Finnair Oyj

Good day, ladies and gentlemen. I'm Erkka Salonen from Finnair Investor Relations, and it's my pleasure to welcome you all to this Finnair's third quarter 2024 earnings call. I have here with me our CEO, Mr. Turkkakuusisto, and he is joined by our CFO, Mr. Christian Pullola, for the Q&A session. I will now turn this call over to you, Turkkka. Please, go ahead.

Thank you, Erkka. Third quarter, 2024, we saw our comparable EBIT to fell short of the strong comparison period of last year due to lower unit revenue. However, we are still maintaining our full year expectation unchanged that I will cover later in this presentation. When we take a bit more detailed view that how did the most important quarter and peak season materialize in our numbers, we did see that the number of passengers increased by some 9%, which was pretty much aligned with our capacity increase. So we started to see more parallel development with the number of passengers versus the capacity that we have put into the market. However, at the same time, we did witness a ticket price decrease of 9% that led into a situation in which our passenger revenue decreased a bit. That was then offset by two very positive revenue components. Our ancillaries grew by some 26% versus last year and also the positive development in the cargo business continued by a 28% growth. However, because of this ticket price increase, our RASC decreased by 8% that led into comparable EBIT falling behind the strong compare of 2000 and 23 landed at 72 million euros. When we look into our passenger load factors, we did see improvement, especially in the North American and North Atlantic traffic, but then it decreased, especially in the Europe and domestic routes and networks. Overall, the load factor for the The quarter was 79.5, which was some 1.5 percentage points below last year. On-time performance was 77, which was pretty much according to our expectations. However, also decreased a bit from the compare period of 2023. And that was mainly impacted by the airspace and air traffic control capacity restrictions in Europe. And that's something that basically all carriers saw during this quarter. Looking into the P&L in a bit more detail, as already mentioned, based on our strategy and commercial efforts, we are very happy to see that the ancillary revenue is increasing by 26% and also the cargo revenue by 29%. which is mainly driven by the e-commerce originated shipments from Asia to US and Europe, and also we still have some sea freight bottlenecks in the supply chain that is giving positive tailwind for air freight. All in all, as already discussed, the revenue remained flatties year over year, and then the comparable operating result was 72 million euros. Having said this, we can be satisfied with the operating expense management, even though the total operating expense is increased, but at the same time, the unit costs increased slower based on the capacity, because of good cost management. CASC was actually 5.2% below last year. At the same time, we start to see positive development also in the P&L, when it comes to the balance sheet improvements, and for instance, our financial expenses were reduced by some 10 million euros in this quarter. We are continuously obviously following the jet fuel price development, that was below the comparison period, but there is a lot of volatility around the oil price development as we speak, and we need to also acknowledge that the oil price is still quite a lot higher than it was in 2019. But all in all, when we factor all in, including the financial income and expenses, the bottom line result was actually better than it was in the third quarter of 2023. Another positive from the third quarter numbers is our capability of continuously generating an operative cash flow, which was some 4 million euros above last year, which is thanks to a strong investment discipline and mainly the cash generated was then used to buy back the outstanding bond that we had. So now finally we have been capable of repaying all the investment facilities and vehicles that were deployed during the double crisis time. And at the end of the period the gas funds were again on a good level and pretty much along to the target of having one third of our annual revenue as gas funds. And in addition to gas funds we do have also at our disposal the 200 million euro revolving credit facility, thus the funding position of the company is solid as we speak. Moving on with the balance sheet perspective, We continue to gradually improve our equity ratio, but at the same time, the gearing ratio is becoming a bit more quickly down and we do have some 300 million euros less interest bearing debt and net debt currently in our balance sheet versus last year. On the strategy implementation side, now we start to see the balanced route network being stabilized and successfully refocused, and this has been a pivotal component of recreating future prospects for Finnerp, given the fact that the Russian airspace has been closed now since the 2022. But now the network has been successfully refocused and our fleet has been successfully redeployed, which supports our revenue management on offering and also yield optimization as we move forward. Earlier in this autumn, we did launch an organizational change that will further strengthen our focus on understanding customer needs and customer experience. That is an area of development as we move forward to the next chapter of Finner. We need to understand the various needs of our various customer groups in greater detail to secure our commercial competitiveness and value creation to our customers. So therefore, I'm happy to report that our net promoter score continued to increase during the third quarter up to 40%, and it was 39 in the compare period. And when we look into the details of this number, we do recognize that the most frequent flyers of Finnair are actually grading us even higher. So that's definitely a positive evidence of our commercial agenda moving forward. This is especially supported by the widebody cabin renewal completion. All of our widebody aircrafts, 25 of them, are now equipped with this new cabin. At the same time, we did launch the new Schengen launch early July this year. That's also getting positive feedback from our customers. In terms of our go-to-market strategy, the share of modern sales channels grew up to 71%, and then when we look into the components of it, it's approximately 60% of our tickets is currently sold through finnar.com, and then the rest, 11 when it comes to the modern channels, are deployed by the NDC capabilities among our partner network. And this is a, in the peer-to-peer comparison, actually relatively high number in global benchmark. Also during this quarter, we finally got validation for our science-based targets for emissions intensity reduction. And on the next slide, we have details around it. So earlier this year in March, we submitted our emission intensity reduction targets for validation for the science-based target initiative. And now the target setting and calculations have been validated by which we aim at reducing our emission intensity by some 34.5% by the end of 2033. That translates into 30% absolute reduction in the emissions. I want to here especially highlight that this is a long-term roadmap, and the development on this front won't be linear, because all the tools and solutions are not yet available when it comes to achieving those goals. And especially in the earlier years, we need to secure the availability and affordability of sustainable aviation fuel that plays a pivotal role in terms of reducing CO2 intensity in our our industry. In 2025, the EU mandates for SAF blending starts to apply and it will be 2%, so therefore it will be a gradual start, but then the pace will, the velocity will increase towards the end of the decade and then the 2033. When we look into our offering and the forthcoming seasons, as already mentioned, we are now better positioned to optimize both the short-haul and long-haul networks and destinations of ours, and I want to specifically pinpoint the two daily additional frequencies to London and also the successful opening of the Dallas route. We will be adding one weekly frequency to Dallas for the winter season. So we'll be flying there daily. And in the summer season of 25, there will be actually 11 weekly frequencies to Dallas. Also, we are flying our wide-body aircrafts to Gran Canaria and Dubai, and also we will increase capacity to our flights to Lapland, and basically already started the winter schedule to Lapland one month earlier than previously. When it comes to the collaboration with Qatar Airways between Stockholm, Copenhagen and Doha, those routes will be ended in mid-January next year, and those aircraft will be allocated to Finners on traffic, and one could spot those planes, for instance, flying to Miami and or Dubai. In addition to some routes that we will be adding daily and weekly frequencies to the North American traffic, we will be adding capacity and frequencies to Japan for the summer season of 2025. Today, we have kept vast majority of the guidance as it was earlier when we discussed with you. We are reiterating that our capacity measured by ASK will increase by some 10% during this fiscal year. And we are also reiterating our revenue guidance, which is 3.0 to 3.2 billion euros. but at the same time we are specifying the previous estimate when it comes to the comparable EBIT and we have narrowed the range both from the upper and lower end and currently we are guiding the market with 120 up to 170 million euros in terms of comparable EBIT. We will update our outlook and guidance in connection with the final statements ballot in early 2025, when we will disclose the numbers for the full year. With this, Erkka, I would be ending my presentation.

Thank you, Turkka. Now would be a convenient time to present any questions you may have. Please follow the operator's instructions to present them.