17 August 2016 CEO Pekka Vauramo CFO Pekka Vähähyyppä Finnair Q2 2016 Result 1
Highlights of the second quarter The seventh consecutive quarter of profit improvement Fukuoka & Guangzhou route openings Skytrax named Finnair Northern Europe's best airline for the seventh time in a row The cooperation agreement with the Chinese Alitrip will bring up to 3 000 Chinese tourists to Finland during the winter months Wireless Network Connection in Finnair's entire long-haul fleet in 2017 2
Q2 2016: Positive result + 3M and 7th consecutive quarter of result improvement Revenue grew by 5% to 570 M Growth in passenger traffic & Travel services Ancillary sales per pax grew to 10.89 (+18%) Cargo volume grew but revenue decreased Comparable operating result improved by 16 M to 3 M 3 Preparing for the growth was reflected in costs: the flying personnel, training delays in A350 deliveries increased costs Fuel costs fell significantly in spite of the increase in traffic *not fully comparable, 2015 revenue restated, external leasing revenue excluded and included in other operating income. 800 600 400 200 0 100 50 0-50 Q1 Q1 Revenue*, M Q2 Q3 2014 2015 2016 Comparable operating result, M Q4 Q2 Q3 Q4 2014 2015 2016
Q2 Finnair's market position Finnair Capacity grew 8.8%, majority of which in Asia (+9.2%) and Atlantic (+66.0%) Finnair gained market share in European and Asian traffic.* Demand for air travel continued to grow in Finnair s main markets Timing of Easter affected the comparison year Strong business travel demand growth Leisure travel demand to some European destinations decreased due to security concerns Siberian Joint Business serving Japanese routes gained market share, Atlantic Joint Business performance weakened in a challenging market environment. Despite overcapacity and weak business environment in cargo traffic, Finnair successfully increased cargo volumes in key markets. Good development in Aurinkomatkat continued despite the situation in Turkey 4 * Finnair s estimates.
Q2: Growth in passenger traffic revenue and travel services revenue 544 +5% 570 Passenger traffic ticket revenue held up well with capacity growth Ancillary and retail sales saw strong, continued growth Less revenue from cargo Good development in Aurinkomatkat continued Travel agencies revenue declined mainly due to sale of Estravel in 2015 5 Q2 2015 Q2 2016 Travel agencies: -32.9% Ancillary and retail revenue: +24.3% Travel services: +1.9% Passenger revenue: +5.5% Cargo: -5.6%
Q2 Traffic Performance Q2 Passenger revenue ASK RPK PLF Cargo Asia North Atlantic Europe Domestic Total* million 173.9 28.8 204.2 39.7 458.3 Chg. % -2.1 40.2 2.6 7.6 5.5 Share % 37.9 6.3 44.5 8.7 100 million 4 070.1 671.9 3 413.6 356.9 8 512.5 Chg. % 9.2 66.0 1.6 7.5 8.8 Share % 47.8 7.9 40.1 4.2 100 million 3 109.6 530.2 2 713.7 237.9 6 591.3 Chg. % 4.6 49.6 2.8 7.1 6.5 % 76.4 78.9 79.5 66.7 77.4 Chg % -3.4-8.6 0.9-0.3-1.7 Revenue, Mill. 42.6 Chg. % -5.6 Tonnes, Mill. 371 Chg. % 9.8 6 *Includes unallocated revenue ASK: Available Seat Kilometres RPK: Revenue Passenger Kilometres PLF%: Passenger Load Factor
H1 Traffic Performance Q2 Passenger revenue ASK RPK PLF Cargo Asia North Atlantic Europe Domestic Total* million 338.8 54.5 365.1 88.4 862.3 Chg. % 0.1 15.8 4.3 12.0 4.1 Share % 39.3 6.3 42.3 10.3 100 million 8 091.6 1 304.4 6 412.2 825.1 16 633.2 Chg. % 6.3 31.7 3.2 14.5 7.1 Share % 47.6 5.2 42.9 4.2 100 million 6 438.0 1 038.9 4 942.5 572.4 12 991.7 Chg. % 5.3 27.4 3.4 14.6 6.4 % 79.6 79.6 77.1 69.4 78.1 Chg % -0.7-2.6 0.1 0.1-0.5 Revenue, Mill. 82.2 Chg. % -8.5 Tonnes, Mill. 725 Chg. % 7.3 7 *Includes unallocated revenue ASK: Available Seat Kilometres RPK: Revenue Passenger Kilometres PLF%: Passenger Load Factor
A350s generate excellent customer ratings Long haul business 9.2 9.0 8.8 8.6 8.4 8.2 8.0 7.8 7.6 7.4 8.4 8.2 8.6 Overall satisfaction 8.0 8.0 8.3 Value for money 9.1 A330 A340 A350 8.9 9.1 Likelihood to reuse Long haul economy 9.2 9.0 8.8 8.6 8.4 8.2 8.0 7.8 7.6 7.4 8.4 8.2 8.2 8.1 8.1 8.0 Overall satisfaction Value for money A330 A340 A350 8.8 8.9 9.1 Likelihood to reuse 8
20 M cost efficiency program Improvement of profitability is a prerequisite for growth Finnair is to review its activities Efficiency measures aim at an annual cost savings of EUR 20 million by the end of June 2017 Planning is starting now, the main points during the fall 9
Outlook for 2016 Finnair s new estimate of capacity growth is approximately 7 per cent, while the previous estimate was a growth of 8 per cent compared to 2015. The revision is due to delays in the deliveries of A350 aircraft. The rate of revenue growth is estimated to be slower than the rate of capacity growth. Uncertainty regarding the demand and yield prospects of the airline industry has increased during recent months. Finnair estimates that its comparable operating result for 2016 will increase from the previous year (2015: 23.7 million euros). 10
Financials 11
Q2 Financial Summary Traffic Q2 2016 Change % Q1-Q2 2016 Change % PAX (1,000) 2,779 6.0 5,280 7.6 ASK 8,513 8.8 16,633 7.1 No of flights 28,251 2.0 55,172 6.2 PLF % (load) 77 % -1.7 78 % -0.5 %-p KPI Q2 2016 Change % Q1-Q2 2016 Change % 6.69-3.8 6.65-3.0 at constant cur 6.77-2.7 6.70-2.2 CASK 6.65-6.5 6.72-5.6 CASK ex fuel 5.17 0.8 5.23 1.7 CASK ex fuel at constant cur 5.13 0.1 5.20 1.0 Results Q2 2016 Change % Q1-Q2 2016 Change % Revenue 569.6 4.7 1106.0 3.8 Comparable EBITDAR 56.3 50.6 92.7 63.8 Comparable EBIT 3.2 > 200.00-12.2 70.5 Net result -1.1 82.3-16.1-1.9 Cashflow and financial Q2 2016 Change Q1-Q2 Change position % 2016 % Operating cash flow 119.6 35.3 130.0 28.2 Interest-bearing net debt -150.2-10.2 Adjusted gearing 82.1 0.7 %-p ROCE 10.0 13.2 %-p 12
Income statement Q2 Q2 Change Q1-Q2 Q1-Q2 Change 2015 in mill. EUR 2016 2015 % 2016 2015 % Revenue 569.6 543.9 4.7 1,106.0 1,065.2 3.8 2,254.5 Other operating income 17.9 21.5-16.9 40.0 44.5-10.2 85.2 Operating expenses Staff costs -93.0-87.4 6.4-184.8-177.4 4.2-353.2 Fuel costs -126.4-155.7-18.8-247.9-307.0-19.2-595.5 Other rents -37.2-41.0-9.4-79.2-78.7 0.7-159.4 Aircraft materials and overhaul -37.6-30.9 21.5-74.2-62.6 18.6-118.9 Traffic charges -66.4-65.8 0.9-127.4-128.3-0.7-258.5 Ground handling and catering expenses -62.3-58.9 5.8-127.4-119.3 6.8-250.3 Expenses for tour operations -15.6-15.4 1.3-42.4-39.1 8.5-79.6 Sales and marketing expenses -20.1-17.9 11.9-38.2-35.6 7.3-74.0 Other expenses -72.8-55.1 32.1-131.6-105.1 25.3-219.3 Comparable EBITDAR 56.3 37.4 50.6 92.7 56.6 63.8 231.2 Lease payments for aircraft -26.9-25.3 6.6-55.7-46.2 20.6-99.3 Depreciation and impairment -26.2-25.1 4.7-49.1-51.7-4.9-108.1 Comparable operating result 3.2-12.9 > 200 % -12.2-41.3 70.5 23.7 13
Passenger revenue development Passenger revenue, M +5.5 % Passenger revenue by traffic area, M +23,86 (+5,5%) 458,3 +8,8% 38,3-3,3-10,0-1,1 458,3 2,8 11,3 434,4 5,2 434,4-3,7 8,2 Q2 2015 ASK FX PLF (load factor) Yield, Mix, other Q2 2016 Q2 2015 Asia North Atlantic Europe Domestic Unallocated revenue Q2 2016 ASK +9% +66% +2% +8% +8.8% Share of ASK 47.8 % 7.9 % 40.1 % 4.2 % 100% 14
Q2 component development vs. LY Q2 ASK +8.8% 10.3% 15.5% 1.0% 0.1% 3.1% 14.2% 13.3% 6.4% 38.4% 3.8% 11.11 0.36 0.50 0.40 0.05 4.27 4.28 5.98 5.38 6.69 FEA ATA EUR DOM PAX Ancillary Cargo Travel services Travel agency Group x.x x.x Change, % to LY FEA = Asia ATA = North America 15
H1 component development vs. LY H1 ASK +7.1% 5.8% 12.1% 1.1% 2.2% 2.8% 17.9% 14.5% 0.3% 36.6% 3.0% 10.71 0.36 0.49 0.56 0.05 4.19 4.18 5.69 5.18 6.65 FEA ATA EUR DOM PAX Ancillary Cargo Travel services Travel agency Group x.x x.x Change, % to LY FEA = Asia ATA = North America 16
Q2 CASK component development vs. LY Q2 ASK +8.8% -2.2% 11.7% -2.1% -25.4% -3.8% -16.7% -7.3% -6.4% 3.8% -6.9% 2.8% 33.5% 4.5% -23.6% -6.5% 0.8% 0.44 0.32 1.48 0.31 0.44 0.78 0.45 0.28 0.18 0.24 0.55 0.31 6.65 5.17 1.09 x.x x.x Change, % to LY 17
H1 CASK component development vs. LY H1 ASK +7.1% -2.7% 10.8% 12.7% -24.6% -11.2% -6.0% -7.2% -3.3% 5.4% 1.4% 0.2% 27.0% 5.0% -16.1% -5.6% 1.7% 1.11 0.45 0.33 1.49 0.30 0.48 0.77 0.49 0.28 0.26 0.23 0.47 0.32 6.72 5.23 x.x x.x Change, % to LY 18
Comparable EBIT Q2 2015 vs. Q2 2016, M 3.8-6.7-0.6-3.4-0.2-2.1-1.2 29.3-1.7-3.6-17.7 23.9-5.6 3.2 Passenger revenue Ancillary and retail revenue 5.9 Cargo Revenue -12.9-2.5-1.5 Travel services & Travel Agencies Revenue 19 Q2 2015 Revenue Other operating income Staff costs Fuel costs Other rents Aircraft materials and overhaul Traffic charges Ground handling and catering expenses Expenses for tour operations Sales and marketing expenses Lease Depreciation Other payments and expenses for aircraftimpairment Q2 2016
Comparable EBIT H1 2015 vs. H1 2016, M 59,1 0,5 11,6 0,9 8,1 3,3 2,6 9,5 2,5 33,6 4,5 7,4 26,6-12,2-41,3 Q1-Q2 2015 12,5 2,4 7,7 40,8 Revenue Other operating income Passenger revenue Ancillary and retail revenue Travel services & Travel Agencies Revenue Cargo revenue Staff costs Fuel costs Other rents Aircraft materials and overhaul Traffic charges Ground handling and catering expenses Expenses for tour operations Sales and marketing expenses Lease payments for aircraft Depreciation and impairment Other expenses 20 Q1-Q2 2016
Jet fuel price decrease supported Q2 performance M 180 160 140 120 4-32 -2 2 100 80 60 40 20 156 126 0 Q2/2015 Volume Price Currency Hedging deviation Q2/2016 21 Q2/15 hedging loss 31.1 M Q2/16 hedging loss 33.0 M
16 Strong cash flow and cash funds Change in cash flows +75.6 M -29.6-6.0 35.2 Proceeds from loans Loan repayments Hybrid bond interests and purchase of own shares Cash at the end Operating Investing +130.0 M -396.3 M Financing +341.8 M 4.2 90.6 457.7-316.3 377.4 17.1-97.1 533.3 457.7 Cash funds +173.4 M 708.2 250.5 187.3 270.5 31 Dec 2015 881.6 348.3 226.3 307.0 533.3 30 Jun 2016 Commercial papers and deposits > 3 months Commercial papers, deposits and funds < 3 months Cash and bank deposits Cash in cash flow Cash at the beginning EBITDA Change in working capital Non-cash transactions and financial items Acquisition of assets Disposal of assets Other investing activities
Balance sheet: 3 new A350 s & JOLCO loans 2.518 109 2.518 7 1.967 Assets held for sale 96 Other current assents 259 2.050 125 Other current assets 220 Other current assets 263 Cash Funds 882 Other liabilities 514 Unflown tickets 438 2.050 0 Other liabilities 494 1.967 25 500 Cash funds 532 Derivatives 219 Fleet 676 Cash funds 708 Derivatives 156 102 Fleet 739 +300,8 Derivatives 100 123 Fleet 1.040 Derivatives 81 Interest-bearing debt 733 Equity 745 Unflown tickets 302 Derivatives 180 Interestbearing debt 346 727 Unflown tickets 394 Derivatives 128 Interest bearing debt 365 555 23 30 Jun 2015 31 Dec 2015 30 Jun 2016 30 Jun 2016 31 Dec 2015 30 Jun 2015
Q2 Strong balance sheet & net cash support investments Strong balance sheet, net cash 708 882 Composition of adjusted net debt 24 82 268 426 171 330 448 208 120 17 2014 2015 H1 2016 Net operating cash flow Gross investments Divestments Liquid funds M -1.500-1.000 Interestbearing debt 7x aircraft leases + currency hedges 762 Cash 882 Adjusted net debt 108-733 82-613 27 0 35 46 30 Equity ratio Gearing Adjusted gearing -500-20 0 24-50 2014 2015 H1 2016
Investments 2016-2023 Net confirmed investments 146 M 25
Thank you 26
In Q2, fuel continues to be the largest cost item, operational costs 584 M 12% 11% 6% 11% 3% 3% 16% 22% 16% Fuel, 126 M Personnel, 93 M Leasing, maintenance, depreciation & impairment, 91 M Traffic charges, 66 M Groundhandling & catering, 62 M Other costs, 73 M Other rents, 37 M Sales & marketing, 20 M Tour operations, 17 M 27
Fuel and currency sensitivities & currency split Currency distribution % 4 6 2016 4 6 2015 1 6 2016 1 6 2015 2015 Sales currencies 59 Currency sensitivities USD and JPY (rolling 12 months from date of financial statements) 10% change without hedging Hedging ratio (rolling 12 months from date of financial statements) 10% change, taking hedging into account EUR 63 54 63 59 59 - - USD* 4 2 4 2 3 see below see below see below JPY 8 9 8 8 8 EUR 12 million EUR 8 million 70% CNY 6 8 6 6 7 - - KRW 3 4 3 3 3 - - SEK 5 5 5 5 5 - - Other 11 18 11 17 15 - - Purchase currencies EUR 53 50 53 52 53 - - USD* 40 40 40 41 41 EUR 55 million EUR 20 million 68% Other 7 10 7 7 7 28 * The sensitivity analysis assumes that the Chinese yuan and the Hong Kong dollar continue to correlate strongly with the US dollar.
Jet fuel hedging ratios 30 June 2016 100% 90% hedge ratio upper lower 80% 70% 71% 72% 64% 60% 54% 50% 40% 30% 20% 10% 0% 42% 32% 22% 11% 0% 0% 0% 0% 29