 69% 686 USD/tons* Q2 2020 59% 682 USD/tons* Q3 2020 48% 670 USD/tons*

* Average of swaps and bought call options strikes.

~12 M€

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

hedge ratio upper lower

15 163 Volume Q3 FY18 Price Currency Hedging deviation Q3 FY19

  • 23

8 27 190

+27

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SLIDE 10

10

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

Healthy balance sheet supports future investments

  • Equity ratio 22.8% (26.3%)
  • Gearing 73.6% (57.3%)

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

Cash investments for the financial year 2019 relate mainly to fleet and are expected to total approximately 480 million euros, including advance payments.

378 1 715 615 1 707 1 119 3 997

30 Sep 2018

4 037 1 056 427 1 073 2 112 341 337 1 678 2 155

31 Dec 2018

2 262 1 006 383

30 Jun 2019

311 2 297

30 Sep 2019

1 021 440 918 314 133

30 Sep 2019

3 944 445 503 742 897 661 165 3 944 921 146

30 Jun 2019

15 3 997 673 639

31 Dec 2018

10 1 774 127

30 Sep 2018

4 014 4 037 4 014 466

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SLIDE 11
  • Productivity increases by

simplifying and automating processes

  • New distribution strategy –

Finnair.com and NDC Partner program

  • Continued focus on improving

customer experience

  • New destinations: Daxing (Beijing),

Sapporo, Punta Cana, Busan and Haneda (Tokyo)

  • Fuel efficiency and other

sustainability actions, e.g. Nordic Initiative for Electric Aviation

11

Sustainable, profitable growth

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SLIDE 12

Outlook and guidance

Global airline traffic is expected to continue growing in the latter half of

  • 2019. However, the operating environment is expected to

remain volatile also in the second half of the year. The slowdown in the economies of Finnair’s key markets and the continued uncertainties surrounding global trade, including the US-China trade talks and Brexit, could impact the demand for air travel and for cargo. Finnair raises its capacity forecast for 2019 owing mainly to its new service to Beijing Daxing International Airport. Finnair estimates that capacity growth in 2019 will be between 11-12 per

  • cent. Revenue is expected to grow at a somewhat slower pace than

capacity in 2019. While the current outlook for Finnair’s seasonally strongest third quarter remains robust, we have started to see increased uncertainty especially in cargo demand. Finnair estimates that its comparable

  • perating result will be between 4.5-6.0% of revenue in

2019, assuming no material changes in fuel prices and exchange rates.

12

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SLIDE 13

13

Appendix

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SLIDE 14

Capacity growth driving revenue growth

15

Passenger revenue Q3/2018 vs Q3/2019, Meur

  • Strong capacity growth drove the increase in passenger

revenue

  • Introduction of new service to LAX and capacity increases to

HKG put pressure on yields.

ASK Q3/2018 PLF (load) FX Yield, mix,

  • ther

Q3 13.6 657.4 60.3 7.5

  • 24.1

714.7

+57.3

175 EUR/ PAX Q3 PY 180 EUR/ PAX Q3

  • 2.9%
  • Avg. fare1

84,5 86,2 Q3 PY Q3 +1.7pp

PLF, %

11,528 Q3 PY 12,624 Q3 +9.5%

ASK, mill

1)

  • Avg. fare = Passenger revenue per revenue passengers
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SLIDE 15

5,16 4,79 4,56 4,88 5,10 4,59 4,59 1,32 1,36 1,41 1,39 1,36 1,47 1,51

0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

CASK ex fuel Fuel

16

RASK trending down whereas CASK ex fuel improvements offset by higher fuel costs

6.46 6.48

CASK development, € cents RASK development, € cents

  • Unit cost (CASK) increased by 2.0%. Unit cost at constant

currency excluding fuel decreased by 0.8%. (Q3/2019 vs Q3/2018)

  • Unit revenue (RASK) decreased by 1.5%. Unit revenue at

constant currency decreased by 2.5%. (Q3/2019 vs Q3/2018)

6.15 5.97 6.27 6.06

6,63 6,70 7,00 6,53 6,31 6,44 6,89

0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

6.10

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SLIDE 16

Steady operating cash flow in Q3

17

412 363 485 194 30 Jun 2019 157 643 415 609 30 Sep 2019 1,021 1,006 Cash funds +15.1mEUR Commercial paper, deposits and funds > 3 months Commercial paper, deposits and funds < 3 months Cash and bank deposits Liquid funds in cash flow

Investments

609.0 642.7

Cash Q2

  • 44.4

Other

  • 42.8

Loan repayments

  • 66.0

Cash Q3 Working capital

  • 97.8

Comparable EBITDA Other

35.2 181.9 Operating +119.3mEUR

Cash flow

  • 33.7mEUR

Investing

  • 110.3mEUR

Financing

  • 42.8mEUR
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SLIDE 17

Income statement

in mill. EUR

Q1-Q3 2019 Q1-Q3 2018 Change % 2018 LTM Revenue 2,336.2 2,166.2 7.8 2,849.7 3,019.7 Other operating income 41.0 55.1

  • 25.6

73.7 59.6 Operating expenses Staff costs

  • 398.3
  • 380.4

4.7

  • 499.6
  • 517.5

Fuel costs

  • 515.9
  • 435.6

18.4

  • 581.0
  • 661.3

Capacity rents

  • 98.1
  • 91.5

7.2

  • 122.4
  • 129.0

Aircraft materials and overhaul

  • 147.7
  • 120.0

23.2

  • 162.9
  • 190.7

Traffic charges

  • 252.6
  • 226.5

11.6

  • 300.8
  • 327.0
  • Sales. marketing and distribution costs
  • 127.6
  • 118.1

8.0

  • 159.0
  • 168.5

Passenger and handling services

  • 371.9
  • 343.1

8.4

  • 453.9
  • 482.7
  • Property. IT and other expenses
  • 97.4
  • 97.6
  • 0.2
  • 131.3
  • 131.0

Comparable EBITDA 367.6 408.5

  • 10.0

512.6 471.6 Depreciation and impairment

  • 235.9
  • 216.6

8.9

  • 294.2
  • 313.4

Comparable operating result 131.7 191.9

  • 31.4

218.4 158.2 Operating result 125.3 183.1

  • 31.6

256.3 198.4 Financial income 2.8

  • 1.2

> 200

  • 2.2

1.8 Financial expenses

  • 65.4
  • 96.7

32.4

  • 126.8
  • 95.5

Result before taxes 62.6 85.2

  • 26.5

127.2 104.6 Income taxes

  • 12.5
  • 17.0

26.2

  • 25.6
  • 21.1

Result for the period 50.1 68.2

  • 26.6

101.6 83.5

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SLIDE 18

Hedging currencies and sensitivities

19

* 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 66 million EUR 31 million Currency distribution, % Q3 2019 Q3 2018 Q1-Q3 2019 Q1-Q3 2018 2018 Currency sensitivities USD and JPY(rolling 12 months from date of financial statements for

  • perational cash flows)

Hedging ratio for

  • perational cash flows

(rolling next 12 months) Sales currencies 10% change without hedging 10% change, taking hedging into account EUR 47 48 52 55 55

  • USD*

6 5 5 4 4 see below see below see below JPY 14 14 12 11 10 EUR 37 million EUR 15 million 66 % CNY 9 10 7 7 7

  • KRW

3 3 3 3 3

  • SEK

2 2 3 3 3

  • Other

18 17 18 17 17

  • Purchase currencies

EUR 56 58 57 61 61

  • USD*

37 35 36 32 32 EUR 85 million EUR 26 million 65 % Other 7 7 7 7 7

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SLIDE 19

THANK YOU

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