back in black - finnair/media/files/f/finnair-ir/... · 2016. 11. 25. · • third phase in...

Finnair Capital Market Day, 3 Dec 20121

Back in Black

Erno HildénCFO

Improved business performance in Jan –Sep 2012...


-29,3

38,6

22,7

20,6

11,0

-21,1

-18,1

-1,7

-96,3

147,7

11,111,5

-19,3

-50.0

0.0

50.0

100.0

150.0

200.0

250.0M€

Operational EBIT build-up Jan – Sep 2012


...driven by increased traffic and unit revenue improvement

Q3 RASK+8.7%

PLF +4.5%-p

RPK yield +2.2%

• Unit revenue per available seat kilometre (RASK) up by 8.7% in Jan-Sep 2012 as both passenger load factor (PLF, +4.5%-p) and yield per revenue passenger kilometre (RPK yield, +2.2%) improved y-o-y

Implementation of €140 millionrestructuring and cost savings programahead of target

25%

24%

14%

10%

9%

8%

8% 2%

Target €140 million

maintenance staff

other lease

sales catering

ground handling fuel

155%

38%

148%

109%

105%

102%

43%

26%

57%

62%

57%

74%

43%

0% 100%

fuel

ground handling

catering

sales

lease

other

staff

maintenance

TOTAL

Savings progress to €140 million target


€50 million€90 million

New €60 million savings programme will ensure reaching our target of 6% operational EBIT margin

• The aim is to achieve a permanent reduction in costs of €60 million by the end of 2014

• The new programme complements the existing €140 million structural change and cost reduction programme launched in 2011


€60 million

2014 201520132012

Savings timeline for in total €200 million sustainable savings from 2010 cost level

Hands-on approach to drive our costs down

• Dedicated project organisation and well defined responsibilities and timelines for each savings initiative

• Regular Executive Board level monitoring of advancements

• All Executive Board members and persons responsible for initiative implementation are incentivised in achieving the targets

• 9 Program streams and over 200 savings initiatives in total


Our financial targets

• Operational profit (EBIT) margin 6%

– over €120 million in the coming few years

• EBITDAR margin 17%

– over €350 million in the coming few years

• Economic profit

– To create positive value over pretax WACC of 9.5%

• Adjusted gearing <140%

• Dividend policy pay-out ratio minimum one third of the EPS


The path towards our profitability target

Continuous unit costreduction (ex. fuel)• Fixed cost

leverage through growth and outsourcing

Improved productivity and quality

• Fleet and network optimisation

• Operational quality top class

Revenue maximi-zation

New product offering

• New destinations

• Next generation Airbus 350 XWB

Capital efficiency and strong

balance sheet



Finnair fleet and future investments

Strong financial position supports business development and future investments

-20

0

20

40

60

80

100

120

2008 2009 2010 2011 09/2012

Strong balance sheet

Equity ratio

Gearing

Adjusted gearing

%


-150

0

150

300

450

600

750

2008 2009 2010 2011 1-9/2012

Good cash position over years despite significant investments

Net cash flow from operations

Investment, gross

Short term cash and cash equivalents

M€

Fleet renewal is key for successful strategy implementation – leads to reduced unit costs and improved fuel efficiency

• First phase in 2008-2010– In Long haul, MD11 fleet replaced with Airbus 330/340

• Second phase in 2012 – Reducing 9 aircraft from European fleet– Embraer traffic transferred to Flybe

• Third phase in 2013-2014– Boeing 757 fleet to be replaced with Airbus A321 ERs

• Fourth phase from H2 2015– Airbus 350 XWB, partly to replace current A340s,

partly to increase capacity


Harmonized Airbus fleet brings asset and crew utilization benefits

Finnair invests in new technology

0

50

100

150

200

250

300

350

400

2013 2014 2015 2016 2017

Gross cash flows totalling €1.2 billion

M€

• 5 Airbus 321 ER and 11 Airbus 350 XWB aircraft

• Net effect of investments is materially lower– lease expiries for current aircraft


We have several funding sources availablefor aircraft investmentssecured by aircraft as collateral, loan to values 70-100% depending on the vehicle

Asset backed loans

Asset backed loans

Export creditExport credit

(Japanese) operating

lease

(Japanese) operating

lease

Asset backed bonds

Asset backed bonds


In the long-run, owning aircraft is the most cost-efficient way to finance fleet.

Finnair’s strategy is >50% ownership of the core fleet

43

5

3

76

4

2

5

38

0

2

4

6

8

10

12

A-319 A-320 A-321 A-330 A-340 E170 E190 ATR-72

Unencumbered 12/2013 Encumbered 12/2013

4

2 2

43

54

3

4

2

2

5

3

7

0

2

4

6

8

10

12

A-319 A-320 A-321 A-330 A-340 E170 E190 ATR-72

Unencumbered 9/2012 Encumbered 9/2012

We can finance investments with our increasing debt capacity


• Currently 26 unencumbered aircraft = 68% of the total fleetvalue of €1.05 billion

• In 15 months 35 unencumbered aircraft

Our funding strategy is to use different funding sources to ensure the lowest total funding cost with maximum operational flexibility and continuity

• Fleet investments through secured financing, unsecured loans for refinancing and flexibility– Commercial paper programme of €200 million,

€61 million outstanding.– Revolving credit facility of €200 million expires in Q2/2013. Unutilized,

last time of utilisation 2002. Only facility with a covenant.

• Other potential funding sources– Non-core fleet sale and leasebacks– Asset optimization– Pension loan– Senior unsecured bond


We have a balanced loan maturity profile


54

134

101

5335

131

89

0

25

50

75

100

125

150

175

200

10‐12/2012 2013 2014 2015 2016 2017=>

M€ Guarantee facility (backed by mortgaged 4*A330) to be renewed, the underlying EIB loan expires in 2019

Maturing loans in total €598 million

Our actual lease liabilities are lower thanreported due to expiring lease agreements

Lease commitments, in total €186 million

Aircraft operating lease liabilities


0

10

20

30

40

50

60

70

80M€

0

100

200

300

400

500

600

Lease liability based on formula (7*annual rentals)

Operating leases are off-balance sheet liabilities. When capitalised using the common method of 7*annual aircraft lease payments, the adjusted gearing on 30 Sep 2012 is 90.1%.

Finnair has the strongest balance sheet in the Nordics

18

Key ratios as of 30 September 2012

Finnair Investor Presentation - Nov 2012

0

25

50

75

100

125

150

175

200

Equity ratio Gearing Adjusted gearing

Finnair SAS Norwegian

%

>400%

• Norwegian adjusted gearing >400%• Pension liabilities excluded from SAS adjusted gearing

Summary

• Profitable Q3 result

• Cost savings are progressing as planned

• We have a strong balance sheet

• Finnair will be the first European airline to fly new A350s in long haul traffic

• We have a good funding position to finance future investments


back in black - finnair/media/files/f/finnair-ir/... · 2016. 11. 25. · • third phase in...

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