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Financial Report 1 January – 31 December 2009 Finnair Group.

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Presentation on theme: "Financial Report 1 January – 31 December 2009 Finnair Group."— Presentation transcript:

1 Financial Report 1 January – 31 December 2009 Finnair Group

2 Sector difficulties continue The overcapacity is still growing Aircraft are underutilised Passenger demand is showing first signs of growth Price pressure remains high Cargo demand improving, price level rising slightly Oil price has risen 30% since last summer Annus Horribilis – IATA estimates 11 billion dollar loss for last year Decennis Horribilis – sector losses totalled 50 billion dollars in 2000–2009 Loss forecast for current year 5.6 billion dollars

3 Finnair’s profitability declined Sector troubles also burden Finnair Turnover fell last year by 20% Operational loss 180 million euros Ticket prices down by 12%, in the latter part of the year 10%, cargo prices -30% and last quarter -27% Passenger load factor remained good Capacity adjusted to volume decline; cost level still too high compared with price level Efficiency programme improved result by 100 million euros Pilot strike and walkout by baggage handling workers is estimated to cause company >20 million euros in losses Finnair still has strong balance sheet and cash position Punctuality and customer satisfaction improved despite difficulties at end of year

4 Very poor operational result for Change % Turnovermill. euro 1,838 2, Operational expensesmill. euro2,0382, Adjusted EBITDAR*mill. euro Adjusted EBIT* i.e. Operational resultmill. euro One off items/ capital gainsmill. euro Fair value changes of derivativesmill. euro Operating profit/loss (EBIT)mill. euro Profit before taxmill. euro *excl. capital gains. fair values changes of derivatives and non recurring items

5 Loss diminished towards the end of the year MEUR EBIT* per quarter *excl. capital gains. fair value changes of derivatives and non recurring items MEUR

6 Unit costs develop in the right direction % Yield (EUR/RTK)Unit costs (EUR/RTK) Change YoY

7 Savings materialise 2009 Q4/09 Unit costs of flight operations*c/RTK-2.4%-7.0% Unit costs of flight operations* excl. fuelc/RTK0.8%-2.2% Personnel expensesc/RTK-4.3%-15.4% Fuel costsc/RTK-10.6%-19.7% Traffic chargesc/RTK+0.5%-8.2% Ground handling and catering€/psgr.-1.7%-4.9% Sales and marketing€/psgr.-13.7%-1.1% Aircraft lease payments and depreciationc/RTK+15.0%+18.3% Other costs*c/RTK+4.5%+3.3% * excluding fair value changes of derivatives and non-recurring items RTK = Revenue Tonne Kilometre

8 200 million euro efficiency program Savings target in personnel costs totalling 120 million euros Targets of close to 150 mill. euro identified or agreed upon Fuel efficiency Structural and operational changes Temporary lay-offs continue Number of staff decreased by 1650 Stabilisation agreements in Technical Services, Catering and cabin service Reduction of unit costs agreed upon in pilots’ collective agreement 100 mill. euro impact on profitability already in 2009 Structural impact of the program per annum 110 mill. euro

9 Headcount 1650 less than year before Personnel on average Personnel

10 Fuel price on rise

11 Hedges smoothened fluctuation in 2009

12 Hedging losses decreased in Q4

13 Finnair has a rolling hedging policy

14 One of the most modern fleets in the world Average age of Finnair's entire fleet is around six years Modern fleet consumes less fuel and produces less emissions Last Boeing MD-11 aircraft will be withdrawn from Finnair traffic on 22 February 2010 Having fewer aircraft types brings commonality benefits Three of seven Boeing 757 aircraft will be withdrawn this spring Two Embraer 170 planes leased, two for sale In the early 2010, two new Airbus A330 aircraft, one more in late 2010

15 Funding secured Funding of Finnair investment programme ensured Investment schedule relaxed Cash reserves more than 600 mill. euros Sale and lease-back of properties and a spare engine, 90 mill. euros European Investment Bank, 180 mill. euros Export Credit Agencies, 1 A330 plane on financial leasing An emitted hybrid bond of 120 mill. euros lowers gearing Funding sources totalling 600 mill. euros Export Credit Agencies, 2 A330 planes on financial leasing Loan-back of TyEL pension fund reserves, 330 mill. euros remaining Liquidity reserve unused credit facility, 200 mill. euros In addition, 200 million euro commercial paper programme, of which 120 in use

16 Strengtened cash in Q4 Cash flow statement Q4/2009Q1-Q4/2009Q1-Q4/2008 Cash flow from operationsmill. euro Investments and sale of assetsmill. euro Investmentsmill. euro Change of advances and others mill. euro Cash flow from financingmill. euro Liquid funds at the beginningmill. euro Change in liquid fundsmill. euro Liquid funds* at the endmill. euro *incl. financial interest bearing assets at fair value

17 Balance sheet made stronger Equity ratio and adjusted gearing Equity ratioAdjusted Gearing %

18 Emissions trading raises questions EU begins air transport emissions trading unilaterally in 2012 Free emissions rights to be received by each airline for will be based on this year’s revenue tonne kilometres Risk of changing ground rules exists Finnair has supplied the necessary documentation to TraFi Current emissions trading model will increase carbon leakage risk and jeopardise EU competitiveness Finnair supports sector-specific emissions trading which is global and does not distort competition

19 Industrial action and weather disrupted traffic at turn of the year In December, illegal walkout by loading workers Over 80% of baggage handled normally flights delayed and some cancelled further disruptions after walkout nearly 7 million euros in losses In January, Central European weather disrupted air traffic turn of the year challenging due to large passenger numbers, terminal change and problematic weather baggage congested at all European airports

20 Finnair still on top in punctuality

21 Challenging start for the year Slow pick-up in passenger and cargo demand Business travel demand growing outside Finland, but at lower price levels Passenger traffic capacity in early 2010 will be 10% less than in 2009 First quarter clearly loss-making Three new Airbus A330 long-haul aircraft Funding for investments arranged Efficiency programme and structural change to be continued Profitability expected to improve towards end of the year

22 Finnair's strategy working Asia-Europe strategy based on Via Helsinki concept is working; geographical advantage a lasting competitive advantage Growing affluence in Asia presents huge growth potential Passenger numbers have grown from 0.3 million in 2001, to over 1.1 million in 2009 Finnair's Asian traffic accounted for 3.7% of Finland's GDP growth in 2002–2007 Created more than 4,000 jobs in Finnair alone 8,000 new jobs by 2015 Without Asian strategy, company would be only half of present size Modern fleet Indicators show operational and service quality at a high level

23 Towards future growth Customers of the future will increasingly come from Asia Strategy update and supporting reforms during the spring – main strategy will not change Competitiveness based on excellent product and efficient operations Group structure focused on core functions in order to achieve flexibility, partners supplement network and service provision Working toghether with personnel, to reach joint objectives Sustainable development creates added value for environment-conscious customers

24 Appendices

25 Weak operational result for Q4 Q4/09Q4/08Change % Turnovermill. euro Operational expensesmill. euro Adjusted EBITDAR*mill. euro Adjusted EBIT* i.e. Operational resultmill. euro One off items/ capital gainsmill. euro Fair value changes of derivativesmill. euro Operating profit/loss (EBIT)mill. euro Profit before taxmill. euro *excl. capital gains. fair values changes of derivatives and non recurring items

26 Segment results* Mill. euro Q4/2009Q4/2008 Airline Business Aviation Services Travel Services Unallocated items-3.4 Total * Operating profit. excluding capital gains, fair value changes of derivatives and non restructuring items

27 Segment results* Mill. euro Q1-Q4/2009Q1-Q4/2008 Airline Business Aviation Services Travel Services Unallocated items Total * Operating profit. excluding capital gains, fair value changes of derivatives and non restructuring items

28 Negative trend in profitability levelled off thanks to efficiency measures MEUR Change in EBIT* per quarter *excl. capital gains, fair value changes of derivatives and non recurring items

29 ROE and ROCE Rolling 12 months % ROEROCE

30 Unit costs develop in the right direction % Yield (EUR/RTK)Unit costs (EUR/ATK) Change YoY

31 Unit costs by cost components 2009Q4/09 Unit costs of flight operations*c/ATK+0.8%+1.0% Unit costs of flight operations* excl. fuelc/ATK+4.2%+6.3% Personnel expensesc/ATK-1.0%-10.0% Fuel costs**c/ATK-8.0%-13.1% Traffic chargesc/ATK+3.5%-0.6% Ground handling and catering€/psgr.-1.7%-4.9% Sales and marketing€/psgr.-13.7%-1.1% Aircraft lease payments and depreciationc/ATK+18.5%+28.5% Other costs*c/ATK+9.5%+13.0% * excluding fair value changes of derivatives and non-recurring items ATK = Available Tonne Kilometre

32 Investments and cash flow from operations Operational net cash flowInvestments MEUR

33 Aircraft operating lease liabilities MEUR Flexibility. costs. risk management On 31 December all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 31 December 2009 would have been 86.9%

34 Finnair Financial Targets ”Sustainable value creation” Operating profit (EBIT) EBIT margin at least 6% => over 120 mill. € in the coming few years EBITDAR EBITDAR margin at least 17% => over 350 mill. € in the coming few years Economic profit Pay out ratio Minimum one third of the EPS Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 % To create positive value over pretax WACC of 8.25%

35 Finnair’s Financial Targets Description of targets Operating profit (EBIT) EBITDAR Economic profit Pay out ratio Adjusted Gearing Turnover + other operating revenues – operating costs Result before depreciation. aircraft lease payments and capital gains Operating profit EBIT – Weighted Average Cost of Capital Interest bearing debt + 7*Aircraft lease payments – liquid funds) / (Equity + minority interests) Dividend per share / Earnings per share

36 Finnair Group Investor Relations tel: fax:


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