Finnair expects its full-year operating result to reach €150 to €210 million, which will be in the range of could exceed that of the €162.8 million reported in 2019. Based on a strong second quarter, the airline has revised its guidance but for the operating result only. The carrier reiterates that revenues will still remain below the €3.1 billion reported in the last year before the Covid-crisis, it said on July 21. Finnair raises profit guidance after positive Q2.
Finnair ended Q2 with a €138.6 million net profit, up from the €-279.5 million net loss in the same period last year. Back then, the airline was hit hard by the sudden closure of Russian airspace following the outbreak of the war in Ukraine. Finnair’s Asian network, already severely reduced by the Covid restrictions in the region, was confronted with additional const from flying forty percent longer routes.
By adapting the network and following the re-opening of Asia and China, Finnair has improved financially year over year. Revenues from carrying 2.8 million passengers improved to €612 million from €394 million. The airline has seen strong demand for package holidays in Q2, which led to higher prices. Including ancillary and cargo, revenues totaled €749.2 million versus €550.3 million. Cargo revenues were down by 47 percent to €47 million.
RASK up by 27 percent
Revenues per available seat kilometer (RASK) were up 27 percent from Q2 2019 thanks to strong demand and limited capacity, resulting in higher ticket prices. Finnair operated at 75 percent of its capacity compared to 2019 or at 78 percent if wet-lease activities are included. The load factor was 76 percent.
Expenses looked more positive with fuel costs down by €9 million year on year to €220 million. Staffing costs were higher (by €12 million to €125 million), as were traffic charges and passenger and handling costs. The operating result of EBIT of €65.8 million is the fourth quarter in a row with a positive result. Since Q3 last year, combined EBIT has been €120 million.
For HY1, Finnair also recorded much-better results, with a €141.6 million net profit compared to €-492.3 million in 2022. Revenues grew to €1.443.9 billion from €950.1 million. Fuel costs were €73 million higher at €438.9 million. The operating result/EBIT is €74.1 million, up from €-257.8 million. Net cash from operating activities was €382.6 million. Finnair carried 5.4 million passengers, up from 3.9 million last year.
Risks have normalized
CEO Topi Manner said that the risks from the pandemic and the closure of the Russian airspace have “normalized” and are no longer substantial. Adapting the network and deploying aircraft on different routes have contributed to this. Revenues to Asia were up €102 million year on year.
“Looking back, I’m proud of how the entire Finnair team has brought the company out of the pandemic and adapted to Russian airspace closure by defining a new strategy and implementing it successfully,” Manner says in the HY1 report.
“The strong quarter was driven by continued strong travel demand and successful implementation of Finnair’s strategy. We captured demand with our balanced network and were successful in our pricing and sales efforts. Also, our cost control measures are bearing fruit. The net result for the period increased to 138.6 million euros, supported by the re-recognition of previously written down deferred tax assets (99 million) due to clearly improved profitability and improved longer-term outlook of our business.”
Thanks to the improved outlook, Finnair already said in June that it expects to reach an EBIT margin of five percent by mid-2024, twelve to eighteen months earlier than expected. The carrier now targets a comparable EBIT margin of six percent by the end of 2025, thanks to some revisions of the strategy update since September that includes balanced growth, continuous cost efficiency, and improved operational performance. Capacity should reach 80-85 percent by the end of this year.
But Manner added that “our work is not done, and we continue to implement our strategy in a determined manner.”
Fleet optimization
Finnair’s fleet optimization has now been completed. Part of this is the wet and later dry-lease of two of the eight Airbus A330s to Qantas from October and March for up to 5.5 years to satisfy the growth plans of the Australian carrier. The agreement secures Finnair of consistent revenues for the aircraft, which under the airline’s current operational restrictions are range-limited. The partnership with Qatar Airways to connect Scandinavia with Qatar has also helped to optimize A330 utilization.
Finnair has seventeen A350-900s in the fleet that it plans to deploy at maximum flexibility on the Asia-Europe network when demand picks up. The type is currently used on some European routes as well and, for instance, is a daily visitor to Amsterdam Schiphol. Despite strict cost-cutting measures, the airline continues cabin refurbishing of the widebody fleet and has now completed eighteen out of 25 aircraft.
Finnair ended June with €1.5 billion in cash, on par with that in December. Net debt was down to €848 million from €1.1 billion. The company repaid the first tranche of €100 million of a pension premium loan. By the end of June, it still had an undrawn €200 million short-term unsecured hybrid bond, but Finnair plans to call this facility in early September.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News and until July 1 2023 in a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.
