FINNAIR -

GOING FOR

PROFITABLE

GROWTH

CHRISTINE ROVELLI

VP GROUP TREASURER

Finnair at a glance

2

• Profitable growth – Revenue to grow by 500 M€ by 2020

• Customer experience – Best European long haul business class, unique Nordic

customer experience

• People experience – Enable growth: Motivated and committed employees are

behind a good customer experience and high productivity.

• Digital transformation – More revenue, higher productivity and better customer

experience with digitalisation.

Finnair founded on 1 November 1923

First talks of long-haul expansion to the USA

Flights from Helsinki (via Copenhagen and Amsterdam) to New York start

Finnair receives its first wide-body aircraft, the DC-10 which carried 300 passengers

Start of Far Eastern expansion with direct flights to Bangkok

First European carrier to offer non-stop flight to Tokyo

First Western European airline to operate non-stop routes between Europe and China

Operating scheduled flights to 20 long-haul destinations across Asia and North America, in

addition to over 70 European destinations

1923

1930’s

1969

1976

Today

State of Finland

55.8%

Others 44.2%

Shareholders

Strategic focus areas

Brief history of Finnair’s long-haul expansion

Key revenue sources and split

1975

1983

1988

Travel Services

Travel agencies

EUR

2,317

million in

2016

Passenger transportation

Ancillary & retail

Cargo

78.4%

5.4%

7.5%

8.1%

0.6%

Key highlights

• Finnair offers smooth and fast

connections in the northern

hemisphere, with specific focus

on Asia

• Core Finnair strategy is to

double Asian traffic by 2018

from 2010 levels

• Currently, Finnair serves 17

Asian destinations across 9

countries, to a mix of financial

centres and leisure

destinations

• Finnair also serves 3 North

American destinations*

• Furthermore, as member of

the oneworld alliance and the

Japan-Europe / Atlantic Joint

Business Agreements, Finnair

benefits through partnerships

with among others: Japan

Airlines and British Airways for

Europe / Japan traffic and

American Airlines for North

Atlantic traffic

Finnair’s core strategy is to connect Europe and Asia…

70

European

cities

17 Asian

cities

... Supported by Joint Business Agreements to

strengthen position and geographical reach...

Atlantic

(AJB)

Japan-Europe

(SJB)

... in addition to membership in the broader oneworld alliance

*New York, Miami and Chicago, San Francisco from summer 2017 onwards 3

4

Key highlights

• Geographical advantage

(proximity) to serve fast-

growing Asian markets,

allowing most direct and

shortest routes

• Only European carrier

achieving 24 hr aircraft

rotations on many Asian

routes1

• On average over 2 hr less total

travel time relative to 1-stop

itineraries via European hubs

and over 4 hr less total travel

time relative to 1-stop

itineraries via Middle-Eastern

hubs3

• Benefit from Helsinki-Vantaa

Airport’s hub strategy, focused

on competitive positioning

(passenger convenience /

experience and cost) in

Europe–Asia traffic segment

Helsinki advantageous geographic location...

1. Finnair is the only EU carrier able to serve Asian routes in 24 hr rotations, with Singapore as the only current exception

2. FINAVIA airport charges comparison sample: cost calculator implying average cost per Pax for Airbus A340-300, based

on: international routes, MTOW 275 tonnes, MLW 192 tonnes, capacity 260, load factor 75%

3. Average time saved, compared to major European and Middle-Eastern hubs

...Supported by favourable geographic location and modern, efficient airport

(hub) infrastructure

26.1 31.6

53.4

76.3

100.1

0

25

50

75

100

HEL CPH ZRH VIE FRA

... Allows Finnair to be the only European carrier able to

operate 24 hr aircraft rotations on all but one of its current

Asian routes1... Sustainable competitive

advantage based on location:

Tokyo – Hamburg

Direct (no service) 9 014 km

Via Helsinki 9 021 km

Via Frankfurt 9 805 km

Via Dubai 12 882 km

Sustainable competitive advantage and cost benefits:

• Very high aircraft utilisation in long-haul traffic (highest utilisation

rates of any airline in terms of block hours for A330s in operation)

• Less need for additional crew members

• Lower fuel consumption due to shorter flight times

• Eco smart, sustainable choice as shortest route with a stop over

generates less emissions

Average cost per pax2 (€)

... And benefit from Helsinki-Vantaa Airport’s comparatively low

costs vs selected other main airports in Europe

5

Key highlights

• For a carrier of Finnair’s size,

an all-Airbus fleet increases

operational efficiency and

flexibility by allowing

centralised spare parts, more

streamlined maintenance

programs, and optimised crew

allocation

• With an average fleet age of

10.1 years1, Finnair is on the

lower end of key peers

• The replacement of older

A340s with the new A350

aircraft will further improve the

average fleet age comparison

with key peers

All-Airbus wide-body fleet delivers strong economic

benefits…

1. Finnair operational fleet as of 30 Dec 2016, excluding Embraer & ATR fleet operated by Norra

2. Owned or finance lease

3. Will be phased out between by the end of 2017, being replaced by the A350. Only one of the A340s was in operation at end-December.

4. Total orders: 19

5. Peer average fleet age as of: 30 June 2016

Overview of Airbus fleet: 49 aircraft in total1 Average fleet age vs peer European network carriers

12.7

11.7

11.1

11.1

10.9

10.1

0 5 10 15

British Airways

Air France

SAS

KLM

Lufthansa

FinnairAircraft Type

7 Airbus A319 2

Owned2 Leased

7 Airbus A320 3

4 Airbus A321 7

3 Airbus A330 5

4 Airbus A340(3) 0

Airbus A350(4)

Years1,5

4 3

6

Finnair was the first European carrier to receive the new

generation A350 in October 2015

Long-haul capacity to grow with A350 deliveries1

… With the new technology A350, the foundation of Finnairs

strategy of disciplined and profitable growth

Front Business compartment Flex compartment

Convertibility allows c. 10% capacity adjustment

1. First deliveries in Q4 2015, last deliveries in 2023

2. Compared with A340 aircraft, operational cash out expenses per seat, per year / normalized traffic

3. Estimated 25% fuel efficiency advantage compared to Airbus A340

Key highlights

• Finnair was the first European

carrier to receive the new

Airbus A350 in October 2015,

allowing:

– Enhanced in-flight

service offering

– 10-20% more

capacity2

– Estimated aggregate

annual seat cost

savings of c. 7-8

MEUR per aircraft,

including 25% fuel

efficiency

advantage3

• The replacement of A340 fleet

by the new A350 will increase

Finnair’s long-haul capacity by

approx. 10-20%, supporting

the core strategy to increase

revenues from Asia

... Which in addition to significant cost

advantages3, provides unique capacity

flexibility

Aircraft

0

5

10

15

20

25

2015 2016 2017 2018 2019 2020

A330 A330 flex A340 A350

8%

15%

5%

11%

Capacity growth

( seats per year, %)

7

Fleet modernization and aircraft up gauging will

decrease unit costs1

Narrow body aircraft capacity set to grow with new aircraft

and up gauging2

… and narrow body fleet investments supporting unit cost

improvement and higher productivity

1. Excluding capital cost

2. More and larger aircraft, additional seats in current fleet

3. Estimated 25% fuel efficiency advantage compared to Airbus A340

Key highlights

• fleet investments support unit

cost improvement and higher

productivity:

– Introduction of A350s

– Replacement of the

A340s

– Increasing the

average narrow body

aircraft size

– Adding more seats to

current narrow body

fleet

• Fleet unit costs to decrease by

8% during the strategy period

of 2016-2018

Aircraft

Capacity growth

( seats per year, %)

0

5

10

15

20

25

30

35

40

2015 2016 2017 2018 2019 2020

A319 A320 A321

4%

7% 1% 1%

7

CASK

without growth or

modernization

2018 2017 2016

Fleet modernization Avg. seat nbr growth AC growth

CASK

-8%

2015 CASK

Current fleet plan enables ASK CAGR of 8-10% in 2017-2018

Available Seat Kilometres by fleet type 2014-2018

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016 2017 2018

A330 / A340 A350 Narrow Body fleet - Base Narrow body fleet - Growth

Accelerated growth: Asian traffic to double by 2018*

8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

*from 2010 level, in ASK’s

20 M€ cost efficiency program proceeding

• Objective: 20 million euros of

permanent cost savings

• Realized savings of 9 million euros.

• Identified additional savings of 11 million

euros, an action plan ready.

• We invest in growth.

9

Objective:

20 million euros of

cost efficiency

improvements

Revenue to grow by 500MEUR by the end of 2019

• We have specified a target to boost our

revenues by 500 million euros by the end of

2019.

• In addition to capacity growth to current and new

destinations, ancillary sales will play a key role in

achieving the target with new revenues streams

and improved distribution capabilities.

• The new cargo hub is to be completed in 2017,

which will enable increased revenue by

providing better facilities for premium services

for specialty goods.

10

Ancillary and retail

sales have a key role

in achieving the

revenue growth

target – Ancillary and

retail revenue target

is 14.9 euros per pax

in 2018

Beating the market RASK in selected markets

© Finnair | September 2016 11

Leveraging competitive advantage in selected markets

Optimising O&D revenue

Launching new revenue streams

Maintaining margins through next generation Cargo

These strategic focus markets offer greatest competitive advantage Concentrating on 30 cities and their catchment areas globally

© Finnair | September 2016 12

Miami

Xi’an

Beijing

Shanghai

Singapore

New York

Bangkok Phuket

Chongqing

Chicago Tokyo Nagoya

Osaka Seoul

Delhi

Ho Chin Minh City

Hong Kong

Krabi

Fukuoka

Guangzhou

Toronto

Strategic JB Markets

Strategic Focus Markets

Strategic Home Markets

Competitive area

SJB

market

share:

21%

AJB

market

share:

25.8%

Atlantic Joint Business Siberian (Europe-Japan)

Joint Business

More revenue, higher productivity and better customer experience with digitalisation

Increase revenue

• Digital touch-points contributed approximately 24% of ticket

sales. Ticket sales through digital touch-points grew by

19% from the comparison period.

• Alipay testing ongoing on Shanghai flights

Improve productivity

• Mobile Applications for Technical Services

• A new production control system, analytics in flight

planning

Improve Customer Experience

• Wi-fi access throughout the wide-body fleet by May

• Mobile application had more than 114 000 active users*,

+85% year on year

• Customer Chat service had 70,000 contacts, +600% y-o-y

13 *In December 2016 vs. December 2015

Shift away from bulk to speciality cargo is the key margin driver - Improvements in cost efficient automation increase our share of higher yielding speciality products

© Finnair | September 2016 14

Special temperature areas to

support special cargo

products

Warehouse automation to improve

efficiency and quality

15

Net investment commitments 532 M€ 2017-2019

M€

0

100

200

300

400

500

600

2017 2018 2019 2020 2021 2022 2023

A350 + spare engines Other commitments Planned InvestmentsNet investments (divestments) SLB Other Divestments

Strong financial position supports upcoming investments

16

Net lease-adjusted debt / EBITDAR (30/09/16)

2.2

Median: 3,5x

0x

1x

2x

3x

4x

5x

6x

7x

8x

9x

Source: Company financials

LTM as of Sep 30, 2016 except EK (June 30, 2016), SK (July 30, 2016)

Rentals are aircraft rentals only; capitalized at 7x

Hybrids and preferreds treated as debt; cash excludes restricted cash

Interest does not include interest embedded in aircraft leases

17

Solid foundation for growth in place Strategy period 2017-2019

Strong financial base

for growth

• Strong operating cash flow and cash funds

(Cash funds at 800 million euros Dec 2016)

• Solid balance sheet supports the coming

investments

Revenue growth

• Ticket revenue will beat market RASK

• Ancillary and retail revenue contribution to

continue to grow significantly

• New products and services

Growth lowers unit costs • Modern and efficient fleet

• Scale economics in fixed costs

• New recruitments reduce unit labour costs

THANK

YOU

Contact us:

IRO Kati Kaksonen

+358 9 818 2780

Kati.kaksonen

@finnair.com