FINNAIR

Q2 2017

RESULT

20 JULY 2017

PEKKA VAURAMO,

CEO

PEKKA VÄHÄHYYPPÄ,

CFO

All-time best Q2 result

• We moved into accelerated growth;

A350 fleet has now 10 aircraft

• Quarterly record in the number of passengers;

strong growth in load factor

• New destinations and frequencies performed well

• Solid growth in ancillary revenue;

Alipay on all Chinese routes boosts ancillary sales

• Finnair Cargo grows

• NPS rose to 48 (Q1: 46)

• Finnair rated again as the best Northern European

airline in the Skytrax review

2

• Finnair named as the best European airline in the TTG China Travel Awards

• Finnair Kitchen: catering reclaimed by Finnair

• We expect our full-year comparable operating result to broadly double

Eleventh result improvement in a row

• Strong revenue growth in all businesses:

passenger traffic, ancillary and retail

sales, cargo and travel services.

• Number of passengers grew 10.5%;

we flew with fuller planes as load factor

improved by 6.3%

• Ancillary and retail sales per passenger

grew by 8.2% and was 11.8 euros/pax

• Q2 comparable operating result 37.5 M€

-11th consecutive y-o-y improvement (3.2

M€ Q2/16)

3

Comparable operating result,

rolling 12 months by quarter

0

20

40

60

80

-20

-40

100

37

24

FY

15

Q3

15

6155

Q3

16

FY

16

5453

Q1

17

Q2

16

Q1

16

Q2

17

-36

96

Q1

15

-24

Q2

15

14

-31

FY

14

Comparable revenue*

Comparable operating result

grew over tenfold y-o-y

Capacity and traffic

4

Q2: Growth brings results

Comparable operating result

+12%

565

Q2 2017

633

Q2 2016

Passenger revenue +11.1%

Ancillary and retail revenue +19.6%

Travel services +12.9%

Cargo +16.1%

3

Q2 2017

1,091%

Q2 2016

38

3,0

1,0

2,5

2,0

3,5

1,5

6.000

4.000

0,52.000

0,0

10.000

8.000

0

7%

6.591

Q2 2017

9.0958.513

7.616

Q2 2016

Capcity (ASK) + 6.8%

Passengers +10.5%

Traffic (RPK) +15.5%

Pax, mill.ASK, mill.

PLF

77.4%PLF

83.7%

* Excluding SMT

Revenue, M€

• Asia +20.6%

• North Atlantic +4.3%

• Europe +14.8%

• Domestic +1.4%*

Passenger load factor, %

5

Q2: Asia and Europe driving growth

• Asia +9.8% -p

• North Atlantic +6.4% -p

• Europe +2.9% -p

• Domestic -0.9% -p*

• Total +6.3% -p

Capacity (ASK), mill. km

• Asia +6.1%

• North Atlantic -3.7%

• Europe 10.5%

• Domestic +0.6%*

300

250

100

200

0

50

150

Domestic

41

Europe

288

4233

Asia

213

251

34

North

Atlantic

256

Q2 2017Q2 2016

4.0704.317

672

Asia

647

Domestic

359357

3.772

North

Atlantic

Europe

3.414

77

67

797976

84

66

828586

North

Atlantic

Asia Europe TotalDomestic

* Domestic flying restricted by runway renewal at Oulu

We develop our customer experience

• Outstanding customer satisfaction in Q2:

Net Promoter Score 48

• New leisure product: Finnair Holidays enables

easy and fast to tailor your dream holiday

• Wi-Fi now on board of the entire long-haul fleet,

installations to narrow body fleet will begin later

this year.

• The mobile application and Finnair.com growing

in popularity and increasing sales;

• Ticket sales in Finnair's digital channels grew

by 16% and ancillary and retail sales were up

23% from the comparison period.

8Mobile app and Finnair.com users in June 2017

New records in

digital channels:

Mobile app had

160,000 active users*,

(+ 79%)

Finnair.com 2.5 million

visitors / month*

(+31%)

Strategy 2018−2020

The growth plan and the four previous

focus areas were reviewed and

confirmed:

• Growth

• Customer experience

• People experience

• Transformation

• Doubling of Asian traffic in 2018

versus 2010

• Doubling of ancillary revenues in 2020

versus 2016

• New target for the number of

passengers, 20 million in 2030

7

Financial targets unchanged:

• EBIT margin 6% over cycle

• EBITDAR margin minimum of

17% over cycle

• Adjusted gearing maximum of

175%

• Return on capital employed

(ROCE) minimum of 7%

Outlook for 2017

The demand outlook for passenger and cargo traffic in

Finnair’s main markets continues to involve uncertainty.

Finnair reiterates its previous estimate that, in 2017, due to

the fleet renewal and introduction of new aircraft, its

capacity will grow 8–10 per cent, weighted strongly

towards the second half of 2017. Full-year revenue is

expected to grow approximately in line with capacity.

At current fuel prices and exchange rates, Finnair expects

its comparable operating result for 2017 to broadly double

year-on-year (2016: 55 million euro)

8

9

Finance

Q2 was 11th quarter of year-on-year profitability improvement in a row

• Capacity grew by 6.8%: More frequencies to Asian traffic (Tokyo, Hong Kong and Fukuoka) in addition to 3 new

A350’s replacing smaller aircraft. Europe increase reflecting seasonal summer route openings and four new A321

narrow-body aircraft. Own fleet capacity increased ca. +7%, whereas wet-leased decreased substantially.

• Strong growth especially in passenger revenue, with strong load factor development despite significant capacity

increase.

• Increased capacity and positive market drove increase in Cargo revenue. Decrease in Travel agency revenue is

explained by sale of SMT in 2016.

• Staff costs increase is driven by Finnair Kitchen integration and new recruitments. LSG costs were previously

booked solely in catering costs, Finnair Kitchen costs are now split between staff, catering and other expenses in

the P&L.

• Fuel costs decrease due to lower hedge-weighted price than in comparison period and increased fuel efficiency.

• Maintenance costs increase is driven by fleet growth in line with the maintenance program.

• Lease costs increased due to more leased A350 and A320 series aircraft.

• Depreciations increased due to fleet renewal from A340 to A350.

EBIT

Q2

37.5

Depreciation

-8.3

Fuel

-4.2-12.1

+34.3

Other

(NET)

11.9

LeasesStaff

Travel agency -4.4

Revenue

-13.9

63.8

-2.9

Maintenance

Travel services 4.4

Passenger 50.9

Cargo 6.9

EBIT

Q2 PY

Ancillary & retail 5.9

3.2

28,251

PY CY

+2.7%

29,001

PY

8,513

CY

9,095

+6.8%

PY

3,070

2,779

+10.5%

CY

RASK

166

EUR /

PAX

165

EUR /

PAX

PY

+0.6%

CY

+6.3pp

CY

83.7

PY

77.4

10.9

EUR /

PAX

PY CY

+8.2%

11.8

EUR /

PAX

6.96

6.69

PY

+4.1%

CY

38.0

KG

+6.0%

CY

40.3

KG

PYCY

+9.6%

1.12

EUR /

KG

1.23

EUR /

KG

PY

FLIGHTS ASK, mill

PAX, 1000 Avg. fare2 PLF, %

Ancillary REV Cargo, mill Cargo yield

2) Avg. fare = Passenger revenue per revenue passengers

Q2 2017 Passenger revenue vs. Q2 2016 Q2 2017 Other revenue items vs.

Q2 2016, excluding SMT

11

Revenue grew on the back of improved load factors and solid performance in Asian and European traffic

Total ASK (%) PLF (pp) Yield1 (%)

Δ to PY 6.8% 6.3 -3.8%

Q2 83.7%

Q2 PY 77.4%

Δ to PY FEA ATA EUR DOM

ASK (%) 6.1% -3.7% 10.5% 0.6%

PLF (pp) 9.8 6.4 2.9 -0.9

Yield1 (%) 1.5% -0.0% -1.0% 2.3%

RASK (%) 14.5% 8.1% 2.5% 1.0%

Q2Yield,

mix,

other

-11.3

509.2

FXQ2 PY

-0.3

ASK

31.1

31.5

458.3

PLF

(load)

+50.9

Q2

-15.3

Europe Unallo-

cated

27.1

1.2

Atlantic

+50.9

Domestic

458.3

509.2

0.6

37.3

AsiaQ2 PY

36.2

38.5

Travel

services

124.1

Q2

+17.2

49.4

5.9

Q2 PY

34.1

42.6

106.9

Ancillary

30.3

4.4

6.9

Cargo

Travel servicesCargoAncillary

1 Revenue per RPK

Balace Sheet: New A350 investments increased assets

12

857.0

80.7

30 Jun 2017 30 Jun 2016

Liab HFS

7.0

2,517.6

514.2

438.2

31 Dec 2016

2,528.7

580.4

744.9

348.5

732.6

25.2

717.7

30 Jun 2016

Cash

979.7

Other curr

assets

517.5

2,517.6 Other

liabilities

538.5109.2

386.3

881.6

100.3

Derivatives 65.1

1,040.2

Derivatives 22.3

2,753.5

31 Dec 2016

Unflown

tickets

518.0

Interest-

bearing debt

775.0

30 Jun 2017

Fleet

1,203.1

176.6

1,048.7

2,753.5

366.8

Assets HFS

30.8

139.3

Equity

856.7

2,528.7

797.3

Composition of adjusted net debt

0

-1.000

-1.200

-600

-1.800

-200

-1.600

-800

-400

-1.400

Adjusted

net debt

-635

7x aircraft

leases +

currency

hedges Cash

-833980

Adjusted

interest-

bearing

liabilities

-781

Strong cash flow from operating activities with improved profitability and sales growth – liquid funds grew to almost €1 billion

13

979.7

534.5

Liquid funds+182.4 M€

31 Dec 2016

328.1797.3

378.4

30 June 2017

651.6

60.0117.1

418.9

318.4

Cash in cash flow

Commercial paper, deposits and funds < 3 months

Cash and bank deposits

Commercial paper, deposits and funds > 3 months

Investing+8.6M€

Oth

er

94.7

199.3

Dis

posa

ls

651.6

Div

idend p

aid

Loan p

aym

ents

-12.8

155.6

Q1-Q

2 2

017

Inve

stm

ents

-241.7

-107.9

Oth

er

-38.4

Work

ing c

apita

l

85.8

EB

ITD

A

Change in cash flows+273.2 M€

Operating+186.1M€

Financing+78.6 M€

Cash

Q2

Loan p

roce

eds

378.4 138.6

Cash

2016

Change in cash flows+0.9 M€

119.5-12.0

Operating+162.2M€

Q2 2

017

Cash

Q1

651.6

650.8

Cash

Q2

-37.6

-199.7

Investing-136.5M€

-12.8155.2

-92.0

0.0

Financing-24.8 M€

80.3

New aircraft deliveries

• Capacity growth to accelerate in Q3 with new aircraft

deliveries:

• 10th A350 delivered in June, one more to be

delivered during 2017

• Four A321 aircraft delivered in H1, three more to

be delivered during 2017

• Aircraft returns: the last remaining A340 aircraft to

be sold back and returned to Airbus during 2017

Net investment commitments 442 M€ 2017-2019

0

50

100

150

200

250

300

350

Q3-Q4

2017

2018 2019 2020 2021 2022 2023

A350+ spare engine + other commitments Planned Investments

Net investments (divestments) SLB + other divestments

14

Capacity growth picked up in Q2 with new aircraft deliveries, growth to accelerate in Q3

*2017 new deliveries in total: 4 * A350s and 7 * A321s

THANK

YOU

Contact us:

Finnair IR / financial

communications

ilkka.korhonen@finnair.com

Income statement

in mill. EUR Q2

2017

Q2

2016

Change

%

H1

2017

H1

2016

Change

%

2016

Revenue 633.4 569.6 11.2 1,187.7 1,106.0 7.4 2,316.8

Other operating income 18.8 17.9 5.1 39.0 40.0 -2.4 75.5

Operating expenses

Staff costs -106.9 -93.0 14.9 -197.4 -184.8 6.8 -362.5

Fuel costs -114.4 -126.4 -9.4 -226.0 -247.9 -8.9 -491.5

Other rents -38.7 -37.2 4.0 -83.0 -79.2 4.8 -167.4

Aircraft materials and overhaul -49.7 -37.6 32.1 -85.3 -74.2 14.9 -147.3

Traffic charges -68.5 -66.4 3.2 -126.7 -127.4 -0.6 -262.8

Ground handling and catering

expenses -59.8 -62.3 -3.9 -126.7 -127.4 -0.5 -258.9

Expenses for tour operations -17.9 -15.6 14.7 -46.4 -42.4 9.5 -87.8

Sales and marketing expenses -21.9 -20.1 9.0 -39.4 -38.2 3.2 -76.9

Other expenses -71.3 -72.8 -2.1 -142.5 -131.6 8.2 -266.6

Comparable EBITDAR 103.2 56.3 83.3 153.3 92.7 65.4 270.4

Lease payments for aircraft -35.2 -26.9 31.0 -65.3 -55.7 17.2 -109.5

Depreciation and impairment -30.4 -26.2 15.9 -59.5 -49.1 21.1 -105.8

Comparable operating result 37.5 3.2 > 200 % 28.5 -12.2 > 200 % 55.216

Revenue Comparable operating result

17

Revenue and comparable operating result development

0

600550

650

150

50

350

250

400

200

100

500

300

450

Q4

544

Q2

570622

570633

521554536

Q3

568641

Q1

2016 20172015

10

40

50

-20

20

0

70

30

60

-10

-30

21

6664

Q4Q3

-9

Q2

-13

3

-15

Q1

-28

38

20162015 2017

• Q2/16 hedging loss 33 M€

• Q2/17 hedging loss 1.7 M€

18

Fuel costs decreased despite spot price increaseImproved fuel efficiency with fleet renewal and aircraft up gauging

126115

5

-31

122

0

20

40

60

80

100

120

140

160

2016Q2 Volume Price Currency Hedging

deviation

2017Q2

mEUR

% share of operating costs (1,198 Mill. € in H1) Fuel hedges as at 30 June 2017

19

Fuel the single largest cost item in H1

18,9 %

17,5 %

16,5 %11,9 %

10,6 %

10,6 %

6,9 %3,9 %

3,3 %Fuel

Leasing, maintenance,depreciation & impairment

Staff

Other costs

Groundhandling & catering

Traffic charges

Other rents

Tour operations

Sales & marketing

Hedging, currencies and sensitivities

Fuel sensitivities 10% change Hedging ratio

(rolling 12 months from date

of financial statements)

without

hedgingwith hedging H2/2017 H1/2018

FuelEUR 42

million

EUR 20

million76 % 61 %

Currency distribution Q2 H1 Currency sensitivities Hedging ratio for

operational cash

flows % 2017 2017 2016 USD and JPY

(rolling 12 months from date of financial

statements for operational cash flows)

(rolling 12 months from

date of financial

statements)

Sales currencies10% change without

hedging

10% change with

hedging

EUR 54 58 56 - -

USD* 4 4 4 see below see below see below

JPY 10 8 9 EUR 19 mill. EUR 9 mill. 67 %

CNY 7 6 7 - -

KRW 4 3 3 - -

SEK 4 5 5 - -

Other 17 16 16 - -

Purchase currencies

EUR 57 57 54 - -

USD* 36 36 38 EUR 51 mill. EUR 16 mill. 71 %

Other 7 7 8

20

* Hedging ratio for USD basket. The sensitivity analysis assumes that the Chinese yuan and the Hong Kong dollar continue to correlate strongly with the US dollar.