Finnair Q3 Result October 2012

Transcription

1 Finnair Q3 Result October

2 Content Market environment in Q3 Business performance and strategy execution Outlook Financials 2 Finnair Q3 Result, 26 October 2012

3 Market Environment The global economy remains fragile, slow growth expected throughout 2012 in most economies. The main downside risk of substantial deterioration of the Eurozone remains, while economy in China appears to stabilize. According to IATA, airline performance remains challenging; Historically airlines have slipped from profit to loss whenever GDP growth has fallen below 2%. Oil price developments and expectations for the rest of the year have also left IATA s 2012 forecast unchanged at $110 a barrel, an historically high level. The modest improvement in 2012 airline industry profits is due to better airline performance, and also due to more robust demand to travel earlier this year. Consolidation is producing positive results. Asset utilization in the passenger business is high across many markets. In past cycles, passenger load factors and aircraft utilization have fallen by this stage, in the face of slowing demand and increasing aircraft deliveries. In this cycle, airlines have kept both load factors and aircraft utilization high, allowing yields to improve and spread fixed costs more widely. Weaker cargo market has, however, seen asset utilization fall. 3 Finnair Q3 Result, 26 October 2012

4 Consolidation continues in the industry Alliance landscape is changing Qatar to join Oneworld alliance, Middle-Eastern airlines active in partnering with legacy carriers Market exits in short haul traffic Legacy carriers continue to restructure their loss-making short haul operations 4 Finnair Q3 Result, 26 October 2012

5 5 Positive trend in business performance strengthens Finnair s position in the market

6 Strong Q3 performance All time high Q3 Turnover and Operational EBIT Turnover M (+7.1%), EBIT 48.9 M (+77.2%) Stable financial position Net cash flow from operations 44,5 M in July-September M short-term cash and cash equivalents (approx. 18% of annual turnover) Notable improvements in traffic performance: Load factor +3.9% -p RASK +7.8% Top performance in punctuality, over 90% of flights arrived on time 6 Finnair Q2 Result, 10 August 2012

7 Turnover growth continued while EBIT* improved by 77.2% Quarterly turnover, million Quarterly Operational EBIT, million 700 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q *Operational result (EBIT), excluding non-recurring items, capital gains and changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves 7 Finnair Q3 Result, 26 October 2012

8 Operational EBIT build-up in Q Milj. Eur 140,0 120,0 100,0 80,0 12,7 11,0 8,6 5,8-2,4-4,6-6,1-6,2-11,4 60,0 40,0 49,2-35,3 20,0 0,0 27,6 48,9 8 Finnair Q3 Result, 26 October 2012

9 Operational EBIT build-up YTD ,0 200,0 150,0 22,7 20,6 11,5 11,1 11,0-1,7-18,1-19,3-21,1 100,0-96,3 50,0 147,7 0,0-29,3 38,6-50,0 9 Finnair Q3 Result, 26 October 2012

10 Unit revenue improvement continues Unit revenue per available seat kilometre (RASK) up by 7.8% in Q3 as both passenger load factor (PLF, +3.9%-p) and yield per revenue passenger kilometre (RPK yield, +2.3%) improved y-o-y Q3 RASK +7.8% PLF +3.9%-p RPK yield +2.3% 10 Finnair Q3 Result, 26 October 2012

11 Strong traffic performance in Q Asian share 52.3% of the total capacity North America ASK 1,3 % RPK 1,9 % PLF 0,5 %-p Traffic revenue* 8,1 % Leisure traffic ASK 23,6 % RPK 29,9 % PLF 4,5 %-p Traffic revenue* 24,2 % Europe ASK -0,5 % RPK 9,2 % PLF 6,9 %-p Traffic revenue* 12,2 % Domestic ASK -9,5 % RPK 2,6 % PLF 7,4 %-p Traffic revenue* -9,4 % Asia ASK 4,3 % RPK 6,4 % PLF 1,6 %-p Traffic revenue* 11,4 % Total traffic ASK 3,4 % RPK 8,6 % PLF 3,9 %-p Traffic revenue* 11,0 % Passenger revenue split 5 % 7 % 5 % 51 % 32 % Asia Europe Domestic North Atlatic Charter Cargo ATK -41,7 % RTK -26,3 % OLF 17,0 %-p Traffic revenue -30,3 % * passenger revenue 11 Finnair Q3 Result, 26 October 2012

12 12 Strategy implementation yielding results

13 Finnair has strong presence in Asian key economies, weekly frequencies* China Japan Finnair Lufthansa Air France KLM IAG Finnair Lufthansa Air France KLM Singapore 12 Republic of Korea Finnair Lufthansa Air France KLM Finnair Lufthansa Air France KLM *Finnair is the 3rd largest carrier in its destinations, estimated market share of 5.9%. Market size of 20 million transfer passengers annually, globally one of the fastest growing traffic areas. Traffic between Europe and China forecasted to triple during the next 30 years. 13 Finnair Q3 Result, 26 October 2012

14 Targeted savings of 80 M already achieved, 90 M by the end of the year Total target 140 M Savings progress to target 8 % 2 % 8 % 25 % Maintenan ce 26% 74% Personnel 43% 57% 9 % Other costs Leasing Fleet 102% 105% 10 % 14 % Maintenance Other costs Sales and distribution Ground handling 24 % Personnel Leasing Catering Fuel Sales and distributi Catering Ground handling Fuel 38% 109% 148% 62% 155% 0% 20% 40% 60% 80% 100% 120% 140% 160% 14 Finnair Q3 Result, 26 October 2012

15 New 60 M savings program launched Despite the good advancement of the structural change and cost reduction program as a whole, the company has not progressed as planned in all its savings categories Finnair still has a long way to go to reach its long-term target operating profit margin of 6 per cent In the face of high fuel prices, intensifying competition and significant fleet investments in the coming years, the company must achieve a marked improvement in profitability. New cost reduction program published with the aim of achieving a permanent reduction in costs of a further 60 million euros by the end of Finnair Q3 Result, 26 October 2012

16 Achievements so far Fleet optimisation in European traffic: 11.5 M savings discontinuation of 4 A320 series aircraft lease agreements and subleasing 5 E170 aircraft Fleet leasing contracts renegotiated and renewed Improved route planning and aircraft utilisation Low performing routes discontinued, average aircraft utilisation up by over an hour a day to 9 hours Partnerships in non-core areas for improved cost efficiency Support functions streamlined Centralized procurement in place cost savings so far 16 M Faster check-in with automation

17 Partnerships an integral part of restoring profitability Operation Partner Status European Airbus traffic European Embraer traffic Analysis on-going Oct 2012 Domestic traffic Oct 2011 Catering Aug 2012 Engine and component maintenance Jul 2012 Ground handling Nov Finnair Q3 Result, 26 October 2012

18 Flybe cooperation brings cost benefits Contract Flying for Finnair: Finnair purchases 100% of seat capacity in Flybe-operated ATR-72 and Embraer 190 aircraft Finnair network planning, pricing, revenue management, marketing and commercial risk Flybe on board product on ATR aircraft 10 international and 5 domestic routes Contract flying effects on the P&L A proportion of staff costs and fleet maintenance reserves will shift to other rental payments inside the P&L No changes in fuel, traffic charges, ground handling, catering and maintenance cost book entries No decreasing effect on the top line 18 Finnair Q3 Result, 26 October 2012

19 Flybe Nordic already the 4th largest operator in the Nordic and Baltic Countries* Leading regional carrier in the Nordic and Baltic Countries Turnover of 102 million euros in 2011 Approx. one million passengers during the first year Over 600 employees in Finland in October 2012 Number of employees has doubled during the first year of operations, growth continues 34 aircraft * Measured in the number of flights 19 Finnair osavuosikatsaus,

20 Distinct products for different traffic areas LONG HAUL Asia & North America SHORT HAUL Feeder traffic, European major routes JV and/or tactical partnerships possible Feeder traffic, European niche routes Embraer contract flying / * REGIONAL TRAFFIC Domestic and some Nordic routes ATR contract flying / * * Finnair owns 40% of Flybe Nordic 20 Finnair Q3 Result, 26 October 2012

21 Fleet renewal is key for successful strategy implementation Fleet investments reduce unit costs and improve fuel efficiency More capacity and lower seat cost with next generation aircraft Airbus 350 XWB from H Up to 18% more capacity: from 270 seats to seats Estimated seat cost -30% compared to Airbus 340 Improved revenue position with superior product 11 orders and 8 options 21 Finnair Q3 Result, 26 October 2012

22 Outlook for 2012 Guidance on 26 October 2012: Finnair estimates that the operational result for the second half of the year, which is stronger than the first half of the year due to seasonal variations, will reflect improved profitability compared to the first half of the year, leading to a profitable operational result for the full year The outlook for the world economy is still uncertain, and Finnair will adjust its passenger traffic capacity with its current structure according to demand. Finnair estimates that this capacity will increase on last year but less than 5 per cent. The growth will mainly come from Asian traffic, where Finnair increased capacity in May by opening a new flight route to Chongqing, China. Finnair s fuel costs are still estimated to be significantly higher in 2012 compared to the previous year due to increased capacity and high fuel prices. Cost reductions of approximately 90 million euros out of the structural change and cost reduction program s total target of 140 million euros are expected to be achieved by the end of Finnair estimates that unit cost (CASK) excluding fuel will decrease year-on-year in the second half of the year. 22 Finnair Q3 Result, 26 October 2012

23 Coming Soon Finnair osavuosikatsaus,

24 24 Financials

25 Key figures Q3 Key Figures Jul-Sep 2012 Jul-Sep 2011 Change % FY 2011 Turnover and result Turnover EUR million 650,3 607,2 7, ,7 Operational result, EBIT EUR million 48,9 27,6 77,2-60,9 Operational result, % turnover % 7,5 4,5 - -2,7 Operating result, EBIT EUR million 71,1 10,6 > 200 % -87,8 EBITDAR EUR million 97,8 75,8 29,0 139,6 Result before taxes EUR million 67,3 3,1 > 200 % -111,5 Net result EUR million 50,8 1,9 > 200 % -87,5 Capital expenditure, CAPEX EUR million 7, ,9 203,9 Net cash flow from operating activities EUR million 44,5-1,2 > 200 % 50,8 Share Share price at end of quarter EUR 2,07 2,94-29,6 2,30 Earnings per share EUR 0,43 0, ,75 25 Finnair Q3 Result, 26 October 2012

26 Airline business: RASK & CASK development Q Unit revenue per available seat kilometre (RASK) up by 7.8% Unit cost per per available seat kilometre excluding fuel (CASK, excl. fuel) down by 1.1% Change, y-o-y, % -15% -11% -7% -3% 1% 5% 9% 13% 17% 21% 25% RASK, unit revenue CASK, unit cost 7,8 % 6,1 % CASK, excl. Fuel Fuel cost Personnel -1,1 % -1,4 % 24,6 % Depreciation & leasing -9,6 % Traffic charges 9,5 % Maintenance 3,4 % Ground handling Catering -10,6 % -6,4 % Other costs 1,5 % 26 Finnair Q3 Result, 26 October 2012

27 Fuel costs continued to climb in Q Operational costs Mill. Eur Fuel cost % y-o-y* The share of fuel costs 30% , ,2 +3.3% 603, ,2 586,1 Mill. Eur ,8 621, Q1 Q2 Q3 Q % 146,4 179,6 144,3 131,7 157,9 132,8 167, Q1 Q2 Q3 Q4 * Hedging taken into account 27 Finnair Q3 Result, 26 October 2012

28 Fuel and personnel biggest cost items in Operational costs Q3 2012, total of Mill. Eur 2,8 % 2,7 % 3,1 % 4,6 % Total Change, y-o-y, % 3,3 % Fuel 24,5 % 5,4 % 29,8 % Personnel -11,5 % 6,1 % Ground handling and catering 22,6 % 8,9 % Traffic charges Other costs -6,3 % 11,0 % 10,2 % 16,2 % Maintenance 14,2 % 10,3 % Depreciation Other rental payments -23,8 % 6,5 % Fuel Ground handling and catering Other costs Depreciation Sales and marketing Aircraft leasing Personnel Traffic charges Maintenance Other rental payments Tour operations Sales and marketing -13,4 % Tour operations -39,6 % Aircraft leasing -7,4 % -40% -20% 0% 20% 40% 28 Finnair Q3 Result, 26 October 2012

29 Fuel, spot-price development 29 Finnair Q3 Result, 26 October 2012

30 Hedging successful at 7 M profit Fuel cost build up LTM Mill. EUR ** 144* 50 0 Q3/2011 Volume Price Currency Hedging Deviation Q3/2012 *Incl. Hedging profit of 22 Mill. EUR * **Incl. Hedging profit of 7 Mill. EUR *) and emission trading cost of 0,8 Mill. EUR 30 Finnair Q3 Result, 26 October 2012

31 Rolling hedging policy Hedging positions, 30 September 2012 Hedge ratio H1 2013: 69% Finnair hedges jet fuel positions 24 months ahead within the limits defined in the hedging policy Finnair is 74% hedged for the next six months The company protects itself against the risks of currency, interest rate and jet fuel positions by using different derivative instruments, such as forward contracts, swaps and options 31 Finnair Q3 Result, 26 October 2012