Finnair is carrying out its strategy of sustainable growth by increasing its Asian traffic and by preparing for the liberalisation of traffic rights in the Baltic States which may take place as early as next year. The goal is sustainable growth based on a healthy economy, first-rate service, well-known brands and a solid market position. President and CEO Keijo Suila presented these points today Monday at an investor seminar in Stockholm.
Growth prospects in Asia and the Baltic area
Asian traffic grew 17 percent in 2001 and just under 40 percent in the first nine months of this year compared with the same time last year. The growth is proportionally greater in Business Class than in Economy Class. Finnair’s passenger load factors in longhaul traffic are over 80 percent. More specific traffic statistics will be released on October 9, 2002 at 9am (6am UTC).
Finnair is increasing its longhaul fleet by a fifth MD-11 aircraft this coming winter. The airline will increase frequencies to its current Asian destinations and reopen its Osaka route next summer. The European Common Aviation Area (ECAA), which may come into force as early as 2003, will allow EU member state and EU applicant state airlines to operate in all countries that are party to the agreement. Finnair’s Estonian affiliate Aero Airlines AS began operations earlier this year and its operations will grow as the Baltic State markets open up.
A healthy economy enables sustainable value creation
During the past year, Finnair has adjusted its operations to meet a healthy growth. The profitability of the route network has been improved by decreases in European and domestic operations and increasing capacity in the strongly growing Asian traffic markets.
Operating costs have been controlled by a 115 million euro cost-cutting programme. The programme has also brought lasting improvements to the cost structure. In the second quarter of the year, unit revenues continued to grow and unit costs to decrease.
“Despite difficult circumstances, I believe we will achieve a better, profitable financial result this year compared with last year,” says President and CEO Keijo Suila.
In order to achieve sustainable and value creating growth, a minimum target for an operating profit with the current capital structure has been set at six percent of the turnover. With the current level of turnover, this should amount to approximately 110-120 million euro.
The annual target for total shareholder return (TSR) has been set at 15 percent. Finnair’s dividend policy is to pay at least a third of the annual result in dividends.