17 August 2016
CEO Pekka Vauramo
CFO Pekka Vähähyyppä
Finnair Q2 2016 Result
1
Finnair Q2 2016 Result, 17 August 2016
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
2
Finnair Q2 2016 Result, 17 August 2016
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
800
600
400
200
0
• 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
3
Q1
Q2
2014
2015
Q3
2016
Q4
Comparable operating result, M€
100
50
0
-50
*not fully comparable, 2015 revenue restated, external leasing revenue
excluded and included in other operating income.
Revenue*, M€
Q1
Q2
2014
Q3
2015
Q4
2016
Finnair Q2 2016 Result, 17 August 2016
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
+5%
544
Q2 2015
5
570
Q2 2016
Travel agencies: -32.9%
Ancillary and retail revenue: +24.3%
Travel services: +1.9%
Passenger revenue: +5.5%
Cargo: -5.6%
• 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
Finnair Q2 2016 Result, 17 August 2016
Q2 Traffic Performance
Asia
Q2
million
Passenger revenue
Chg. %
Share %
million
ASK
Chg. %
Share %
million
Chg. %
RPK
%
Chg %
PLF
Cargo
6
Revenue, Mill.
Chg. %
Tonnes, Mill.
Chg. %
*Includes unallocated revenue
ASK: Available Seat Kilometres
RPK: Revenue Passenger Kilometres
PLF%: Passenger Load Factor
173.9
-2.1
37.9
4 070.1
9.2
47.8
3 109.6
4.6
76.4
-3.4
North
Atlantic
28.8
40.2
6.3
671.9
66.0
7.9
530.2
49.6
78.9
-8.6
Europe
204.2
2.6
44.5
3 413.6
1.6
40.1
2 713.7
2.8
79.5
0.9
Domestic
39.7
7.6
8.7
356.9
7.5
4.2
237.9
7.1
66.7
-0.3
Total*
458.3
5.5
100
8 512.5
8.8
100
6 591.3
6.5
77.4
-1.7
42.6
-5.6
371
9.8
Finnair Q2 2016 Result, 17 August 2016
H1 Traffic Performance
Asia
Q2
million
Passenger revenue
Chg. %
Share %
million
ASK
Chg. %
Share %
million
Chg. %
RPK
%
Chg %
PLF
Cargo
7
Revenue, Mill.
Chg. %
Tonnes, Mill.
Chg. %
*Includes unallocated revenue
ASK: Available Seat Kilometres
RPK: Revenue Passenger Kilometres
PLF%: Passenger Load Factor
338.8
0.1
39.3
8 091.6
6.3
47.6
6 438.0
5.3
79.6
-0.7
North
Atlantic
54.5
15.8
6.3
1 304.4
31.7
5.2
1 038.9
27.4
79.6
-2.6
Europe
365.1
4.3
42.3
6 412.2
3.2
42.9
4 942.5
3.4
77.1
0.1
Domestic
88.4
12.0
10.3
825.1
14.5
4.2
572.4
14.6
69.4
0.1
Total*
862.3
4.1
100
16 633.2
7.1
100
12 991.7
6.4
78.1
-0.5
82.2
-8.5
725
7.3
Finnair Q2 2016 Result, 17 August 2016
A350s generate excellent customer ratings
Long haul business
Long haul economy
9.2
9.1
9.0
9.1
8.9
8.4
8.2
8.6
9.0
8.8
8.6
8.4
8.2
8.2
8.0 8.0
7.8
7.6
7.6
7.4
7.4
A330
Value for money
A340
8.4
8.1
8.2 8.1
8.2
8.0
8.0
7.8
Overall
satisfaction
8.9
8.4
8.3
8.0
8
9.1
8.8
8.8
8.6
9.2
Likelihood to reuse
A350
Overall
satisfaction
Value for money Likelihood to reuse
A330
A340
A350
Finnair Q2 2016 Result, 17 August 2016
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
9
Finnair Q2 2016 Result, 17 August 2016
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).
10
Finnair Q2 2016 Result, 17 August 2016
Financials
11
Finnair Q2 2016 Result, 17 August 2016
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
28,251
2.0
55,172
6.2
77 %
-1.7
78 %
-0.5 %-p
No of flights
PLF % (load)
Results
Revenue
C omparable EBITDAR
C omparable EBIT
Net result
12
Q2 2016
Change
%
Q1-Q2
2016
Change
%
569.6
4.7
1106.0
3.8
56.3
50.6
92.7
63.8
3.2
> 200.00
-12.2
70.5
-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
C ASK
6.65
-6.5
6.72
-5.6
C ASK ex fuel
5.17
0.8
5.23
1.7
C ASK ex fuel at constant cur
5.13
0.1
5.20
1.0
Cashflow and financial
position
Operating cash flow
Interest-bearing net debt
Q2 2016
Change
Q1-Q2
Change
%
2016
%
119.6
35.3
130.0
28.2
-150.2
-10.2
Adjusted gearing
82.1
0.7 %-p
ROC E
10.0
13.2 %-p
Finnair Q2 2016 Result, 17 August 2016
Income statement
Q2
2016
569.6
Q2
2015
543.9
Change
%
4.7
Q1-Q2
2016
1,106.0
Q1-Q2
2015
1,065.2
Change
%
3.8
2,254.5
17.9
21.5
-16.9
40.0
44.5
-10.2
85.2
-93.0
-87.4
6.4
-184.8
-177.4
4.2
-353.2
-126.4
-155.7
-18.8
-247.9
-307.0
-19.2
-595.5
Other rents
-37.2
-41.0
-9.4
-79.2
-78.7
0.7
-159.4
Aircraft materials and overhaul
-37.6
-30.9
21.5
-74.2
-62.6
18.6
-118.9
Traffic charges
-66.4
-65.8
0.9
-127.4
-128.3
-0.7
-258.5
Ground handling and catering expenses
-62.3
-58.9
5.8
-127.4
-119.3
6.8
-250.3
Expenses for tour operations
-15.6
-15.4
1.3
-42.4
-39.1
8.5
-79.6
Sales and marketing expenses
-20.1
-17.9
11.9
-38.2
-35.6
7.3
-74.0
Other expenses
-72.8
-55.1
32.1
-131.6
-105.1
25.3
-219.3
Comparable EBITDAR
56.3
37.4
50.6
92.7
56.6
63.8
231.2
Lease payments for aircraft
-26.9
-25.3
6.6
-55.7
-46.2
20.6
-99.3
Depreciation and impairment
-26.2
-25.1
4.7
-49.1
-51.7
-4.9
-108.1
3.2
-12.9
> 200 %
-12.2
-41.3
70.5
23.7
in mill. EUR
Revenue
Other operating income
2015
Operating expenses
Staff costs
Fuel costs
Comparable operating result
13
Finnair Q2 2016 Result, 17 August 2016
Passenger revenue development
Passenger revenue, M€ +5.5 %
Passenger revenue by traffic area, M€
458,3
+23,86
(+5,5%)
-3,3
11,3
-10,0
-1,1
+8,8%
458,3
38,3
2,8
5,2
434,4
434,4
8,2
-3,7
Q2 2015
ASK
FX
PLF (load
factor)
Yield, Mix,
other
Q2 2015
Q2 2016
ASK
Share of ASK
14
Unallocated Q2 2016
revenue
Asia
North
Atlantic
Europe
+9%
+66%
+2%
+8%
+8.8%
47.8 %
7.9 %
40.1 %
4.2 %
100%
Domestic
Finnair Q2 2016 Result, 17 August 2016
Q2 RASK component development vs. LY
Q2 ASK +8.8%
‐10.3%
‐15.5%
1.0%
0.1%
‐3.1%
0.36
11.11
4.27
4.28
FEA
RASK
ATA
RASK
x.x
‐x.x
15
5.98
EUR
RASK
Change, % to LY
14.2%
‐13.3%
0.50
‐6.4%
‐38.4%
0.40
0.05
6.69
5.38
DOM
RASK
PAX
RASK
FEA = Asia
ATA = North America
‐3.8%
Ancillary
RASK
Cargo
RASK
Travel
services
RASK
Travel
agency
RASK
Group
RASK
H1 RASK component development vs. LY
H1 ASK +7.1%
‐5.8%
‐12.1%
1.1%
‐2.2%
‐2.8%
17.9%
0.36
‐14.5%
0.49
0.3%
0.56
‐36.6%
‐3.0%
0.05
10.71
4.19
4.18
FEA
RASK
ATA
RASK
x.x
‐x.x
16
5.69
EUR
RASK
Change, % to LY
6.65
5.18
DOM
RASK
PAX
RASK
FEA = Asia
ATA = North America
Ancillary
RASK
Cargo
RASK
Travel
services
RASK
Travel
agency
RASK
Group
RASK
Q2 CASK component development vs. LY
Q2 ASK +8.8%
-2.2%
11.7%
-2.1%
-25.4%
-3.8% -16.7%
0.31
0.44
0.32
1.48
1.09
x.x
‐x.x
17
Change, % to LY
0.44
-7.3%
0.78
-6.4%
0.45
3.8%
0.28
-6.9%
0.18
2.8%
0.24
33.5%
0.55
4.5%
-23.6%
-6.5%
0.8%
0.31
6.65
5.17
H1 CASK component development vs. LY
H1 ASK +7.1%
-2.7%
0.45
1.11
x.x
‐x.x
18
10.8%
12.7%
0.33
-24.6%
-11.2%
1.49
Change, % to LY
0.30
-6.0%
0.48
-7.2%
0.77
-3.3%
0.49
5.4%
0.28
1.4%
0.26
0.2%
0.23
27.0%
0.47
5.0%
-16.1%
-5.6%
1.7%
0.32
6.72
5.23
Comparable EBIT Q2 2015 vs. Q2 2016, M€
3.8
-6.7
-0.6
-3.4
-0.2
-1.2
-1.7
29.3
-17.7
-3.6
-5.6
23.9
-2.1
3.2
Passenger revenue
Ancillary and retail revenue
5.9
19
-12.9
-2.5
-1.5
Q2
2015
Revenue
Cargo Revenue
Travel services & Travel Agencies Revenue
Other
operating
income
Staff
costs
Fuel
costs
Other
rents
Aircraft
materials
and
overhaul
Traffic
charges
Ground Expenses Sales and Lease Depreciation Other
Q2
handling for tour marketing payments
and
expenses
2016
and
operations expenses for aircraft impairment
catering
Finnair Q2 2016 Result, 17 August 2016
expenses
Comparable EBIT H1 2015 vs. H1 2016, M€
0,5
11,6
0,9
8,1
3,3
59,1
2,6
9,5
2,5
26,6
4,5
7,4
33,6
-12,2
Passenger revenue
-41,3
12,5
Ancillary and retail revenue
2,4
7,7
Travel services & Travel Agencies Revenue
Cargo revenue
40,8
Q1-Q2
2015
20
Revenue
Other
operating
income
Staff
costs
Fuel costs
Other
rents
Aircraft
materials
and
overhaul
Traffic
charges
Q1-Q2
Lease Depreciation Other
Ground Expenses Sales and
expenses
2016
for tour marketing payments
and
handling
operations expenses for aircraft impairment
and
catering
Finnair Q2 2016 Result, 17 August 2016
expenses
Jet fuel price decrease supported Q2
performance
M€
180
160
4
-32
140
120
-2
2
100
80
156
126
60
40
20
0
Q2/2015
Volume
Price
Currency
Hedging deviation
Q2/2016
• Q2/15 hedging loss 31.1 M€
• Q2/16 hedging loss 33.0 M€
21
Finnair Q2 2016 Result, 17 August 2016
Strong cash flow and cash funds
Cash funds
+173.4 M€
Change in cash flows
+75.6 M€
Operating
+130.0 M€
Investing
-396.3 M€
4.2
-29.6
90.6
457.7
881.6
Financing
+341.8 M€
-6.0
533.3
35.2
708.2
348.3
250.5
533.3
-316.3
457.7
377.4
226.3
187.3
17.1
Cash at the end
Hybrid bond interests and
purchase of own shares
Loan repayments
Proceeds from loans
Other investing activities
Disposal of assets
Acquisition of assets
Non-cash transactions
and financial items
EBITDA
Change in working capital
16
Cash at the beginning
-97.1
270.5
307.0
31 Dec 2015
30 Jun 2016
Commercial papers and deposits > 3 months
Commercial papers, deposits and funds < 3 months
Cash and bank deposits
Cash in cash flow
Balance sheet: 3 new A350’s & JOLCO loans
2.518
109
Other current
assets
263
2.050
1.967
2.518
7
Other liabilities
514
2.050
0
125
Assets held for sale
96
Other current
assents
259
Other current
assets
220
Cash funds
532
Cash funds
708
25
Cash Funds
882
Unflown tickets
438
Derivatives 81
Derivatives 219
Derivatives 156
102
23
Fleet
676
Fleet
739
30 Jun 2015
31 Dec 2015
1.967
Derivatives
100
123
Interest-bearing
debt
733
+300,8
Fleet
1.040
30 Jun 2016
Other liabilities
494
500
Unflown tickets
302
Derivatives 180
Interestbearing debt
346
Equity
745
727
30 Jun 2016
31 Dec 2015
Unflown tickets
394
Derivatives 128
Interest –bearing
debt
365
555
30 Jun 2015
Finnair Q2 2016 Result, 17 August 2016
Q2 Strong balance sheet & net cash support
investments
Strong balance sheet, net cash
Composition of adjusted net debt
882
708
M€
448
426
Net operating cash flow
330
268
24
120
82
2015
762
Liquid funds
-1.000
H1 2016
108
Adjusted
net debt
882
-733
-613
82
-500
46
35
27
Cash
Divestments
17
2014
7x aircraft leases
+ currency hedges
Gross investments
208
171
-1.500
Interestbearing debt
Equity ratio
30
Gearing
0
Adjusted gearing
0
-20
24
-50
2014
2015
H1 2016
Finnair Q2 2016 Result, 17 August 2016
Investments 2016-2023
Net confirmed
investments 146 M€
25
Finnair Q2 2016 Result, 17 August 2016
Thank you
26
Finnair Q2 2016 Result, 17 August 2016
In Q2, fuel continues to be the largest cost
item, operational costs 584 M€
3%
6%
3%
22%
12%
16%
11%
11%
27
16%
Fuel, 126 M€
Personnel, 93 M€
Leasing, maintenance, depreciation & impairment, 91 M€
Traffic charges, 66 M€
Groundhandling & catering, 62 M€
Other costs, 73 M€
Other rents, 37 M€
Sales & marketing, 20 M€
Tour operations, 17 M€
Finnair Q2 2016 Result, 17 August 2016
Fuel and currency sensitivities & currency split
Currency
distribution
%
4–6
2016
4–6
2015
1–6
2016
1–6
2015
Sales currencies
2015
Currency
sensitivities USD
Hedging ratio
and JPY
(rolling 12 months from date of
(rolling 12 months
financial statements)
from date of financial
statements)
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
-
-
EUR
53
50
53
52
53
-
-
USD*
40
40
40
41
41
EUR 55 million
EUR 20 million
Other
7
10
7
7
7
Purchase
currencies
28
68%
Finnair Q2 2016 Result, 17 August 2016
* The sensitivity analysis assumes that the Chinese yuan and the Hong Kong dollar continue to correlate strongly with the US dollar.
Jet fuel hedging ratios
30 June 2016
100%
hedge ratio
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
29
71%
upper
lower
72%
64%
54%
42%
32%
22%
11%
0%
0%
0%
0%
Finnair Q2 2016 Result, 17 August 2016