1 (8) FINAVIA INTERIM REPORT 1 JANUARY 2010 30 SEPTEMBER 2010: DEMAND FOR AIR SERVICES RECOVERING Summary of the key figures for January to September Finavia Group s corresponding figures for the previous year are presented as reference data. Revenues dropped by 3.8 per cent to EUR 231.8 million (241.1) The increase in the number of passengers compared to the previous year was 0.8% The operating result excluding non-recurring items was EUR 27.0 million (25.5) The profit before taxes was EUR 38.3 million (28.9) Cash flow from operations was EUR 43.1 million (59.8) The solvency ratio* was 45.1% (61.9) *Revaluation of the balance sheet at the start of the year Summary of the key figures for the third quarter Finavia Group s corresponding figures for the previous year are presented as reference data. Revenues increased by 4.9 per cent to EUR 79.7 million (76.0) The increase in the number of passengers compared to the previous year was 6.3% The operating result excluding non-recurring items was EUR 15.0 million (11.0) The profit before taxes was EUR 15.1 million (17.4) Summary of the President and CEO The third quarter confirmed the notion that the industry is slowly recovering from the recession, which had hit it hard. From Finavia s perspective, the road to the pre-recession level does not seem long, but on the other hand, the loss of revenues due to the price reductions makes the journey longer from the point of profitability. Efficiency measures and improved demand have nevertheless improved the Group s profit more than expected. Financial result 1 January 2010 30 September 2010 Group revenues in January September dropped by 3.8 per cent to EUR 231.8 million (EUR 241.1 million in the previous year). The operating result excluding non-recurring items strengthened from the previous year and stood at EUR 27.0 million (25.5). Profit before taxes was EUR 38.3 million. The result includes non-recurring items totalling EUR 16.7 million. Non-recurring items are mainly capital gains from sale of assets. The revaluation of balance sheet items, which was performed at the start of the year, had an impact on the depreciable amount and reduced depreciation and amortisation expenses from the beginning of January to the end of September by EUR 13.2 million. Arrangements have been made in Finavia and its subsidiaries during the summer that affect both the Group structure and the consolidated income statement. Cash flow from operations in January September stood at EUR 43.1 million (59.8). The solvency ratio was 45.1 per cent. Since the beginning of the year, the Group s operating expenses have increased by 2.5 per cent on last year. Total expenditure was EUR 178.6 million (174.2). Costs for purchases of materials and services have decreased by 9.1 per cent. The greatest saving was achieved in costs for purchases of external services, which have decreased by 13.8 per cent, or EUR 5.1 million, on last year. The cost increase eliminated due to reorganisation of the Group structure was 0.6 per cent. Staff costs increased by 8.7%. Without the arrangements made by the Group companies in the summer, the increase in staff costs would be 5.5 per cent. The rest of the growth resulted from the effect of both wage in- FINAVIA OYJ VAIHDE 020 708 000 POSTAL ADDRESS BUSINESS ID: 2302570-2 DIRECT DIALLING PO BOX 50 DOMICILE: VANTAA FAX 01531 VANTAA VAT NUMBER: FI23025702 EMAIL WWW.FINAVIA.FI
2 (8) creases and the refund of the State Treasury s pension contribution contained in last year s base figures, which reduced the costs for 2009 by EUR 1.1 million. Financial result 1 July 2010 30 September 2010 Revenues increased in the third quarter by 4.9 per cent and stood at EUR 79.7 million (76.0). The Group s operating result excluding non-recurring items was EUR 15.0 million (11.0). Profit before taxes was EUR 15.1 million, which was a drop of EUR 2.4 million on the previous year (17.4). Operating expenses in the third quarter were EUR 56.0 million, which is 9.3 per cent higher than in the previous year. Costs for purchases of materials and services were 3.3 per cent lower than the previous year, while staff costs increased by 15.6 per cent. The increase in total costs eliminated due to reorganisation of the Group structure was 3.0 per cent. Business areas Finavia Group s operations are divided into four business areas and other operations supporting them. The model follows the practice adopted by European airport operators. Finavia Group s management model and day-to-day financial reporting is based on the same division of responsibilities by business area. The Airport business area comprises authorised airport services and mainly commercial services produced for passengers by Finavia or through the network of partners. Airport services is responsible for the services produced at the airports for air carriers, such as the maintenance of runways and terminals, ramp handling services, security check and passenger services. Commercial operations include the leasing of commercial spaces in terminals and parking services, as well as shops and cafés. Air Navigation Services is responsible for managing the use of Finnish airspace and the related route and air navigation services at Finavia s airports. Real estate operations comprise real estate companies offering facilities services to companies operating at the airports. The most important individual company in the real estate operations is LAK Airport Real Estates Plc, which operates as an owner of buildings and also as a developer of building projects. The revenues of real estate operations mainly come from outside the Group. The airports terminals and other production areas are owned by the parent company and are the responsibility of airport services. Airpro develops and provides traffic, airport and travel services for logistics and tourism companies and directly for passengers. Airpro Oy acquired 100% of RTG Ground Handling in July 2010. The Airpro business area comprises Airpro Oy and its subsidiary. RTG Ground Handling Oy was incorporated in the Group as of 1 July 2010. The shares of the Group s common operations and centralised services as well as other minor business activities are reported in other business operations. The 2009 figures include a EUR 2 million item, realised by means of legal proceedings and posted as income, which improves the profit for 2009. A EUR 1.1 million adjustment of pension contributions also strengthens the result for 2009. The figures for the current year include changes due to reorganisation, including completion of the concentration of IT operations and business and property insurance premiums required because of the incorporation, which increase insurance expenses by EUR 1.0 million. Eliminations of Group transactions between the business areas have been adjusted through line items.
3 (8) Revenues and operating profit by business area EUR Million Change- % 2010 2009 Change- % Revenues* 2010 Q3 2009 Q3 2010 vs 2009 1.1.-30.9 1.1.-30.9 2010 vs 2009 Airport 56,9 54,7 4 % 165,2 174,5-5 % Air Navigation Services 13,8 14,3-4 % 40,6 44,8-9 % Real estate operations 2,6 3,3-20 % 10,2 10,9-6 % Airpro 10,7 6,7 60 % 28,1 21,7 29 % Other operations 1,0 1,6-36 % 2,8 3,5-19 % Eliminations -5,2-4,5-5 % -15,1-14,3-5 % GROUP TOTAL 79,8 76,0 5 % 231,8 241,1-4 % Operating profit Airport** 17,9 20,7 51,7 47,6 Air Navigation Services -1,1-2,1-5,9-8,3 Real estate operations*** 1,4 0,4 6,6 2,1 Airpro 0,4 0,6 2,4 1,6 Other operations -3,5-1,3-14,3-9,1 Eliminations 2,8 0,5 3,1 0,8 Group total**** 17,8 18,7 43,7 34,8 * The figures for Airpo and Real estate operations include the Group s reorganisation that took effect in July ** The operating profit from the start of the year to September includes non-recurring items of EUR 10.7 million *** The operating profit from the start of the year to September includes non-recurring items of EUR 3.2 million **** In addition to the above, the operating profit includes EUR 2.7 million of non-recurring items on the Group level Development of the business areas Airport The segment s turnover dropped 5.3 per cent cumulatively compared with the previous year, but in the third quarter revenues grew by 4.1 per cent. The operating result for January-September was EUR 51.7 million (47.6) and in the third quarter EUR 17.9 million (20.7). Non-recurring sales revenue boosting the result totalling EUR 10.7 million has been recorded for the business area. The positive trend in the number of passengers the most important variable for the sector seen in the second quarter has continued, and the cumulative number has also been increasing since August. The total number of passengers in January September exceeded last year s levels by 0.8 per cent, and third-quarter growth was 6.3 per cent. Landings also increased during the quarter, although the cumulative number still remains below last year s levels. The approximately 10 per cent overall reduction in the prices for air traffic, implemented on 1 September 2009, will impact traffic revenues for the entire year. Finavia has grouped its airports under five different concepts based on traffic flows. Concept deployment is progressing as planned, and will be completed by the end of the year. In the concept work, the focus is on the utilisation of the multiple skills of the personnel. The effects are already visible as more efficient operations and a marked reduction in the costs for contracted services. The income from commercial operations developed positively in January September. The main factor contributing to the increase in revenues is the strong growth in both Finavia s own sales operations and rental income from commercial premises. Revenues generated by Finavia s own shops have increased, thanks to the development and introduction of operational concepts, sales promotion actions and the opening of new shops. The opening of new commercial premises at Helsinki Airport and renewed agreements in particular have had an impact on the development of rental income. Advertising revenue has also improved positively since the reces-
4 (8) sion. Revenues from parking is the only area of commercial operations which, in terms of revenues, was weaker than in the previous year. The cold winter and large amount of snow at the start of the year reduced the use of cars by air passengers, which reduced revenues and the impact of the ash cloud was felt in April May, which emptied the car parks. Air Navigation Services Revenues in January September of the Air Navigation Services dropped 9.4 per cent compared with the previous year. The third-quarter figures already show signs of a turn in the negative trend, and revenues were only down 3.6 per cent. The cumulative operating result at the end of September was a loss of EUR 5.9 million (- 8.3). Since the start of the year, the performance of the Air Navigation Services is still below last year s levels in some areas, but the third-quarter figures are already clearly positive. Landings in the third quarter showed an increase of 1.4 per cent, and overflights an increase of 5.9 per cent on the corresponding period last year. The corresponding cumulative figures were -2.2 per cent and +2.8 per cent. Air Navigation Services has several development projects in progress, the purpose of which is to prepare for future challenges and improve the efficiency of operations. The briefing services centralisation project, which brought significant savings in personnel costs, was completed in September. The centralisation project for area control centres has progressed to the training stage, and the project is expected to be completed, on schedule, in November 2010. Real estate operations Revenues of real estate operations in January September were below last year s level, standing at EUR 10.2 million. The operating result improved to EUR 6.6 million (2.1). Non-recurring items of EUR 3.2 million have been entered in the result, which accrued from sales profits from trade in land undertaken by LAK Plc. The work to expand the Hilton Hotel at Helsinki Airport has continued according to schedule and the cost estimate. The building project owned by LAK Plc aims to increase the hotel s capacity by around 80 rooms. The work will be completed in May 2011. Airpro Airpro s revenues for January-September increased by 29.4 per cent on the previous year and stood at EUR 28.1 million (21.7). The operating result rose to EUR 2.4 million from last year s EUR 1.6 million. Airpro Oy acquired RTG Ground Handling Oy through a contract of sale that was signed on 23 June 2010. As a result of the company acquisition, RTG Ground Handling Oy became a subsidiary of Airpro Oy. The effects of the acquisition are visible in Airpro s third-quarter result. At the start of the year, flights managed by Airpro increased, which explains for its part the increase in revenues. In addition, the severe winter increased the need for the services produced by Airpro. Increasing the efficiency of internal processes, developing shift planning and the staff structure have been the factors that have had the greatest impact on the development of costs. Various measures over many years are starting to bear fruit. Investments The Group s investments in January September totalled EUR 31.6 million (62.7). The investment level was significantly lower than in the previous year, which is due to the completion of major investments in 2009 and the savings measures initiated due to the recession. The renovation of the terminal at Helsinki Airport is continuing in T2 in concourse 4. In the terminal expansion project at Oulu Airport, work at the apron level has been completed and construction of the terminal building is underway. The project is a co-financed one and Finavia s share is EUR 9 million. Within the air navigation services, the follow-up development project to the Eurocat FRESH system is underway. The main objective of the project, which is estimated to cost around EUR 12 million, is to update Helsinki Airport s radar display system to meet internal and external requirements for the safe, economical, environmentally friendly and customeroriented management of traffic.
5 (8) Development in air traffic The cumulative figures for development in Europe s internal air traffic are slowly returning to the 4 per cent level prior to the volcanic eruption in Iceland. In its statistical review, the Airports Council International 1 (ACI) reported the January August development as 3%. However, according to preliminary information the September figures were somewhat more positive. For example, based on its weekly monitoring, Association of European Airlines 2 (AEA), another air transport industry organization, reported the September growth rate to be as high as 7%. In freight traffic, the rate of growth continues to be materially different from the trends in passenger traffic, remaining above 20 per cent month after month. According to ACI statistics, the growth in January August was 23%. Of the airports in the capitals of the Nordic countries 3, Copenhagen and Oslo in particular have resumed strong growth after the ash crisis. The growth in passenger numbers in January September was 8% in Copenhagen and 5% in Oslo, whereas the cumulative growth rates of 4% in Stockholm and, in particular, 1% in Helsinki, indicate a somewhat slower recovery. The third quarter of the year was a record quarter for Finland s international air traffic. The solid growth of 8.7% ensured the fact that the nearly 3.4 million passengers recorded during the third quarter was a higher figure than ever before achieved during any quarter. However, the trend in domestic traffic remained negative at -1.6%. The total number of passengers, 4.3 million, was only a fraction smaller than the record level achieved during the third quarter of 2008. In international traffic, the development of the traffic between Finland and the EU was still very moderate during the first two quarters. The third quarter signified a marked change in the development, as EU traffic was up 8.8%. A particularly noteworthy development is the increase in resources which low-cost airlines have invested their traffic to Finland, which resulted in a growth rate of 60 per cent on their part. Strong growth areas in EU traffic included Sweden, Denmark, France and Latvia. Traffic to countries outside the EU has grown faster throughout this year than EU traffic. This was also true for the third quarter, for which the growth rate was 9.5%. Norway and Russia continue to be in the lead. In Asian traffic, the second quarter in particular was a time of dynamic growth, with a growth rate of 14.6%. In the third quarter growth levelled off at 9.3%, driven by traffic to South Korea and Japan in particular. As regards Thailand, this was already the second consecutive quarter during which the development was negative. The third quarter marked a distinct turning point in the number of commercial air traffic landings in Finland. The trend in domestic traffic remained negative at -4.6%, but there was considerable growth in the number of international traffic landings, 10.4%. The average size of aircraft expressed as tonnes increased by 3.7%. This is due to the increased share of European traffic where the planes are larger than in domestic traffic. After four more modest quarters, overflights in Finnish air space showed excellent growth of 5.9% during the third quarter of 2010. The first six months were nevertheless a bit more quiet, which means that the cumulative growth for January September was only +2.8%. 1 ACI Europe represents. over 400 airports in 46 countries in Europe. 2 AEA is an association of 35 European airlines. 3 Stockholm Arlanda, Copenhagen, Oslo Gardermoen and Helsinki Airport.
6 (8) Q3 2010 Q3 2009 Q3 change-% 10 vs 09 Q3 change-% 09 vs 08 Passengers, total* 4 340 410 4 084 393 6,3 % -6,0 % Domestic 953 180 968 402-1,6 % -12,4 % International 3 387 230 3 115 991 8,7 % -3,8 % Q1-Q3 2010 Q1-Q3 2009 Q1-Q3 muutos-% 10 vs 09 Q1-Q3 muutos-% 09 vs 08 Passengers total* 12 306 002 12 209 428 0,8 % -7,5 % Domestic 3 310 828 3 556 608-6,9 % -12,5 % International 8 995 174 8 652 820 4,0 % -5,3 % (*incl. departing, arriving and transfer passengers) Million passengers 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Passengers Q3 / 2000-2010 (incl. departing, arriving and transfer passengers) International Dome stic Q3/00 Q3/01 Q3/02 Q3/03 Q3/04 Q3/05 Q3/06 Q3/07 Q3/08 Q3/09 Q3/10
7 (8) Q3 2010 Q3 2009 Q3 change-% 10 vs 09 Q3 change-% 09 vs 08 Landings 72 844 71 839 1,4 % -3,8 % Commercial 31 035 29 877 3,9 % -5,1 % Domestic 12 395 12 990-4,6 % -2,9 % International 18 640 16 887 10,4 % -6,7 % Other aviation 41 809 41 962-0,4 % -3,0 % Landing tonnes 1 878 119 1 749 422 7,4 % -9,4 % Commercial 1 717 314 1 593 608 7,8 % -9,4 % Other aviation 160 805 155 814 3,2 % -10,0 % Overflights 8 523 8 045 5,9 % 1,0 % Average aircraft size (Mtow, tonnes) Commercial traffic 55,3 53,3 3,7 % -4,5 % Total 25,8 24,4 5,9 % -5,8 % Q1-Q3 2010 Q1-Q3 2009 Q1-Q3 change-% 10 vs 09 Q1-Q3 change-% 09 vs 08 Landings 201 026 205 548-2,2 % -6,3 % Commercial 93 456 95 502-2,1 % -5,6 % Domestic 41 802 45 170-7,5 % -2,0 % International 51 654 50 332 2,6 % -8,6 % Other aviation 107 570 110 046-2,2 % -7,0 % Landing tonnes 5 487 259 5 555 103-1,2 % -9,9 % Commercial 5 029 277 5 072 956-0,9 % -9,4 % Other aviation 457 982 482 147-5,0 % -15,4 % Overflights 23 082 22 445 2,8 % 3,9 % Average aircraft size (Mtow, tonnes) Commercial traffic 53,8 53,1 1,3 % -4,0 % Total 27,3 27,0 1,0 % -3,8 % Passengers by destination Q3/2010 (Q3/2009) EU, 59% (58%) Non-EU Europe, 9% (8%) Asia, 8% (8%) Other, 2% (2%) Domestic, 22% (24%)
8 (8) Changes in the Group Structure RTG Ground Handling Oy, acquired by Finavia s subsidiary Airpro, was incorporated in the Group as of 1 July 2010. On 1 July 2010, the share of ownership of the joint-stock property company Lentäjäntie 1 was reduced from 51.2 per cent to 37.2 per cent and correspondingly the 60.9 per cent share of ownership of the joint-stock property company Lentäjäntie 3 was increased so that the entire share capital was transferred to the Group s ownership. Outlook for the rest of 2010 In its mid-term forecast for 2010 2016, published at the beginning of September, Eurocontrol s Statfor-Unit 4 predicts a gradual increase in the number of operations 5 for the rest of 2010. The full-year growth rate for the Eurocontrol Statistical Reference Area (ESRA), comprising 38 countries, is estimated at 1.6%. The corresponding growth in the EU will be somewhat lower at 1.0%. Growth will again be significantly stronger in eastern Europe, and growth is generally estimated at 6% 9%. With the exception of Denmark, the Nordic countries are largely in line with the overall trend in the Eurocontrol area: Denmark, 4.7%; Norway, 2.0%; Sweden, 1.6%; Iceland, 0.9%; and Finland, 0.9 %. The demand for air traffic picked up in May, and the trend is expected to remain strong. In particular the passenger numbers in international traffic are clearly better than the expectations at the beginning of the year and also better than could be expected on the basis of the first six months. The impact of the ash crisis in April on people s willingness to travel seems to have remained minor. The current forecasts indicate that the Group will make a clearly positive operating result. 4 Statfor, which operates under Eurocontrol, produces statistics and forecasts on air traffic in Europe and monitors and analyses trends in the aviation sector. The unit produces short-term forecasts on the development of flight operations generally four times a year. 5 IFR operations in total (including overflights).