Finnair's negative results in line with expectations

Finnair Group turnover fell 6.4% to 1557.6 million euros. Last year's result after financial items was 21.7 million euro in the red when the previous year's result was in profit by 54.4 million. The financial position has remained strong and the result for the current year is expected to be clearly better than last year.

"A difficult year is behind us and, in line with last spring's forecast, our result dipped into the red. The start of the year was adversely affected by the Iraq war and the SARS epidemic, while the challenges of the autumn arose from intense price competition," says Finnair President and CEO Keijo Suila.

"Demand for Finnair's scheduled passenger traffic is growing strongly in the first quarter of the year. The market climate continues to be tight and as a result the average price level will again fall significantly. The result for the whole year is expected to improve clearly from the previous year and to be in profit."

The result after financial items excluding 22.1 million in capital gains was 43.8 million euro in the red. The result per share was -0.08 euro. The Board of Directors of the company proposed a dividend of 0.10 euro.

Average prices and unit costs dropped

Unit revenues for all traffic decreased by nine percent. During the fourth quarter, unit revenues for all traffic dropped by 15 percent. This was due mainly to a lower price level, a decline in premium class volumes, the weakness of the dollar and a price reform implemented in September.

Operating expenses also decreased during the financial year by a little over two percent and unit costs by a little over seven percent. During the last quarter of the year, operating expenses dropped almost four percent and flight operations unit costs by almost 13 percent.

New competitors appeared on the Finnish market to join the existing ones. Overcapacity heightened price competition to a previously unseen level.

"Substantial over-capacity in the airline industry inflamed the market in an unprecedented way, and led many to forget the fundamental rules of economics. If load factors and average prices are poor and fall far short of the profitability level, the preconditions for sustainable business simply do not exist. It is clear that things cannot go on like this for long. The winners will be those who have a competitive cost level, financial staying power and good quality," President and CEO Suila states.

Cost-cutting ensures financial health

The 160 million cost-cutting and operational adjustment programme has as a whole proceeded as planned. In 2003, approximately a third of the savings were realised. The target of the programme is to lower unit costs by at least 15 percent in 2003-2005.

"Despite our cost-cutting efforts, we have maintained our position among the leading European airlines in terms of quality. Last year Finnair was once again Europe's most punctual airline."

Finnair's financial position is strong, the company has no net debt and its equity ratio is over 44 percent. The 29 aircraft Airbus A320 family acquisition programme will be finalised in 2004, meaning that half of the fleet has been renewed in five years.

Clear improvement in result this year

The strong turn for growth that took place in the autumn is expected to continue in the first half of the year. Capacity at Finnair Group airlines - Finnair, Aero and Nordic Airlink - is expected to increase over 15 percent during the beginning of the year.

"Our sound finances, competitive operations and service quality as well as more diverse growth prospects allow me to look on the coming year with confidence," Suila states.