COMPANY FORUM 2005 Copenhagen,

Transcription

1 Lasse Heinonen, CFO COMPANY FORUM 2005 Copenhagen, Den Danske Finansanalytikerforening

2 On blue and white wings since 1923 Over 8 million passengers/year Turnover 1.7 billion euro employees 68 aircraft Listed 1989 in Helsinki 2

3 Finnair Group Business Units FINNAIR GROUP SCHEDULED PASSENGER TRAFFIC Finnair Scheduled Passenger Traffic Finnair Cargo Aero flynordic Finnair Aircraft Finance LEISURE Finnair Leisure Flights Suntours Ltd TRAVEL SERVICES Finland Travel Bureau Area Estravel Amadeus Finland AVIATION SERVICES Finnair Technical Services Northport ground handling Finnair Catering Finncatering Finnair Facilities Management

4 Airline structure Finnair Scheduled Passenger Traffic Long-haul traffic European traffic Domestic trunk routes operated with Boeing MD-11, Airbus 320 -fleet Finnair Leisure Flights Mediterranean, Asia, North and South America operated with Boeing B757 Aero Feeder traffic operator based in Tallinn, Estonia The Baltics and Southern Finland operated with turbo prop ATR 72 flynordic Low cost operator based in Stockholm Scandinavia and elsewhere in Europe operated with Boeing MD-80

5 Strategy Remains Unchanged Cost efficiency vs. competitors Competitive edge from distinct, superior product Partnerships / alliances Growth from Asia, Baltic Sea region and Scandinavia Focus on core business and more flexibility through structural changes SUSTAINABLE, PROFITABLE GROWTH

6 Superiority of product Direct to over 40 international destinations No time-consuming transfers at crowded airports Best schedules Morning-evening concept Most punctual in Europe with least cancellations Top class service in Europe oneworld alliance with best quality and coverage Good connections to 135 countries New aircraft in European traffic

7 Airlines finally take off? + Demand is growing + Passenger load factors continue to rise - Industry burdened by high fuel prices - Price competition continues, many having profitability problems

8 Clear improvement in result (IFRS-reporting) Q1/2005 Q1/2004 Turnover, EUR mill. 449,4 413,2 EBITDAR 64,4 42,3 Operating profit/loss (EBIT) 18,7-2,4 EBIT from the disposal of capital assets excluded and without hedging of future cash flows 14,0-3,9 Profit before taxes 17,4 2,7 Profit from the disposal 0,0 1,5 of capital assets

9 Robust growth January-March 2005, scheduled traffic Finnair SAS AEA Demand +9,6 % -0,4 % +6,4 % (RPK) Capacity +4,8 % -0,7 % +4,2 % (ASK) Passenger load factor +2,6 p.u. 0,2 p.u p.u. FIGURES ARE BASED ON AEA REPORT RPK = Revenue Passenger Kilometer ASK = Available Passenger Kilometer

10 Strong opening for the year EUR mill. Operating profit/-loss Capital gains Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q

11 Fifth consecutive profitable quarter Change in EBIT per quarter, excluding capital gains EUR mill Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q

12 Group has strong liquidity Cash flow January - March CASH FLOW STATEMENT (EUR mill.) Cash flow from operations 33-4 Investments and sale of assets Cash flow from financing 13-2 Change in liquid funds Liquid funds at the beginning Liquid funds at the end

13 EUR mill. 500 Net debt free Liquid funds 322 EUR mill. Credit facilities 200 EUR mill Q1 Interest bearing debt Liquid funds Net debt

14 Strong balance sheet Equity ratio and adjusted gearing % Q Equity ratio Adjusted gearing

15 Modern and efficient fleet Finnair has renewed half its fleet in five years 29 Airbus A320s in firm orders for Embraer E170 aircraft (deliveries 9/2005 2/2007) and 8 options MD80 fleet phased out in 2006 (excl. flynordic) All ATR 72s operated by Aero 7th Boeing MD11 joins long-haul fleet, next phase under review

16 Finnair fleet 31 March 2005 Type Number of seats Owned Leased Total Average age MD B A A A MD * 16.3 ATR ** 14.3 Total * Includes eight aircraft operated by flynordic ** All aircraft operated by Aero

17 Drop in average prices has ended Change YoY % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Yield (EUR/RTK) Unit costs (EUR/ATK)

18 Productivity improved as planned Q1/2005 Q1/ Unit costs of flight operations c/atk -3,8 % -14,7 % -11,9 % Personnel expenses c/atk -6,9 % -19,1 % -22,3 % Fuel costs c/atk +14,6 % -6,6 % +12,2 % Materials and overhaul for aircraft /flight hour -5,2 % -10,9 % -19,5 % Traffic charges c/atk +3,0 % +1,5 % +1,7 % Ground handling and catering /passenger +8,6 % -16,9 % +2,6 % Sales and marketing /passenger -29,7 % -28,1 % -16,0 % Aircraft lease payment and depreciation c/atk -9,3 % -12,2 % -15,3 % Other costs c/atk -0,0 % -31,6 % -27,5% ATK = Available Ton Kilometer

19 Operations systematically rationalised Personnel Personnel on average Q1

20 Finnair long-haul destinations Osaka ASIA Bangkok (daily/10 flights/week) Beijing (daily) Hong Kong (3 flights/week) Osaka (5 flights/week) Shanghai (5 flights/week) Singapore (4 flights/week) Guangzhou (3 flights/week) Tokyo (2 flights/week) Shanghai Kanton Hongkong NORTH AMERICA New York (5-7 flights/week) 20

21 Sustainable competitive edge: Fastest and shortest routes Sustainable competitive edge from Asian traffic through geography CPH + 80 mill. HEL Asia

22 Asian success story continues Demand grew January-March 22.3% Passenger numbers increased 17.2% Direct flights to Hong Kong and daily to Singapore in the summer New destination Guangzhou opens in September Seventh Boeing MD-11 for Asian traffic for winter season Lie-flat beds in Business Class

23 Every fourth euro from Asian traffic Scheduled Traffic and Cargo Revenues 2005 Q1 Asia 24 % America 5 % Domestic 22 % Europe 49 %

24 Tail wind for Leisure Traffic Aurinkomatkat-Suntours largest with over 35 per cent market share, Finnair Leisure Flights also have strong market lead Four Boeing B757 lease agreements were renewed at clearly more affordable conditions Collective labour agreements strengthen competitiveness of Leisure Traffic Economic effects of tsunami remained relatively small Advance sales of long-haul leisure tours now +50% Preparations for incorporating leisure flight operations have begun

25 flynordic Stockholm-based low cost carrier Competitive cost structure Creaming the crop on high-volume Scandinavian routes Six routes in 2004: Oslo, Copenhagen and four domestic routes in Sweden New openings in 2005: From STO: Berlin, Munich, Dublin and Tallinn; from GOT: Munich; from CPH: Tallinn New routes through co-operation with Sterling passengers during the first full operation year 2004 Target: over one million passengers in 2005 Currently a fleet of eight Boeing MD-80 aircraft

26 Nordic number 1, European elite Profitability Growth Balance sheet Quality Service Punctuality Value for money Finnair is the only profitable listed airline in the Nordic skies.

27 Finnair share price vs. major European carriers Index of share price of Finnair vs. Index of major European carriers Bloomberg Europe Airlines Index Finnair

28 Short term outlook Strategy working well Profitability turning for the better Growth of demand continues, goal also to improve load factors flynordic continues to increase its market share Improvement of productivity on track Average prices and fuel expenses on the rise Clear improvement expected for 2005 result compared with previous year

29 Appendices

30 First quarter key points Finnair profitability clearly turned for the better EBIT 18,7 mill. euros vs. -2,4 in Q1/2004 Unit costs dropped 3.8%, average price level at last year s level Strong, positive cash flow from operations 30 mill. euro increase in liquid funds flynordic continues to increase market share New collective labour agreements with all unions until 2007/2008

31 Development of Group Business Units OPERATING PROFIT EXCLUDING CAPITAL GAINS, BY SECTOR Q1 Q1 EUR mill. Scheduled Passenger Traffic Leisure Traffic Aviation Services Travel Services Unallocated items Finnair Group Total 9,7 4,9 5,2 1,3-2,4 18,7-15,4 11,1 4,8 1,8-6,2-3,9

32 Investments and cash flow from operations EUR mill Q Operational cash flow Investments

33 Operating lease liabilities have grown in line with funding strategy Flexibility, costs, residual risk management EUR mill On 31 March 2005 all leases were operating leases. If capitalized, using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 31 March 2005 would have been 98.5 %.

34 ROE and ROCE Rolling 12 months 12 9 % Q Q Q Q Q Q Q Q Q Q Q Q Q ROE ROCE

35 150 Stock price development Finnair vs. SAS Stock prices of Finnair and SAS, = 100 SAS Finnair

36 Operating profit (EBIT) Finnair Financial Targets Sustainable value creation EBIT margin at least 6% => mill. in the coming few years EBITDAR EBITDAR margin at least 17% => over 300 mill. in the coming few years Economic profit To create positive value over pretax WACC of 8.5% not later than 2005 Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 % Pay out ratio Minimum one third of the EPS Total Shareholder Return (TSR) On average 15% annual TSR => to double the value for shareholders in five years Market Cap Price to Book minimum target 1.0

37 Finnair s Financial Targets Description of targets Operating profit (EBIT) EBITDAR Economic profit Adjusted Gearing Pay out ratio Turnover + other operating revenues operating costs Result before depreciation, aircraft lease payments and capital gains Operating profit EBIT Weighted Average Cost of Capital (Interest bearing debt + 7*Aircraft lease payments liquid funds) / (Equity + minority interests) Dividend per share / Earnings per share Total shareholder return (TSR) Total return for shareholders including dividend paid out during certain period. Expects that dividend is invested back into Finnair shares immediately. Price to book ratio Finnair s market value calculated on the basis of its share price divided by its book equity

38 Finnair Group Investor Relations tel: fax: