Finnair Oyj

Good day, ladies and gentlemen. I'm Erkka Salonen from Finner IR, and it's my pleasure to welcome you all to this Finner's first quarter 2021 earnings call. I have here with me Finner's CEO, Mr. Topi Manner, and he's joined by the CFO, Mr. Mika Stirkkinen, for the Q&A session. I will now turn this call over to you, Topi. Please, go ahead.

Thank you Erkan and good day everybody. Thank you for joining this quarterly earnings call once again and let's recap the Q1 this year from a Finnair perspective. This was another pandemic quarter for us and the pandemic mitigation actions continued at Finnair. We adjusted costs, both temporary costs as well as permanent costs, and we continued the financing actions. And now, on the back of the progress in vaccinations, You most likely noticed that during the weekend, the global vaccinations passed the milestone of one billion vaccinations. We see that the vaccinations are accelerating in speed and that will be enabling a gradual lift of travel restrictions during the course of the summer and thereby we expect that a more meaningful travel recovery will gradually take place from late summer onwards. So if we look at the Q1, we flew approximately 75 passenger flights per day, carrying on average 3,000 passengers. something like 10% of the pre-pandemic levels. In terms of destinations, the Finnish Lapland destinations were among the most popular, and that traffic was effectively a bright spot in our offering. After a year of not flying to North America, we were able to reopen our flights to New York in March, and that is heavily supported by cargo demand. Since the end of January, we have requested from all passengers a pre-flight negative COVID test in accordance with the recommendation of Finnish health authorities. We also during the quarter we introduced one-way fares and those have been welcomed by our customers and a meaningful share of our tickets are now sold as one-way fares. Customer satisfaction remained at very high levels, actually record high levels. The net promoter score for the quarter being 54. For Cargill, the quarter was very strong while the passenger revenue remained weak. We flew 547 cargo-only flights during the quarter and actually on monthly basis the month of March was our all-time best in terms of cargo revenue. The Suez Canal blockage did not have a big impact on cargo revenue during the Q1, but we see that the impact of that blockage to global supply change and to the cargo market overall will be supportive of air freight demand during the course of Q2. As we have been mentioning previously, the good cargo demand also enables long-haul passenger flights. That is the case with New York and that is the case with our long-haul flights to Asia. The price development per ton has been notable during the past months and during the course of the whole pandemic. In comparison to previous quarter, the prices increased by one third. And in comparison to pre-pandemic levels, the prices have increased 200%. So very notable development taking place on that front. What we see increasingly also in cargo business that the short northern route being also the most CO2 efficient is a competitive advantage, because our customers, for example, the Norwegian salmon companies and others are increasingly focused on their sustainability goals and increasingly mindful of the CO2 emissions in their entire value chain. And this is something that we can leverage in the cargo business now and going forward. Altogether during Q1, Cargo was clearly more than 50% of our total revenue as illustrated by the bars on the right hand side of the picture. When we look at the Q1 numbers, the revenue landed at 114 million euros. So a notch better than during the Q4. And this was clearly driven by the cargo business, as mentioned. In terms of costs, we basically proceeded as expected. And our comparable operating result landed at minus 143 million euros. When comparing with the previous quarter we will need to remember that there we had this one very sizable positive one-off related to our pension arrangements and in comparison to Q1 last year we will need to remember that that was The first quarter when the pandemic started to take its toll, especially during the course of March when we needed to ramp down basically the entire network as the lockdown started across the world. We are taking good steps forward in our savings program, cost saving program that aims for permanent cost savings. And we will be reaching our target of 140 million euros ahead of time. And with that, we are able to increase the target to 170 million euros. We have been taking significant steps forward. We have been basically revamping all of our headquarter functions, applying sort of zero budgeting as a method to these units. And we have been reducing during the course of the fall and winter approximately 30% of our staff in these units. Um, As late as yesterday, we completed a significant project related to our IT infrastructure, moving all of our data from a physical data center to a cloud-based IT architecture. And that means that as of today, we are an all-cloud company when it comes to data. We are reducing the square meters in our office premises quite significantly, up to 40% reduction in these premises. This is partially driven by the decreased headcount in the headquarter functions, but also partially driven by the fact that we estimate that people will be at least partly working more remotely going forward. And this kind of a hybrid way of working will be reducing our office space need going forward. On the maintenance and operations side, we have been also able to realize some significant cost savings on that space as well as across the board we have been renegotiating basically all of our supplier agreements and we have been able to materialize significant cost savings in the process so all of these measures are examples of the kind of measures where we have been exceeding our original targets and these are enabling us to increase the permanent cost savings target right now. We will turn every stone in order to find these cost savings. And we push forward. We have been setting stretch targets for our entire organization. And we are confident that we will be reaching the new target of 170 million euros. And if and when we reach that, we are not stopping at that. We will be pushing for more as we do realize that cost competitiveness will be crucially important for us to be competitive on the marketplace post-pandemic and us to be able to pay back the debt that we are accumulating by means of increased profitability. So when we look at the headline number of 170 million euros of permanent cost savings, I think that the good comparison point would be the operating result of 2019, which was 162 million euros in terms of EBIT. So all other things equal. this would be doubling our profitability in comparison to 2019. When we take a closer look at the composition of the cost saving target, 65 million euros of the saving target are related to fixed costs and 105 million euros are related to variable unit costs that are of permanent nature. So that gives you an idea of the dynamics and how that will be reflected in our P&L depending on how the volumes will be coming back. In terms of cash, the negative cash flow during the quarter amounted to 158 million euros. What we are seeing now is that the working capital impact on the cash flow is clearly stabilising in comparison to last fall when we still had quite a bit of the refunds to take care of. At the end of the quarter, we had 665 million euros of cash at hand, and available undrawn credit facilities amounted to 575 million euros. That includes the 400 million hybrid loan that we have been agreeing with the government of Finland. to which we have an EU commission approval to 350 million euros. We will be seeking for the additional approval from EU commission for the remaining 50 million euros at a later stage. We also renegotiated our revolving credit facility, the curing covenant during the quarter, and that revolver remains in our disposal. So altogether, putting this liquidity together, it amounts to 1.2 billion euros roughly. And that would be with the burn rate of Q1, that would be enough for eight quarters to come. But as stated, we do expect that the demand will be gradually picking up from late summer onwards. Taking a look at the balance sheet, our equity ratio is currently at 22.7%, so still on healthy levels after more than a year of the pandemic situation. The gearing is increasing, but what is worthwhile to note is that the 400 million hybrid loan increases our equity buffers and it's not included in the numbers on this page. As stated, it is all about building the long-term competitiveness now, and cost competitiveness will be a big part of this. We have been comparing ourselves vis-à-vis the competitors in the Asian long-haul traffic, And when we look at the CASC numbers, we see that we are comparing well toward our Asian competitors and even better toward our European competitors. Customer and product is another major headline for us. And here we will be redefining and refocusing our core product, the basic product, what is included in the basic fare. And we will be creating new revenue streams to ourselves from ancillary business. And we will be focusing strongly, much more strongly than previously to direct distribution and with the help of retailing capabilities boost the usage of Finnair.com not only in our Nordic home markets but internationally, gradually in Europe and in our key markets in Asia. So the distribution transformation is a big part of our agenda. We have also continued investments to in-flight customer experience and premium economy as a new travel class will be part of our plans going forward and we do think that premium leisure as a segment will be increasingly important for an airline like us post pandemic. In terms of agility and flexibility, I think that during the pandemic, we have been really learning new ways of working. As an organization, we are less hierarchical, more entrepreneurial now, and I'm sure that that will be serving our purpose going forward. Committed personnel is really key to our plans. On that front, we have been taking steps forward during the past days. We just yesterday announced that we have come to an agreement with our pilots, with our pilot union, of a new collective agreement for three and a half years to come. The CLA is a groundbreaking agreement in many ways. It brings predictability to our business. It increases the flexibility of our business. We already have a quite seasonal demand structure. We estimate that that seasonality will be further increasing post-pandemic. if there will be a degree of hit in the corporate travel. And this CLA enables us to address that seasonality better going forward. We are also moving from a purely seniority based salary model into a vacancy based salary model and therefore we are simplifying many of the old structures in our CLA and optimizing the usage of our pilot resources. So a very important deal and a very important building block in the rebuild efforts of Finne. Looking forward, we are now preparing for a gradual increase in the traffic during the course of the summer. The first eligibility trainings for our flying crews have begun. The pilots will go through simulator training, the cabin crews go through their sort of travel and service related training for several days. But when the trainings are done, they will go back to furloughs and once we start flying more, then they will be called back on a relatively short notice. And this enables us to flexibly manage the cost and manage the resourcing. We yesterday announced our summer network, the network that we are starting with, and that includes over 60 destinations. So the summer destinations include countries like Spain, Italy and Greece. And on the back of a rapidly increasing vaccine penetration in the US, we estimate that the travel restrictions will be lifted toward the end of June. And thereby we are introducing and reopening Chicago and Los Angeles as new destinations. And we will be also adding frequencies to New York. We will be keeping a close eye on the demand development and we stand ready to add frequencies and flights hand in hand with demand as travel restrictions are loosened. We are continuing our comprehensive flight, health and safety related measures. And last week we also announced that we are from 11th of May onwards accepting vaccination certificate as an alternative to negative COVID test as the vaccine coverage increases rapidly in the markets that are relevant to us. We also able the customers to book with confidence so that they can transfer their bookings without any fees flexibly if the bookings are made before 1st of September. Also the corona cover is extended for bookings made by end of June at the latest. And with this we hope that customers are able to move from travel related dreaming to travel booking and then onwards to actual travel experience during the course of the summer. There has been a lot of talk of government exit plans. I guess in many countries, the Finnish government also announced its own exit plan. And while that plan is a very high level plan, a very good part of it is that the Finnish government is committed to EU digital green certificate as the basis for reopening travel. and EU digital green certificate which by definition restores free movement in EU indeed is a big part of our plans and we expect that to promote travel across Europe from late June onwards when it is supposed to be decided. Getting travel arrangements and travel agreements with countries outside of EU will be very important, and we will be working very closely with our government to get those arrangements in place, both in Asia as well as in North America. And we do understand that especially related to US, EU is also taking steps steps forward. We have been having a joint task force with a number of local parties that are relevant to health and safety measures and that we will be separately publishing a report on those recommendations later today. So when we look at the outlook and guidance for Q2, we are reiterating the essence of our guidance for previous quarters. And as stated, we expect that the gradual recovery of demand will take place from late summer onwards and thereby from Q3 onwards. I stop at this. So thank you for listening. And then I think that it is time to go for questions.

Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. There will just be a brief pause where any questions are being registered. And we have a question from the line of Jaakko Tyrvänen from SEB. Please go ahead.

Yes, good afternoon, everyone. A couple of questions from my side, if I may. I would like to repeat the same question I had last time, and by asking you, what is your current take on the long-haul traffic recovery, i.e. will it lack the intra-European traffic with some two to three months, which I recall was the answer last time. And a follow-up on this, could you elaborate a bit more around the Chinese restrictions currently, and what is your take when they will accept a kind of European Covid passport or certificate in order for passengers to enter the country? or will there be additional country-specific requirements, in China specific, but also to other Asian countries? Thanks.

between European travel and the Asian travel, then we can repeat what we commended in the last call. So we see the situation in similar fashion currently. When we look at the vaccination speed in Asia, it differs quite a bit between countries. Now, lately, we have been hearing cautiously encouraging news from China in terms of vaccination. It seems that the total volume of people vaccinated in China has exceeded 200 million. And when we talk to our local sources, our local people, local research firms, and for example, the Finnish embassy in Beijing, they are stating that the vaccination coverage in bigger cities is actually quite high as of now. For example, in Beijing, the vaccination coverage seems to be above 40%. as of now. Now, we don't know how that will translate into lifting of the travel restrictions. So that is an open question and that remains to be seen. Of course, from an aviation perspective, from a global trade perspective, if you will, it would be well advised if the bigger cities in China would be vaccinated fast, and then that would be enabling the lifting of some of the travel restrictions during the course of the fall. China has communicated a target of vaccinating approximately 40% of its population by July, and that is something that we estimate that they can stick to. Vaccination speed in Japan has been notably slower. So that is something that we are observing closely as we speak. We also see some something similar in South Korea, although very lately the vaccination speed in South Korea has been accelerating quite a bit. And then there are individual countries like Singapore, where the start was slower, but which have been gaining a lot of speed in terms of vaccinations. So this would be probably how we would be seeing the Asian situation on the overall. India obviously it is a case of its own and that is something that we will need to consider as a separate India's role in our entire network before the pandemic was not significant. We basically only flew to Delhi.

Okay, thank you very much. Very helpful. Then also on the short-term demand, what is your current understanding on the level of pent-up demand for leisure traveling? i.e. will the customers accept higher pairs and just want to go abroad regardless of the price level? Could you elaborate a bit on the yield expectation in the short term?

This is of course an important question. We do see a lot of pent-up demand at this point of time. Based on customer research, we have seen the global example. Domestic traffic in the US recovering very fast during the past month or two. And on a smaller scale, we see the pent-up demand also materializing in the bookings for our sun tours part of the business. There the bookings have been increasing clearly during the past weeks. Some of the bookings are for summer, but predominantly the bookings are for next fall and next winter. What is happening in that part of the business is that we are currently selling with higher than average prices. That would be a small indication of customers' willingness to pay post-pandemic. But at the same time, we do think that the competition will be tough once the travel restrictions are lifted. And therefore, we estimate that many competitors will be deploying capacity and that will be impacting the yield environment as well. When it comes to a little bit more long term picture, we are not calculating on increased unit revenue. Rather, we want to be more cost competitive and we will be pushing forward with our permanent cost savings program.

Excellent. A follow-up on the competition. Have you evidenced any new rivals entering the Helsinki market? As we know that the Norwegian, at least according to their current plan, will basically serve just a couple of Nordic routes from Helsinki. But have you evidenced any new rivals entering the market or their plans?

Not at this stage. So... of course, remains to be seen. And we are, of course, observant about the customers that Norwegian is leaving behind, so to speak, and we want to grab our fair share of those customers.

Right. Then one technical question on the costs. I noticed your maintenance costs were on a relatively low level. What was the impact of weaker dollar and higher discount rate you have there for the reserves on this coastline? And also, what will be the impact of the ramp-up cost in maintenance coastline when you start to take more fleet into use?

Discount rating back in Q3 was 3 million, positive. And the maintenance cost, we are really cash conscious during the ramp up. So we will optimize the maintenance cost very carefully. So that's what I can say about the maintenance cost.

Okay. Thank you very much, sir. That's all from my side at this point.

And the next question comes from the line of Achal Kumar from HSBC. Please go ahead.

Yeah, hi. Thank you for taking my question. First of all, so basically what I wanted to understand, just to follow up on the trading question, so now you mentioned that you're opening the bookings in May and you're opening the flights in May and June, and I believe you must have opened the flights in the system. So how the forward bookings are looking like at this point of time for Asia, for North Atlantic and for Europe, please, if you could discuss that.

I stated it is early days because we have been having, of course, some flights published during the past months. And we have basically have we have not had any active marketing on that one. We published our summon network. yesterday and now we will be gradually ramping up our marketing efforts so the bookings the forward bookings are still subdued going forward but as stated we estimate that we will be seeing gradually increasing bookings toward summer as the vaccination coverage increases. In our sun tours part of the business the booking window is notably longer and as stated there we have been seeing a notable

notable pickup of bookings during the past past weeks right okay understood the other thing I also wanted to understand in terms of the slots so previously Of course, most of the airports have allowed airlines not to lose the slots, even if they're not flying. But now, of course, how long have you enjoyed that exemption? I mean, is it still the case, or now, if you don't fly, you will lose the slot? How is that situation, especially in Hong Kong and China?

If we start from the European end, the European slot regulator has been updating the slot rules. With the updated rules, we can safeguard the important slots for summer 2022. And with important slots, I refer to those slots on key European airports, on the most congested airports that would be critical for our Europe-Asia connectivity. So that's where we are. This coming summer, summer 22, I mean the slot rules have been postponed until end of June, so the slot waiver is in place and then we foresee that that the pandemic still will be impacting the demand picture during this summer and therefore it is possible to find the slots on ad hoc basis during this summer. When it comes to key slots in Asia, the travel restrictions are more stringent in Asia currently in the key countries and therefore Therefore, there's no danger of losing key slots at this point of time in Asia.

Right, right. Okay, understood. Fair enough. The other thing also, I just wanted a bit more detail about your deal with the pilots. You mentioned that you have reached an agreement and that will help you to be more flexible But could you please elaborate a bit more in terms of what kind of deal? I mean, how much salary do you need to increase? So if you could please explain a bit more on that, that would be helpful.

One part of the agreement is the so-called scope that will be enabling us to use, for example, with least capacity, clearly more than previously, to address some of the seasonality. in the traffic. So that's improving the operational flexibility of the company. And then the other key part of the new agreement is the new salary structure that I mentioned.

Okay. Right. Okay. Other thing I also wanted to understand about the details regarding this hybrid loan. So, according to the statement, of course, you can use 350 million, provided your equity falls below a certain level. So, just want to understand, if you could please elaborate that a bit more on the hybrid loan.

Sorry, we can't disclose anything more what we have disclosed. So... we need to follow our policy on guidance, on disclosure. Okay.

Okay, no worries. Finally, on the cargo, I mean, so you, of course, the cargo was, this quarter was very strong in terms of cargo business. But how do you see cargo business going ahead? And especially once you resume your passenger business, how would that have an impact on the cargo business, definitely in terms of cargo capacity, but otherwise also? How do you see the cargo business going ahead?

Yes, we see that on the short term, We see the cargo business enjoying a good demand environment and good price environment. As stated, the Suez Canal blockage and the unwinding of that in terms of cargo will most likely be supportive to the cargo business during the next couple of months. We see this cargo momentum to continue until a more meaningful amount of passenger flights, long haul passenger flights are restored. and when that happens then of course there will be more belly cargo capacity out there and then that will be impacting the air freight demand environment as well as the price environment. What is the big outstanding in this one is that what obviously happens on the shipping side and what will be the impact of that to global value change. But on that one, we really cannot speculate at this point of time.

Okay, fair enough. Fine. Thank you so much and good luck.

And we have one more question from the line of Giovanni Cafforio from LexCorp Capital. Please go ahead.

Hi. Hi, guys. This is actually Nicholas from Giovanni's line. I'm here today. Thanks for the call. I have a couple of questions really.

The first one is on, I mean, you had this EBIT margin target pre-COVID and pre all this mess of sort of, you know, aiming to get to 7.5%. Now, obviously, as you said, the cost savings are a big plus. But I guess against that, you have sort of CO2 prices, et cetera, fuel prices moving back up. And obviously, other airlines are also cutting costs, right? So ultimately, what's the yield? I mean, you addressed that, I guess, earlier. But I think my question is really, you know, do you sort of

think the seven and a half percent target if you sort of think two three four years out is that is that sort of where where you think the business can can be in a few years time or is that sort of more difficult or maybe actually easier in a sort of post-covid world we are we are currently updating updating our strategy and that strategy will be building on the key cornerstones of our strategy before so uh We will be all about connecting Europe and Asia. We want to be a modern premium airline. Sustainability will be important for us and so forth. In connection to this strategy update, we will be also updating our long-term financial targets. And we will be making that strategy public probably toward the latter part of the year, end of the year. The exact timing is not decided at this point of time. But what we do want to see is that the traffic is coming back. first and we do want to see or we do want to have a better understanding of the competitive environment and the impact of that to yield and then I think that we will be better positioned to address this particular question. What remains clear, however, is that with the savings package of permanent cost savings, we are improving our underlying profitability parameters quite significantly, and we will be better equipped to tackle the competition in the post-pandemic world. As stated, we are comparing well to our key competitors, both Asian and European, in the Asian traffic part of the business. And based on what we have seen, our target of a permanent cost savings is also more ambitious than some of the competitors are having.

Thank you. Thank you very much. Um, and I guess sort of second question would be, so I, I understand that from a sort of accounting perspective, the hybrid is sort of seen largely as a sort of debt, um, sort of equity, but, but, you know, I guess I'm, I'm, I'm minded to look at it a bit also as being sort of dead here, uh, as opposed to straight equity. And I guess, you know, I have a market cap of sort of way above a billion euros, um, again, the market is wide open, isn't there sort of a temptation or isn't there sort of a ultimately, wouldn't it put sort of Finnair in a much stronger position to actually go for some sort of proper equity here, considering that it might be a year until next summer maybe where you have sort of proper cash flows again?

That is not part of our plans. So, as stated, when we look at our balance sheet and when we look at the current scenarios of the demand coming back, no matter whether we are talking about the base case or whether we are talking about the pessimistic case, we feel that the needs of the balance sheet are addressed by this hybrid arrangement. And the key reason for us liking the hybrid instrument, and now I refer to the 400 million hybrid loan with the state of Finland, is that we can draw on that one flexibly based on needs. So in this uncertain environment, that aspect of the hybrid loan comes in handy.

Right. But if you think about the free cash flow, it's, you know, do you think that, I mean, it looks to us that we probably might have to wait until next summer, meaning summer 22, to get a sort of properly positive cash flow. Does that sort of make sense? Or do you think we could be sort of positively surprised here?

That's not true, so you need to remember that operating cash flow turns positive around two months before the EBITDA turns positive. And when EBITDA is, let's say, well in black, so operating cash flow is also well in black, and our upcoming investment cash flows are quite small going forward because we won't... It's basically some investments to our current fleet and some cabin retrofits and that's it. We have only three widebody orders in place. The next one is already financed. And hence, the investment cash flow part of the equation is quite small, actually. And as stated, the working capital impact, when we grow from this current level, and we have already repaid all of the refunds on some of our peers. So you need to remember that we had a very negative working capital dynamics last year, but when the growth starts, it's vice versa.

And when it comes to the investment cash flows, what we have been stating previously is that whereas before the pandemic, there was a discussion about narrow-body investment at Finnair, we have stated that this narrow-body investment is still part of our long-term plans, but it is not actual for next couple of years. So instead, in terms of the fleet management, we will be working with life extensions and optimization of our fleet.

And just the last question then, because obviously there's sort of this operating and investing cash flow, there's also sort of financial expenses that you, although, I mean, they're part of the operating cash flow, I guess, but just can you, help us out here, is the sort of Q1 financial expenses something that one should unrealize at this point, or would you, you know, sort of, how do we think of what, you know, what sort of unrealized 2021 financial expenses are going to be?

Financial expenses paid net, i.e. that part what's in the operating cash flow, is slightly less during the rest of the year than during Q1. So it's not foreseen to be as high as now, but a tad smaller than currently. I was now talking about cash flow, but there are quarters when it's even below that. But in terms of cash flow, as you know, when you have an interest payment, you pay a coupon. So during that quarter, you have a higher higher cash flow, but as said, on average smaller than the previous quarter.

And the cost of the hybrid, would that also sort of flow through that line, or would it sort of be more like... It's directly from equity. Right, okay, so effectively, we can sort of see how you account for that over the periods to get a better sense of how it accrues, basically.

Hybrid is equity, and the hybrid coupon is directly out from equity.

Right, so on the balance sheet, that amount is going to be increasing. On the part of this drone, as a good point, sort of flowing through the balance sheet, basically.

Yes.

Okay, very clear. Thank you so much, guys. Thank you.

And we have just one follow-up question from the line of Achal Kumar from HSBC. Please go ahead.

Yeah, hi. I'm sorry. Just two questions. One, in terms of capacity, so although I understand that the situation is very fluid and there is high uncertainty, But what will be your best guess in terms of your capacity? I mean, is it fair to assume that your 2020 capacity in terms of ASK would be about 50% of 2019? Or what is your best guess in case you need to talk about that?

We're not speculating on that one. I stated there are uncertainties related to how the demand will be coming back during the course of this year. And then we will be adapting our offering and deploying our capacity hand in hand with demand. So that is what we can say about that when we speak of this year.

Okay, right. Second question was about the capex and liquidity. So what will be the capex guidance for this year? I know it's so small, but what is the capex guidance for this year? And what is the cash burn rate you are expecting this year?

Capex for the full year was, including Q1, was 119 million. And as stated, the cash flows related to CAPEX are weighted towards the latter part of the year. So that's what I can say. So now during the first quarter, the investment cash flow was extremely small. Now during the next three quarters, it will be a tad higher than that.

Right. And then what will be your cash burn rate? Sorry.

Please continue.

No, sorry. I just think that, you know, and what will be your cash burn rate for this year?

As said earlier, I start with the operating cash flow. So operating cash flow, in our projection is seen to turn positive approximately two months before the EBITDA turns positive. And we see in our projections that the EBITDA would turn positive in one of the summer months, depending on the growth rate and how the traffic comes back. And then in our projections, we have positive operating cash flow quarters, But once again, it really depends on which scenario materializes. And then, as I stated earlier, so investment cash flow total, a tad higher than 100 million for the year. And when we had a really small investment cash flow quarter after us, so you can calculate roughly where the investment cash flow per quarter lands.

Thank you so much.

And we have another follow-up question from Jaakko Turvanen from SEB. Please go ahead.

Yes, another technical cost-related question from my side. Your depreciation declined notably from the Q4 levels. Could you elaborate a bit more on what was behind this? And were there some exceptional items in the fourth quarter? Also remember that you retired a couple of your old A390s. Did those have some kind of an impact on the comparison here?

On the depreciation, we had some... lease agreements for the right of where you capitalize the leases and hence when you do that and you for instance extend the lease and decrease the monthly lease cash payment so that when you do the IFRS 16 accounting treatment so then you end up with the smaller depreciation so That was visible there. But on the other hand, the depreciation of Q4 was abnormally high. So it was a one-off there. So when you look at a bit longer term, it was actually the other way around. So Q4 was a tad high compared to the run rate.

Right, thanks. And so should we expect the Q1 level to be a good proxy for going forward?

Correct. However, as I said earlier, we are looking for savings on the lease side. And if and when we are finalizing those, let's say, lower lease rates, then when this right of use methodology is applied, then potentially the depreciations would be lower, but we will report on those in due course. Excellent. Thank you very much.

And we have just one more question from Richard Schuman from Avonside. Please go ahead.

Good afternoon. I see on your page 9, when you talk about the fleet renewal, that you also mentioned the renewal of the short-haul, medium-haul fleet. And on page 9, you say the time horizon of the remaining fleet investment plan will be reassessed. But you add the company will in particular follow the rapidly evolving aircraft market. What is exactly your time schedule when it comes to the renewal of the A320C or family fleet?

When we have been discussing about the narrowbody campaign before the pandemic, we have been especially talking about Airbus 320s and NEOs and similar aircraft from other other providers, but as stated now on the back of the pandemic, narrow-body investment is not actual for us during the next couple of years. We still keep that as part of our long-term plans, but then the time horizon is beyond this next couple of years that I mentioned.

May I add a question? What do you mean exactly by the rapidly evolving aircraft market? Do you see opportunities to jump on when the right offer may come along?

Well, we talk in general about the aircraft market. There might be opportunities in the shorter-term lease market, but it could also mean that we could use for instance leased engines because there might be opportunities there that it might make more sense to instead of a major overhaul for an engine to lease an engine and stuff like that so we are constantly optimizing the cost of the fleet and that's part of the equation so we might end up I mean theoretically speaking we might end up leasing an aircraft or leasing an engine or then buying an aircraft or buying an engine or doing an overhaul or maintenance event. So we are looking at the big picture and optimizing the cash flow.

Okay, thank you.

And as there are no further questions, I'll hand it back for any closing remarks.

Okay, as there are no further questions, I guess it's time to end the call. So we would like to thank you for the excellent questions and joining the call. We wish you a great day.

Thank you for joining. Bye-bye.