q2 2015 en final - finnair/media/files/f/finnair-ir/documents/... · gross capital expenditure....

FinnairQ2 2015 Result

14 August 2015CEO Pekka Vauramo, Interim CFO Mika Stirkkinen

1 Finnair Q2 2015 Result, 14 August 2015

Market environment shows signs of improvement• There were signs of a recovery in the demand for consumer and business travel in all traffic

areas.

• Appreciation of several income currencies supported unit revenue improvement in long-haul traffic.

• The supply of packaged travel by tour operators active in Finland for the summer season 2015 has now been well-balanced with the demand.

• The appreciation of the dollar diluted the benefit gained from the substantial decrease in the price of jet fuel and increased other dollar-denominated costs.

• In cargo traffic, continued overcapacity between Asia and Europe put further downward pressure on yields.

• Finnair’s market share increased in European traffic and fell slightly in Asian traffic due to decreased capacity in Asian traffic.*

Finnair Q2 2015 Result, 14 August 20152

*Finnair’s estimate based on MIDT data collected on the sales volumes of travel agencies and Finnair’s estimates of airlines’ sales through their own sales channels, such as websites.

Revenue close to last years level, Operational EBIT improved significantly

• Revenue close to LY at 561 M€– Passenger revenue grew– Revenue from Cargo decreased– Loss of external revenue from sold operations

• Operational result-12.9 M€, +34.2%

• Currency increased both unit costs & revenues– Airline business unit revenue at constant currency

-1.9% – Unit cost excluding fuel, at constant currency

+0.7%

3

* Operational result (EBIT), excluding non-recurring items and changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves.

0

200

400

600

800 Revenue, M€

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8% Operational EBIT, %

Positive trend in passenger traffic revenue, revenue from cargo decreased


• Passenger traffic ticket revenue and ancillary sales grew y-o-y.

• Cargo revenue decreased, but profitability improved due to discontinuation of the cargo freighter flights.

• Other Group External revenue decreased after the sale of Travel Retail store operations and Finncatering businesses.

• Travel Services' revenue flat.

4

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

Q2 2014 Q2 2015

Passenger revenue Ancillary servicesCargo OtherTravel Services

565.7 M€ 561.0 M€

+4%

-23%-49%

+1%

+33%

4

Q2: Passenger unit revenues developed favourably in all traffic areas, overcapacity drags cargo marketdown

5

North America**

ASK 5.0 %

RPK 0.4 %

PLF -4.0 %-p

Revenue* 9.4 %

Europe

ASK 4.7 %

RPK 2.3 %

PLF -1.9 %-p

Revenue* 5.7 %

Total Traffic

ASK 0.4 %

RPK -0.1 %

PLF -0.4 %-p

Revenue* 4.6 %

Asia**

ASK -4.2 %

RPK -2.9 %

PLF 1.1 %-p

Revenue* 1.7 %

Domestic

ASK 7.6 %

RPK 9.7 %

PLF 1.3 %-p

Revenue* 11.2 %

Cargo***

ATK -10.7 %

RTK -19.2 %

OLF -5.9 %-p

Revenue -22.4 %

47%

40%

8%4%

Europe Asia

Domestic North America

Passenger Revenue Split


*Passenger revenue incl. leisure.**Atlantic / Siberian (Japan) Joint Business revenue contribution included.

***Discontinuation of freighter flights decreased revenue, but improved profitability

Nordic Regional Airlines ownership negotiations• On 31 March 2015, Norra was transferred to Finnair’s ownership on an interim

basis.

• Following the acquisition, Finnair has continued negotiations regarding the future ownership of Norra.

• Finnair expanded its contract flying agreement with Norra from 1 May 2015 onwards to cover all routes operated by Norra at its own commercial risk from Helsinki.

• The possible change in ownership will not have a significant financial impact on Finnair in 2015.


Outlook for 2015

• Finnair estimates that in 2015, its operational result is around break-even or slightly positive.

• Finnair reiterates its previous estimate that its capacity measured in Available Seat Kilometres will grow by approximately 3 per cent and that its revenue will remain approximately at the 2014 level. As a change to its previous estimate, the company now estimates, that its 2015 unit costs excluding fuel at constant currency will remain at the 2014 level.

• Finnair also reiterates as a separate guidance that, when calculated using the exchange rates effective at the end of the review period, the non-recurring items associated with the long haul fleet renewal in 2015 will have a substantial positive impact on Finnair’s operating result due to the strengthened US dollar.



Financials

Changes in the calculation method and reporting of unit revenues and - costs


9

6.05

Q1 RASKNew 2015

Fx effect

2. New constant currency calculation principle

5.93

RASK at constant currency

4.82

Q1 CASK ex. Fuel

New 2015

Fx effect

2. New constant currency calculation principle

4.66

CASK ex. Fuel at constant currency

5.81

Q1 RASK2014

Q1 CASK ex. Fuel

2014

1. Technical adjustments

FlyBe

Other adjustments

In flight 5.96

4.37

1. Technical adjustments

4.61

ChangesYoY

Q1 CASK ex. Fuel

New 2014

Q1 RASKNew 2014

FlyBe

In flightChanges

YoY

Other adjustments

Airline business: Q2 RASK & CASK development

1.9 %

-1.9 %3.0 %

4.8 %0.7 %

-1.0 %-1.8 %-5.1 %

14.2 %10.1 %

-4.3 %14.0 %

6.2 %

-10% -5% 0% 5% 10% 15% 20%

RASK, unit revenueRASK at constant currency

CASK, unit costCASK, excluding fuel

CASK, excluding fuel, at constant currencyFuel

Staff costsDepreciation & lease expenses

Traffic chargesGround handling

CateringMaintenance

Other expenses*

Change, %


• Unit cost excluding fuel, at constant currency +0.7%• Unit revenue at constant currency -1.9%

IncludingFx and hedging

* Including Group management- , IT-, sales and marketing expences and other rents (Norra)

Key figures Q22015

Q22014

Change %

Q1-Q2 2015

Q1-Q2 2014

Change%

Revenue and resultRevenue, EUR million 561.0 565.7 -0.8 1,101.4 1,109.0 -0.7Operational EBITDAR, EUR million 37.4 35.5 5.3 56.6 53.0 6.8Operational result, EBIT, EUR million -12.9 -19.6 34.2 -41.3 -53.9 23.3

Operational result, % of turnover -2.3 -3.5 1.2 %-p. -3.7 -4.9 1.1 %-p.Operating result, EBIT, EUR million -5.7 -26.3 78.4 -13.9 -54.7 74.5Result before taxes, EUR million -7.4 -31.0 76.0 -19.5 -64.9 69.9Net result, EUR million -6.0 -23.9 75.0 -15.8 -52.0 69.6Balance sheet and cash flowGross investment, EUR million 7.3 19.9 -63.1 19.8 53.0 -62.7Net cash flow from operating activities, EUR million 88.4 69.2 27.7 101.4 48.7 108.2ShareShare price at the end of quarter, EUR 2.76 2.84 -2.8Earnings per share from the result of the period, EUR * -0.05 -0.19 74.6 -0.12 -0.41 69.5Earnings per share, EUR -0.06 -0.20 68.6 -0.16 -0.44 64.2


Key Figures

* Before hybrid bond interest

Operational result, EBIT Q2 2014 vs. Q2 2015, M€


-19.6-12.9

10.5

-15.4

-1.6

-13.4

2.2

-7.410.4

24.2

-0.7-1.1-1.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

Segment results: Airline Business

Finnair Q1 2015 Result, 7 May 201513

83 %

9 %5 % 3 %

Airline Business revenue535 M€

Matkustajaliikenne Rahti

Lisämyynti Muut

• Segment profitability significantly improved y-o-y, result still at loss• Passenger revenue and ancillary sales grew significantly• Cargo share of segment revenue decreased mainly due to discontinuation of

dedicated cargo freighter flights, Cargo profitability improved

Key figures Q2 2015

Q2 2014

Change %

Q1-Q2 2015

Q1-Q2 2014

Change %

2014

Revenue and result

Revenue, EUR million 534.8 541.3 -1.2 1,045.6 1,049.4 -0.4 2,167.7

Operational result, EUR million -14.7 -20.8 29.3 -38.8 -55.3 29.8 -43.5

Operating result, EBIT, EUR million -7.2 -27.0 73.4 -11.0 -55.2 80.0 -78.4

Operating result, % of revenue -1.3 % -5.0 % -1.1 % -5.3 % -3.6 %

Personnel

Average number of employees 3949 4367 -9.6 3,963 4,450 -11.0 4,232

Segment result: Travel Services

Finnair Q1 2015 Result, 7 May 201514

• The revenue declined slightly y-o-y mainly due to adjustment of Suntours package tour supply.

• The profitability of Suntours improved after restructuring of operations. • The revenue of the business travel agency SMT was flat y-o-y and its operational

result showed a slight profit.

Key figures Q2 2015

Q2 2014

Change %

Q1-Q2 2015

Q1-Q2 2014

Change %

2014

Revenue and result

Revenue, EUR million 41.4 42.6 -2.7 102.7 116.8 -12.1 216.7

Operational result, EUR million 1.7 1.1 56.9 -2.5 1.4 <-200 % 7.0

Operating result, EBIT, EUR million 1.5 0.8 99.0 -2.9 0.5 <-200 % 5.9

Operating result, % of revenue 3.6 % 1.9 % -2.8 % 0.4 % 2.7 %

Personnel

Average number of employees 585 676 -13.5 587 690 -15.0 645

Operating costs 578 M€, -1.9% Fuel largest cost item


Change, %

-6.7 %

-8.6 %

24.7 %

4.9 %

3.3 %

-28.2 %

4.1 %

12.7 %

-3.7 %

1.3 %

-6.3 %

-1.9 %

-40% -20% 0% 20% 40%

Other costs

Sales and marketing

Leasing

Tour operations

Maintenance

Depreciation

Other rents

Traffic charges

Ground handling and catering

Staff

Fuel

Total

27%

15%

11%10%

10%

7%

5%

4%3%

4% 3%

Fuel Staff costsTraffic charges Ground handling and cateringOther costs Other rental paymentsMaintenance DepreciationTour operations LeasingSales and marketing

49%

43%

8%

EUR USD* Others

54%

18%

9%

8%

5%4% 2%

EUR Others JPY CNY SEK KRW USD

Currency Split, Q2

Sales currencies


Purchase currencies

Jet fuel spot price development


Jet fuel December 2009 – June 2015

USD appreciation and hedges diluted the benefit from fuel price decrease

• Q2 2014 hedging loss 4.5 Mill. Eur

• Q2 2015 hedging loss 31.3 Mill. Eur


166 156

8

27-77

32

0

20

40

60

80

100

120

140

160

180

200

Q2/2014 Volume Price Currency Hedging deviation Q2/2015

Q2 Comparable fuel cost, M€

-40

-20

0

20

40

60

80

100

120

2011 2012 2013 2014 H1 2015

Strong balance sheet

Equity ratio Gearing Adjusted gearing

%


-150

0

150

300

450

600

2011 2012 2013 2014 2Q 2015

Good Cash position

Net cash flow from operating activitiesGross capital expenditureCash and cash equivalents

M€

Net debt 167 M€ negative, Cash 532 M€

Rolling Hedging policy


Hedging positions as of 30 June 2015Hedging ratio for 2015: 66 %

• Finnair hedges jet fuel consumption 24 months ahead within the limits defined in the hedging policy.

• Finnair’s fuel purchases are 66% hedged for H2 2015 and 52% for H1 2016.

• The company protects itself against the risks of currency, interest rate and jet fuel positions by using different derivative instruments, such as forward contracts, swaps and options.

Thank you


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