Finnair outlook weakens further

Finnair Group results for the 2001 financial year are expected to be negative. The weak economic development in the key market areas has been reflected in decreased demand for Business Class since last spring, and this trend has accelerated since the September events in the United States. The number of Business Class passengers fell by 21.5 per cent in September. At this time, the result for September and the third quarter is expected to be considerably lower than the year before.

Increased personnel costs will also have an effect on results for the entire year. The main reason for this is the increase in contribution payments to the Finnair Pension Fund, which in turn are a result of the weak development of the fund's investments due to the decline stock rates. As a result of the terrorist attacks, insurance expenses as well as costs incurred from heightened security have increased considerably since September.

On the basis of advance bookings, passenger volumes are expected to further decline. The greatest change has taken place in the demand for Finnair's only North American destination New York. Development in the company's key market areas, Europe and Finland, is also expected to be negative. The growth in demand for the Asian routes has also weakened. Changes in leisure traffic have mainly included changes in destinations as well as cancellations, which have been made in co-operation with travel agents.

Finnair has previously announced a seven per cent decrease in supply in the winter season compared with the traffic plan that was in effect before the terrorist attacks. In addition to this, several cutbacks will be made in European and domestic traffic, especially around the holiday season.

Finnair aims at saving an annual total of approximately EUR 115 million, of which savings in personnel costs account for a little under half. In addition to the savings measures already in effect, which will total EUR 17 million by the end of the year, new savings will be sought in all operational expenses. Finnair started negotiations with its personnel on October 18, 2001 in accordance with the Act on Co-operation within Undertakings. In the negotiations, savings in personnel costs will be sought that make it possible to avoid laying off the entire workforce for between two to four weeks by the end of 2002, or to reduce such layoffs to the shortest possible periods.