FINNAIR OYJ STOCK EXCHANGE RELEASE 6 FEBRUARY 2007 AT
09:00
FINNAIR GROUP FINANCIAL STATEMENT 1 JANUARY - 31 DECEMBER 2006
Operational result slightly in profit
Summary of 2006 key figures
Turnover rose by 6.3% to 1,989.6 million euros
Passenger traffic grew 7.1% from the previous year, passenger
load factor rose 2.5 percentage points to 75.2%
Unit revenues from flight operations grew by 0.4%, unit costs by
1.8%
Operating loss was -10.8 million euros (operating profit 81.9
million)
Operational result i.e. EBIT, excluding capital gains, non-
recurring arrangement expenses and changes in the fair value of
derivatives was 11.2 million euros (70.1 million)
Result before taxes was -14.7 million euros (87.5 million).
- Gearing at the end of the year was 6.7% (-25.1%) and gearing
adjusted for leasing liabilities was 112.3% (66.8%)
Balance sheet cash and cash equivalents totalled 297.0 million
euros (418.4 million).
Equity ratio 37.2% (42.2%)
Equity per share 6.77 euros (7.73)
- Earnings per share -0.16 euros (0.73)
- Return on capital employed -0.1% (11.1%)
President and CEO Jukka Hienonen on the result for the financial
year:
We have recognised for the last year exceptionally large
restructuring expenses, so 2006 represents an interim year in the
development of Finnairs result despite the increase in revenue
and improvement of passenger load factors,. In addition to
unavoidable restructuring, the result was burdened by a strong
rise in fuel prices. The level of ticket prices in Finland was
depressed by aggressive price-driven marketing. Two budget
airlines departed the Finnish market last year.
This year we will obtain two new wide-bodied aircraft for Asian
traffic, which will grow by 30 per cent. Next year we will acquire
two further aircraft, whereupon our long-haul traffic capacity
will have doubled in two years. The Delhi route, which opened last
autumn, has proved to be popular and this year we will quadruple
our Indian traffic by increasing the number of Delhi flights and
by opening a route to Mumbai.
Work on cutting our loss-making operations will continue this
year. Particular attention will be paid to aviation services. The
objective of the competitiveness project initiated in Finnair
Technical Services is to make all subareas profitable by 2008.
Ownership or partnership options will be explored for the ground
handling services company Northport, whose result was a loss.
Now, with the full effort of all our personnel, we are striving to
deliver clearly profitable operations. Finnairs strategy based on
Asian traffic has been tested in practice. Our organisational and
personnel structure as well as our operating culture are being
adapted to Europe-Asia traffic, where Finnair has excellent
prerequisites for success.
Demand in the key types of traffic is growing healthily. The trend
of average prices in long-haul traffic is heading in the right
direction. The 80 million euro restructuring programme will not be
evident in full this year, but the restructuring programmes
together with the stable price development of oil create a basis
for a significant improvement in the operational result in 2007,
especially starting from the second quarter.
General Review
The year under review was one of restructuring in Finnair. The
companys main business area, international scheduled passenger
traffic, has been shaped by conditions dictated by growing Asian
traffic. Changes in organisational and personnel structures have
been aimed at focusing operations particularly on scheduled
passenger traffic between Europe and Asia. Growing Asian traffic
is increasing travel demand on European routes, too.
In 2006 European airlines scheduled passenger traffic grew more
than five per cent and financial performance was better than in
previous years. Finnairs scheduled passenger traffic grew overall
by more than 13 per cent and Asian traffic by nearly 30 per cent.
Due to the trend in fuel prices and Group restructuring, the
operational result was modest and the result for the quarter was
in the red, however.
In the early part of the year, turnover developed favourably, even
though the average price of flight tickets declined by 2-3 per
cent. Simultaneously, fuel costs rose strongly, placing a heavy
burden on operating costs.
Finnair Technical Services result was adversely affected not only
by non-recurring arrangement expenses but also by some financially
unprofitable external maintenance contracts. Moreover, Finnair
Scheduled Passenger Traffics replacement of its Boeing MD-80
aircraft with an Embraer fleet resulted in transition costs. More
extensive maintenance than planned on two wide-bodied aircraft
increased costs at Finnair Technical Services. Aircraft Heavy
Maintenance unit was under-utilised and the year was heavily loss-
making.
In the second quarter, a restructuring programme was initiated
with the aim of finding 80 million euros of annual savings
starting in 2008 as well as long-term cost competitiveness. Over
15 million euros in non-recurring expenses for restructuring were
recognised in the second quarter, including a 10 million euro
provision for personnel reductions and an impairment of more than
five million euros on Finnair Technical Services inventories. In
a statutory employer-employee procedure, a reduction of 670 jobs
by the end of 2007 was agreed. Most of the reductions will take
place in Finnair Technical Services and administrative support
functions.
Negotiations have been conducted with flight personnel to develop
terms and conditions of employment to correspond with Finnairs
present traffic structure. Finnairs goal of hiring 500 new
employees for cabin work under the national collective employment
agreement led to a dispute with the Finnish Flight Attendants
Association SLSY, which organised a two-day strike at the end of
October. The strike had a negative impact on the result of more
than 10 million euros. In negotiations held after the flight, an
agreement was reached on more flexible conditions of employment
and, among other things, on the establishment of a group that will
focus on long-haul flights.
Finnairs fleet has been modernised by discontinuing the oldest
types of aircraft and by acquiring additional new aircraft. The
present fleet will enable the company to reduce operating costs
and improve passenger load factors. The fleet modernisation is
evident in increased depreciation and lease payments.
The postponement by Airbus of production decisions caused
uncertainty in the production schedule of the A350 type of
aircraft, which Finnair has ordered by 201215. A decision by
Airbus to begin production of the aircraft would also have
confirmed the production schedule of the aircraft ordered by
Finnair. We expect to conclude to negotiations with Airbus
Industrie in the near future and confirm a plan for aircraft
acquisitions during a transition period.
At the end of November 2006, the EU and Russia agreed to
discontinue gradually, from 2010 to 2013, the charging of royalty
fees for traffic overflying Russia. Finnair currently pays Russia
more than 20 million euros for flights that fly over Russia on its
Japanese and Chinese routes.
Financial Result, 1 October 31 December 2006
Turnover rose in the final quarter by 4.3 per cent to 499.3
million euros. The Groups operational result, i.e. EBIT excluding
capital gains, non-recurring arrangement expenses and changes in
the fair value of derivatives, fell to -24.4 million euros (0.4
million). Adjusted EBIT margin was -4.9 per cent (0.1%). The
result before taxes was -26.3 million euros (-2.4 million).
Changes in the fair value of derivatives weakened the final
quarter result by 1.4 million euros, but this has no effect on
cash flow.
In October-December, passenger traffic capacity rose 2.6 per cent
and demand grew 3.5 per cent, while Asian traffic alone rose by
22.2 per cent. Passenger load factor rose 0.6 percentage points
from the previous year to 72.2 per cent. The quantity of cargo
carried grew by 1.1 per cent.
In scheduled passenger and leisure traffic, total unit revenues
per passenger kilometre rose by 3.2 per cent. Yield per passenger
rose by 14.8 per cent. Unit revenues for cargo traffic declined by
10.9 per cent. Weighted unit revenues for passenger and cargo
traffic rose by 0.9 per cent.
Euro-denominated operating costs rose during the period by 5.3 per
cent. Unit costs for flight operations fell by 3.2 per cent. Fuel
costs rose by 18.5 per cent in the final quarter. Unit costs,
excluding fuel costs, fell by 6.9 per cent.
A two-day strike by cabin staff in October resulted in losses of
revenue and extra costs, which weakened the final quarter result
by more than 10 million euros. In the final quarter, moreover,
Finnair Technical Services result was weakened by a more than 10
million euro shortfall in external revenue compared to the
previous year.
Earnings per share for the quarter amounted to -0.23 euros (-
0.03).
Financial Result, 1 January 31 December 2006
Turnover rose 6.3 per cent and was 1,989.6 million euros. The
Groups operational result, i.e. EBIT excluding capital gains,
changes in the fair value of derivatives and arrangement expenses,
i.e. the operating result on operations, fell to 11.2 million
euros (70.1 million). Adjusted EBIT margin was 0.6 per cent (3.7).
The result before taxes was -14.7 million euros (87.5 million). A
result weakening instalment of 8.8 million euros from changes in
the fair value of derivatives was registered into the result for
the entire year, but it does not have an effect on cash flow.
In 2006 passenger traffic capacity grew 3.5 per cent and demand
grew 7.1 per cent. Passenger load factor rose 2.5 percentage
points from the previous year to 75.2 per cent. The quantity of
cargo carried grew by 4.0 per cent.
In scheduled passenger and leisure traffic, total unit revenues
per passenger kilometre rose by 1.4 per cent. Yield per passenger
rose by 7.5 per cent. Unit revenues per tonne kilometre for cargo
traffic declined by 1.6 per cent. Weighted unit revenue for
passenger and cargo traffic rose by 0.4 per cent.
In 2006 euro-denominated operating costs were 10.4 per cent higher
than the previous year. Relative to flight performance, unit costs
of flight operations rose by 1.8 per cent. Unit costs, excluding
fuel costs, fell by 3.5 per cent. Finnairs fuel costs in 2006
were more than 90 million euros, i.e. 31.5 per cent, higher than
in 2005 and the share of fuel in the Group turnover was 19.4 per
cent (15.6).
Earnings per share for the full year amounted to -0.16 euros
(0.73). Equity per share at the end of December 2006 amounted to
6.77 euros, compared with 7.73 euros the year before.
Investment, financing and risk management
Investments in 2006 totalled 252.2 million euros (57.5 million),
including one Airbus A340 wide-bodied aircraft, six Embraer 170
aircraft, one Embraer 190 aircraft and an Embraer 170 flight
simulator. Including advance payments, the cash flow impact of
investments was 227.7 million euros. The investment programme for
new aircraft in 2007 and 2008 is more than 300 million euros in
both years.
In June and August, Finnair signed two 50 million euro credit
facilities for aircraft financing. In June, Finnair also issued a
100 million euro bond. At the end of the year, the Group had
balance sheet cash and cash equivalents amounting to 297.0 million
euros, in addition to which there was a total of 300 million euros
in unused committed credit facilities.
Operational net cash flow was 95.8 million euros, compared with
191.8 million euros a year earlier. Gearing has risen from -25.1
per cent at the beginning of the year to 6.7 per cent at the end
of the year. Gearing adjusted for leasing liabilities was 112.3
per cent (66.8%). In addition to internal financing, the
considerable fleet modernisation will require external capital
provisional financing. Different options for confirming the
capital structure are being explored. The equity ratio fell by 5.0
percentage points from the corresponding point in the previous
year to stand at 37.2 per cent.
According to the financial risk management policy approved by
Finnairs Board of Directors, the company has hedged 63 per cent
of scheduled traffics jet fuel purchases during the next six
months and thereafter for the following 30 months with a
decreasing level of hedging. At the end of 2006 Finnair adjusted
its hedging policy so that the hedging horizon for jet fuel was
lengthened from two to three years. Finnair Leisure Flights has
price hedged around 80 per cent of the fuel consumption of its
agreed traffic programme for the coming season.
Derivatives linked to the jet fuel price are mainly used as the
fuel price hedging instrument. Due to the lengthening of the
hedging horizon and derivatives market efficiency differences,
Finnair also uses other oil derivatives.
Under IFRS rules, a change during the financial period in the fair
value of derivatives that mature in future is recognised in the
Finnair income statement item Other expenses. It is a valuation
loss in accordance with IFRS reporting practice and not a realised
hedging loss nor does it have an effect on cash flow. In 2006 the
change in the fair value of derivatives was -8.8 million euros.
A weakening of the US dollar against the euro has a positive
impact on Finnairs operational result. At the end of December,
the degree of hedging for a dollar basket over the following 12
months was 66 per cent.
Finnairs investments, financing and risk management are outlined
in more detail in the Financial Report section of the annual
report.
Shares and Share Capital
The market value of the company was 1,101.5 million euros
(1,039.9 million) and the closing price was 12.41 euros. During
2006 the highest price for the Finnair Plc share on the Helsinki
Stock Exchange was 15.00 euros (12.15), while the lowest price
was 10.01 euros (5.56) and the average price 12.50 euros (8.56).
During 2006, some 30.0 million (32.2 million) of the companys
shares, with a value of 374.6 million euros (276.0 million), were
traded on the Helsinki Stock Exchange. At the end of the period
under review, the Finnish State owned 55.8 per cent (57.09%) of
the companys shares, while 33.5 per cent (29.1%) were held by
foreign investors or in the name of a nominee.
At the beginning of the financial period, the company held 535,000
of its own shares, which it had purchased in previous years. On 23
March 2006 the Annual General Meeting authorised the Board of
Directors for a period of one year to purchase the companys own
shares up to a maximum of 3,500,000 shares and dispose of the
companys own shares up to a maximum of 3,650,000 shares. The
authorisation applies to shares amounting to less than five per
cent of the companys share capital. Under the authorisation, the
company transferred 383,097 shares to key individuals on 19 April
2006 as part of a share bonus scheme for key individuals. The
company did not make further purchases of own shares in 2006. On
31 December 2006 the company held a total of 151,903 own shares,
i.e. 0.2 per cent of all shares.
Two series of Finnair Plc option rights were traded on the Main
List of the Helsinki Stock Exchange. At the beginning of the
financial period, 396,394 Series A 2000 options were in
circulation and 816,150 Series B 2000 options. The options were
removed from the Helsinki Stock Exchange list on 31 August 2006,
when the subscription for shares with the options ended and the
options expired. Between 1 January and 31 August 2006, 396,169 new
shares were subscribed for with Series A options and 816,020 new
shares with Series B options, a total of 1,212,189 new shares. The
subscription ratio was 1:1. A total of 355 options were not
exercised. After the registration of the new shares, Finnair Plcs
registered share capital on 31 December 2006 was 75,442,904.30
euros (73,783,496.05) and the total number of shares was
88,756,358 (86,804,113).
A more detailed account of the share and share capital can be
found in the Financial Report section of the annual report.
Board of Directors and Senior Management
At the Annual General Meeting held on 23 March 2006, the following
former members were elected as Members of the Board of Directors
until the end of the next Annual General Meeting: Christoffer
Taxell (Chairman), Markku Hyvärinen, Kari Jordan, Veli Sundbäck
and Helena Terho. In addition, Kalevi Alestalo, Satu Huber and
Ursula Ranin were elected as new members.
PricewaterhouseCoopers Oy, Authorised Public Accountants, were
elected as the companys regular auditors, with Jyri Heikkinen,
Authorised Public Accountant, as responsible auditor, and Matti
Nykänen APA and Tuomas Honkämäki APA as deputy auditors.
Jukka Hienonen, appointed to succeed President and CEO Keijo
Suila, who retired on 31 December 2005, began as President and CEO
of Finnair Plc on 1 January 2006. Before joining Finnair, Hienonen
was Executive Vice President of Stockmann Oyj Abp with
responsibility for the department stores group.
EVP Scheduled Passenger Traffic Henrik Arle was appointed Deputy
CEO of Finnair Plc as of 1 January 2006. At the same time Arle was
appointed Finnair Plcs Accountable Manager, as specified in the
Airline Operators Licence.
There were changes in the Groups Board of Management. SVP
Technical Services Jarmo Vilenius moved to become Managing
Director of Finnair Facilities Management as of 15 January 2006.
The new SVP Technical Services is Kimmo Soini, who transferred to
the post from his role as Scheduled Passenger Traffics VP
Technical Services.
SVP Leisure and Travel Services Mauri Annala retired on 1 March
2006. Kaisa Vikkula Doc(Econ) was appointed to replace him. She
had been a member of Finnairs Board of Directors since 2003.
Vikkula left her Board position on 16 February 2006.
Finnairs SVP, Administration and Human Resources Tero Palatsi
resigned from Finnair on 15 February 2006. The duties of Senior
Vice President, Human Resources were handled by VP Ari Kuutschin
until 31 January 2007. As of 1 February 2007, the Senior Vice
President, Human Resources is Anssi Komulainen, who moved to the
position from his duties as Managing Director of Finnair Catering
Oy. Kristina Inkiläinen has been appointed to replace Komulainen
as Managing Director of Finnair Catering Oy and SVP, Catering as
of 30 April 2007. Inkiläinen was formerly Managing Director of
Select Service Partner Finland Oy.
Finnairs Legal Counsel Sami Sarelius was appointed Vice President
and General Counsel as of 1 February 2007. He will also act as
secretary to the companys Board of Directors and Board of
Management.
At the beginning of 2006, senior management working was
rearranged, so that the Groups Executive Board comprises, in
addition to President and CEO Jukka Hienonen, Deputy CEO Henrik
Arle, Chief Financial Officer Lasse Heinonen, Senior Vice
President, Human Resources Anssi Komulainen (as of 1 February
2007), SVP, Leisure Traffic and Travel Services Kaisa Vikkula,
SVP, Commercial Division Mika Perho and SVP, Finnair Technical
Services Kimmo Soini.
In addition to the Executive Board, the Board of Management
comprises SVP, Communications Christer Haglund, SVP, Flight
Operations Hannes Bjurström, Finnair Cargo Oys Managing Director
Antero Lahtinen, Northport Oys Managing Director Tero Vauraste
and Finnair Catering Oys Managing Director Kristina Inkiläinen
(as of 30 April 2007) and plus three personnel representatives.
Finnairs Corporate Governance is outlined in more detail in the
Financial Report section of the annual report.
Personnel
During 2006, the average number of staff employed by the Finnair
Group totalled 9,598, which was 1.6 per cent more than a year
before. Scheduled Passenger Traffic had 4,114 employees and
Leisure Traffic 343 employees. The total number of personnel in
technical, catering and ground handling services was 3,771 and in
travel services 1,145. A total of 225 people were employed in
other functions.
The number of Scheduled Passenger Traffic personnel grew in the
early part of the year by 5.9 per cent. The increase has occurred
in Flight Operations, particularly for the needs of growing Asian
traffic. The number of personnel in other business areas has
declined or remained as before. The trend is in accordance with
the Finnair Groups restructuring plan.
Foreign units had around 800 employees, of whom 300 work mainly
in sales and customer service duties related to Finnairs
passenger and cargo traffic. There are a total of 500 employees
working for the Swedish airline FlyNordic, the Estonian airline
Aero, the Estravel travel agency chain, which operates in the
Baltic states, and as guides at Aurinkomatkat-Suntours holiday
destinations. Foreign personnel are included in the total number
of Group employees.
Of Finnair Group personnel, half are women and half are men. The
proportion of women in management positions, for example in
department manager roles, is growing. There are two women members
on the Finnair Groups Board of Management. Three of the eight
members of Finnair Plcs Board of Directors are women.
Full-time staff account for 91 per cent of employees. Around half
of part-time staff are employees on partial child-care leave.
Some 92 per cent of staff are employed on a permanent basis.
Seasonal staff are included among those on fixed-term contracts.
The average age of employees is 43 years, with most being between
30 and 50 years of age. More than 20 per cent are over 50 years
old and one in ten are under 30.
Employees average length of service is 14 years. One third of
Finnairs personnel have been in the service of Group for more
than 20 years. Nearly half of these have been employed for more
than 30 years.
Finnair has collective employment agreements valid at least until
30 September 2007 with six labour unions and with pilots until May
2008.
In May 2006, Finnair announced a target of cutting 670 jobs,
mainly in Finnair Technical Services as well as administrative
support functions by the end of 2007. A statutory employer-
employee negotiation procedure related to this took place in May-
June 2006 and an agreement on the reduction of jobs was reached in
September. The reduction has already been implemented in
administrative and property services functions through the merger
and outsourcing of units. A reduction of personnel numbers by 300
in Finnair Technical Services will take place mainly through early-
retirement solutions.
More flexible terms and conditions of employment have been
negotiated with pilots and cabin staff to make more efficient use
of labour. Around 20 million euros of annual savings will be
sought through more flexible procedures. Agreement on the issue
has been reached with cabin staff and agreement with pilots is
expected in the near future.
At the end of October, the Finnish Flight Attendants Association
SLSY, which represents cabin staff, organised a two-day strike in
response to Finnairs plans to hire 500 cabin attendants by summer
2007 on terms according to the national collective employment
agreement.
According to an agreement concluded under the guidance of the
national conciliator, Finnairs collective employment agreement
will be applied to the recruitment and employment terms of new
cabin staff for the duration of the current agreement period. The
current collective employment agreement is valid until
30 September 2007.
Changes to the current collective employment agreement were agreed
that improve the efficiency of the cabin staffs work. The
scheduling of cabin staffs working and free days was improved and
restrictions relating to working and rest periods on long-haul
routes were unwound, for example by establishing a group focusing
on long-haul flights. Savings will also be made in crew hotel
costs.
Incentive bonuses amounting to nearly 3 million euros are expected
to be paid to personnel for 2006. The financial result for 2006
did not fulfil the terms of the share bonus scheme for key
individuals nor conditions for the payment of a profit bonus to
the Personnel Fund.
Fleet changes
Finnair Groups fleet is managed by Finnair Aircraft Finance Oy,
which belongs to the Scheduled Passenger Traffic business area. On
31 December 2006, the Finnair fleet had 72 aircraft. The average
age of the entire fleet was 8.3 years. In European traffic, the
average age of the fleet is approximately four years. Finnair has
at its disposal the most modern fleet in European air traffic,
which brings both cost savings and eco-efficiency.
Finnairs parent company discontinued the use of the Boeing MD-80
type of aircraft at the beginning of July. This type of aircraft
will continue to be used by Finnairs Swedish subsidiary
FlyNordic. The Estonian subsidiary Aero AS operates with seven ATR
72 aircraft. A decision has been made to sell four aircraft. The
aim is to sell the aircraft by spring 2007.
The Embraer aircraft acquisition programme, which began in autumn
2005, continues. The number of Embraer aircraft ordered to date is
20, of which ten are the 76-seat 170 model and ten the 100-seat
190 model. At the end of the year, all ten 170 model aircraft and
the first Embraer 190 had been delivered to Finnair. During 2007,
five more Embraer 190s will arrive, and the remaining four will be
delivered in 2008-9, two each year.
For the growing needs of Asian traffic, Finnair bought its first
Airbus A340 aircraft in July 2006. The aircraft was purchased pre-
owned. In addition, long-haul traffic capacity in 2006 was
increased by a seventh Boeing MD-11 wide-bodied aircraft, acquired
in December 2005. The capacity brought by the aircraft provided
cover during winter and spring 2006 for the maintenance shutdowns
caused by conversion work on the six other MD-11 aircraft. The
additional capacity was brought fully into use in May 2006.
In December 2005 Finnair ordered nine new Airbus A350 wide-bodied
aircraft and arranged options for four more. After Finnairs order
decision, Airbus Industrie announced that it would revise the
design of the A350. This will delay the introduction of this type
of aircraft by Finnair, with the first aircraft arriving in 2014.
The redesigned A350 aircraft, when completed, will be a more
economic and higher performance model than originally planned.
Finnair will receive the aircraft it ordered at the originally
agreed acquisition price.
Finnair has also ordered four Airbus A340-wide-bodied aircraft and
has options for four more. The ordered aircraft will be delivered
to Finnair in 200708. In negotiations between Finnair and Airbus
Industrie, an agreement is expected in the near future on
compensation awardable to Finnair for the delay in the A350
production schedule.
In spring 2006 three lease agreements of seven Boeing 757 aircraft
used by Finnair Leisure Flights were renewed on clearly more
favourable terms. The agreements of the other four aircraft had
already been renewed.
By the end of 2007, winglets will be fitted to all seven Boeing
757 aircraft used by Finnair Leisure Flights. They improve an
aircrafts aerodynamics and thus reduce fuel consumption and
emissions. Fuel consumption falls approximately by an estimated
four per cent.
Environment
At the end of 2006, the EU announced a proposal for extending
emissions trading to air transport around the turn of the decade.
The emissions trading calculation principles take into account the
benefit produced for the fuel consumed. As it will only apply to
airlines operating in the area of the EU, the scheme distorts
competition in the industry.
Finnair has been renewing its fleet systematically since 1999. The
Airbus A320 and Embraer aircraft families used in European and
domestic traffic represent the newest technology. The modern fleet
is eco-efficient both in regard to carbon dioxide and noise
emissions.
Finnair takes the environment into consideration in all its
operations and decision-making. Finnair environmental matters are
presented in more detail in the Annual Report and on the Finnair
website.
Performance of business areas
The primary segment reporting of the Finnair Groups financial
statements is based on business areas. The reporting business
areas are Scheduled Passenger Traffic, Leisure Traffic, Aviation
Services and Travel Services.
Scheduled Passenger Traffic
This business area is responsible for sales of scheduled passenger
traffic and cargo, service concepts, flight operations and
activity connected with the procurement and financing of aircraft.
Scheduled Passenger Traffic leases to Leisure Traffic the crews
and aircraft it requires. The business area consists of the
following units and companies: Finnair Scheduled Passenger
Traffic, Aero Airlines, FlyNordic, Finnair Cargo Oy and Finnair
Aircraft Finance Oy.
In 2006 the business areas turnover rose by 8.1 per cent to
1,522.1 million euros. The adjusted EBIT i.e. operational result
was 28.6 million euros (34.3 million).
Finnair Scheduled Passenger Traffic carried more than 7.5 million
passengers in 2006. Demand for Finnairs Scheduled Passenger
Traffic grew by 13.3 per cent, while capacity grew by 7.2 per
cent, leading to an improvement in passenger load factor by 3.9
percentage points to 71.6 per cent.
Unit revenues for scheduled passenger traffic fell 2.0 per cent in
2006. In addition to a general fall in price levels, growth of the
relative share of long-haul traffic in scheduled traffic as a
whole also contributed to the decline in unit revenues. In long-
haul traffic, passenger kilometre-based unit revenue is lower than
in European and domestic traffic. In long-haul traffic, however,
average prices rose from the previous year. The price level in
European traffic was nearly the same as in 2005. In domestic
traffic, on the other hand, the decline in prices continued.
Unit revenues for cargo declined by 1.6 per cent in 2006. The
total quantity of cargo carried in scheduled passenger traffic
grew by 6.7 per cent. The quantity of cargo carried in Asian
traffic increased 19.4 per cent from the previous year.
In international scheduled traffic, Finnair has maintained its
market share relative to its main competitors. In domestic
traffic, Finnairs market share has fallen slightly during the
current year. Finnair has reduced domestic traffic capacity
significantly in order to maintain profitability.
The operating result of Finnairs Swedish subsidiary FlyNordic was
in profit for the last two quarters of 2006. FlyNordics
profitability has been improved by transferring capacity from
scheduled traffic to more profitable leisure traffic. The full-
years result, however, is a loss.
During 2006, the arrival punctuality of scheduled passenger
flights fell by 3.6 percentage points to 84.4 per cent (88.0%).
Even so, Finnairs punctuality is still among the best in Europe.
Leisure Traffic
This business area consists of Finnair Leisure Flights as well as
the Aurinkomatkat-Suntours package tour company, which is the
biggest in its field in Finland, with a market share of more than
39 per cent. Finnair Leisure Flights also enjoys a strong market
leadership in leisure travel flights. The company has ten tour
operators as customers.
In 2006 Finnair Leisure Flights carried more than 1.2 million
passengers. Performance calculated in passenger kilometres was 7.2
per cent lower than a year earlier. Capacity was reduced by 7.4
per cent, so the passenger load factor of leisure flights remained
nearly at the previous years level, at 87.4 per cent. For the
summer season 2006, two Leisure Flights aircraft had been leased
to an English charter company.
Aurinkomatkat-Suntours passenger numbers grew five per cent in
2006 to more than 340,000 passengers. Overcapacity in the sector
reduced price levels and increased sales of loss-making last-
minute departures, thus weakening profitability compared to the
previous year. In terms of the result, however, the year was the
third best in Aurinkomatkat-Suntours history. Aurinkomatkat-
Suntours reached an agreement on the purchase Estonias second
biggest tour operator, Oü Horizon Travel. The company increases
Aurinkomatkats tour capacity by more than five per cent. The
finalisation of the deal still awaits the approval of the
competition authority.
Owing to fuel surcharges collected from tour operators, the
business areas 2006 turnover remained at the previous years
level, at 386.8 million euros. The adjusted EBIT i.e. operational
result was a profit of 18.6 million euros (20.3 million), a
decline of 8.4 per cent.
For the current winter season, Finnair has agreed fixed prices
with tour operators and provided for the fuel risk with price
hedging in accordance with the Groups financial policy.
Aviation Services
This business area comprises aircraft maintenance services, ground
handling and the Groups catering operations. In addition, the
Groups property holdings, the procurement of office services, and
the management and maintenance of properties related to the
Groups operational activities also belong to the Aviation
Services business area.
In 2006 Aviation Services turnover rose 1.6 per cent to 407.5
million euros. The adjusted EBIT i.e. operational result declined
by 50 million euros, however, and was clearly loss-making, i.e.
24.5 million euros (25.5 million). The business areas loss is
derived from Finnair Technical Services and Northport Oy; catering
operations are profitable.
Most of the over 15 million euros in arrangement expense
provisions made in the second quarter of 2006 were designated for
Aviation Services, particularly Finnair Technical Services.
Finnair Technical Services also has some unprofitable maintenance
contracts for non-Group customers, the most significant part of
which it was able to cancel during 2006.
The utilisation of the Aircraft Heavy Maintenance unit in
particular has been low, and operations have been loss-making.
Activity at the Aircraft Heavy Maintenance unit will be clearly
better than the previous year in spring 2007.
At the beginning of 2006, Finnair Technical Services initiated a
competitiveness project which examined the entire organisations
revenue and cost structure. The goal is to return the business to
profitability by specialising and by developing processes and
operating models. At the same time, operations for which there is
no commercial justification will be discontinued.
Finnair Technical Services personnel numbers will be cut by
around 300 in 20067. The reduction will be implemented through
various pension solutions, outsourcing of functions and
redundancies.
The ground handling company Northport Oy expanded its operations
to Oslos Gardemoen Airport. A subsidiary, which has a light cost
and administration structure, started operating in Oslo on
1 October 2006. Early-stage costs and operational challenges have
been connected with the start-up of operations. A Northport
subsidiary is also operating at Stockholms Arlanda Airport.
As part of the Finnair Groups restructuring and profitability
improvement, opportunities for the reorganisation of Northport Oy
and its subsidiaries are being investigated. Various ownership and
partnership options for the company or its parts are being
explored.
At the end of 2006, Finnair signed an agreement with YIT
Kiinteistötekniikka Oy by which responsibility for Finnairs real-
estate and facilities management services transferred to YIT for
the next five years. Overall, the value of the contract is more
than 40 million euros. Around 50 Finnair Facilities Management
employees transferred to YITs service under existing their terms
of employment at the beginning of 2007. Group-owned properties
were not transferred in the arrangement.
Travel Services
This business area consists of the Groups domestic and foreign
travel agency operations - including Finland Travel Bureau,
Estravel and Area as well as the operations of the travel
reservations systems supplier Amadeus Finland Oy.
In 2006, the business areas turnover fell 4.2 per cent to 87.4
million euros and the adjusted EBIT i.e. operational result was
2.3 million euros (8.1 million). The sharp decline in adjusted
EBIT resulted mainly from pressure on service fees caused by tight
competition in the travel agency sector as well as the
discontinuation of sales commissions paid by travel providers and
airlines. The result includes non-recurring items relating to
company arrangements and efficiency measures.
Through a business transaction completed at the end of June, Area
sold to Finland Travel Bureau (FTB) its operating points that
specialise in leisure travel. Area will focus on providing these
services via the internet and its telephone service as well as on
business travel. FTB will continue as a full-service travel
department store with the aid of its office network as well as
telephone and internet services. Business travel remains FTBs
main segment. FTBs city destination package tour production was
transferred to Aurinkomatkat-Suntours. As a result of the
arrangements, personnel numbers in the travel agencies were
reduced by around 70.
FTB, Area and Amadeus Finland have brought to the market a network
service with which customers can tailor for themselves a travel
package from the offerings of different service providers.
Flight Traffic Services and Products
Finnair is increasingly an airline engaged in traffic between
Europe and Asia, and nearly half of scheduled passenger traffic
revenue is linked to Asian traffic. From spring 2007, Finnair will
have a total of 59 flight connections per week to ten Asian
destinations. To China alone, the company will fly more than 100
flights per month.
Finnairs entire route network, which benefits from Helsinkis
ideal location on flight routes between Asia and Europe, has been
built particularly to serve this type of traffic. Flights covering
15 domestic and 40 European destinations connect into Finnairs
Asia network. At the same time, a wide selection of direct
connections are offered within Finland and from Finland to the
rest of Europe.
Growing passenger streams between Europe and Asia have created the
basis for opening new routes in Europe. The expansion of the
European network also provides an excellent service to Finnish
customers, who can utilise Finnairs morning-evening concept in
their European connections.
In spring 2007 Finnairs Asian route network will be revised so
that all destinations are served by direct flights, with no
intermediate stops. The objective is to fly daily to as many Asian
destinations as possible, so that business passengers are offered
as competitive a product as possible. Product improvement also
increases average revenues.
From spring 2007 the daily destinations will be Bangkok, Delhi,
Hong Kong, Osaka, Beijing and Shanghai. In addition, Finnair will
fly to Guangzhou in China and to Tokyo and Nagoya in Japan. In
December 2006 Finnair doubled its traffic to Tokyo from two to
four flights per week. A new destination, Mumbai in India, will
open in spring 2007 with five flights per week. As a consequence
of the rearrangement, the route from Bangkok to Singapore will be
discontinued and the planned opening of the Kuala Lumpur route
abandoned.
The type of aircraft used in long-haul traffic is mainly the wide-
bodied Boeing MD-11. The cabins of the wide-bodied fleet were
refurbished and new lie-flat seats were fitted in business class
at the beginning of 2006. Feedback from customers has been very
positive. In the summer, Finnairs first Airbus A340 wide-bodied
aircraft was taken into use. Finnairs business class has been
highly rated in many independent surveys, and especially the sale
of long-haul business class is growing strong.
A fleet consisting of aircraft of different sizes allows routes
and flights to be added to the route network flexibly as the
demand base varies. In Europe, five new destinations, serving
local demand as well as the needs of Asian traffic, were opened in
summer 2006. The new destinations are Edinburgh, Geneva, Kiev,
Krakow and Pisa/Florence. Flight frequencies on the St. Petersburg
and Warsaw routes were increased.
Routes to Bucharest, Gdansk, Ljubljana, Lisbon and Nuremberg will
be opened in 2007. In addition, the Madrid and Manchester flights
will fly direct, without an intermediate stop in Stockholm. The
changes mean that all European routes will be served by non-stop
flights.
Finnair Leisure Flights carries the customers of ten tour
operators to 66 holiday destinations in 33 countries. In addition,
flights only can be purchased on the internet to dozens of Leisure
Flights destinations, the latest addition being Phuket in
Thailand.
Leisure Flights fleet consists of seven Boeing 757 aircraft and
Airbus capacity leased from Scheduled Passenger Traffic. At the
beginning of 2007, Leisure Flights launched extra services that
customers can pay for. Before their trip, customers can order on
the internet a special meal or a more spacious seating place, for
example. Child passengers have their own meal service.
Future prospects
The success of Finnairs core business, international scheduled
passenger traffic, is based on the fastest connection between
Europe and Asia. For this reason, the companys investments are
focused on ensuring the growth of Asian traffic. Fleet
acquisitions in the coming years will be aimed at improving
competitiveness in long-haul traffic directed to Asia and in
European feeder traffic.
Finnair is developing more and more into an airline engaged in
Europe-Asia traffic. In 2007 Asian traffic capacity will grow by
30 per cent when two new Airbus A340 aircraft join Finnairs long-
haul fleet in the second quarter. Further standardisation of the
fleet will increase profitability.
The majority of passengers on Finnairs Asian flights connect to
the companys European network. Growth in Asian traffic is
therefore strongly reflected also in demand for European traffic,
which together with the more flexible use of capacity is improving
the passenger load factors of European flights.
In domestic and European traffic, competition for market share
will remain tight. Ticket prices are expected to remain at the
previous years level in domestic and European traffic, but to
rise in long-haul traffic. Overall, unit revenues in scheduled
passenger traffic are however falling, because the relative
proportion of long-haul traffic, characterised by lower unit
revenues, is growing.
Productivity improvements, cost savings and pruning of loss-making
operations will be sought through operational rationalisation and
restructuring. The competitiveness project initiated in Finnair
Technical Services is focusing particularly on the line
maintenance and aircraft heavy maintenance units. Of Technical
Services four units, the operations of these units are loss-
making. As far as ground handling services company Northport is
concerned, possible ownership or partnership arrangements are
under consideration.
Personnel will be added in the area of expanding flight
operations, while job numbers will be reduced in support
operations. It is essential for growth in Asian traffic to make
more efficient use of flight personnel and to attain a flexible
cost and operating structure in flight operations.
The profit impact of the 80 million euro restructuring programme
currently under way will be fully evident in 2008, but a large
proportion of the savings will also become apparent in 2007. If
the development of fuel prices remains stable, this will create a
basis for significant improvement in the operational result in
2007.
Board of Directors Proposal on the Dividend
The distributable equity of Finnair Plc amounts to 270.8
million euros. The Board of Directors proposes to the Annual
General Meeting that a dividend of 0.10 euros per share (0.25)
be distributed, a total of 8.9 million euros, and that the
remainder of the distributable equity be carried over as
retained earnings.
FINNAIR PLC
Board of Directors
Briefings
Finnair will hold briefings for media representatives (11 a.m.)
and analysts (12.30 p.m.) on 6 February 2006 at the address
Toimistotorni, Lentäjäntie 3 at Helsinki-Vantaa Airport. Further
information and registrations: Hanna-Kaisa Nurmi, tel. +358 9 818
4951 or hanna-kaisa.nurmi@finnair.com.
Finnair Plc
Communications
Christer Haglund
SVP, Communications
For further information, please contact:
SVP and CFO Lasse Heinonen
tel. +358 9 818 4950
lasse.heinonen@finnair.com
SVP Communications, Christer Haglund
tel. +358 9 818 4007
christer.haglund@finnair.com
Director, Investor Relations, Taneli Hassinen
tel. +358 9 818 4976
taneli.hassinen@finnair.com
http://www.finnair.com/investor
FINNAIR GROUP FINANCIAL STATEMENT FOR JANUARY 1 - DECEMBER 31,
2006
KEY FIGURES EUR mill.
2006 2005 Change 2006 2005 Change
1 Oct 1 Oct % 1 Jan 1 Jan %
31 31 Dec 31 Dec 31 Dec
Dec
Turnover 499.3 478.6 4.3 1 989.6 1 871.1 6.3
Profit before 27.9 45.1 -38.1 206.8 249.3 -17.0
depreciation
and lease
payments,
EBITDAR *
Lease payments 22.8 21.5 6.0 90.8 88.5 2.6
for aircraft
Operating -24.4 0.4 - 11.2 70.1 -84.0
profit, EBIT*
Fair value -1.4 -9.5 -85.3 -8.8 4.5 -
changes of
derivatives
Profit from 0.0 4.9 - 2.0 7.3 -72.6
disposal of
capital assets
Operating -25.8 -4.2 - -10.8 81.9 -
profit, EBIT
Profit for the -20.3 -2.9 - -13.6 61.4 -
financial year
(share
attributable
to
shareholders
of parent
company)
Operating -4,9 0,1 - 0,6 3,7 -
profit, EBIT,
% of turnover
*
EBITDAR, % of 5,6 9,4 - 10,4 13,3 -
turnover *
Unit revenues 74,6 73,9 0,9 74,0 73,7 0,4
of flight
operations
c/RTK
Unit costs of 46,8 48,3 -3,2 46,1 45,3 1,8
flight
operations
c/ATK
Earnings per -0,23 -0,03 - -0,16 0,73 -
share EUR
(basic)
Earnings per -0,23 -0,03 - -0,16 0,71 -
share EUR
(diluted)
Equity per 6,77 7,73 -12,4 6,77 7,73 -12,4
share EUR
Gross 57,1 18,6 - 252,2 57,5 -
investment EUR
mill.
Gross 11,4 3,9 - 12,7 3,1 -
investment, %
of turnover
Equity ratio % 37.2 42,2 -
Gearing % 6,7 -25,1 -
Adjusted 112,3 66,8 -
gearing %
Rolling 12- -0,1 11,1 -
month ROCE %
Rolling 12- -2,0 9,8 -
month ROE %
* Excluding capital gains, fair value changes of derivatives and
reorganization express.
Unit costs of flight operations c / ATK = Operating expenses
(excluding fair value changes of derivatives) of Scheduled Traffic
business area and Leisure Flights business unit / ATK of Group.
CALCULATION OF KEY RATIOS
Earnings / share:
Profit for the financial year/
Average number of shares at the end of the financial year adjusted
for share issues
Equity / share:
Shareholders' equity/
Number of shares at the end of the financial year
adjusted for share issues
Gearing %:
Net interest bearing liabilities*100/
Shareholders' equity + minority interest
Return on capital employed % (ROCE):
Profit before taxes + interest and other financial expenses *100/
Balance sheet total - non-interest-bearing liabilities (average)
Net interest-bearing liabilities:
Interest-bearing liabilities - interest-bearing assets - listed
shares
Equity ratio %:
Shareholders' equity + minority interest*100/
Balance sheet total - advances received
Return on equity %: (ROE)
Result before extraordinary items taxes*100/
Equity + minority interests (average)
Operating profit. EBIT = Operating profit excluding the disposal
of the capital assets and fair value changes of derivatives
Shareholders equity = To equity holders of the parent
The figures of financial statement have not been audited.
INCOME STATEMENT EUR mill.
2006 2005 Change 2006 2005 Change
1 Oct 1 Oct % 1 Jan 1 Jan %
31 Dec 31 Dec 31 Dec 31 Dec
Turnover 499.3 478.6 4.3 1 989.6 1 871.1 6.3
Work used for 1.7 6.3 -73.0 3.7 11.3 -67.3
own purposes
and
capitalized
Other 0.8 11.8 -93.2 17.9 31.8 -43.7
operating
income
Operating 501.8 496.7 1.0 2 011.2 1 914.2 5.1
income
Operating
expenses
Staff costs 131.6 134.6 -2.2 508.2 495.8 2.5
Fuel 99.8 84.2 18.5 385.0 292.7 31.5
Lease payment 22.8 21.5 6.0 90.8 88.5 2.6
for aircraft
Other rental 22.4 17.7 26.6 80.7 69.2 16.6
payments
Fleet 25.3 21.1 19.9 100.6 82.6 21.8
materials and
overhauls
Traffic 38.9 41.0 -5.1 161.9 159.1 1.8
charges
Ground 36.7 33.0 11.2 139.4 134.0 4.0
handling and
catering
expenses
Expenses for 30.5 28.0 8.9 111.5 102.0 9.3
tour
operations
Sales and 26.4 28.7 -8.0 91.3 95.5 -4.4
marketing
expenses
Depreciation 29.5 23.2 27.2 104.8 90.7 15.5
Other expenses 63.7 67.8 -6.0 247.8 222.2 11.5
Total 527.6 500.9 5.3 2 022.0 1 832.3 10.4
Operating -25.8 -4.2 - -10.8 81.9 -
profit EBIT
Financial 3.4 3.5 -2.9 11.0 20.1 -45.3
income
Financial -3.9 -1.8 116.7 -15.0 -14.6 2.7
expenses
Share of 0.0 0.1 - 0.1 0.1 -
result in
associates
Profit before -26.3 -2.4 - -14.7 87.5 -
taxes
Direct taxes 6.0 -0.8 - 1.7 -25.5 -
Profit for -20.3 -3.2 - -13.0 62.0 -
financial year
Earnings per -20.3 -2.9 -13.6 61.4
share to
shareholders
of the parent
company
Minority 0.0 -0.3 0.6 0.6
interest
Earnings per
share
calculated
from profit
attributable
to
shareholders
of the parent
company
Earnings per -0.23 -0.03 -0.16 0.73
share EUR
Earnings per -0.23 -0.03 -0.16 0.71
share EUR
(diluted)
BALANCE SHEET EUR mill.
31 December 31
2006 December
2005
ASSETS
Non-current assets
Intangible assets 47.5 44.6
Tangible assets 1 012.3 844.4
Investments in associates 2.9 3.1
Financial assets 15.4 17.7
Deferred tax receivables 27.1 17.5
Total 1 105.2 927.3
Short-term receivables
Inventories 38.5 45.1
Trade receivables and 211.8 247.6
other receivables
Investments 271.3 391.7
Cash and bank equivalents 25.7 26.7
Total 547.3 711.1
Non-current Assets held 7.6 0.0
for sale
Assets total 1 660.1 1 638.4
SHAREHOLDERS´ EQUITY AND
LIABILITIES
Capital and reserves
attributable to equity
holders of the parent
company
Shareholders´equity 75.4 73.8
Other equity 524.5 598.6
Total 599.9 672.4
Minority interest 1.6 1.6
Equity, total 601.5 674.0
Long-term liabilities
Deferred tax liability 115.7 125.8
Financial liabilities 286.9 214.9
Pension obligations 7.0 12.7
Total 409.6 353.4
Short-term liabilities
Current income tax 3.0 20.1
liabilities
Reserves 10.0 0.0
Financial liabilities 56.6 52.7
Trade payables and other 579.4 538.2
liabilities
Total 649.0 611.0
Liabilities total 1 058.6 964.4
Shareholders' equity and 1 660.1 1 638.4
liabilities, total
SHAREHOLDERS´EQUITY EUR mill.
Equity attributable to shareholders of parent company
Share New Share Bonus Hedgin Retai- Total Mino- Own
capi- issu pre- issue g ned rity equit
tal e mium reserv ear- inte- y
ac- e nings rests total
count
Share- 72.1 0.0 5.7 147.7 -9.9 359.5 575.1 1.2 576.3
holders´
equity
1.1.2005
New issue 0.0 0.0 0.0
shares
Dividend -8.5 -8.5 -0.2 -8.7
payment
Purchase -1.5 -1.5 -1.5
of own
shares
Sales of 0.2 0.2 0.2
own
shares
Optio 1.7 10.3 12.0 12.0
right to
shares
Optio 0.6 0.6 0.6
right to
shares,
share
issue
Share 2.3 2.3 2.3
premium
account
changes
Change in 30.8 30.8 30.8
fair
value of
hedging
instrumen
ts
Profit 61.4 61.4 0.6 62.0
for the
period
Share- 73.8 0.6 18.3 147.7 20.9 411.1 672.4 1.6 674.0
holders´
equity
31.12.200
5
SHAREHOLDERS´EQUITY EUR mill.
Equity attributable to shareholders of parent company
Share New Sha- Bonus Hed- Re-tai- Total Mino- Own
capi- issu re issue ging ned rity equit
tal e pre- re- ear- inte- y
mium serve nings rests total
ac-
count
Share- 73,8 0,6 18,3 147,7 20,9 411,1 672,4 1,6 674,0
holders´
equity
1.1.2006
Share -2,3 2,1 -0,2 -0,2
premium
account
changes
Translati 0,3 0,3 0,3
on
differenc
e
Purchase -0,6 -0,6 -0,2 -0,8
of
minority
interest
Dividend -21,8 -21,8 -0,4 -22,2
payment
Optio 1,6 -0,6 4,4 5,4 5,4
right to
shares
Change in -42,0 -42,0 -42,0
fair
value of
hedging
instrumen
ts
Profit -13,6 -13,6 0,6 -13,0
for the
period
Share- 75,4 0,0 20,4 147,7 -21,1 377,5 599,9 1,6 601,5
holders´
equity
31.12.200
6
CASH FLOW STATEMENT
EUR mill. 1 Jan 1 Jan
31 Dec 2006 31 Dec 2005
Cash flow from operating
activities
Profit for the financial -13.0 62.0
year
Operations for which a 100.2 91.7
payment is not included 1)
Interest and other 15.0 14.6
financial expenses
Interest income -9.1 0.0
Other financial income -1.8 -12.0
Dividend income -0.1 -0.3
Taxes -1.7 25.5
Changes in working
capital:
Change in trade and other 10.2 -18.5
receivables
Change in inventories 6.7 1.3
Change in accounts 13.4 33.5
payables and other
liabilities
Interest paid -11.0 -9.5
Paid financial expenses -3.4 -1.5
Received interest 9.9 0.0
Received financial income 1.6 7.0
Taxes paid -21.1 -2.0
Net cash flow from 95.8 191.8
operating activities
Cash flow from investing
activities
Sell of subsidiarys, net 0.0 3.5
of cash sold
Investments in intangible -12.6 -16.1
assets
Investments in tangible -273.0 -57.7
assets
Net change of financial 53.2 -30.2
interest bearing assets at
fair value through profit
and loss
Sales of tangible fixed 2.3 2.8
assets
Received dividens 0.1 0.3
Change in non-current 2.3 -2.6
receivable
Net cash flow from -227.7 -100.0
investing activities
Cash flow from financing
activities
Loan withdrawals and 108.3 11.0
changes
Loan repayments -25.9 -19.0
Purchase of own shares 0.0 -1.5
Sales own shares 0.0 0.2
Optio right to own shares 5.4 12.6
Share premium account 0.0 2.3
changes
Dividends paid -21.8 -8.5
Net cash flow from 66.0 -2.9
financing activities
Change in cash flows -65.9 88.9
Change in liquid funds
Liquid funds. at beginning 339.4 250.5
Change in cash flows -65.9 88.9
Liquit funds, in the end 273.5 339.4
EUR mill. 1 Jan 1 Jan
31 Dec 2006 31 Dec 2005
Notes to cash flow
statement
1) Operations for which a
payment is not included
Depreciation 104.8 90.7
Employee benefits -2.8 2.6
Finance leases -5.0 -4.9
Other adjustments 3.2 3.3
Total 100.2 91.7
Financial asset at fair 271.3 391.7
value
Cash and bank equivalents 25.7 26.7
Short-term cash and cash 297.0 418.4
equivalents in balance
sheet
Shares held to trading -5.6 -7.9
purposes
Maturing after more than 3 -17.9 -71.1
months
Total in cash flow 273.5 339.4
statement
SEGMENT INFORMATION
The business segments, Scheduled
Passenger Traffic, Leisure Traffic,
Aviation Services and Travel Services
are the primary reporting format. The
geographical segments, Finland, Europe,
Asia, North America and Others, make up
the secondary reporting format. Segment
information is based on the
corresponding information reported in
the financial statement.
PRIMARY REPORTING FORMAT - BUSINESS
SEGMENT DATA 1 January 31 December
2006
Schedul Leisu Aviati Travel Group Unallocat Group
ed re on Services eliminatio ed items
Passeng Traff Servic ns
er ic es
Traffic
EUR mill.
External 1 415.0 382.9 108.8 82.9 1 989.6
turnover
Internal 107.1 3.9 298.7 4.5 -414.2 0.0
turnover
Turnover 1 522.1 386.8 407.5 87.4 -414.2 0.0 1 989.6
Operating 28.6 18.4 -34.9 2.3 -25.2 -10.8
profit
Share of 0.1 0.1
results of
associated
undertakin
gs
Financial 11.0 11.0
income
Financial -15.0 -15.0
expenses
Income tax 1.7 1.7
Minority -0.6 -0.6
interest
Result for -13.6
the period
Other
items
Investment 216.3 0.7 32.3 1.4 0.0 1.5 252.2
s
Depreciati 71.8 0.2 28.3 1.6 0.0 2.9 104.8
on
PRIMARY REPORTING FORMAT - BUSINESS
SEGMENT DATA 1 January- 31 December
2005
Schedul Leisu Aviati Travel Group Unallocat Group
ed re on Services elimina ed items
Passeng Traff Servic tions
er ic es
Traffic
EUR mill.
External 1 296.9 383.7 104.2 86.3 1 871.1
turnover
Internal 111.0 3.6 296.7 4.9 -416.2 0.0
turnover
Turnover 1 407.9 387.3 400.9 91.2 -416.2 0.0 1 871.1
Operating 37.6 20.3 29.3 8.1 -13.4 81.9
profit
Share of 0.1 0.1
results of
associated
undertakin
gs
Financial 20.1 20.1
income
Financial -14.6 -14.6
expenses
Income tax -25.5 -25.5
Minority -0.6 -0.6
interest
Result for 61.4
the period
Other
items
Investment 26.8 0.1 27.8 0.9 0.0 1.9 57.5
s
Depreciati 62.5 0.2 23.7 1.6 0.0 2.7 90.7
on
TURNOVER
2006 2005 Chang 2006 2005 Change
e
1 Oct 1 Oct % 1 Jan 1 Jan %
31 Dec 31 Dec 31 Dec 31 Dec
EUR mill.
Scheduled 375.1 350.2 7.1 1 522.1 1 407.9 8.1
Passenger
Traffic
Leisure 104.3 107.4 -2.9 386.8 387.3 -0.1
Traffic
Aviation 106.2 104.5 1.6 407.5 400.9 1.6
Services
Travel 21.3 22.5 -5.3 87.4 91.2 -4.2
Services
Group -107.6 -106.0 1.5 -414.2 -416.2 -0.5
eliminations
Total 499.3 478.6 4.3 1 989.6 1 871.1 6.3
OPERATING PROFIT EXCLUDING GAINS ON
SALES OF FIXED ASSETS,
FAIR VALUE CHANGES OF DERIVATIVES AND
ARRANGEMENT EXPENSES
2006 2005 Change 2006 2005 Change
1 Oct 1 Oct % 1 Oct 1 Oct %
31 Dec 31 Dec 31 Dec 31 Dec
EUR mill.
Scheduled -8.9 -20.7 -57.0 28.6 34.3 -16.6
Passenger
Traffic
Leisure 3.5 4.5 -22.2 18.6 20.3 -8.4
Traffic
Aviation -15.1 1.8 -938.9 -24.5 25.5 -196.1
Services
Travel 0.1 2.9 -96.6 2.3 8.1 -71.6
Services
Unallocated -4.0 11.9 -133.6 -13.8 -18.1 -23.8
items
Total -24.4 0.4 - 11.2 70.1 -84.0
AVERAGE PERSONNEL
2006 2005 Change
1 Jan 1 Jan %
31 Dec 31 Dec
Scheduled 4 114 3 884 5.9
Passenger
Traffic
Leisure Traffic 343 336 2.1
Aviation 3 771 3 816 -1.2
Services
Travel Services 1 145 1 178 -2.8
Other functions 225 233 -3.4
Finnair Group 9 598 9 447 1.6
Total
SECONDARY REPORTING FORMAT -
GEOGRAPHICAL SEGMENTS
TURNOVER OUTSIDE THE GROUP BY SALES
DESTINATION
2006 2005 Change 2006 2005 Change
1 Oct 1 Oct % 1 Jan 1 Jan %
31 Dec 31 Dec 31 Dec 31 Dec
EUR
mill.
Finland 112.3 118.7 -5.4 436.7 475.3 -8.1
Europe 219.8 231.5 -5.1 936.5 916.7 2.2
Asia 134.9 106.2 27.0 482.0 361.0 33.5
North 13.6 12.0 13.3 66.4 65.7 1.1
America
Others 18.7 10.2 83.3 68.0 52.4 29.8
Total 499.3 478.6 4.3 1 989.6 1 871.1 6.3
AIR TRAFFIC 1 January 31 December
2006
Total Europe North Asia Domest Schedul Leisur Cargo
America ic ed e
traffi Traffic
c Total
Passengers 8 792 4 502 143 890 2 016 7 550 1 242
(1000)
%-change 3.2 7.4 -11.1 25.7 -2.5 6.0 -10.8
Cargo and 93 807 23 242 8 135 47 514 3 856 82 747 373 93 807
mail
(tonnes)
%-change 4.0 -9.7 2.9 19.4 -6.3 6.7 -6.4 4.0
Available 23 846 7 791 1 138 7 811 1 756 18 496 5 350
seat-
kilomet-
res mill
%-change 3.5 -0.6 -14.8 26.5 -8.3 7.2 -7.4
Revenue 17 923 5 259 943 6 045 998 13 225 4 678
passenger
kilometres
%-change 7.1 9.1 -13.5 27.3 -3.3 13.3 -7.2
Passenger 75.2 67.5 82.9 77.4 56.9 71.6 87.4
load
factor %
%-change 2.5 5.9 1.3 0.5 2.9 3.9 0.2
Available 3 602 918
tonne-
kilometres
%-change 5.9 26.4
Revenue 2 100 498
tonne-
kilometres
mill
%-change 8.2 11.5
Overall 58.3 54.3 *
load
factor %
%-change 1.2 -11.8
* Operational calculatory capacity
CONTINGENT LIABILITIES AND DERIVATIVE
CONTRACTS EUR mill.
31 Dec 31 Dec
2006 2005
Other contingent
liabilities
Pledges on own behalf 236.9 260.1
Guarantees on group 536.3 414.2
undertakings
Total 773.2 674.3
Aircraft lease obligations 389.8 490.9
Total 1 163.0 1 165.2
CONTINGENT LIABILITIES AND DERIVATIVE
CONTRACTS EUR mill.
Derivative contracts Nominal Fair value Nominal Fair value
value (EUR (EUR value (EUR (EUR mill.)
mill.) mill.) mill.)
31 Dec. 31 31 Dec. 2005 31 Dec. 2005
2006 Dec.2006
Currency derivatives
Hedge accounting
items
Forward contracts, 260.2 -8.2 168.5 9.4
Jet Fuel currency
hedging
Forward contracts, 324.7 -9.1 191.6 5.5
Hedging of Aircraft
purchace price
Forward contracts, 63.8 -1.9 55.2 2.8
Currency hedging of
lease payments
648.6 -19.2 415.3 17.7
Currency derivatives
at fair value
through profit or
loss
Operating cash flow 26.7 -1.3 107.5 4.7
hedging
Balance sheet 94.1 -0.6 117.9 1.3
hedging
Total 120.9 -2.0 225.4 6.0
Total, Currency 769.5 -21.2 640.7 23.7
derivatives
Nominal Fair value Nominal Fair value
value (tonnes) value (tonnes)
(tonnes) (tonnes
31 Dec. 31 31 Dec. 2005 31 Dec. 2005
2006 Dec.2006
Commodity
derivatives
Hedge accounting
items
Jet Fuel swaps 510 400 -12,8 351 800 11,6
Commodity
derivatives at fair
value through profit
or loss
Jet Fuel Forward 79 300 -5,1 71 700 -2,8
contracts
Jet differential 112 500 0,0 0 0,0
forward contracts
Options
Jet Fuel call 35 000 0,3 12 000 0,2
options
Jet Fuel put options 70 000 -0,5 12 000 -0,1
Gasoil call options 9 000 0,0
Gasoil put options 18 000 0,0
Total -18,2 8,9
Nominal Fair value Nominal Fair value
value (EUR (EUR value (EUR (EUR mill.)
mill.) mill.) mill.)
31 Dec. 31 31 Dec. 2005 31 Dec. 2005
2006 Dec.2006
Cross currency
Interest rate swaps
Interest rate
derivatives
Hedge accounting 42.5 -15.2 61.4 -14.2
items
Cross currency 22.1 -10.7 30.1 -9.6
interest rate swaps
at fair value
through profit or
loss
Total 64.7 -25.9 91.5 -23.8
Interest rate swaps
Hedge accounting 0.0 0.0 0.0 0.0
items
Interest rate swaps 20.0 1.0 20.0 0.4
at fair value
through profit or
loss
Total 20.0 1.0 20.0 0.4