17 august 2016 ceo pekka vauramo cfo pekka vähähyyppä/media/files/f/finnair-ir/documents/... ·...

Finnair Q2 2016 Result, 17 August 20161

Finnair Q2 2016 Result

17 August 2016CEO Pekka Vauramo

CFO Pekka Vähähyyppä

Highlights of the second quarter

• The seventh consecutive quarter of profit improvement

• Fukuoka & Guangzhou route openings

• Skytrax named Finnair Northern Europe's best airline for the seventh time in a row

• The cooperation agreement with the Chinese Alitrip will bring up to 3 000 Chinese tourists to Finland during the winter months

• Wireless Network Connection in Finnair's entire long-haul fleet in 2017


Q2 2016: Positive result + 3M€ and 7th consecutive quarter of result improvement

• Revenue grew by 5% to 570 M€– Growth in passenger traffic & Travel services– Ancillary sales per pax grew to

10.89€ (+18%)– Cargo volume grew but revenue decreased

• Comparable operating result improved by 16 M€ to 3 M€– Preparing for the growth was reflected in

costs: the flying personnel, training– delays in A350 deliveries increased costs– Fuel costs fell significantly in spite of the

increase in traffic


*not fully comparable, 2015 revenue restated, external leasing revenue excluded and included in other operating income.

0

200

400

600

800

Q4Q3Q2Q12014 2015 2016

100

-50

0

50

Q2 Q3 Q4Q120152014 2016

Revenue*, M€

Comparable operating result, M€

Q2 Finnair's market position

• Finnair Capacity grew 8.8%, majority of which in Asia (+9.2%) and Atlantic (+66.0%)

• Finnair gained market share in European and Asian traffic.* • Demand for air travel continued to grow in Finnair’s main markets

– Timing of Easter affected the comparison year– Strong business travel demand growth – Leisure travel demand to some European destinations decreased due to security concerns

• Siberian Joint Business serving Japanese routes gained market share, Atlantic Joint Business performance weakened in a challenging market environment.

• Despite overcapacity and weak business environment in cargo traffic, Finnair successfully increased cargo volumes in key markets.

• Good development in Aurinkomatkat continued despite the situation in Turkey 4 * Finnair’s estimates. Finnair Q2 2016 Result, 17 August 2016

Q2: Growth in passenger traffic revenue and travel services revenue

• Passenger traffic ticket revenue held up well with capacity growth

• Ancillary and retail sales saw strong, continued growth

• Less revenue from cargo• Good development in Aurinkomatkat

continued• Travel agencies revenue declined

mainly due to sale of Estravel in 2015


Q2 2015

544

Q2 2016

570

+5%

Cargo: -5.6%

Travel services: +1.9%

Travel agencies: -32.9% Ancillary and retail revenue: +24.3%

Passenger revenue: +5.5%

Q2 Traffic Performance


Q2 Asia North Atlantic Europe Domestic Total*

Passenger revenue million 173.9 28.8 204.2 39.7 458.3

Chg. % -2.1 40.2 2.6 7.6 5.5Share % 37.9 6.3 44.5 8.7 100

ASK million 4 070.1 671.9 3 413.6 356.9 8 512.5

Chg. % 9.2 66.0 1.6 7.5 8.8Share % 47.8 7.9 40.1 4.2 100

RPK million 3 109.6 530.2 2 713.7 237.9 6 591.3Chg. % 4.6 49.6 2.8 7.1 6.5

PLF % 76.4 78.9 79.5 66.7 77.4Chg % -3.4 -8.6 0.9 -0.3 -1.7

Cargo

Revenue, Mill. 42.6Chg. % -5.6

Tonnes, Mill. 371Chg. % 9.8

*Includes unallocated revenueASK: Available Seat KilometresRPK: Revenue Passenger KilometresPLF%: Passenger Load Factor

H1 Traffic Performance


Q2 Asia North Atlantic Europe Domestic Total*

Passenger revenue million 338.8 54.5 365.1 88.4 862.3

Chg. % 0.1 15.8 4.3 12.0 4.1Share % 39.3 6.3 42.3 10.3 100

ASK million 8 091.6 1 304.4 6 412.2 825.1 16 633.2

Chg. % 6.3 31.7 3.2 14.5 7.1Share % 47.6 5.2 42.9 4.2 100

RPK million 6 438.0 1 038.9 4 942.5 572.4 12 991.7Chg. % 5.3 27.4 3.4 14.6 6.4

PLF % 79.6 79.6 77.1 69.4 78.1Chg % -0.7 -2.6 0.1 0.1 -0.5

Cargo

Revenue, Mill. 82.2Chg. % -8.5

Tonnes, Mill. 725Chg. % 7.3

*Includes unallocated revenueASK: Available Seat KilometresRPK: Revenue Passenger KilometresPLF%: Passenger Load Factor

A350s generate excellent customer ratings

Long haul business

8.4

8.0

9.1

8.2

8.0

8.9

8.6

8.3

9.1

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

9.0

9.2

Overallsatisfaction

Value for money Likelihood to re-use

A330 A340 A350

Long haul economy


8.1 8.0

8.8

8.2 8.2

8.9

8.4

8.1

9.1

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

9.0

9.2

Overallsatisfaction

Value for money Likelihood to re-use

A330 A340 A350

20 M€ cost efficiency program

• Improvement of profitability is a prerequisite for growth

• Finnair is to review its activities

• Efficiency measures aim at an annual cost savings of EUR 20 million by the end of June 2017

• Planning is starting now, the main points during the fall


Outlook for 2016

• Finnair’s new estimate of capacity growth is approximately 7 per cent, while the previous estimate was a growth of 8 per cent compared to 2015. The revision is due to delays in the deliveries of A350 aircraft.

• The rate of revenue growth is estimated to be slower than the rate of capacity growth.

• Uncertainty regarding the demand and yield prospects of the airline industry has increased during recent months.

• Finnair estimates that its comparable operating result for 2016 will increase from the previous year (2015: 23.7 million euros).



Financials


Q2 Financial Summary

Traffic Q2 2016 Change %

Q1-Q2 2016

Change %

PAX (1,000) 2,779 6.0 5,280 7.6

ASK 8,513 8.8 16,633 7.1

No of flights 28,251 2.0 55,172 6.2

PLF % (load) 77 % -1.7 78 % -0.5 %-p

Results Q2 2016 Change %

Q1-Q2 2016

Change %

Revenue 569.6 4.7 1106.0 3.8

Comparable EBITDAR 56.3 50.6 92.7 63.8

Comparable EBIT 3.2 > 200.00 -12.2 70.5

Net result -1.1 82.3 -16.1 -1.9

KPI Q2 2016 Change %

Q1-Q2 2016

Change %

RASK 6.69 -3.8 6.65 -3.0

RASK at constant cur 6.77 -2.7 6.70 -2.2

CASK 6.65 -6.5 6.72 -5.6

CASK ex fuel 5.17 0.8 5.23 1.7

CASK ex fuel at constant cur 5.13 0.1 5.20 1.0

Cashflow and financial position

Q2 2016 Change %

Q1-Q2 2016

Change %

Operating cash flow 119.6 35.3 130.0 28.2

Interest-bearing net debt -150.2 -10.2

Adjusted gearing 82.1 0.7 %-p

ROCE 10.0 13.2 %-p

Income statement

in mill. EURQ2

2016Q2

2015Change

%Q1-Q2

2016Q1-Q2

2015Change

%2015

Revenue 569.6 543.9 4.7 1,106.0 1,065.2 3.8 2,254.5Other operating income 17.9 21.5 -16.9 40.0 44.5 -10.2 85.2Operating expensesStaff costs -93.0 -87.4 6.4 -184.8 -177.4 4.2 -353.2Fuel costs -126.4 -155.7 -18.8 -247.9 -307.0 -19.2 -595.5Other rents -37.2 -41.0 -9.4 -79.2 -78.7 0.7 -159.4Aircraft materials and overhaul -37.6 -30.9 21.5 -74.2 -62.6 18.6 -118.9Traffic charges -66.4 -65.8 0.9 -127.4 -128.3 -0.7 -258.5Ground handling and catering expenses -62.3 -58.9 5.8 -127.4 -119.3 6.8 -250.3Expenses for tour operations -15.6 -15.4 1.3 -42.4 -39.1 8.5 -79.6Sales and marketing expenses -20.1 -17.9 11.9 -38.2 -35.6 7.3 -74.0Other expenses -72.8 -55.1 32.1 -131.6 -105.1 25.3 -219.3Comparable EBITDAR 56.3 37.4 50.6 92.7 56.6 63.8 231.2Lease payments for aircraft -26.9 -25.3 6.6 -55.7 -46.2 20.6 -99.3Depreciation and impairment -26.2 -25.1 4.7 -49.1 -51.7 -4.9 -108.1Comparable operating result 3.2 -12.9 > 200 % -12.2 -41.3 70.5 23.7


Passenger revenue development

Passenger revenue, M€ +5.5 % Passenger revenue by traffic area, M€


PLF (load factor)

-10,0

FX

-3,3

ASK

434,4

Q2 2015

+8,8%

+23,86(+5,5%)

Q2 2016

458,3

Yield, Mix, other

-1,138,3

Unallocated revenue

11,3

Domestic

2,8

Europe

5,2

North Atlantic

8,2

Asia

-3,7

Q2 2015

434,4

ASK +9% +66% +2% +8% +8.8%

Share of ASK 47.8 % 7.9 % 40.1 % 4.2 % 100%

Q2 2016

458,3

Q2 RASK component development vs. LY

4.27 4.285.98

11.11

5.38

0.36 0.500.40 0.05

6.69

FEARASK

ATARASK

EURRASK

DOMRASK

PAXRASK

AncillaryRASK

CargoRASK

TravelservicesRASK

TravelagencyRASK

GroupRASK

‐10.3% ‐15.5% 1.0% 0.1% ‐3.1% 14.2% ‐13.3% ‐6.4% ‐38.4% ‐3.8%

15

Q2 ASK +8.8%

x.x

‐x.xChange, % to LY FEA = Asia

ATA = North America

H1 RASK component development vs. LY

16

H1 ASK +7.1%

4.19 4.185.69

10.71

5.18

0.36 0.49 0.56 0.05

6.65

FEARASK

ATARASK

EURRASK

DOMRASK

PAXRASK

AncillaryRASK

CargoRASK

TravelservicesRASK

TravelagencyRASK

GroupRASK

‐5.8% ‐12.1% 1.1% ‐2.2% ‐2.8% 17.9% ‐14.5% 0.3% ‐36.6% ‐3.0%

x.x

‐x.xChange, % to LY FEA = Asia

ATA = North America

Q2 CASK component development vs. LY

17

Q2 ASK +8.8%

1.09

0.44 0.32 1.48

0.31 0.440.78 0.45 0.28 0.18 0.24 0.55 0.31

6.655.17

x.x

‐x.xChange, % to LY

-2.2% 11.7% -2.1% -25.4% -3.8% -16.7% -7.3% -6.4% 3.8% -6.9% 2.8% 33.5% 4.5% -23.6% -6.5% 0.8%

H1 CASK component development vs. LY

18

H1 ASK +7.1%

1.110.45 0.33

1.490.30 0.48

0.770.49 0.28 0.26 0.23 0.47 0.32

6.725.23

x.x

‐x.xChange, % to LY

-2.7% 10.8% 12.7% -24.6% -11.2% -6.0% -7.2% -3.3% 5.4% 1.4% 0.2% 27.0% 5.0% -16.1% -5.6% 1.7%

Comparable EBIT Q2 2015 vs. Q2 2016, M€


Traffic charges

-3.4

-0.2

Q2 2015

Other operating income

Staff costs

Sales and marketing expenses

-3.6

Revenue

-1.5-2.5

5.9

29.3

-2.1

-1.7

Lease payments for aircraft

-1.2

Depreciation and

impairment

Other expenses

Q2 2016

Fuel costs

-6.7

Other rents

Ground handling

and catering expenses

Aircraft materials

and overhaul

-0.6

Expenses for tour

operations

-12.9

23.9 -5.6

3.8

-17.7

3.2

Cargo Revenue

Ancillary and retail revenue

Travel services & Travel Agencies Revenue

Passenger revenue

Comparable EBIT H1 2015 vs. H1 2016, M€

20 Finnair Q2 2016 Result, 17 August 2016

Lease payments for aircraft

Depreciation and

impairment

2,5

Other expenses

Q1-Q2 2016

-12,2

26,6

-41,3

Sales and marketing expenses

Other rents

0,5

Aircraft materials

and overhaul

11,6

3,3

0,9

Traffic charges

8,1

Ground handling

and catering expenses

2,6

Expenses for tour

operations

9,5

Fuel costs

59,1

Staff costs

7,4

40,8

7,72,4

12,5

33,6

Q1-Q2 2015

Revenue Other operating income

4,5

Ancillary and retail revenue

Passenger revenue

Cargo revenue

Travel services & Travel Agencies Revenue

Jet fuel price decrease supported Q2 performance

• Q2/15 hedging loss 31.1 M€• Q2/16 hedging loss 33.0 M€


156126

4

2

-32

-2

0

20

40

60

80

100

120

140

160

180

Q2/2015 Volume Price Currency Hedging deviation Q2/2016

M€

Strong cash flow and cash funds

16

-29.6

Proc

eeds

from

loan

s

-6.0

Loan

repa

ymen

ts

35.2

Hyb

rid b

ond

inte

rest

s an

dpu

rcha

se o

f ow

n sh

ares

Change in cash flows+75.6 M€

Cash

at t

he e

nd

Investing-396.3 M€

Operating+130.0 M€ Financing

+341.8 M€

457.7

Cash

at t

he b

egin

ning

90.6

EBIT

DA

4.2

Chan

ge in

wor

king

cap

ital

-316.3

Non

-cas

h tran

sact

ions

and

finan

cial i

tem

s

17.1

533.3

Acqu

isitio

n of

ass

ets

-97.1

Disp

osal

of a

sset

s377.4

Oth

er in

vest

ing

activ

ities

250.5

187.3

270.5

457.7

708.2

881.6

533.3

31 Dec 2015

348.3

226.3

307.0

30 Jun 2016

Cash funds+173.4 M€

Cash in cash flow

Cash and bank deposits

Commercial papers, deposits and funds < 3 months

Commercial papers and deposits > 3 months

Balance sheet: 3 new A350’s & JOLCO loans


Assets held for sale96

31 Dec 201530 Jun 2015

Unflown tickets438

1.967

Fleet739

30 Jun 2016

Cash Funds882

Derivatives100

Other current assets263

109

Equity745

Interest-bearing debt733

Derivatives 81Cash funds

532

Interest –bearing debt365

Other current assets220

Cash funds708

Derivatives 219

Fleet676

Other liabilities514

Interest-bearing debt

346

Unflown tickets302

Other liabilities494

727

2.050

555

Derivatives 180

72.518

0

Unflown tickets394

25

Derivatives 128

+300,8

500

1.967

30 Jun 2015

2.518

Derivatives 156

102

30 Jun 2016 31 Dec 2015

Other current assents

259

125

123

Fleet1.040

2.050

Q2 Strong balance sheet & net cash supportinvestmentsStrong balance sheet, net cash Composition of adjusted net debt


-500

-1.000

-1.500

0

762

Interest-bearing debt

-733

Cash

882

-613

7x aircraft leases + currency hedges

Adjusted net debt

M€

120171

24

208

330

8217

448

268

882

708

426

2014 H1 20162015

Net operating cash flow

Gross investments

Divestments

Liquid funds

303527

-20

-50

0

82

46

108

2014 H1 20162015

Gearing

Equity ratio

Adjusted gearing

Investments 2016-2023


Net confirmedinvestments 146 M€


Thank you

In Q2, fuel continues to be the largest costitem, operational costs 584 M€


16%

16%

22%

11%

11%

12%

6%3%

3%

Leasing, maintenance, depreciation & impairment, 91 M€Personnel, 93 M€Fuel, 126 M€

Other costs, 73 M€Groundhandling & catering, 62 M€Traffic charges, 66 M€

Other rents, 37 M€Sales & marketing, 20 M€Tour operations, 17 M€

Fuel and currency sensitivities & currency split

28* The sensitivity analysis assumes that the Chinese yuan and the Hong Kong dollar continue to correlate strongly with the US dollar.


Currency distribution %

4–6 2016

4–62015

1–62016

1–62015 2015

Currency sensitivities USD and JPY (rolling 12 months from date of financial statements)

Hedging ratio (rolling 12 months from date of financial statements)

Sales currencies 59 10% change without hedging

10% change, taking hedging into account

EUR 63 54 63 59 59 - -

USD* 4 2 4 2 3 see below see below see below

JPY 8 9 8 8 8 EUR 12 million EUR 8 million 70%

CNY 6 8 6 6 7 - -

KRW 3 4 3 3 3 - -

SEK 5 5 5 5 5 - -

Other 11 18 11 17 15 - -

Purchase currencies

EUR 53 50 53 52 53 - -

USD* 40 40 40 41 41 EUR 55 million EUR 20 million 68%

Other 7 10 7 7 7

Jet fuel hedging ratios30 June 2016


71% 72%64%

54%

42%

32%

22%

11%

0% 0% 0% 0%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

hedge ratio upper lower

17 august 2016 ceo pekka vauramo cfo pekka vähähyyppä/media/files/f/finnair-ir/documents/... ·...

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