finnair group interim report january 1 –march 31,...
TRANSCRIPT
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28. huhtikuuta 2011 1
FINNAIR GROUP INTERIM REPORT JANUARY 1 – MARCH 31, 2011
Key Facts from the First Quarter
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Industry continues on growth track
• Air Traffic on the rise:
– IATA estimate for the capacity growth 6%* in 2011
– Weak Net Profit Margins expected (1.4 %)
• External disturbances and overcapacity have a negative effect on the load factors, the fuel cost increase cannot be transferred to ticket prices
• Finnair Q1 traffic +12.1% (ASK):
– Asian traffic grew 20.2% (ASK)
– Asian traffic revenue +23%
– Global corporate sales +19%, outside Finland +43%
• Finnair Passenger load factor 72.6%
– Q4 2010 Strike continued to have an effect on Asian leisure demand during Q1
– Events in Japan , Middle East and Africa affected strongly on the Q1 sales
• Cargo continued to develop positively, revenue up by 57%
* compared with previous year
Traffic Region Development Q1 2011 vs. Q1 2010
ASK 9,7 %
RPK -0,8 %
PLF% -6,4 %-p
Traffic revenue 0,4 %
Europe
ASK 15,1 %
RPK 9,6 %
PLF% -3,7 %-p
Traffic revenue 18,8 %
North Atlantic
ASK 20,2 %
RPK 5,0 %
PLF% -10,7 %-p
Traffic revenue 22,9 %
Asia
ASK 20,0 %
RPK 5,1 %
PLF% -7,6 %-p
Traffic revenue 9,6 %
Domestic
ASK -3,1 %
RPK -3,8 %
PLF% -0,7 %-p
Traffic revenue -2,3 %
Leisure traffic
ASK 12,1 %
RPK 1,7 %
PLF% -7,4 %-p
Traffic revenue 9,4 %
Total
ATK 62,4 %
RTK 42,5 %
CLF% -8,7 %-p
Traffic revenue 57,0 %
Cargo
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We are Investing in Growth and Partnerships
• Singapore route launch in May 2011; outlook positive
• We are developing our cooperation in feeder fraffic and cargo to enable growth and to increase cost efficiency
– Air Berlin cooperation had a good start
– In Finncomm Airlines’ partnership arrangements we are seeking a solution in cooperation with an industry partner
– American Airlines’ Chicago route launch in May 2011
– Kingfisher connections in India
– Qantas/Jetstar offers connections to Australia and New Zealand from our Asian flights
– Cargo Joint Venture – cost-efficient cargo capacity from Helsinki
to long-haul destinations at the end of the year
We will continue to improve productivity and invest in service expertise
• In our operations, we will focus on business growth areas
• Cost-efficiency and additional capacity in European traffic with Airbus A32S cabin retrofit and higher fleet load factor
• Catering: industry review of alternative cooperation solutions
• Operational efficiencies through process development projects
• Improved efficiency in purchasing
• Significant service-expertise training and development programme under way
4
Finnair is a quality airline
• We are the leading European airline in level of customer service; customer satisfaction still rising
• Our operational quality is top class, punctuality has returned to a good level, operational quality indicators have improved all along the line
• Competitive advantage from customer service: status of most desired airline in Asia-Europe traffic the goal
• We are developing our service culture and
sharpening our service identity
Key figures January - March 2011 vs. 2010
183,5-55,1 %68,730,9Capital expenditure (gross)
-22,8-56,2 %-21,7-33,8Net profit
-13,3-66,4 %-25,9-43,1EBIT
-0,2 %-2,6 %-p-5,5 %-8,1 %Operational result, EBIT,
% of turnover
-4,7-63,8 %-26,3-43,1Operational result, EBIT
2 023,310,8 %481,5533,7Turnover
FY 2010vs. PYQ1 2010Q1 2011mill. EUR
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Jet fuel spot + fwd curve
Cost Structure Q1 2011
Fuel 23 %
Personnel 20 %
Other Costs 10 %
Traffic Charges 9 %
Depreciation and Leasing 7 %
Groundhandling and Catering 7%
Tour operator costs 7%
Other Rents 5%
Maintenance 5%
Sales and Marketing 4%
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Headcount in decline
0
2000
4000
6000
8000
10000
12000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q12011
Average number of employeesNumber of Employees
7470
Restructuring of technical services
• In the restructuring the company discontinues the heavily loss-making aircraft base maintenance service offered to external customers
• Service provision will in future be focused on line maintenance of the company’s own aircraft
• Employee consultations within Finnair Technical Services were completed at the end of March, a reduction of 450 jobs will be implemented by the end of the year
• As part of the restructuring, a letter of intent signed on a possible transfer of business of warehouse services
• The first-quarter results include a non-recurring personnel expense item of 18.4 million euros for the restructuring
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Development of operating expenses per ASK, Airline, Change Quarter 1 2011 vs. Quarter 1 2010
RASK, tuotto per ASK
CASK, kustannus per ASK
CASK ilman pa.
Henkilöstökustannus
Maapalvelu- ja catering-kulut
Poistot ja leasing-maksut
Muut kulut
Polttoaine
Liikennöimismaksut
7,4
-8,0
-6,9
Change % Q1 2011 vs. Q1 2010
Change %c ASK
-2,5
-0,1
-1,3
-2,5
-1,1
1,3
RASK, revenue per ASK
CASK, cost per ASK
CASK excl. Fuel
Staff costs
Ground handling & catering exp.
Depreciation & lease expenses
Other expenses
Fuel
Traffic charges
Strong balance sheet Equity ratio and adjusted gearing
0
20
40
60
80
100
120
2006 2007 2008 2009 2010 Q1 2011
Omavaraisuusaste Oikaistu nettovelkaantumisaste, Adjusted Gearing%
80,6
34,7
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Strategy – From Vision to Implementation
Finnair’s vision 2020
• Finnair’s vision is to be number one in the Nordic countries
• The most desired option in Asian traffic, in the transit traffic between Asia and Europe among the three largest
• Significance of Scandinavia as part of domestic market is growing
• Our growth strategy is based on cost-competitiveness, our success factors are quality, freshness and creativity
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Osaka 7
7 New York
Tokio 7Nagoya 7
Soul 7
Peking 7
Shanghai 7
Hong Kong 12
Bangkok 7
Delhi 6
74 Weekly Departures to Asia in the Summer 2011
Singapore 7
New destinations and additional flights in European summer season
• Route to Aarhuus opened in cooperation with Sun-Air
• Malaga and Toronto become scheduled services, five flights per week
• Nice becomes scheduled service, three flights per week
• Four flights per week to Ljubljana
• Daily connection to Gdansk
• Krakow twice per week
• Venice three times per week
• Stuttgart service increased to two flights per day
• Lissabon three flights per week
• Service to Pisa starts on May 13, two flights per week
• Three flights per week to Bergen via Arlanda from May 22
• Three flights per week to Murmansk in summer from 15 June
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Outlook for the Year 2011
• Finnair expects that the second-quarter result will be negative
• The results of the second half of the year expected to be positive
• Turnover expected to grow by more than 10% in the full year
• Finnair will continue measures aimed at restoring operational profitability and will explore new means of increasing cost-efficiency
Thank You
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-60
-40
-20
0
20
40
60
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Milj. EUR
2006 2007 2008 2009
* excl. capital gains, fair value changes of derivatives, changes in the
exchange rates of overhauls and non-recurring items
Operating profit* by quarter
2010 2011
-29,4-46,2Profit before taxes
0,419,6Fair value changes of derivates and changes in the exchange rates of overhauls
-25,9-43,1Operating profit (EBIT)
-82,020,03,6Profit before depreciation and lease payments, EBITDAR*
13,6
10,8
Change %
0,0-19,6Capital gains and non-recurring items
-26,3-43,1EBIT excl. asset sales, hedging & arrangements
511,1580,8Operating expenses
481,5533,7Turnover
Q1 2010Q1 2011Mill. EUR
Result Q1 2011 vs. Q1 2010
*excl. capital gains, non-recurring items and fair value changes of derivatives and changes in the exchange rates of overhauls
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Asia
58 %
North Atlantic
6 %
Europe
29 %
Domestic
7 %
Asia Representing Majority of Scheduled Traffic
Revenue Passenger Kilometers Q1 2011
35 %47 %
13 %
Aasia-Eurooppa
Via Helsinki>50 %
Over a Half of Traffic Revenue from Asia in Scheduled Traffic
Asia USDomestic Europe
Aasia-Eurooppa>60 %
* Cargo revenue about 20 % of Asian traffic revenue total
5 %
(Q1/11)
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Finnair Group2010 Q1EBIT* to 2011 Q1 EBIT* build up
20,6
5,7
-43,1
-26,3
-43,1-27,4
-11,2
26,6
-3,7-2,2
-10,3
-4,0-4,9
-6,1
-50,0
-40,0
-30,0
-20,0
-10,0
0,0
10,0
20,0
30,0
40,0
2010Q
1 EBIT
Traffic revenue
Cargo
reven
ue
Other revenue
Maintenan
ce
Ground Han
dlin
g & Catering
Tour ops. Expen
ses
Salaries
Traffic Charges
Other rents
Fuel
Other exp.
2011Q
1 EBIT
* Operating EBIT
Development of operating expenses, Finnair Group, Quarter 1 2011 vs. Quarter 1 2010
+69,8
+42,3
+27,4
+6,1
+4,0
+0,4
+23,3
+4,9
+3,7
13,6
10,4
4,4
13,7
9,0
10,6
18,7
Change % Q1 2011 vs. Q1 2010
Change %Mill. EUR
0,8
26,1
Operating expenses
Operating expenses excl. Fuel
Fuel
Traffic charges
Expenses for tour operators
Depreciation & lease expenses
Other expenses
Staff costs
Ground handling & catering exp.
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Development of operating expenses per ASK, Airline, Change Quarter 1 2011 vs. Quarter 1 2010
RASK, tuotto per ASK
CASK, kustannus per ASK
CASK ilman pa.
Henkilöstökustannus
Maapalvelu- ja catering-kulut
Poistot ja leasing-maksut
Muut kulut
Polttoaine
Liikennöimismaksut
7,4
-8,0
-6,9
Change % Q1 2011 vs. Q1 2010
Change %c ASK
-2,5
-0,1
-1,3
-2,5
-1,1
1,3
RASK, revenue per ASK
CASK, cost per ASK
CASK excl. Fuel
Staff costs
Ground handling & catering exp.
Depreciation & lease expenses
Other expenses
Fuel
Traffic charges
Airbus A32S Cabin Configuration Retrofit–Increased Capacity and Productivity
Airbus A319
From 123 to 138 seats
+12.2% capacity
-10.8% unit cost reduction
Airbus A320
From 159 to 165 seats
+3,8 % capacity
-3,6 unit cost reduction
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Key figures of the business segments
93,7 %34,4 %<200 %(vs. PY)
1,37,5-19,2EBITDA
175,0<-200 %52,9%(vs. PY)
1,1-15,6-39,9Adj. op. margin
175,0 %75,0 %-78,5 %(vs. PY)
1,12,8-43,9Operating result
6,5 %3,5 %12,2 %(vs. PY)
106,6114,5452,3Turnover
Travel Services
Aviation Services Airline Business in m EUR
Q1 2011 vs. Q1 2010
Key figures January - March 2011 vs. 2010
5,04-11,7 %4,353,84Share price, EUR
645,8-11,7 %557,4492,0Market capitalisation, mill. EUR
235,10,8 %251,4253,4Interest bearing debt, net, mill. EUR
26 %-0,1 %-p29 %24 %Liquid assets per revenue
(12 months rolling) %
79,6-11,3 %-p91,980,6Adjusted gearing %
27,8-0,2 %-p30,230,0Gearing %
8,00-0,3 %-p8,258,0WACC %
-0,46,8 %-p-8,3-1,5ROCE %, rolling 12 months
-2,79,2 %-p-13,4-4,2Return on equity (ROE) %,
rolling 12 months
36,20,1 %-p34,634,7Equity ratio %
31.12.2010
Change %31.03.2010
31.03.2011
16
Cashflow from operating activites Q1 2011 vs. Q1 2010
+312.1
+18.1
+294.0
-13.6
+100.6
-30.9
+69.7
-38.0
Q1 2011
+333.9Liquid funds at end
+71.0Change
+262.9Liquid funds at beginning
-108.2Cashflow from financing activities
+265.8Change in advances
-68.7Fixed asset investments
+197.1Cash from investing activities
-17.9Cashflow from operating activities
Q1 2010Cashflow statement EUR million
Return on equity and capital employedrolling 12 months
-20
-15
-10
-5
0
5
10
15
20
Q1 20
06
Q2 20
06
Q3 20
06
Q4 20
06
Q1 20
07
Q2 20
07
Q3 20
07
Q4 20
07
Q1 20
08
Q2 20
08
Q3 20
08
Q4 20
08
Q1 20
09
Q2 20
09
Q3 20
09
Q4 20
09
Q1 20
10
Q2 20
10
Q3 20
10
Q4 20
10
Q1 20
11
% ROE return on equity ROCE return on capital employed
-1.5%
-4.2%
17
Capital expenditure andnet operational cashflow
-200
-100
0
100
200
300
400
2006 2007 2008 2009 2010 Q1 2010 Q1 2011
Net operational cashflow Capital expenditureEUR million
30.9
-38.0
Aircraft operating lease liabilities
0
50
100
150
200
250
300
350
400
450
2006 2007 2008 2009 2010 Q1 2011
Milj. EUR
On 31 March all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 31 December 2010 would have been 80,6 %
253,2
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Rolling Hedging Policy
0%
20%
40%
60%
80%
100%
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
hedge ratio
upper
lower
Change in fuel costs Q1 2011
38
132**
105*
-24
2
11
0
50
100
150
Q1/2010 Amount Price Foreign currency
Hedgings Q1/2011
EUR million
* Includes EUR 12 million hedging loss
**Includes EUR 12 million hedging profit
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Crude oil – speculative positioning on stronger oil is at all time high
Crude oil futures positions in CME
Source: Danske Markets
Capacity, Passenger volume and Load Factor development Q1 y-o-y
-8 %8 %Ryanair
-3 %22 %27 %Norwegian
-1,90 %1,00 %3,50 %Air France-KLM
11,90 %n. 12 %Easyjet
-7,40 %1,70 %12,10 %Finnair
Load Factor change
Passengervolume change
Capacity Change
Airline
2,70 %6,20 %Iberia
-1,9 %11,90 %13,90 %British Airways
-1,90 %8,80 %11,50 %IAG
-8,80 %-1,60 %9,80 %Cathay Pacific
-7,60 %-3,60 %6,40 %Singapore Airlines
-5,30 %0,30 %7,50 %Lufthansa
-5 %0,20 %7,60 %SAS
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Finnair’s financial targets“Sustainable, value-creating growth”
Operating profit Operating profit margin at least 6% => over 120 milj. EUR
EBITDAREBITDAR % at least 17% => over EUR 350 million EBITDAR
Financial added value
Dividend ratio At least one third of annual profit to be paid as dividend
Adjusted gearing Gearing adjusted for aircraft lease liabilities not to exceed140%
Target is to generate positive financial added valueover 8.25 % pre-tax WACC