Finnair Group Interim Report 1 January – 30 June 2006

Esitys aiheesta: "Finnair Group Interim Report 1 January – 30 June 2006"— Esityksen transkriptio:

1 Finnair Group Interim Report 1 January – 30 June 2006

2 Sense is slowly returning, even in airline industry
Many airlines still in shaky financial shape Competition remains tough in Nordic countries Two airlines have withdrawn from Finnish market Successful airlines have strong economy, effective strategy and costs in check Strong airlines invest in new aircraft with low fuel consumption

3 Quarter of structural change
Finnair’s increasing role in Asia-Europe traffic is reflected in the company structure One-off adjustment costs of structural change 15.2 MEUR, result clearly under last year’s level Introduction of new aircraft temporarily weakened productivity in first half of year Average price of flight tickets decreased Good development in demand Record load factors

4 Personnel cuts agreed 670 jobs will be cut in 2006-2007
Emphasis on Finnair Technical Services and support functions Planned efficiency measures to bring 80 MEUR annual cost benefits Efficiency measures everywhere in the organisation

5 Operations systematically rationalised
Personnel on average 1996/ / / / Henkilöä 8

6 Structural change weighed on result
Q2/ Q2/2005 Change % Turnover mill. € EBITDAR EBIT excl. capital gains, fair values changes of derivatives and reorganization expenses Capital gains Fair value changes of derivatives Operating profit/loss (EBIT) Profit after financial items

7 Fuel bill rose by over 50 MEUR in first half of year
Q2/2006 Q1-Q2/2006 Unit costs of flight operations* c/ATK +6,5% +8,3 % Unit costs of flight operations excl. fuel* c/ATK +1,4% +2,1 % Personnel expenses c/ATK +8,4% +5,4 % Fuel costs c/ATK -29,7% +37,4 % Traffic charges c/ATK -4,5% +0,1 % Ground handling and catering €/passenger -4,8% -3,5 % Sales and marketing €/passenger -5,2% -5,7 % Aircraft lease payments and depreciation c/ATK +13,3% +5,8 % Other costs c/ATK +9,5% +8,8 % * excluding fair value changes of derivatives ATK = Available Tonne Kilometre

8 Fuel costs increasing 2003: 10.2% of turnover 2004: 12.5% of turnover
2006: ~20.0% of turnover at current price level and planned traffic growth Finnair scheduled traffic has hedged 62% of its fuel purchases for the next six months, thereafter for the following 18 months with a decreasing level. Finnair leisure flights hedged 60 % of winter traffic programme’s consumption.

9 Realized prices and swap prices

10 Development of average flight and fuel price 2001 - 2006

11 Unit costs +6.5%, without fuel +1.4% Change YoY
2002 2003 2004 2005 2006 % 1 1

12 Most modern European fleet
Boeing MD-80 aircraft retired from parent company fleet in July Popular new Embraer 170/190 aircraft increase flexibility, decrease costs and are eco-efficient A new Embraer joins fleet monthly until end of year, four new aircraft next year (total 16) Eighth wide-body aircraft, Finnair’s first Airbus 340 took flight in July New Airbus A340/350 aircraft replace current wide-body fleet

13 Harmonised fleet Airbus A340/A350 Airbus A319/A320/A321
Long haul aircraft seats Mid haul - 29 aircraft seats Airbus A319/A320/A321 Embraer 170/190 Feeder traffic - 16 aircraft seats

14 Strong balance sheet Equity ratio and adjusted gearing
% 1996/ / / / % 16

15 Group continues to have strong liquidity Cash flow January-June

16 Asian success continues
Demand (Jan-June) grew 23.3%, passenger numbers 24.4%, load factors 3.3%, cargo 17.2% New route to Nagoya opened in June and Delhi will be launched in November. Next year Kuala Lumpur which is 11th Asian destination. Over 100 flights a month to China Capacity will grow by 30% in last half of year Lie-flat bed seats installed in long-haul business class

17 Finnair long haul network
2 Tokyo 3 Nagoya 6 7 Osaka New York 7 Beijing 7 Shanghai 4 Guangzhou 5 Hong Kong 7 Bangkok Helsinki Singapore 7 41 flights to Asia per week

18 Sustainable competitive edge based on geography
Most preferred choice for passengers needing at least one stop-over. Examples: Stockholm Gothenburg Oslo Hamburg Dusseldorf Berlin Stuttgart Edinburgh Tallinn Krakow Asia HEL Riga Vilnius Budapest Warsaw Prague Barcelona Madrid Milan Zurich Venice CPH LON PAR FRA

19 Finnair favored in reservation systems
AN1A09SEP ARNPVG (=Stockholm-Shanghai) ** AMADEUS AVAILABILITY - AN ** PVG PU DONG.CN 1 AY 892 J9 C9 D9 RL UL Y5 B4 /ARN 2 HEL E0/320 AY 057 J9 C9 D9 I9 RL UL Y9 /HEL 2 PVG E0/M :25 2 SK 415 C9 D9 J9 Y9 S9 B9 M9 /ARN 5 CPH E0/321 SK 997 A2 C9 D9 J9 Y9 S9 B9 /CPH 3 PVG / :15 3 KL1110 J0 C0 Z0 S0 B0 M0 K0 ARN 5 AMS E0.737 KL895 C4 D4 W4 Y9 T4 K4 H4 AMS PVG M :45 4 CA 912 C4 D4 Y4 B4 H4 K4 L4 ARN 5 PEK MU 583 C4 Y4 V4 Q PEK PVG :45 => total travel time defines the order of alternatives

20 Share of Asian traffic growing
Scheduled traffic passenger and cargo revenues Q1-Q2/2006

21 Finnair significant player in Europe-Asia traffic
Two new destinations in long-haul network this year and recruitment of pilots and cabin crew Size of long-haul fleet will grow to meet demand for Asian traffic 1-2 new Asian destinations per year, more frequencies to existing destinations New feeder lines in European network Demand remains strong at good price level Market share continues to increase, Finnair’s Asian sales have increased by 60% in Sweden

22 Assesments for future development
Passenger and cargo demand continues to grow Competition remains tight Flexible capacity => load factors improve Focus on traffic expansion in Asia 2006 result still expected to be profitable, but below previous year’s level High load factors and strong booking situation give basis for improved price level Better productivity with structural change Good conditions for improving profitability in future

23 Appendices

24 Slow quarter as predicted Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and reorganization expenses) MEUR 2002 2003 2004 2005 2006 1 1

25 Average yield and costs EUR c/RTK & EUR c/ATK
2002 2003 2004 2005 2006 1 1

26 Development of Group Business Areas
Excluding capital gains, fair value changes of Derivatives and reorganization expenses 2006 2005 Q2 MEUR Scheduled Passenger Traffic 21.7 25.2 Leisure Traffic 1.0 2.4 Aviation Services -1.5 10.6 Travel Services 0.9 2.0 Unallocated items -3.9 -10.2 Total 18.2 30.0

27 Investments and cash flow from operations
MEUR

28 Aircraft operating lease liabilities have grown in line with strategy Flexibility, costs, risk management On 30 June all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 30 June 2006 would have been 92,6%

29 ROE and ROCE Rolling 12 months
%

30 Finnair Group Business Units
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

31 Airline structure Finnair Scheduled Passenger Traffic
Long-haul traffic European traffic Domestic trunk routes Finnair Leisure Flights Mediterranean, Asia, North and South America Aero Feeder traffic operator based in Tallinn, Estonia The Baltics and Southern Finland FlyNordic Low cost operator based in Stockholm Scandinavia and elsewhere in Europe

32 Superiority of product
Direct to 50 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

33 Finnair Financial Targets ”Sustainable value creation”
EBIT margin at least 6% => mill. € in the coming few years Operating profit (EBIT) EBITDAR margin at least 17% => over 300 mill. € in the coming few years EBITDAR Economic profit To create positive value over pretax WACC of 8% Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 % Pay out ratio Minimum one third of the EPS Finnairin keskeisenä tavoitteena on kaksinkertaistaa arvo siihen sijoittaneille osakkeenomistajille viiden vuoden aikana. Tämä merkitsee keskimäärin noin 15%:n vuotuista kokonaistuottoa osakkeenomistajalle. Kokonaistuotto sisältää sekä osakkeen arvonnousun että osakkeelle maksetut osingot. Välitavoitteena kohti arvoa luovaa kasvua on se. että yhtiön markkina-arvostus vastaa osakekohtaisen oman pääoman määrää. Edellytykset vähintään oman pääoman tasoiselle markkina-arvolle ovat olemassa. kun käytetylle pääomalle saadaan vähintään sen kustannusta vastaava tuotto. Pääoman kustannusta vastaava tuotto merkitsee noin 6%:n liikevoittotasoa. eli noin M€ liikevoittoa lähivuosina. Vastaavasti EBITDAR-%:n tavoitetaso on 17%. mikä lähivuosien tavoitteena merkitsee vähintään 300M€:n EBITDAR:ia. Liikevoitto- ja EBITDAR-tasojen ero on 11% johtuen strategian mukaisesti hankitusta vuokratun laivaston merkittävästä määrästä. Taloudellisen lisäarvon osalta tavoitteena on parantaa taloudellista lisäarvoa ja saada se kestävästi positiiviseksi viimeistään vuonna 2004. Future growth value... Finnairin osinkopolitiikan tavoitteena on maksaa suhdannesyklin aikana keskimäärin vähintään kolmasosa osakekohtaisesta tuloksesta osinkoina. Yhtiön kulloinenkin tuloskehitys ja –näkymät sekä rahoitustilanne ja pääomatarpeet pyritään ottamaan huomioon. Velkaantumisaste (nettovelan suhde omaan pääomaan) saa olla enintään 0.6 ja omavaraisuusasteen (oma pääoma/taseen loppusumma) pitää olla vähintään 30%.

34 Finnair’s Financial Targets Description of targets

35 Finnair Group Investor Relations email: investor.relations@finnair.com
Finnair Group Investor Relations tel: fax: