building a new silk road - finnair/media/files/f/finnair-ir/documents/... · building a new silk...

Finnair Capital Market Day, 3 Dec 20121

Building A New Silk Road – Capacity Planning and Selecting Markets

Greg KaldahlSVP Resource Management

The Airline Industry Is In A State Of Constant Change

2.9

4.04.24.34.84.9

6.16.46.4

Market cap (€bn) as of 1 Jan 1999

6.5

8

6

4

2 1.51.71.81.81.9

7.0

9.3

2.12.52.7

10

Note: AMR is parent company of American Airlines, Sairgroup of swissairSources: Capital IQ, Bloomberg, Datastream, Analyst Reports, ECB

1.5

0

NA/EU

Rest of world


0.7

3.93.7

4.74.24.0

6.3

1.0


6

8

10

3.6

0.7

9.4

4.0

1.3

4

2 1.50.7

Ban

kruptc

y pro

cess

Ban

kruptc

y pro

cess

Acq

uired

by

LH

Acq

uired

by

DL

Mer

ged

with A

F

0

Sources: Capital IQ, Bloomberg, Datastream, Analyst Reports, ECB


NA/EU

Rest of world


1.1


6

4

2

10

8

0

Acq

uired

by

LH

Acq

uired

by

DL

Mer

ged

with D

L

Mer

ged

with A

F

Mer

ged

with U

A

Ban

kruptc

y pro

cess

BA m

erged

with I

B

Ban

kruptc

y pro

cess

Mer

ged

with C

O5.1

4.2

5.1

0.6

7.1

5.4 5.2

1.2

2.6

Sources: Capital IQ, Bloomberg, Datastream, Analyst Reports, ECB


NA/EU

Rest of world



10

6

4

2

8

0

7.1

5.4 5.2 5.1 5.1

4.2

2.6

9.1

6.3

5.3 5.24.6

3.3

2.52.2 2.1

Note: Market value of Emirates estimated, LAN/TAM shown as combined entity Sources: Capital IQ, Bloomberg, Datastream, Analyst Reports, ECB

4.8

New in top 20

2.0 2.0

8.4NA/EU

Rest of world



Finnair Is Changing As Well In Order To Succeed

• Narrowbody fleet optimization– Nine aircraft removed from service– Renegotiated leases with multiple Airbus lessors– Total savings in excess of 10M€

• Improved route planning and aircraft utilization– New network forecasting and fleet planning tools– Narrowbody utilization up almost two hours and over 9 hrs/day

• Partnerships for improved cost efficiency and flexibility– FlyBe Finland provides lower cost base for turboprops and small jets

• 20 airplanes now under contract– Fewer excess aircraft = more lease in opportunities



SHORT HAUL

NordicChampion

LONG HAUL

Top-3 in Europe – Asia

Customer Oriented – Agile – Right Partners

What Is Important – Finnair’s 2 Fold Strategy

• Global Network Offering

• Economies of Scale

• Large Home Market

• Strong Relationships with Travel Agents

• Brand

• Loyalty Programs

• Competitive Seat Costs

• Competitive Fares

• Flexible Cost Structure

• Rapid Market Entry & Exit

• High Aircraft Utilization

• Point-to-Point Operation

• Ancillary Revenue

• Internet Distribution

Profitable Finnair

To: BJS vs. LH vs. EK vs. SK

From: GOT -23% -52% -5%

CPH -18% -48% 0%

HAM -11% -43% 0%

BRU -5% -38% 0%

BCN +1% -23% 0%

Nordics

Above alps

South Europe

GOT

CPH

HAM

BCN

North Asia

South Asia

Distance advantage to LH and EK

Neutral: No significant distance advantage

BRU

Distance disadvantage

BJS

Geography Provides A Competitive Advantage


To: TYO vs. LH vs. EK vs. SK

From: GOT -21% -50% -4%

CPH -17% -46% 0%

HAM -11% -43% 0%

BRU -5% -38% 0%

BCN 0% -25% 0%

Nordics

Above alps

South Europe

TYO

GOT

CPH

HAM

BCN

North Asia

South Asia



BRU




To: HKG vs. LH vs. EK vs. SK

From: GOT -17% -26% -3%

CPH -13% -23% +1%

HAM -7% -20% +1%

BRU -2% -17% +1%

BCN +3% -6% 0%

Nordics

Above alps

South Europe

HKG

GOT

CPH

HAM

BCN

North Asia

South Asia



BRU




11

2012Destinations: 13 Frequencies: 90

Osaka 7

New York 7

Tokyo 10Nagoya 7

Seoul 7Beijing 7

Hong Kong 9Chongqing 4

Bangkok 7

Delhi 6

Toronto 5

Singapore 7

Shanghai 7

We Have Successfully Exploited Our Geographic Advantage


Long Haul Networks Depend On Exponential Effects

A

H

B

G

C

F

ED

AB

C

E

D

ResultsFour aircraftFour marketsOne market per aircraft

ResultsFour aircraftTen markets2.5 markets per aircraft

12 Finnair Capital Market Day, 3 Dec 2012

Key Elements Of Market Selection – Let’sExamine Singapore


• 30 new city pairs• High beyond demand• Biggest Scandinavia to Asia

route unserved by Finnair

• Highly competitive

• Growing market• High share of business travel

1

2

3

Traffic Flows

Competitive Capacity

Fare Levels

• Long haul drives lower unit costs4 Trip Cost; Unit Cost

Key Elements Of Market Selection – Let’sExamine Singapore


1

2

3

Traffic Flows

Competitive Capacity

Fare Levels

4 Trip Cost; Unit Cost

Sufficient demandCompetitive productAttractive fare levels

Reasonable costs

Leads To Overperformance vs. Plan


‐2000000

‐1000000

0

1000000

2000000

3000000

4000000

Jun 20

11

Jul 201

1

Aug 20

11

Sep 20

11

Oct 201

1

Nov 201

1

Dec 2011

Jan 20

12

Feb 20

12

Mar 201

2

Apr 2

012

May 201

2

Jun 20

12

Jul 201

2

Aug 20

12

Sep 20

12

Oct 201

2

Nov 201

2

Dec 2012

Jan 20

13

Feb 20

13

Mar 201

3

Apr 2

013

May 201

3

Jun 20

13

Jul 201

3

Aug 20

13

Sep 20

13

Oct 201

3

Nov 201

3

Dec 2013

SIN Performance vs Original Forecast

Original forecast Actual performance

Summary

• Finnair is a strong network carrier

• Capturing our share of traffic between Europe and Asia is critical to Finnair’s success

• We are also striving for increased presence in the Nordics

• Our goal is to continue to profitably increase utilization and ruthlessly decrease costs

→ leading to improved profitability


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