During the second quarter of 2022, Finnair was impacted by one crisis after another. The impacts of the severe, two years-and-counting pandemic started to ease as demand recovered, but at the same time, we felt the full weight of the impacts of the war in Ukraine. The operating result remained negative at - 84 million euros.
April – June 2022
- Earnings per share were -0.20 euros (-0.09)*.
- Revenue increased by 392.0% to 550.3 million euros (111.8).
- Comparable operating result was -84.2 million euros (-151.3). Operating result was -92.9 million euros (-139.1).
- Record high fuel price had an adverse cost impact of c. 126 million euros** year-on-year.
- Cash funds were 1,570.1 million euros (31 Dec 2021: 1 265.7) and the equity ratio was 7.2 per cent (31 Dec 2021: 11.8).
- Net cash flow from operating activities was 182.0 million euros (-59.3), and net cash flow from investing activities was 2.8 million euros (13.8).***
- Number of passengers increased by 711.3% to 2.4 million (0.3).
- Available seat kilometres (ASK) increased by 452.9% to 7,841.2 million kilometres (1,418.2).
- Passenger load factor (PLF) was 67.3% (30.6).
January – June 2022
- Earnings per share were -0.36 euros (-0.19).
- Revenue increased by 321.5% to 950.1 million euros (225.4).
- Comparable operating result was -217.1 million euros (-294.5). Operating result was -257.8 million euros (-288.2).
- High fuel price had an adverse cost impact of 177 million euros** year-on-year.
- Net cash flow from operating activities was 217.3 million euros (-177.0), and net cash flow from investing activities was -20.8 million euros (19.0).***
- Number of passengers increased by 603.4% to 3.9 million (0.6).
- Available seat kilometres (ASK) increased by 463.3% to 14,756.4 million kilometres (2,619.7).
- Passenger load factor (PLF) was 57.9% (28.3).
* Unless otherwise stated, comparisons and figures in parentheses refer to the comparison period, i.e., the same period last year.
** Fuel price impact including impact of currencies and hedging
*** In Q2, net cash flow from investing activities includes 4.8 million euros of redemptions (28.6 million euros of redemptions) in money market funds or other financial assets (maturity over three months). In H1, the investments, however, totalled in net terms to 2.9 million euros (37.9 million euros of redemptions). They are part of the Group’s liquidity management.
Outlook
GUIDANCE ISSUED ON 27 APRIL 2022:
Finnair's operating environment is two-sided. In Europe, the United States and South Asia*, travel is normalising as the impacts of the pandemic have eased. In contrast, travel restrictions in North Asia**, combined with the closed Russian airspace, have a significant impact on Finnair’s operating environment.
Finnair estimates that during the summer season in Q2 and Q3 2022, it will operate an average capacity of c. 70 per cent, as measured in ASKs, compared to the corresponding period in 2019. With the leases of aircraft with crew to other airlines that have now been agreed for the summer season, the total capacity deployed would be almost 80 per cent.
Finnair estimates that the comparable operating result in Q2 2022 will improve from Q1 2022 and be of a similar magnitude as in Q4 2021 (-65 million euros) supported by the strong rebound of demand in Finnair network yet burdened by the significant increase in fuel price and the continuing low level of North Asian traffic.
The company estimates that in Q3 2022, demand will be closer to the pre-pandemic levels in Europe, North America and South Asia.
* India, Singapore and Thailand
** Japan, South Korea and China
NEW GUIDANCE ON 19 JULY 2022:
Demand has almost normalised particularly in Europe and in the United States. Finnair estimates that in Q3 2022, it will operate an average capacity of c. 70 per cent, as measured in ASKs, compared to the corresponding period in 2019 and in Q4 2022, it will operate similar or slightly higher volumes than in Q3. With the leases of aircraft with crew to other airlines, the total capacity deployed would be more than 80 per cent in Q3 and c. 80 – 85 per cent in Q4, depending on future lease agreements.
Significant uncertainty in Finnair’s operating environment prevails, however, as the market price of fuel is historically high and the length of Russian airspace closure, the impact of inflation on demand and costs, as well as the development of the COVID-19 pandemic and related measures are unclear.
Even though the impacts of the pandemic on Finnair’s operations have partially eased, the 2022 comparable operating result will be significantly negative for a third consecutive year due to the impacts of the Ukrainian war. Further, Finnair estimates that the difficult operating environment, inclusive of the closed Russian airspace, will prevail for a longer period and, therefore, the company is preparing a new strategy to improve its weak profitability and to strengthen its financial position. The company’s target is to complete the strategy work during the autumn of 2022.
Finnair will update its outlook and guidance in connection with the Q3 2022 interim report.
CEO Topi Manner:
During the second quarter of 2022, Finnair was impacted by one crisis after another. The impacts of the severe, two years-and-counting pandemic started to ease as demand recovered, but at the same time, we felt the full weight of the impacts of the war in Ukraine. Our comparable operating result remained negative and was -84 million euros. The result was affected by the longer flight routes following the Russian airspace closure and especially the historically high fuel price, which almost doubled from year-end 2021.
Air travel demand started to normalise during the second quarter in many markets, which was visible as clear growth in passenger volumes and passenger load factors. We operated c. 64 per cent of our capacity compared to 2019, as the Russian airspace closure restricted flying to our traditionally important markets of Japan and South Korea. Some 6 per cent of aircraft capacity was wet-leased to partner airlines, providing work for around 600 Finnair employees.
Finnair is facing the impacts of the Ukrainian war as a company weakened by the pandemic. Due to these two crises, our operating result will be heavily negative for the third consecutive year. To confront this latest challenge, we continue to do what we have done during the pandemic: we adapt with active measures. We are preparing for the Russian airspace to remain closed for a long time. In addition, the fuel price is historically high, and our competitive environment has changed. The development of the COVID-19 pandemic and the strong growth in inflation adds to the uncertainty of our operating environment. These changes require a new strategy and significant structural renewal of Finnair. Therefore, we are working on a thorough strategy renewal and aim to communicate more about our direction and the changes it brings in the autumn.
As a part of our initial response to the Russian airspace closure, we updated our network in the spring, adding flights to North America and South Asia. Our new Dallas and Seattle routes have gotten off to a promising start during the summer. In spring, we also launched a new 60-million-euro additional cost savings programme, which has progressed as planned.
During the period, we strengthened our balance sheet by drawing 290 million euros of the capital loan granted by the State of Finland, and 110 million euros remain undrawn.
The rapid recovery of air travel has led to resourcing challenges in many airports around Europe, and these have impacted also our on-time performance. Our renewed home hub, Helsinki Airport, is nonetheless functioning well, and our relative on-time performance was on a good level also during the review period. This was also reflected in customer satisfaction, resulting in a net promoter score of 42, which is a very good score for an airline. I want to extend my warmest thanks to the Finnair team and all of our partners for their relentless commitment to ensuring a safe and smooth travel experience for our customers as the number of passengers rapidly increased.
