Finnair announces Financial Results for 2002

Capacity adjustment and the cost-cutting campaign helped Finnair improve its result last year. The result improvement was 31.5 million euros. The result for the financial year before taxes was 54.4 million euros.

The current year, however, looks bleak because of the threat of war and the intensified price competition.

"The airline industry is currently having to contend with rather bleak conditions. The tense anticipation of war continues, demand is falling and the heated market situation is weakening earnings prospects. It is  illustrative of the state of the sector that the losses recorded during the last two years are greater than the total profit earned during the previous 45 years. Viewed in this light, our result can be considered to be reasonable," comments President and CEO Keijo Suila.

"We can feel the effects of the threat of war already. At this stage, it is already  evident that the early part of the year will be loss-making and the whole year difficult."

Finnair's turnover for 2002 was 1,639.9 million euros, 0.5 per cent higher than the previous year. The Group's result after financial items and excluding the 35.5 million euro capital gains was 18.9 million euros. The  majority of the capital gains consisted of the sale of Finnair IT and ground equipment as a part of the Group's restructuring.

The earnings per share was 0.43 euros. The Board of Directors proposes a dividend of 0.15 euros per share be paid out.

Unit revenues for passenger traffic remained at the previous year's level but,  taking cargo revenue into account, unit revenues overall fell by almost two per cent. Operating costs fell during the year under review by 1.5 per cent and unit costs of flight operations by a little over four per cent.

The number of personnel fell by a little over three per cent to just under 10,500 persons. Despite lower personnel numbers and cost-cutting measures, personnel costs rose by almost two per cent. Contributions paid to Finnair's pension fund amounted to almost 90 million euros, which was a little under 15 per cent more than the previous year.

Finnair's Finances Healthy

Due to the strong cash flow, a hundred million euros of interest-bearing debt was repaid, leaving the Group with virtually no net debt. The gearing ratio has fallen from a little under 35 per cent to three per cent and the equity ratio has risen to almost 45 per cent. At the end of the financial year, the Group had liquid cash reserves of 300 million euros.

Capital investments in 2002 totalled a little over a hundred million euros. The expenditure included the purchase of two Airbus A319 aircraft. Another five new aircraft of the Airbus A320 family delivered in 2002 have been  acquired on long-term operational lease agreements.

The Market Situation Requires Action

Uncertainty about a recovery in economic growth as well as the world political situation make the result for 2003 difficult to estimate. The intensified market situation and the start-up of new airlines will have a negative impact on unit revenues in the future.

"Finnair's fundamentals and basic health are better than many of its competitors. Even so, in order to safeguard our competitiveness and earnings capacity, we must continue to cut costs deeply in the future as  well," President and CEO Keijo Suila says.

Growth in Asia Continues

The most significant cuts in capacity will take place in European and domestic traffic. The overall growth in capacity, measured in passenger kilometres, is expected to be less than five per cent in the period January-June 2003.

Finnair, in accordance with its strategy, continues to increase frequencies in Asian scheduled traffic. June 2003 will see the start of Osaka followed  by Shanghai in September. Both new destinations will be served three times a week. The number of weekly flights to Beijing will rise to six in June and  later during the autumn to daily.

Asian traffic's share of Finnair scheduled traffic revenues is 17 per cent while the share of domestic operations is 23 per cent. Over half the revenues still come from European traffic. Passenger numbers on Asian routes grew by 38 per cent, and Finnair flew 400 000 passengers on its Far East flights last year.