Finnair Plc. Financial Statement Release 8 February 2013 at 09:30
In 2012, turnover grew by 8.5 per cent; operational profit was 44.9 million euros.
|Turnover and result|
|Turnover, EUR million||612.9||577.4||6.1||2 449.4||2 257.7||8.5|
|Operational result, EBIT, EUR million||6.3||-31.6||-||44.9||-60.9||-|
|Operational result, % of turnover||1.0||-5.5||6.5 %-p||1.8||-2.7||4.5 %-p|
|Operating result, EBIT, EUR million||2.7||-30.1||-||35.5||-87.8||-|
|EBITDAR, EUR million||55.0||26.4||108.3||241.9||139.6||73.3|
|Result before taxes, EUR million||0.9||-38.2||-||16.5||-111.5||-|
|Net result, EUR million||1.2||-32.6||-||11.8||-87.5||-|
|Balance sheet and cash flow|
|Equity ratio, %||35.7||32.6||3.1 %-p|
|Gearing, %||17.6||43.3||-25.7 %-p|
|Adjusted gearing, %||76.8||108.4||-31.6 %-p|
|Gross investment, EUR million||23.7||31.9||-25.7||41.4||203.9||-79.7|
|Return on capital employed, ROCE, 12 months rolling, %||3.0||-5.2||8.2 %-p|
|Return on equity, ROE, 12 months rolling, %||1.5||-10.9||12.4 %-p|
|Net cash flow from operating activities||17.9||-1.2||> 200 %||154.7||50.8||> 200 %|
|Share price at end of quarter, EUR||2.38||2.30||3.50||2.38||2.30||3.5|
|Earnings per share, from the result of the period**||0.01||-0.25||104.0||0.09||-0.69||113.0|
|Earnings per share||-0.06||-0.27||77.8||0.02||-0.75||102.7|
|unit costs and revenue|
|Passengers, thousand people||2 081||1 913||8.8||8 774||8 013||9.5|
|Available seat kilometres (ASK), million||7 568||7 288||3.8||30 366||29 345||3.5|
|Revenue passenger kilometres (RPK), million||5 693||5 192||9.6||23 563||21 498||9.6|
|Passenger load factor (PLF), %||75.2||71.2||4.0 %-p||77.6||73.3||4.3 %-p|
|Unit revenue per available seat kilometre,|
|Unit revenue per revenue passenger kilometre,|
|Unit cost per available seat kilometre,|
|CASK excluding fuel, cents/ASK||4.47||4.89||
|Available tonne kilometres (ATK), million||1 135||1 151||-1.3||4 647||4 571||1.7|
|Revenue tonne kilometres (RTK), million||734||698||5.1||3 029||2 823||7.3|
|Cargo and mail, tonnes||36 047||38 031||-5.2||148 132||145 883||1.5|
|Cargo traffic unit revenue per|
|revenue tonne kilometre, cents/RTK||26.49||26.09||1.5||25.45||26.50||-4.0|
|Overall load factor, %||64.6||60.7||3.9 %-p||65.2||61.8||3.4-p|
|Number of flights, pcs||
|Average number of employees||6 784||7 467||-9.1|
* Operational result: Operating result excluding changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves, non-recurring items and capital gains
**Before Hybrid Bond interest
Mika Vehviläinen, President and CEO:
Overall, 2012 and its last quarter were gratifying for Finnair. We were able to turn the whole year into a profit, for the first time since 2007. The operational result for the entire year stood at 44.9 million euros and turnover grew by 8.5 per cent to 2,449.4 million euros. Our sales and marketing efforts brought results, and our unit revenue improved by a record 7.7 per cent. Consumers have more often chosen Finnair, which is satisfying as we have invested significantly in improving customer experience and operational quality in the past few years.
In recent years, the last quarter of the year has been lossmaking due to seasonal fluctuations, but this year the operational result showed a profit of 6.3 million euros. This proves that our structural change and cost-reduction programme is bringing results. The programme has progressed faster than the original schedule, and, at the end of the year, we had already achieved permanent annual cost reductions of 100 million euros. Unit cost excluding fuel decreased by 3.6 per cent in 2012, while capacity simultaneously grew by 3.5 per cent and fuel costs rose by one-fifth. Showing a profit is a great achievement that required hard work. Thanks for the result belong to the entire Finnair team.
The good work and results are also seen in the fact that the company’s Board of Directors is proposing that a dividend of 0.10 euros per share be distributed and that 4,8 million euros be contributed to the Personnel Fund this year.
However, following through with the structural change and cost-reduction programme of 140 million euros launched in 2011 and implementing the additional cost-reduction programme of 60 million euros announced in October 2012 still requires hard work and further difficult changes.
There’s still room for improved efficiency in Finnair’s operations. The partnership agreements made during last year make room for further process development and re-evaluating of functions and structures. The aim is to question existing practises and to rethink, in what ways we could improve our profitability.
With regard to personnel costs, we are still more expensive than our competitors, and this problem has to be solved. The intention is to find solutions together with personnel groups to simplify the complex salary and remuneration structures. Implementing such reforms is never easy, but I hope and believe that by discussing matters together and considering the different options it is possible to reach a reasonable solution from the point of view of both parties.
Additional cost reductions are absolutely necessary for Finnair: the goal is sustainable profitability so that Finnair is capable of investing in new Airbus 350 aircraft that are vital for a competitive future. Finnair is thus determined to continue working toward improved profitability.
Finnair will be celebrating its 90th anniversary in 2013, and 2012 provided the company with a good basis for making the current year a turning point. Finnair is progressing towards its aim of doubling its revenue from Asian traffic by 2020. The Xian and Hanoi routes that will open in the summer of 2013 will increase the number of Finnair’s Asian routes to thirteen. Finnair expects that the operational result of 2013 will show a profit.
2012 was my last full year at Finnair. For my part, I give warm thanks to our customers, shareholders and personnel. During my Finnair years, I have learned how much Finnair as a company means to all of us, and it will always have a place in my heart.
Global airline industry is currently undergoing structural changes, the typical characteristics of which are market liberalisation, increasing competition, overcapacity, consolidation, alliances and specialisation. In 2012, the intense competition in the industry was seen in major cost-reduction and structural change programmes and bankruptcies of a number of European airlines. The capacity growth in the market is clearly more controlled than previously, and various partnerships have emerged, especially in international long-haul traffic. Finnair’s goal is to take advantage of the opportunities presented by the changes in its industry and to strengthen its position in traffic between Asia and Europe and within Europe.
The largest individual cost factor of airlines is jet fuel, which already accounts for one fourth of Finnair’s costs. The price of jet fuel was still high in the last quarter of 2012, creating significant cost pressures for airlines. On the other hand, it has made the industry healthier as the financially weakest competitors have exited the market.
Despite the poor economic environment, passenger traffic continued to grow in Europe in the fourth quarter, which, combined with moderate capacity increases by airlines, improved aircraft load factors. Traffic between Asia and Europe also grew as a result of strong demand. However, the uncertain economic outlook in Europe, together with slower growth in Asia, increase the uncertainty related to future development.
In the last quarter of the year, uncertainty in the world economy depressed demand in cargo traffic between Asia and Europe. Unit revenues in cargo traffic continue to be under pressure due to the decline of import demand in the euro area and the overcapacity of air cargo traffic.
Progress of the structural change and cost-reduction programme
The implementation of the structural reform and cost-reduction programme commenced by Finnair in August 2011 continued in the last quarter of the year. The aim of the programme is to cut Finnair’s costs permanently by 140 million euros by the end of 2013. Due to the actions taken, Finnair achieved cumulative, annual savings of 100 million euros by the end of 2012. At the same time, the company has been able to move a significant share of fixed costs to volume based variable costs. The cost-reduction measures were also seen in the decrease of airline unit costs in the last quarter of the year.
As a whole, the cost-reduction programme has progressed well, and Finnair believes that the full target will be reached on schedule. With regard to fleet, sales and distribution, and catering costs, the original objectives have already been exceeded, but the progress of reductions has been slower than the original objectives particularly in the personnel and maintenance cost categories.
Despite the reduction of the cost level achieved in 2012, Finnair is still far from the long-term return objective set for it, i.e. an operating profit margin of six per cent. In addition, the high fuel price, intensifying competition and significant fleet investments in the coming years require a clear improvement in profitability. Due to this, Finnair published a new cost-reduction programme at the end of October, which aims to reduce the cost level permanently by an additional 60 million euros by the end of 2014.
The new cost-reduction programme supplements the previous programme of 140 million euros, and it primarily focuses on enhancing the efficiency of the functions and processes of Finnair’s different units so that they will best respond to the future needs of Finnair. The company will analyse in detail how efficiency could be further improved and different functions adjusted in its streamlined organisation. Increasing productivity would also mean that the remuneration structures are openly reviewed and compared to the current practices in the industry.
Financial performance in October–December 2012
Finnair’s turnover grew by 6.1 per cent in October–December compared with the corresponding period in 2011 and totalled 612.9 million euros (577.4), mainly as a result of growth in the demand for passenger traffic.
The progress of the structural reform and cost-reduction programme was seen in the operational costs of the period under review. Operational costs excluding fuel costs decreased by 3.5 per cent on the comparison period, while capacity simultaneously grew by 3.8 per cent. Fuel costs, including hedging and costs incurred for emissions trade, rose by 12.8 per cent to 165.2 million euros (146.4), whereas personnel costs decreased by 14.8 per cent to 100.4 million euros (117.8) due to the personnel reductions implemented in connection with the structural change. Due to the increase in fuel costs, euro-denominated operational costs rose by 0.4 per cent on the comparison period to 615.7 million euros (613.4). The group’s operational result, which refers to the operating result excluding non-recurring items, capital gains and changes in the fair value of derivatives and in the value of foreign currency-denominated fleet maintenance reserves, showed a profit at 6.3 million euros (-31.6).
Finnair’s income statement includes the change in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves that took place during the period under review but will fall due later. This is an unrealised valuation result based on IFRS, where the result has no cash flow effect and which is not included in the operational result. The change in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves amounted to 0.0 million euros (4.6). Non-recurring items stood at -4.5 million euros (-3.1). Operating result showed a profit and amounted to 2.7 million euros (-30.1). The result before taxes for October–December was 0.9 million euros (-38.2) and the result after taxes 1.2 million euros (-32.6).
The unit revenue per available seat kilometre (RASK) increased by 4.8 per cent on the comparison period to 6.37 euro cents (6.09). Unit cost per available seat kilometre (CASK) decreased by 2.9 per cent to 6.54 euro cents (6.74) despite the increase in fuel price. Unit cost excluding fuel (CASK excl. fuel) decreased by 8.6 per cent to 4.47 euro cents (4.89).
Outlook for 2013
The uncertain economic outlook in Europe, together with weakened consumer demand and slower growth in Asia, make it difficult to assess how air traffic will continue to develop. Fuel costs are expected to remain high in 2013 as well, and the demand for air traffic is estimated to grow in moderation.
Finnair estimates that its turnover will grow in 2013. The airline unit costs excluding fuel (CASK excl. fuel) are expected to decrease compared with 2012, and operational result is expected to show a profit in 2013.
Finnair Plc. follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority and hereby publishes its Finnair Group Financial Statements Bulletin 2012 enclosed to this stock exchange release. The Finnair Group Financial Statements Bulletin 2012 is attached to this release in pdf format and is also available on the company’s website at www.finnairgroup.com.
Publication of the Financial Statements and the Annual Report and the 2013 Annual General Meeting
Central parts of Finnair Plc Group’s financial statements for 2012 and the Board of Directors’ Report for 2012 will be published as part of the financial report for 2012 during week 10. The financial statements in their entirety, the Board of Directors’ Report and other final accounts referred to in the Limited Liability Companies Act will be available on the company’s website on 6 March 2013 at the latest. Finnair Plc’s Annual General Meeting will be held on 27 March 2013 at 3:00 p.m. in Helsinki.
Corporate Governance Statement
Finnair Plc’s Corporate Governance Statement will be published as a document separate from the Board of Directors’ Report as part of the company’s financial report for 2012 during week 10, and it will also be available on the company’s website.
Board of Directors
Finnair will hold a press conference on 8 February 2013 at 11:00 a.m. and an analyst briefing at 12:30 p.m. at Helsinki-Vantaa Airport’s World Trade Center, located at Lentäjäntie 3. An English-language telephone conference will begin at 3:30 p.m. Finnish time. The conference may be attended by dialling your local access number +358 800 770 306 and using the PIN code: 255856#.
8 February 2013
For further information, please contact:
Chief Financial Officer
Tel. +358 9 818 8550
Financial Communications and Investor Relations Director
Tel. +358 9 818 4054
Kati Kaksonen, IRO
Financial Communications and Investor Relations
Tel. +358 9 818 2780