Transcript Finnair PowerPoint Title Verdana 32pt Bold

Finnair Group
Interim Report 1 January – 30 June 2007
Flight travel growing,
infrastructure under pressure
European airlines’ performance improved in the
early part of the year by an average five per cent,
Finnair growth was over 20%
Asian traffic overall grew by less than five per cent,
Finnair’s Asian traffic grew 30%
European airlines’ growth is now directed towards
South America
Fuel prices were high and rose slightly
The industry is expecting its first profitable year
since the beginning of the millennium
In the difficult years, system investments have
fallen behind growth in traffic
Baggage chaos in Europe
Increased travel and security measures have delayed
baggage at large European airports => also reflected in
Finnair’s customer service.
Strongly growing Asian traffic creates challenges for
the service level of Helsinki-Vantaa Airport
=> temporary arrangements together with Finavia
Preparations made for summer challenges; sharp
tightening of security regulations in UK was a surprise
Long delays, lots of problems for customers
Terminal extension ready in 2009 will raise
infrastructure to an excellent standard at Finnair’s
home station
Finnair heading
in the right direction
Strong demand in scheduled traffic continues
In addition to Asia, European traffic is also growing
Finnair’s market share growing in international traffic
departing from Finland
Unit revenues on last year’s level
Unit costs have fallen due to efficiency measures
Profitability of scheduled traffic has improved
FlyNordic joined Norwegian Air Shuttle, creating a
strong Scandinavian airline
Finnair sold
FlyNordic to Norwegian
Deal was signed at the end of June
Payment in shares, Finnair’s holding in Norwegian
Air Shuttle rose over five per cent
Options allow Finnair to increase its ownership up
to ten per cent by the end of 2008
FlyNordic’s charter traffic revenue divided 50/50
until October 2008
Cooperation agreement between Finnair and
Norwegian in Asian feeder traffic
Result improved as expected
Q2/2007
Q2/2006
Change %
538.1
494.6
8.8
EBITDAR
74.0
68.2
8.5
EBIT excl. capital gains, fair values changes
of derivatives and reorganization expenses
27.2
18.2
49.5
-
-15.2
-
Capital gains
5.0
1.9
-
Fair value changes of derivatives
4.9
0.6
-
Operating profit/loss (EBIT)
37.1
5.5
-
Profit after financial items
34.4
3.3
-
Turnover mill. €
Reorganization expenses
Scheduled Passenger Traffic and
Technical Services improved
Profitability of scheduled traffic has improved
Unit revenues have stabilised
Unit costs have fallen
Finnair Technical Services and FlyNordic have also
clearly improved
Northport still loss-making
Due to tighter competition, average prices for
cargo have fallen
Unit costs decreased more than yield
Change YoY
15
%
Yield (EUR/RTK)
Unit costs (EUR/ATK)
10
5
0
-5
-10
-15
-20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2002
2003
2004
2005
2006
2007
Efficiency programme
yields concrete results
Target EUR 80 million, of which half from
personnel expenses
Targets specified in full
Savings weighted towards end of year
Profit impact for 2007 over EUR 40 million
Full financial impact will begin in 2008
Jobs cut by around 600 in 2006-07
More than 300 people recruited into Flight
Operations Group
Business growing,
number of staff maintains
Personnel
Personnel on average
14000
12000
10000
8000
6000
4000
2000
0
1999
2000
2001
2002
2003
2004
2005
2006
Q2 2007
Key efficiency areas
Technical Services competitiveness programme
Flight personnel agreements
Savings from support functions
More efficient crew utilisation through network
reform
Management of irregularity processes
Feeder traffic reform
Mergers in travel agency network (SMT+Area)
Cutting distribution costs
Unit costs decreasing
Unit costs of flight operations* c/ATK
Unit costs of flight operations excl. fuel*
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
* excluding fair value changes of derivatives
ATK = Available Tonne Kilometre
Q2/2007
2006
-3,8%
+1.8 %
-5.3%
-3.5 %
-5.0%
-4.1 %
+1.3%
+24.1 %
-3.1%
-3.9 %
+3.3%
-1.0 %
+7.3%
-7.9 %
-14.4%
+1.9 %
-2.9%
-3.1 %
01/07
10/06
07/06
04/06
01/06
10/05
07/05
04/05
01/05
10/04
07/04
04/04
01/04
10/03
07/03
04/03
01/03
10/02
07/02
04/02
ATK
1000/person
01/02
10/01
07/01
04/01
01/01
Productivity improved
Productivity (incl. Aero and FlyNordic)
(ATK/person) 12 m rolling sum
540
490
440
390
340
290
240
Higher jet fuel prices
Fuel costs a fifth of turnover
2003:
2004:
2005:
2006:
2007:
10.2% of turnover
12.5% of turnover
15.6% of turnover
19.4% of turnover
~20% of turnover (over 400 mill. euro)
Finnair scheduled traffic has hedged 66% of its
fuel purchases for the next six months, thereafter
for the following 24 months with a decreasing
level. Finnair leisure flights hedged 60% of
summer traffic programme’s consumption.
Liquid funds used for investments
Cash flow January-June
Cash flow statement (EUR mill.)
Q1-Q2/2007
Q1-Q2/2006
114
24
-195
-245
+50
-113
-119
+6
Cash flow from financing
-46
72
Change in liquid funds
-35
-17
Liquid funds at the beginning
273
339
Liquid funds at the end
238
322
Cash flow from operations
Investments and sale of assets
Investments
Change of advances and others
Strengthening the capital structure
under evaluation
Equity ratio and adjusted gearing
%
Equity ratio
140
Adjusted Gearing
120
100
80
60
40
20
0
2002
2003
2004
2005
2006
Q2 2007
Expansion to Asia continues
Demand grew during Jan-Jul07 by 30.5%,
passenger numbers 24.6%, cargo 18.9%
Passenger load factor 77,7%
Indian traffic quadrupled in June, new destination
Mumbai
59 flights a week to Asia
Non-stop flights to 10 destinations, six out of
which daily
Growth in different markets in Asia diversifies risk
Capacity will grow by over 30% this year
Seoul in South Korea as new destination in 2008
Most rapid growth in Asian traffic
China
2001:
3 flights/week
2007:
22 flights/week
Japan
2001:
2 flights/week
2007:
15 flights/week
India
2006:
3 flights/week
2007:
12 flights/week
Aasian fleet increased from two to nine in six years
Long-haul network – summer 2007
7 New York
Helsinki
Tokyo 4
Nagoya 4
Osaka 7
Beijing 7
Shanghai 7
Guangzhou 4
Hong Kong 7
Bangkok 7
Delhi 7
Mumbai 5
Share of Asian traffic growing
Scheduled traffic passenger and cargo revenues H1/2007
Domestic
4%
Europe
14 %
37 %
45 %
Asia
America
New planes enable future growth
In 2007-14
• A330/A340 fleet of maximum 15 planes in
total
In 2014-16
• A350 fleet of maximum 15 planes in total
Most modern European fleet
Average age of European fleet four years
29 Airbus A320 family aircraft
A total of ten smaller (E170) and four larger
(E190) Embraer in fleet, six larger aircraft coming
2007-09
New aircraft increase flexibility and improve load
factors, decrease costs and are eco-efficient
oneworld energized
oneworld a high quality and only profitable
alliance. Three new members as of April 1st
• Japan Airlines, largest in Asia and the Pacific
region
• Royal Jordanian, complementing our network
in growing Middle-East market
• Hungary´s Malev will serve as partner in
Central Europe
Future outlook
High degree of hedging and dollar exchange rate
will stabilise fuel costs in latter part of year
Renewal of the wide-bodied fleet has begun
New route openings will put pressure on traffic load
factors and price levels
Unit costs still decreasing
Restructuring proceeding
Six out of seven of the Finnair Group’s agreements
with labour unions are due to expire in September
The operational result for the full year is expected
to exceed 70 million euros
Appendices
Profitability development
Change in EBIT per quarter (Excluding capital gains, fair value
changes of derivatives and reorganization expenses)
MEUR
40
30
20
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-10
-20
-30
-40
-50
2002
2003
2004
2005
2006
2007
Average yield and costs
EUR c/RTK & EUR c/ATK
Yield (EUR/RTK)
120
Unit costs (EUR/ATK)
100
80
60
40
20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2002
2003
2004
2005
2006
2007
Segment results
Excluding capital gains, fair value changes of
Derivatives and reorganization expenses
MEUR
Scheduled Passenger Traffic
Leisure Traffic
Aviation Services
Travel Services
Unallocated items
Total
2007
Q2
2006
Q2
27.7
1.1
1.3
1.2
-4.1
27.2
21.7
1.1
-1.3
0.9
-4.2
18.2
Investments and cash flow
from operations
MEUR
Operational net cash flow
300
Investments
250
200
150
100
50
0
2002
2003
2004
2005
2006
Q2 2007
Aircraft operating lease liabilities
Flexibility, costs, risk management
MEUR
600
500
400
300
200
100
0
2002
2003
2004
2005
2006
Q2 2007
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 2007 would have been
114,6%
1
Q
20
02
2
2
Q 002
3
20
02
Q
4
2
Q 002
1
2
Q 003
2
20
03
Q
3
2
Q 003
4
2
Q 003
1
20
04
Q
2
2
Q 004
3
2
Q 004
4
20
04
Q
1
2
Q 005
2
2
Q 005
3
20
Q
05
4
2
Q 005
1
2
Q 006
2
2
Q 006
3
2
Q 006
4
2
Q 006
1
20
07
Q
2
20
07
Q
ROE and ROCE
Rolling 12 months
%
ROE
ROCE
14
12
10
8
6
4
2
0
-2
-4
Emissions trading for air traffic
EU air traffic accounts for only 0.5% of all CO2
emissions in the world
Finnair in favour of emissions trading principles
EU proposal sets airlines at somewhat unequal
footings depending on route network structure
Should be global
Competitively neutral
Investments already made in new technology
should be taken into account
Open emissions trading
Customers can make
environmental choices when flying
Choose an airline with a modern fleet
Fly in the right direction all the way, without
unnecessary stopovers. Shorter flight routes result
in less emissions
Avoid large, congested airports
By making these choices, fuel consumption
and emissions can drop by at best 30%!
Finnair Financial Targets
”Sustainable value creation”
Operating
profit (EBIT)
EBIT margin at least 6% => over 120 mill. € in the coming
few years
EBITDAR
EBITDAR margin at least 17% => over 350 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
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
www.finnair.com
Finnair Group Investor Relations
email: [email protected]
tel: +358-9-818 4951
fax: +358-9-818 4092