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Finnair

Finnair H1 result is under pressure by high fuel prices and more competition on routes to Asia.

Finnair reported Tuesday 17th July its H1 (January-June) results. The operating result came in 41.9 percent below last year, disturbing the financial markets and Finnair shares fell sharply in early trading at Helsinki stock exchange.

Key H1 2018 figures versus H1 2017

Revenues were up 13.7 percent to Euro 1.18 billion, but the operating result was down 41.9 percent to Euro 45.9 million, earnings per share (EPS) are down 56.2 percent to Euro 0.41.
The main reasons for the reduced operating result are linked to; fuel costs increased with 20.7 percent, staff costs up 12.5 percent, traffic charges up 13.0 percent, together with increased competition that put pressure on the airfares. The increase in expenses hit unit costs per available seat kilometer (CASK) inclusive fuel and drove it down 3.8 percent to Euro cents 6.30, unit revenues per available seat kilometer (RASK) were down 3.9 percent to Euro cents 6.62 and the yield per revenue passenger kilometer was down 3.8 percent to Euro cents 6.30.

On the positive side, passenger volume increased 14.1 percent to 6.47 million, ancillary revenues increased 13.8 percent to Euro 79.6 million but ancillary revenues per passenger decreased 0.3 percent to Euro 12.30. Available seat kilometers (ASK) increased 18.4 percent to 20.3 million, revenue passenger kilometers (RPK) increased 18.5 percent to 16.8 million, while passenger load factor was down 0.1 percent unit to 82.6 percent. Total fuel consumption ended on 495 million tonnes, an increase of 14 percent and resulting in 0.079 tonnes CO2 emission per ASK, a reduction of 3.7 percent.

Competition on the important Asian markets has increased

Finnair has grown to be the leading European airline on transporting passengers between Europe and Asia. Despite competition has increased and demand slowed during 2018, Finnair reports increased number of passengers and higher load factor on its Asia routes. Finnair also engage in closer cooperation within the oneworld alliance on its Asia operation, by participating in the Siberian Joint Business (SJB).
Asia traffic generated Euro 460 million in ticket revenues in H1 and is the largest market for Finnair, ahead of Europe that generated Euro 427 million. North-Atlantic ticket revenues where at Euro 60 million, while domestic traffic in Finland generated Euro 97 million.

Outlook for the rest of 2018

Global airline traffic continues to grow strongly in the second half of 2018. Finnair expects increased competition as existing and new operators increase capacity, particularly on routes linking Europe with Asia and North-America.
Finnair estimates that its capacity increases by more than 15 percent in 2018. Passenger volume is expected to grow broadly in line with capacity while revenue growth is expected to be slightly lower.

The substantial increase in the price of jet fuel will impact Finnair’s result especially in the second half of 2018. Finnair estimates that its comparable operating result in 2018 will be broadly at the previous year’s level (2017: 170.4 million euros), if current fuel prices and exchange rates prevail and assuming no material changes in business environment.