Finnair's first half in red, demand is picking up

Finnair's turnover fell in the second quarter by 14.2 per cent to 366.1 million euros. The operating loss amounted to 9.9 million euros, compared to an operating profit of nearly 30 million euros a year earlier. Operational result for the full financial year is still expected to be a clear loss.

"Profit-wise, this will be a miserable year. The beginning of the year was characterized by falling prices and a loss of demand in the spring. The double blow of Iraq and SARS that struck the industry had a deep impact on Finnair due to the relatively high weighting of Asian traffic in our operations," says President & CEO Keijo Suila.

Operating costs fell by 5.7 per cent. The most significant factors were a cut in sales and marketing costs by nearly a third and a fall in ground handling and catering costs by nearly a fifth. The 160 million euro cost-cutting programme initiated in the spring has proceeded according to plan. The number of Group personnel has fallen to slightly below 10,000 employees.

"The improvement in operational and cost structures that began already some years ago will continue. It is with these measures that we will safeguard our competitiveness also in future."

A strong cash position has been maintained, despite a reduction in cash flow from business operations. Finnair's net debt is close to nil. Capital expenditure in the current year is expected to amount to 80 million euros.

"Our strong financial position gives us the necessary stamina to endure the industry turbulence. It also enables us to fully implement our long-term growth strategy."

Load factors crashed in the second quarter, particularly due to the weighting of Asian traffic in Finnair's operations. After the rock-bottom figures of the spring, demand has recovered through the late summer and will continue towards the end of the year.

"Asian traffic is recovering quickly and our new Shanghai route will sustain our strong progress in Asia. I believe that in the latter part of the year positive figures will be seen in overall demand - not only in Asia but also in European traffic. Our new acquisition, low-cost airline Nordic Airlink, will open up totally new opportunities for us to expand our operations in our neighbourhood," says Suila.

Price levels are expected to fall as domestic and international competition intensifies, which will pose a challenge to profitability. Finnair will respond to competition with new price and product concepts, to be introduced during the autumn.

"I am convinced that the decisive actions to reduce our costs, new pricing principles and strong growth in Asia and in the Nordic markets will put Finnair once again on a profitable track."