Oil price pushes Finnair's six-month result into the red

Finnair's six month turnover rose by nearly 12 per cent to 410 million euros. Operating loss, excluding capital gains, was 2.8 million euros. Post-tax result for the second quarter, however, was 7.5 million euros and hence earnings per share were 0.09 euros. Particularly record high oil price and lower average price level burdened the Group's result. Average yield in scheduled passenger traffic was one fifth below last year's level.

"In terms of the result, the second quarter of the year was a clear disappointment to us. The price level achieved fell short of expectations and higher fuel costs had an adverse impact on the result. For Finnair the extra bill for jet fuel will this year amount to an estimated 50 million euros," says President and CEO Keijo Suila.

Finnair's demand has been growing strongly during the first half of the year. In January-June, Finnair's overall traffic demand, measured in revenue passenger kilometres, grew approximately 24 per cent. During the same period, unit revenues for passenger traffic fell by 15 per cent, during the second quarter over 17 per cent.

"A positive aspect is that growth in demand and operational quality have been among the best in Europe. Despite an increase in capacity, our load factors have been on a positive trend over the last 12 months. These create a good foundation for future success," Suila says.

Operating costs rose by 9.0 per cent in the second quarter due to increased traffic as well as the costs caused by the start-up and operational expansion of Nordic Airlink. Unit costs for flight operations fell by over 15 per cent. Personnel costs fell by 3.0 per cent and the proportion of the Group's total operating costs accounted for by personnel costs declined by more than three percentage units to 27 per cent.

"I am confident that the reduction in unit costs brought by our efficiency programme and the correction in price levels will produce conditions in which we can improve on last year's result and achieve a profitable result next year."

The Finnair Group said it plans to increase the capacity of its airlines by around 12 per cent in the second half of 2004. The growth takes place mostly in the Asian traffic as well as in Nordic Airlink's capacity.

The decline in the general price level is expected to come to a halt as airlines strive to increase their prices under pressure from higher fuel costs.

"Our own average price is expected to rise by 7.5 per cent from its current level. The impact of the increase will be delayed, however, and will be felt mainly in the final quarter of the year. The current quarter will therefore remain weak and this year's result will be a loss." Keijo Suila estimates.