Finnair`s second quarter result improved from last year. The operational result after financial items rose to 27 million euros. Lower operating costs have lead to improved profitability.
We have the situation well in hand. The reasons for our positive progress are twofold: we have successfully implemented our cost savings plan, and our Asian strategy is paying off. I am confident that we will make a profitable result in 2002, excluding capital gains, says President and CEO Keijo Suila.
The Finnair Group turnover decreased in the second quarter by 4.3 per cent to 421.1 million euros. Despite of this, the result after financial items, excluding capital gains, improved from the previous year by over three million euros to 27 million euros.
Capital gains were 0.8 million euros. Earnings per share were the same as last year i.e. 0.23 euros. At the end of June, equity per share was at 7.40 euros.
Operating costs decreased by five percent and unit costs by a little over four per cent. Fuel expenses decreased by 16.6 per cent thanks to the lower cost of fuel and smaller capacity.
Although salary costs fell by a little under six per cent, the overall fall in personnel costs was only 0.2 per cent. The reason for this was an increase in contributions paid to Finnair`s pension fund, which was mainly due to a weaker performance than last year of the pension fund`s investment activity. A significant increase in insurance premiums contributed to a rise in other operating costs.
In the period January-June, the average number of staff employed by the Finnair Group amounted to 10,567 people, which was 2.6 per cent fewer than a year before.
Capital investments excluding advance payments for the first half of the year totalled 28 million euros. In the previous corresponding period they came to 130 million euros. Thanks to a strong cash flow, over a hundred million euros of interest-bearing debt was repaid during the early part of the year, leaving the Group with net debt of 131 million euros at the end of June. The gearing ratio was 20.9 per cent and the equity ratio was 43.4 per cent.
The adjustments begun last autumn as well changes in the route network have resulted in an improved load factor for Finnair. During the first half of the year, the passenger load factor for all traffic improved significantly, by 3.4 percentage points to 72.4 per cent. “Capacity adjustments have been made in the right places at the right time, which can be seen in our greatly improved passenger load factors,” Suila states.
Turnover for scheduled passenger traffic fell in April-June by 1.8 per cent. Profitability as measured by operating profit improved to 27 million euros from the previous year`s figure of a little over 18 million euros.
In April-June demand for business class travel fell in the company`s main market area, Europe, by a little under ten per cent, but strong growth on Asian and North American routes meant that the overall fall in demand for business class travel was only about seven per cent.
The number of weekly Asian flights was increased to the existing destinations of Beijing and Bangkok, and a new route was opened to Hong Kong. In the first half of 2002 the number of passengers on Finnair`s Asian routes increased by nearly 40 per cent. In autumn 2002 a fifth weekly flight will be added between Beijing and Helsinki.
In the first half of 2002, the airline`s fleet grew by two Boeing B757 aircraft required for leisure traffic. During the winter, the wide-body fleet will also grow by one MD-11 aircraft. The Airbus fleet will be strengthened by a further two aircraft during the course of the autumn. By the end of 2002, the total number of Airbuses will reach 17 and by the end of 2003, the Airbus fleet will consist of 22 aircraft. In the next few years the DC-9`s will be phased out.
Finnair`s associate company, Aero Airlines AS, began traffic between Helsinki and Tallinn at the end of March, using one ATR72 aircraft. In the next few years Aero`s role in Baltic-region traffic will be increased. Aurinkomatkat-Suntours has increased its market share. Together with capacity cuts this has improved the profitability of Leisure Traffic. An over four per cent increase in travel agency turnover suggests a recovery in this industry. Due to adjustment measures the Cargo Traffic result has returned to the black.
A Finnair and IBM joint venture company, Aerosystems Oy, which will provide information technology services, began operating at the beginning of August. In addition, Finnair will sell its ground equipment and related maintenance and repair services to ABB Oy. The objective of the structural arrangements is to release capital tied up in support operations for core operations thus improving efficiency. The capital gains resulting from the arrangements will have a positive impact on the 2002-2004 financial result.