Finnair GroupInterim Report

1 January – 30 September 2006

Industry faces challenges despite lower oil prices

• Lower oil prices pave the way for better profitability

• Competition remains tough in Nordic countries, but unprofitable routes already cut

• Two airlines have withdrawn from Finnish market

• Strong airlines invest in new aircraft with low fuel consumption

• New security procedures add costs

Weak third quarter

• Demand still strong• Record load factors • Increasing Business Class demand• Fuel expenses up 25 MEUR• Decreasing unit costs• Aviation Services and Leisure Traffic below

targets• FlyNordic´s operating result in profit

Restructuring programme well underway

• Planned restructuring programme to bring 80 MEUR annual cost benefits

• 670 jobs will be cut in 2006-2007• Emphasis on Finnair Technical Services and

support functions• Efficiency measures and flexibility also include

pilots and cabin staff, negotiations underway• Finnair Facilities Management to be outsourced• Owner- and partnership options are being

explored for Northport Oy and its subsidiaries

Operations systematically rationalised, Asian growth requires more personnel

Personnel

7 000

8 000

9 000

10 000

11 000

12 000

1999 2000 2001 2002 2003 2004 2005 Q32006

Personnel on average

Result pressed by fuel and support services

Q3/2006 Q3/2005 Change %

Turnover mill. € 515.4 479.7 7.4

EBITDAR 69.8 71.0 -1.7

EBIT excl. capital gains, fair values changes of derivatives, reorganization expenses, depreciation and rents 22.5 25.7 -12.5

Capital gains 0.1 0.6 -83.3

Fair value changes of derivatives -7.9 5.8 -

Operating profit/loss (EBIT) 14.7 32.1 -54.2 Profit after financial items 13.5 36.2 -62.7

Unit costs fell

* excluding fair value changes of derivatives ATK = Available Tonne Kilometre

Q3/2006 Q1-Q3/2006

Unit costs of flight operations* c/ATK -4,7% +3,6 %

Unit costs of flight operations excl. fuel* c/ATK -10,0% -2,3 %

Personnel expenses c/ATK -12,0% +2,8 %

Fuel costs c/ATK +15,5% +29,3 %

Traffic charges c/ATK -4,7% -1,5 %

Ground handling and catering €/passenger -2,0% -2,3 %

Sales and marketing €/passenger -10,9% -7,8 %

Aircraft lease payments and depreciation c/ATK -7,0% +0,2 %

Other costs c/ATK -10,0% -4,5 %

• 2003: 10.2% of turnover

• 2004: 12.5% of turnover

• 2005: 15.6% of turnover

• 2006: ~20% of turnover at current price level and planned traffic growth

Finnair scheduled traffic has hedged 62% of its fuel purchases for the next six months, thereafter for the following 30 months with a decreasing level. Finnair leisure flights hedged 78% of winter traffic programme’s consumption.

Fuel bill up with almost 80 MEUR

Jet Fuel derivatives still on a high level

Development of average flightand fuel price 2001 - 2006

6,00

7,00

8,00

9,00

10,00

11,00

12,00

2001 2002 2003 2004 2005 2006 Q1-Q3

Ave

rage

price

/ R

PK

200

250

300

350

400

450

500

550

600

€/to

nne

Finnair average priceFuel tonne price

-20

-15

-10

-5

0

5

10

15

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Yield (EUR/ RTK) Unit costs (EUR/ ATK)

Unit costs down 4.7%

Change YoY

%

2004 2005 200620032002

Most modern European fleet

• Average age of European fleet below four years• Boeing MD-80 aircraft retired from parent company

fleet in July• Popular new Embraer 170/190 aircraft increase

flexibility and load factors, decrease costs and are eco-efficient

• A total of ten new Embraer 170 in November, six new Embraer 190 next year, four options

• Eighth wide-body aircraft, Finnair’s first Airbus 340 took flight in July

• Two new Airbus A340 aircraft annually 2007-2008

Harmonised fleet

Embraer 170/190

Long haul- 12-18 aircraft- 250-314 seats

Airbus A340/A350

Mid haul- 29 aircraft- 126-181 seats

Airbus A319/A320/A321

Feeder traffic- 16 aircraft- 76-100 seats

Strong balance sheetEquity ratio and adjusted gearing

%

Group continues to have strong liquidity

Cash flow January-September

CASH FLOW STATEMENT (EUR mill.) 2006 2005

Cash flow from operations 23 123

Investments and sale of assets -149 -57

Cash flow from financing 73 -6

Change in liquid funds -53 60

Liquid funds at the beginning 339 250

Liquid funds at the end 286 310

Asian success continues

• Demand (Jan-Sept) grew 29,2 %, passenger numbers 28,5 %, load factor 1,6 %, cargo 22,4 %

• New route to Delhi opened in October. Next year Kuala Lumpur which is 11th Asian destination.

• Over 100 flights a month to China• Capacity will grow by 30% in last half of year

Share of Asian traffic growingScheduled traffic passenger and cargo revenues Q1-Q3/2006

Domestic13 %

Europe45 %

Asia37 %

America5 %

Finnair transformingto Europe-Asia traffic

• This year two new aircraft for long haul traffic• Competitive operating terms a necessity • 1-2 new Asian destinations per year, more

frequencies to existing destinations• New feeder lines in European network• Demand remains strong at a higher price level• Market share continues to increase, Finnair’s

Asian sales have, for example, increased by 70% in Sweden

Assesments for future development

• Impact of Flight Attendants´strike on Q4 is 10 MEUR• The 80 MEUR savings of the restructuring

programme mainly felt in 2007, fully evident in 2008• Fleet renewal continues • Flexible capacity => load factors improve• 2006 result expected to be in profit, but clearly

below previous year’s level• Unit costs development on track• Good conditions for a clearly more positive financial

performance next year

Appendices

-50

-40

-30

-20

-10

0

10

20

30

40

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

MEUR

2003

Weak quarter Change in EBIT per quarter

(Excluding capital gains, fair value changesof derivatives and reorganization expenses)

2004 20052002 2006

40

50

60

70

80

90

100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Yield (EUR/ RTK) Unit costs (EUR/ ATK)

Average yield and costs EUR c/RTK & EUR c/ATK

2004 2005 200620032002

Development of Group Business Areas

Excluding capital gains, fair value changes of Derivatives and reorganization expenses

  2006 2005

  Q3 Q3

MEUR    

Scheduled Passenger Traffic 20.3 20.1

Leisure Traffic 8.2 8.5

Aviation Services -4.4 7.9

Travel Services 1.0 1.9

Unallocated items -2.6 -12.7

Total 22.5 25.7

Investments and cash flowfrom operations

0

50

100

150

200

250

2002 2003 2004 2005 Q1-Q3 2006

Operational net cash flow Investments

MEUR

Aircraft operating lease liabilities Flexibility, costs, risk management

0

50

100

150

200

250

300

350

400

450

500

MEUR

2002 2003 2004 2005 Q3 2006

On 30 September all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 30 September 2006 would have been108,0%

ROE and ROCE Rolling 12 months

-6

-3

0

3

6

9

12

15

Q1

2002

Q2

2002

Q3

2002

Q4

2002

Q1

2003

Q2

2003

Q3

2003

Q4

2003

Q1

2004

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Q2

2006

Q3

2006

ROE ROCE

%

Finnair Group Business Units

SCHEDULED PASSENGER TRAFFIC

Finnair Scheduled Passenger Traffic

Finnair Cargo

Aero

FlyNordic

Finnair Aircraft Finance

LEISURE

Finnair Leisure Flights

Suntours Ltd

AVIATION SERVICES

Finnair Technical Services

Northport – ground handling

Finnair Catering

Finncatering

Finnair Facilities Management

TRAVEL SERVICES

Finland Travel Bureau

Area

Estravel

Amadeus Finland

FINNAIR GROUP

Airline structure

• Finnair Scheduled Passenger Traffic• Long-haul traffic • European traffic• Domestic trunk routes

• Finnair Leisure Flights• Mediterranean, Asia, North and South America

• Aero• Feeder traffic operator based in Tallinn, Estonia• The Baltics and Southern Finland

• FlyNordic• Low cost operator based in Stockholm • Scandinavia and elsewhere in Europe

Superiority of product• Direct to 50 international destinations

– No time-consuming transfers at crowded airports

• Best schedules– Morning-evening concept

• Most punctual in Europe with least cancellations

• Top class service in Europe• oneworld – alliance with best quality and

coverage• New aircraft in European traffic

Finnair Financial Targets”Sustainable value creation”

Operating profit (EBIT)

EBIT margin at least 6% => 110-120 mill. € in the coming few years

EBITDAR EBITDAR margin at least 17% => over 300 mill. € in the coming few years

Economic profit To create positive value over pretax WACC of 8%

Pay out ratio Minimum one third of the EPS

Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 %

Finnair’s Financial Targets Description of targets

Operating profit (EBIT)

Turnover + other operating revenues – operating costs

EBITDAR Result before depreciation, aircraft lease payments and capital gains

Economic profit Operating profit EBIT – Weighted Average Cost of Capital

Adjusted Gearing (Interest bearing debt + 7*Aircraft lease payments – liquid funds) / (Equity + minority interests)

Pay out ratio Dividend per share / Earnings per share

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