27 April, 2023

Finnair's cost cutting measures seem to be making a difference......

The Helsinki-based Finnair's continuing cost-cutting and streamlining appear to be making a difference to the firm's performance, especially over the last quarter was proved to be more positive than many had forecast. Indeed, during what is the seasonally weakest quarter of the year for the carrier, it managed to reach the break-even point. 

There are many reasons for the airline's more positive position, not least the commitment and dedication of the staff,  which saw its Finland-based cabin crew sign a new agreement that actually means lower wages and increased work as productivity is enhanced which allows more savings. The airline is also subcontracting cabin service on long-haul operations, which the management sees as a key way to transform the carrier. Following the new agreement with cabin crew,  the leaders are not bringing in the same subcontracting model of cabin service on domestic and European routes for the next five years. 

Key figures released in the most recent publication show Finnair's revenue increased by 73.8% to 694.7 million euros in the first quarter. Net cash flow from operating activities was 206.8 million euros (35.4), and net cash flow from investing activities was -143.7 million euros (-23.7).

The higher fuel prices continued to have an adverse impact on the airline, which expects to cost an extra 40 million euros year-on-year, including the impact of currencies and hedging

Finnair estimates that in 2023, it will operate an average capacity of 80–85 per cent, as measured in ASKs, compared to 2019. The capacity is impacted by the development of demand, e.g., increase in travel on Chinese routes, and potential leases of aircraft with crew to other airlines.

CE­O Topi Manner issued the following statement:  "The year started on a positive note, as Finnair achieved a marginally positive comparable operating result in the seasonally weakest first quarter. This was the third consecutive profitable quarter after ten loss-making quarters caused by the pandemic and the closure of Russian airspace. Typically, the first quarter of the year is loss-making and, thus, the result speaks of both good progress in strategy implementation, and of a strong demand environment. Strong demand, combined with capacity and resource constraints in the aviation sector caused by the pandemic, contributed to the positive development of our unit revenues."

Manner continues "We are heading in the right direction, but the road to recovery is a long one. We cannot expect that the current strong demand situation is a permanent one. Our operating environment remains challenging in many respects, as the fuel price has remained high, inflation has not subsided, interest rates have risen, and the Russian airspace remains closed as the war in Ukraine continues. Therefore, we are determined to continue implementing our strategy, seeking both an increase in unit revenue, and a reduction in unit costs, in order to be able to achieve our financial targets in a normalised demand and capacity environment. 

Finnair now has a more geographically balanced network. Although the closure of Russian airspace has reduced traffic to Asia and travel to China is only starting to increase, Finnair's position in traffic between Europe and Asia has remained strong. At the same time, we have found new passenger flows in long-distance traffic, for example, in traffic between the United States and Europe, India and the United States, and the Middle East and Northern Europe. Brisk travel within Europe has also continued. Leisure travel has returned to the pre-pandemic level, and the recovery of business travel continues.

During the quarter, we signed a new agreement with our Finland-based cabin crew to support productivity enhancement and enable savings. As a result, almost 90 per cent of Finnair's personnel have agreed on savings to nurse the company back to health. We have also made changes to the service concept on our flights, reducing unit costs. As part of our sustainability work, we purchased the largest single batch of sustainable aviation fuel from Neste to date, 750 tonnes. While this represents only a small portion of our current fuel consumption, it is a meaningful step in our long-term journey to scale up sustainable aviation fuel usage.

Our on-time performance during the first quarter was 82 per cent. Customers have been satisfied with Finnair's service, as our net promoter score was 42. I would like to thank the entire Finnair team for their good customer care and systematic implementation of the strategy during the quarter.

We are now preparing for the busy summer season. We have strengthened our resources by recruiting pilots and hiring seasonal workers for cabin service through a partner. Thanks to our strong team and well-functioning home base Helsinki Airport, we are in an excellent position to serve our customers during the upcoming peak travel season."

Finnair's operating fleet......
Finnair’s fleet is managed by Finnair Aircraft Finance Oy, a wholly-owned subsidiary of Finnair Plc. At the end of March, Finnair itself operated 55 aircraft, of which 25 were wide-body and 30 narrow-body aircraft. The average age of the fleet operated by Finnair was 11.7 years.

At the end of March, Finnair had seventeen A350 aircraft, which have been delivered between 2015–2021, and two A350 aircraft on order from Airbus. The first of these aircraft is scheduled to be delivered to Finnair in Q4 2024 but, based on an agreement signed after the period, the delivery of the second aircraft has been deferred from Q1 2025to Q2 2026. 

During the first quarter, Finnair redelivered one Airbus A319 aircraft to the lessor at the end of its lease and purchased two Airbus A320s and one Airbus A321 aircraft from their respective lessors.Finnair’s investment commitments for property, plant and equipment, totalling 353.4 million euros, include the upcoming investments in the wide-body fleet. 

Norra Fleet
Nordic Regional Airlines (Norra) operates a fleet of 24 aircraft for Finnair on a contract flying basis. All the aircraft operated by Norra are leased from Finnair Aircraft Finance Oy