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1 31/10/2008 Presentation name / Author

Finnair GroupInterim Report1 January – 30 September 2008


Airline industry at a historical turning point

Expensive fuel price in the beginning of 2008 has dramatical effect on the operational result, benefit of cheaper fuel comes later Average ticket prices have not kept up with costsDepression atmosphere weakens demand of air trafficFinance sources have been closed for many airlinesOver 30 airlines already under bankruptcy, more bankruptcies expected during the winter


Expensive fuel and low ticket pricelevel spoiled the result

Finnair’s operational result clearly weakened from last yearLoad factors above last year, demand still positiveFinnair market share in Asian traffic increasedPrice level of scheduled passenger traffic droppedwith 4 per centFuel costs went up by 35.8 per centUnit costs exclusive fuel dropped with 3,4 per cent50 million euro efficiency programme partly fulfilled,25 million euro savings with lay-offs and redundanciesStatutory employer-employee negotiations going onPunctuality among the best airlines in Europe


Third quarter clearly weaker than previous year

Q3/2008 Q3/2007 Change%

2.7

-38.6

-92.9

-

-

-

-

Turnover mill. € 559.7 545.2

One off items/ capital gains -1.5 17.3

Fair value changes of derivatives -26.1 3.4

Operating profit/loss (EBIT) -24.8 59.9

Profit for period -17.3 39.6

Adjusted EBITDAR* 54.0 88.0

Adjusted EBIT* 2.8 39.2

*excl. capital gains, fair values changes of derivatives and non recurring items


Strong cash balance, weakened cash flow

Cash flow statement (EUR mill.) Q1-Q3/2008 Q1-Q3/2007

Cash flow from operations 70 169

Liquid funds at the beginning 540 294

Change in liquid funds -166 -37

Investments and sale of assets -152 -238Investments -220 -264Change of advances and others 68 26

Cash flow from financing -84 32

Liquid funds at the end with financial interestbearing assets at fair value* 374 257

Cash flow January-September

*In addition, agreed credit facilities of 310 MEUR, and 250 MEUR from EIB requiring a bank guarantee


Strong balance sheet

0

20

40

60

80

100

120

2002 2003 2004 2005 2006 2007 Q3 2008

Equity ratio Adjusted Gearing%


Unit costs arised

Q3/08 Q1-Q3/08

Unit costs of flight operations* c/ATK 4,8% -1,7 %Unit costs of flight operations excl. fuel* c/ATK

-3,4% -9,2 %

Personnel expenses c/ATK -6,9% -7,7 %Fuel costs c/ATK +27,5% +21,4 %Traffic charges c/ATK -0,9% -6,5 %Ground handling and catering €/passenger

+5,8% +13,8 %

Sales and marketing €/passenger +27,8% +25,6 %Aircraft lease payments and depreciation c/ATK

-13,8% -14,8 %

Other costs c/ATK -4,6% -14,7 %* excluding fair value changes of derivatives and non-recurring itemsATK = Available Tonne Kilometre


Unit costs increased more than yield

Change YoY

-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 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

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

2004 2005 200620032002 2007 2008


Development of fuel costs and average ticket prices in scheduled traffic 2002–2008

7,00

7,50

8,00

8,50

9,00

9,50

10,00

10,50

11,00

11,50

12,00

2002 2003 2004 2005 2006 2007 2008e

euro

cent

/RPK

200

300

400

500

600

700

800

€/fu

el to

nne

Average revenue per RPKFuel per tonne

Fuel and ticket priceson separate paths


Number of staff stable

0

2000

4000

6000

8000

10000

12000

14000

1999 2000 2001 2002 2003 2004 2005 2006 2007 Q3 2008

Personnel on averagePersonnel


Efficiency programme under way

Over half of 50 million euro efficiency programmeunder way or fulfilledResult effects will take place next yearPersonnel cut savings approx. 25 million euroMain efficiency improvement areas:• Capacity adjustment/ discontinuing unprofitable

flights– Discontinuing flights to Guangzhou– 3 Embraer 170 aircraft away from traffic as of January– Effect on staff and variable costs

• Partners’ pricing and deepening of cooperation• Fuel burn / flight procedures• Support functions and business unit interfaces


Growth in Asian traffic continues

Seoul launched as new destination in June

Asian demand grew 17.4% in January-September, cargo loads by 25.0%

60 flights a week to Asian destinations

Non-stop flights to 10 destinations

India up to 13 flights per week

Guangzhou discontinued

Zero growth in 2009 due to the fleet renewal


42%

43%

4% 11%

Aasia-Eurooppa

Via Helsinki>50 %

More revenues from Asian trafficDistribution of passenger and cargo revenues in scheduled traffic

Asia USDomestic Europe

Asia-Europegateway

>50%


Future price of fuel still high


Fuel costs 2007 vs. 2008 January-September

Fuel hedging outside hedging calculations: Q1-Q3/Y2007 -2 MEUR ja Q1-Q3/Y2008 +21 MEUR

324

436

41

187 -52

-53-11

0

100

200

300

400

500

600

Q1-Q3/2007 Volume Price Flynordic Currency Hedging Q1-Q3/2008


Fuel costs clearly over a quarter of turnover

2003: 10.2% of turnover2004: 12.5% of turnover2005: 15.6% of turnover2006: 19.4% of turnover2007: 20,2% of turnover2008: ~26% of turnover

Finnair scheduled traffic has hedged 76% of its fuel purchases for the next six months, thereafter for the following 24 months at a decreasing level.


Fuel hedging rates (Scheduled Passenger Traffic, 30 September 2008)

73%79%

0%

20%

40%

60%

80%

100%

2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4

hedge ratio

upper

lower


In 2007-14 a fleet of maximum 15 Airbus A330/A340 aircraft• Five new Airbus A330 planes arrive in 2009• Boeing MD-11 fleet will be phased out in early 2010

In 2014-16 a fleet of maximum 15 new technology Airbus A350XWB aircraft

Fleet renewal safeguarded

Fuel consumption and emission index*

Boeing MD-11

Airbus A340

Airbus A330

Airbus A350

100 89 80 69*) Per seat


Investment program6 E170 purchases1* E190 purchase1 A340 purchase

2006

5* E190 purchases2 A340 purchases

2007

2 A340 firm orders2* E190 firm orders

2008

5 A330 firm orders2 E190 firm orders

2009

3 A330 firm orders (+ two options)2010

*) Total number of four E190 sale and lease backs after a short period of ownership

Total capex of €250m in 2008 and over €400m in 2009


Future prospects

Demand and price level will be challengingBenefits of lower fuel prices with delayMinimum level of 50 million euro savingsPilots’ collective agreement under negotiationsCapacity scheduled passenger traffic in Q4 will be eightper cent lower than originally plannedCapacity will be dropped with 1-2 per cent in 2009Renewal of fleet for long-haul flightsOperating result is expected to be negative for lastquarter at current expections


Appendices


Quarterly change in profitability

-50

-40

-30

-20

-10

0

10

20

30

40

50

60


MEUR

2003 2004 20052002 2006 2007

Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and non recurring items)

2008


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

0

20

40

60

80

100

120


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

2004 2005 200620032002 2007 2008


Segment results

2008 2007Q3 Q3

MEUR

Leisure Traffic 6.0 7.8

Total 2.8 39.2

Scheduled Passenger Traffic -4.0 28.8

Aviation Services 1.9 2.7Travel Services 1.3 1.3Unallocated items -2.4 -1.4

Excluding capital gains, fair value changes of derivatives and non restructuring items


Segment results

2008 2007Q1-Q3 Q1-Q3

MEUR

Leisure Traffic 14.6 14.5

Total 19.1 72.2

Scheduled Passenger Traffic -2.5 56.2

Aviation Services 8.8 7.3Travel Services 3.1 3.8Unallocated items -4.9 -9.6

Excluding capital gains, fair value changes of derivatives and non restructuring items


ROE and ROCERolling 12 months

-4

-2

0

2

4

6

8

10

12

14

16

Q1 20

02Q2

2002

Q3 20

02Q4

2002

Q1 20

03Q2

2003

Q3 20

03Q4

2003

Q1 20

04Q2

2004

Q3 20

04Q4

2004

Q1 20

05Q2

2005

Q3 20

05Q4

2005

Q1 20

06Q2

2006

Q3 20

06Q4

2006

Q1 20

07Q2

2007

Q3 20

07Q4

2007

Q1 20

08Q2

2008

Q3 20

08

% ROE ROCE


Most modern European fleet

Average age of Finnair’s European fleet approximatelyfive years29 Airbus A320 family aircraftTen smaller Embraer 170 aircraft and eight larger 190 model aircraft already in the fleet, three more arrivingin 2009-2011New aircraft have increased flexibility, improved loadfactors, reduced costs and are eco-efficient


Investments and cash flowfrom operations

0

50

100

150

200

250

300

350

2002 2003 2004 2005 2006 2007 Q1-Q3 2008

Operational net cash flow InvestmentsMEUR


Aircraft operating lease liabilities

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 2007 Q3 2008

MEUR Flexibility, costs, risk management

On 30 September all leases were operating leases. If capitalised usingthe common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 30 September 2008 would have been51,1%


Finnair Financial Targets

”Sustainable value creation”

Operatingprofit (EBIT)

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

EBITDAREBITDAR margin at least 17% => over 350 mill. € in the coming few years

Economicprofit

Pay out ratio Minimum one third of the EPS

AdjustedGearing

Gearing adjusted for aircraft lease liabilities not to exceed 140 %

To create positive value over pretax WACC of 9,5%


Finnair’s Financial Targets

Description of targets

Operatingprofit (EBIT)

EBITDAR

Economicprofit

Pay out ratio

AdjustedGearing

Turnover + other operating revenues – operating costs

Result before depreciation, aircraft lease paymentsand capital gains

Operating profit EBIT – Weighted Average Cost of Capital

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

Dividend per share / Earnings per share


www.finnair.comFinnair Group Investor Relationsemail: [email protected]

tel: +358-9-818 4951fax: +358-9-818 4092

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