Finnair Group Annual Result 1 January 31 December 2005

Transcription

1 Finnair Group Annual Result 1 January 31 December 2005

2 Industry picking up Best growth in demand for European airlines in five years Competition remained tough, especially in Nordic countries Load factors improved Rise in average price did not offset increase of fuel price Many airlines still in shaky financial shape

3 Finnair s profit trippled Profitability improved thanks to increase in demand, average prices and productivity Demand and turnover grew significantly Result trippled despite expensive fuel Load factors improved Average prices went up, but waned towards the end of the year Asian demand engine for growth Fleet being renewed and expanded

4 MEUR Best result in five years Operating profit/loss

5 Slow fourth quarter as predicted Q4/2005 Q4/2004 Change % Turnover mill EBITDAR EBIT from disposal of capital assets excluded and without hedging of future cash flows Capital gains Fair value changes of derivatives Operating profit/loss (EBIT) Profit after financial items

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

7 MEUR 500 Net debt free December 2005 Liquid funds 418 mill. Credit facilities 200 mill Interest bearing debt Liquid funds Net debt

8 Strong balance sheet Equity ratio and adjusted gearing % Equity ratio Adjusted gearing

9 Expensive fuel raised unit costs Unit costs of flight operations without hedging of future cash flows c/atk Unit costs of flight operations excl. fuel and hedging of future cash flows c/atk Personnel expenses c/atk Fuel costs c/atk Traffic charges c/atk Ground handling and catering /passenger Sales and marketing /passenger Aircraft lease payments and depreciation c/atk Other costs c/atk Q4/ % -2.9 % % % +2.9 % % % % +2.5 % Q1-Q4/ % -3.3 % +5.9 % % -0.4 % -0.4 % % % +0.7 % ATK = Available Tonne Kilometre

10 Average yield and costs have risen Change YoY % Q Q3 Q Q3 Q Q3 Q1 Q3 Q1 Q3 Yield (EUR/RTK) Unit costs (EUR/ATK)

11 Work continues to improve productivity Despite increase in fuel price, goal is that unit costs of flight operations (c/atk) will not increase Goal is a decrease of five per cent in unit costs in all other cost groups besides fuel Introduction of new aircraft will weaken productivity temporarily at beginning of year In current competitive situation, average price will not go up

12 Asian success story continues In 2005 demand grew by 16.8%, passenger numbers by 14.8% and load factors by 0.8% New route to Guangzhou opened in September and this year Nagoya and Delhi resulting in 10 destinations and over 40 weekly flights to Asia 1-2 new Asian destinations per year, more frequencies to existing destinations New Asian feeder routes to Edinburgh, Pisa, Kiev, Krakow, and Geneva, more flights to St Petersburg and Warsaw Lie-flat bed seats in long-haul business class Expansion of long-haul fleet in 2006

13 Share of Asian traffic growing Scheduled traffic passenger and cargo revenues in 2005 America 5 % Domestic 18 % Asia 27 % Europe 50 %

14 Modern fleet Finnair Scheduled Traffic will have one of most modern fleets in Europe by next summer Very popular new Embraer 170/190 aircraft increase flexibility, decrease costs and are eco-efficient Remaining Boeing MD-80 aircraft retired at quickened pace by summer 2006 New Airbus A340/350 aircraft replace current wide-body fleet by 2012 Eighth wide-body aircraft in 2006

15 Strategic cornerstones Growth from traffic between Europe and Asia as well as from near-by areas Most desired airline by customers Increased flexibility Cost efficiency vs. competitors SUSTAINABLE, PROFITABLE GROWTH

16 New drive for oneworld Largest airline in Asia and Pacific region Japan Airlines to join. Finnair already made code-share agreements Royal Jordanian to complement network in growing market area in Middle East Hungary s Malev has signed letter of intent for joining oneworld only profitable airline alliance

17 Best in northern skies, a market leader in Europe Profitability Growth Balance sheet Quality Service Punctuality Value for money Shareholder return

18 Fuel costs increasing 2003: 10.2% of turnover 2004: 12.5% of turnover 2005: 15.6% of turnover 2006: >19.5% of turnover at current price level and planned traffic growth Finnair has hedged approx. 60% of its fuel purchases for the first six months of 2006, descending from this level for 18 months.

19 Jet fuel derivatives determine price increase

20 Assesments for future development Focus on Asian expansion will continue with additional aircraft Load factors will improve with more flexible capacity Productivity will continue to be improved Fuel expenses will continue to be high Price development continues poor due to tight competition Development at start of year modest, fuel expensed for first quarter 19% of turnover (13% Q1/2005) 2006 result clearly profitable

21 Appendices

22 Slow fourth quarter as predicted MEUR Change in EBIT per quarter (Excluding capital gains and fair value changes of derivatives) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

23 Development of Group Business Units Excluding capital gains and fair value changes of derivatives 2005 Q Q4 MEUR Scheduled Passenger Traffic Leisure Traffic Aviation Services Travel Services Unallocated items Total

24 Investments and cash flow from operations MEUR Operational net cash flow Investments

25 Aircraft operating lease liabilities have grown in line with strategy MEUR Flexibility, costs, risk management On 31 December all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 31 December 2005 would have been 66,8%

26 Q Q Q ROE and ROCE Rolling 12 months Q Q Q Q Q Q Q Q Q Q ROE ROCE Q Q Q %

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

28 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 New aircraft in European traffic

29 Operations systematically rationalised Personnel Personnel on average

30 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% 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

31 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.

32 Finnair Group Investor Relations tel: fax: