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 2025 earnings call. I have here with me our CEO, Mr. Turku Kuusisto, and our new CFO, Mrs. Pia Aldonen-Forsell. I will now turn this call over to you, Turkkka. Please, go ahead.

Thank you, Erkka, and very good afternoon to all of you joining this earnings call. The busiest season is now behind us, and we are happy to report that we did deliver a solid Q3 financial performance, especially considering the negative impact from the industrial action. As you might recall, it took until mid-July to get the final CLA concluded and behind us. Before that, the quarter was shadowed by three strike days that led into cancellation of more than 300 flights. Today, we are reporting some 18 million euros of direct impact from the industrial action. Of course, for us, it's been very difficult to evaluate the so-called indirect impact, but they are in millions of euros. If we take the comparable operating result of 51 million euros and calculate back 18 million euros plus something from the indirect side, I guess that we can all agree that we would have been in part with the last year performance or even above. The revenue increase was 2% and that was also influenced by the cancellations and the indirect impact of the industrial action and then unfortunately we faced some unexpected maintenance slash AOG issues during the quarter that continued to impact negatively due to ASK and revenue development. But it's worth mentioning that after we got the CLAs and disruptions behind us, our quality of our service and flight regularity returned to a very high level almost immediately, because the weeks followed by the industrial actions actually scored to 99.3 in terms of regularity, but now the full quarter result is somewhat lower because of the AOGs. Also from the traffic plan and summer season network planning side, it was a great success when it comes to our traffic in Far East Asia, especially in Japan. We decided to increase the frequencies and capacity so that we flew 25 weekly frequencies between Helsinki and Japan, which made us the biggest operator or carrier between the Europe and Japan and as we can see from our load factors and also yield development that has been a very strong geographical region for us during the summer season. It's not on my slide but Pia will revert to it later in her presentation but yesterday the board of directors of Finner has also decided on the second installment of the return of capital payment that is now due 7th of November if I recall it right. Still taking some remarks around the collective labour agreements. Now we have reached with all employee groups and unions agreements that are in line with the general labour market framework and policies, which is of course extremely important for us when it comes to protecting and developing our cost competitiveness, not only in the short term, but also when we take a longer term value creation roadmap in front of us. We've been working intensively when it comes to returning customer satisfaction. And as you know, the biggest contributor to the positive NPS development is the quality of the service and regularity and punctuality. Very happy to report that the NPS of the total customer base did increase from the low point of 2080s close to 40 from August to September and then the development has continued. I will come back very shortly in this seed cover issue that we faced. But anyhow, when we take a more granular view related to the MPS development and explore the core customers of ours, we are actually trending even higher. So the most frequent flyers are even more satisfied with our services as we speak. Even though it was an event after the reporting period, this seat cover issue that we faced, we wanted to take the topic also today with you because it has gained quite a lot of media attention because we needed to ground eight aircrafts of our 321 fleet two weeks back because of a question mark in the certification process of the seats and seat covers. To be very transparent, we followed the instructions of the designer and OEM of those covers and seals. But then in our own internal procedures, we found the question marks and therefore we decided to ground the aircrafts. But also very happy to report that all planes are now flying. Six of them are back in our scheduled routes. Two of them are anyhow in the maintenance shop, one being painted and then one going through a heavy overhaul process. So from that point of view the operation is stabilized back to normal. When it comes to quantifying the financial impact, especially now when we face these CLA related disruptions, this is a completely different size item it's a minor item versus the CLA disruption and impact so we are at max discussing few million euros so that's something that we wanted to very transparently discuss with you today and of course also within the range within the guidance range that we will discuss later in this call Then moving to the geographical footprint of ours, as already mentioned, Asia performing very strong double digit growth, both in ASK and revenue development and also Rusk developing positively and also the RPK yield and load factors also on a positive side. Europe and domestic are rather stable or flattish, but nothing extraordinary in these geographical regions. And the big negative numbers in the Middle East area are explained by the fact that we are not flying anymore from Copenhagen and Stockholm to Doha. So it's only Helsinki-Doha operation. So therefore we are two thirds down given that change in our scheduled traffic. North Atlantic traffic and North America, especially USA, has of course remained as a challenge I guess for all Iran companies because of various aspects and we had a plan to increase the ASK and capacity for that area and we did so. Of course we already hedged some of the capacity down given the CLA issues and also the development that we witnessed early Q2, early Q3. But anyhow, the demand and yield development didn't meet our expectations and therefore we are reporting a double digit decline in RASC and also load factor came down by high single digit numbers. But maybe with these words, I would hand it over to Pia to discuss the financials in greater detail.

Thank you, Turkka, and good morning, good afternoon, everybody. I can maybe start by saying I joined as CFO on 1st of August and I've been happy to join in a period when we have resumed normal operations, as Turka just described. So someone said to me earlier today that, hey, Pia, you had sort of the right smile when you presented the results. We are not on camera right now, so you cannot see that. And I think it's based on the fact that, hey, we have been able to operate Q3 as an important season. And you can also see that in the results that despite the really difficult periods that we had before this quarter and the long strikes, and the fact that the strike impact was still 18 million euros into the operating result of this quarter, we did land at a comparable operating result of 51 million euros. And really, if you take into account the strike impacts, we were more or less sort of at last year's level. And given some of the sort of structural changes on the cost side that I will come back to, I still think this was a good expression of the team's also ability to bounce back. So thank you to the team. And also, of course, customer trust rebounding. Thank you to customers, as Juu Turka pointed out. There's maybe a few other sort of smaller changes that are visible on this page, but I think I'll answer your questions later on if you have detailed questions on the specific lines. And I would really go to the next page, which is more about giving the holistic view of the results in the third quarter. So we already discussed the strike impacts, and I think that's maybe Just a technical note, if you look at the more detailed bridge that we have in some of the appendixes, of course there you see sort of a breakdown of all of the elements, but I really think it's important to summarize the strike impacts into one bucket. And then there are considerations relating to the closure of the Russian airspace that had led to higher navigation and landing costs in this very corner of Europe where we are operating. Obviously, we are one of the few that really remains with sort of big traffic amounts here. So we have taken some additional costs due to that. And obviously that's a topic, the Russian airspace closure, that is a fact that we have to accept, and that's where we are right now. Obviously then, is there a question, could this cost be lower? That's for the authorities to look into if that could be possible or not. Then there's another big societal change right now, which is particularly in Europe, the strive towards decarbonisation. And that's visible for companies like us in many ways, In this chart, what you see is, of course, the addition to costs. So you see it's like 10 million more per quarter. And I think that gives a good representation of what we are experiencing right now. So we are experiencing the emission rights costs now sort of being there. to the full because there are no more free allowances for us. So that change has happened during this year and that we still had maybe something, I don't want to say in our back pocket, but some reserves from previously. But that is definitely something that going forward, we know the European legislation is there. There are no more free allowances. And that's really one of the big points of additions to costs during this year for decarbonisation. And obviously the other one is sustainable aviation fuel, where there's now the mandate to buy 2% blend. And that's obviously as well increasing our costs. It's a fair representation, a quarterly addition of 10 million during this year. And I still see into next year, there will still be a little bit of a hike up because of the ETS and the emission rights sort of being full blown impact during next year. So those were those structural changes. And then you can see that we have volume growth. And that's really, you know, if I would like to simplify things, I would say that the green change here, the improvement of 17 million euros, really, the gross actually improvement on volume side is even a bit bigger than that. But obviously, if you look into the details, You can see a few other minor changes there as well. Someone asked me about the changes in yield. I think one sort of noteworthy thing is that the compensations that we have paid also for the strike, they tend to go impacting that key figure. So maybe that's just one thing to keep in mind. I also already got today a lot of questions about the impact, which, Turka, you already commented about the seat covers and whether that's a big thing or not. It's not a big thing, but obviously for our customers, it came during a period of school holidays. So, of course. That's a thing that we really needed to fix as soon as we could. And it has also been debated quite a lot. But if I look only from a financial perspective, it's a few millions, the impact will be in Q4. And that negative impact is within, when we have given the guidance for Q4, obviously that's within the limits of that. Okay, I will speed up. I only have a few more things to say. The second installment of the return of the capital, so this was something that was already decided in the AGM. Now it's kind of the formal decision about also paying the second installment, because we are in a strong enough financial position to be able to pay. That will be happening on the 7th of November. When you look at the ratios from our balance sheet, we are kind of continuously showing some improvements. And I think I will go to the next page to finally comment on a few of the things that we've done through this year. Obviously, if you look at first the operating cash flow, that's sort of the big, that's the positive here. When you then look at where have we spent and allocated some of the cash, obviously we've done a lease buyback. We have also been paying back our loans and leases according to the schedules. So I think that the same diligent work that was already started earlier to make the balance sheet healthier has continued step by step, and it continues to show as gradually also improving ratios. I think with that, Turku, I would hand it back to you.