Volcanic Ash and Strikes Tarnish Year of Growth

“Last year we witnessed much that was positive in the development of our operating environment. Due to efficiency measures, we were able to reap the benefit of improving demand and price levels as well as a tailwind provided by the strengthening of key sales currencies,” says Finnair’s President & CEO Mika Vehviläinen as Finnair’s annual results for 2010 are published.

The effects of the volcanic ash from Iceland and of industrial action are reflected in the figures. The Finnair Group’s turnover grew last year by 10% to 2,023 million euros. The operational result was a loss of just under five million euros but profitability clearly improved from the previous year’s 170 million euro operational loss. The result before taxes was a loss of 33 million euros.

Finnair’s result includes an estimated 55 million euros profit weakening from the ash crisis and industrial action. Last year Finnair implemented many efficiency measures, which helped production costs to rise clearly more slowly than turnover. Cash flow from business operations strengthened by 180 million euros. Development was particularly positive in the Airline Business segment, whose turnover improved by around 200 million euros.

“Due to efficiency measures, profitability improved from the deep loss of the previous year, but it is still far from the company’s financial targets,” says Vehviläinen. “The final quarter, however, was adversely affected by an unfortunate labour dispute which, together with the Iceland volcanic ash crisis, undermined the progress made last year. Without this disruption, the final quarter performance would have been very strong and the full year profit-making.”

Passenger numbers were slightly over seven million, which is 4% fewer than in 2009. Finnair’s total capacity declined by 3%. Carried load, on the other hand, grew by just under 8%. One significant factor was strongly increased cargo traffic, which grew 38%. Cargo carried in the holds of Finnair aircraft and by cargo aircraft totalled 122 million kilos, most in traffic between Asia and Europe.

The modernisation of Finnair’s long-haul fleet will be completed today (February 4) when the final Airbus A340 aircraft joins the fleet. This year, Finnair will have a total of 15 long-haul traffic aircraft, which is three more than last year. This year, Asian traffic capacity will accordingly grow by more than 20%.

“Last year, we managed to restrain growth of personnel costs by stabilization agreements and a collective agreement with pilots; the agreement lowers pilots’ unit costs,” Vehviläinen continues. “With the ending of stabilization agreements this year’s challenge is to further reduce overall unit costs in order to improve our competitiveness. With cabin personnel, we made recently a new three-year collective agreement, which contain some elements improving productivity.

“We are committed to the company’s success, which we have expressed by updating our vision and by initiating an identity renewal and change of operating culture. Success also requires that we continue our work and implement structural changes during the coming year. There is still room for improvement in work productivity. It is to our benefit that we can undertake this work as traffic grows.

“Like a rally driver, we are therefore pressing the brake and accelerator at the same time. In this way, we can both improve our performance with efficiency measures and take advantage of growth opportunities in the operating environment, particularly in Asia-Europe traffic, which is our main strategy,” explains Vehviläinen.

“The outlook for this year is positive. Turnover is expected to grow by more than 10%. The first quarter is expected to remain clearly loss-making, while the result for full year is projected to be in profit.”

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