Finnair Q2 2015 Result 14 August 2015 CEO Pekka Vauramo, Interim CFO Mika Stirkkinen 1
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. 2 Finnair s market share increased in European traffic and fell slightly in Asian traffic due to decreased capacity in Asian traffic.* *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% 800 Revenue, M 600 400 200 0 8% Operational EBIT, % 6% 4% 2% 0% -2% 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. -4% -6% -8%
Positive trend in passenger traffic revenue, revenue from cargo decreased 600,000,000 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 0 565.7 M 561.0 M +1% -49% -23% +33% +4% Q2 2014 Q2 2015 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 Passenger revenue Cargo Travel Services Ancillary services Other
Q2: Passenger unit revenues developed favourably in all traffic areas, overcapacity drags cargo market down North America** Europe Domestic Asia** ASK 5.0 % ASK 4.7 % ASK 7.6 % ASK -4.2 % RPK 0.4 % RPK 2.3 % RPK 9.7 % RPK -2.9 % PLF -4.0 %-p PLF -1.9 %-p PLF 1.3 %-p PLF 1.1 %-p Revenue* 9.4 % Revenue* 5.7 % Revenue* 11.2 % Revenue* 1.7 % Passenger Revenue Split 8% 4% Total Traffic ASK 0.4 % Cargo*** ATK -10.7 % RPK -0.1 % RTK -19.2 % PLF -0.4 %-p OLF -5.9 %-p Revenue* 4.6 % Revenue -22.4 % 47% 40% 5 Europe Domestic Asia North America *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. 6
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. 7
Financials 8
Changes in the calculation method and reporting of unit revenues and - costs Q1 RASK 2014 FlyBe Q1 RASK New 2014 Q1 RASK New 2015 RASK at constant currency 5.81 In flight 5.96 Changes YoY 6.05 Fx effect 5.93 Other adjustments 1. Technical adjustments 2. New constant currency calculation principle Q1 CASK ex. Fuel 2014 FlyBe Q1 CASK ex. Fuel New 2014 Q1 CASK ex. Fuel New 2015 CASK ex. Fuel at constant currency 4.37 In flight 4.61 Changes YoY 4.82 Fx effect 4.66 9 Other adjustments 1. Technical adjustments 2. New constant currency calculation principle
Airline business: Q2 RASK & CASK development Unit cost excluding fuel, at constant currency +0.7% Unit revenue at constant currency -1.9% Change, % RASK, unit revenue RASK at constant currency CASK, unit cost CASK, excluding fuel CASK, excluding fuel, at constant currency Fuel Staff costs Depreciation & lease expenses Including Traffic charges Fx and Ground handling hedging Catering Maintenance Other expenses* -10% -5% 0% 5% 10% 15% 20% -1.9 % -1.0 % -1.8 % -5.1 % -4.3 % 1.9 % 3.0 % 4.8 % 0.7 % 6.2 % 10.1 % 14.2 % 14.0 % 10 * Including Group management-, IT-, sales and marketing expences and other rents (Norra)
Key Figures Key figures Q2 2015 Q2 2014 Change % Q1-Q2 2015 Q1-Q2 2014 Change % Revenue and result Revenue, EUR million 561.0 565.7-0.8 1,101.4 1,109.0-0.7 Operational EBITDAR, EUR million 37.4 35.5 5.3 56.6 53.0 6.8 Operational 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 74.5 Result before taxes, EUR million -7.4-31.0 76.0-19.5-64.9 69.9 Net result, EUR million -6.0-23.9 75.0-15.8-52.0 69.6 Balance sheet and cash flow Gross investment, EUR million 7.3 19.9-63.1 19.8 53.0-62.7 Net cash flow from operating activities, EUR million 88.4 69.2 27.7 101.4 48.7 108.2 Share Share price at the end of quarter, EUR 2.76 2.84-2.8 Earnings per share from the result of the period, EUR * -0.05-0.19 74.6-0.12-0.41 69.5 Earnings per share, EUR -0.06-0.20 68.6-0.16-0.44 64.2 11 * Before hybrid bond interest
Operational result, EBIT Q2 2014 vs. Q2 2015, M 40.0 30.0 2.2-0.7-1.0-1.1-1.6 20.0 10.4-7.4 10.0 10.5-13.4 0.0-10.0-19.6 24.2-15.4-12.9-20.0-30.0 12
Segment results: Airline Business Airline Business revenue 535 M Key figures Q2 2015 Q2 2014 Change % Q1-Q2 2015 Q1-Q2 2014 Change % 2014 5 % 3 % 9 % 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 Matkustajaliikenne Lisämyynti 83 % Rahti 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 13 Finnair Q1 2015 Result, 7 May 2015
Segment result: Travel Services 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 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. 14 Finnair Q1 2015 Result, 7 May 2015
Operating costs 578 M, -1.9% Fuel largest cost item 3% 4% 3% Change, % 4% Total -1.9 % 5% 27% Fuel -6.3 % Staff 1.3 % 7% Ground handling and catering -3.7 % 10% 15% Traffic charges Other rents 4.1 % 12.7 % 10% Depreciation -28.2 % 11% Maintenance 3.3 % Fuel Traffic charges Other costs Maintenance Tour operations Sales and marketing Staff costs Ground handling and catering Other rental payments Depreciation Leasing Tour operations 4.9 % Leasing 24.7 % Sales and marketing -8.6 % Other costs -6.7 % -40% -20% 0% 20% 40% 15
Currency Split, Q2 5% Sales currencies 4% 2% Purchase currencies 8% 8% 9% 54% 43% 49% 18% EUR Others JPY CNY SEK KRW USD EUR USD* Others 16 16
Jet fuel spot price development Jet fuel December 2009 June 2015 17
USD appreciation and hedges diluted the benefit from fuel price decrease Q2 Comparable fuel cost, M 200 180 160 140 120 8-77 32 27 Q2 2014 hedging loss 4.5 Mill. Eur Q2 2015 hedging loss 31.3 Mill. Eur 100 80 166 156 60 40 20 0 Q2/2014 Volume Price Currency Hedging deviation Q2/2015 18
Net debt 167 M negative, Cash 532 M % 120 Strong balance sheet M 600 Good Cash position 100 80 450 60 40 300 20 150 0-20 0-40 2011 2012 2013 2014 H1 2015-150 2011 2012 2013 2014 2Q 2015 19 Equity ratio Gearing Adjusted gearing Net cash flow from operating activities Gross capital expenditure Cash and cash equivalents
Rolling Hedging policy Hedging positions as of 30 June 2015 Hedging 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. 20
Thank you 21