Finnair Oyj

Good day, ladies and gentlemen. I'm Erkka Kalonen from Finner Investor Relations, and it's my pleasure to welcome you to this Q1 2026 earnings call. I'm joined by our CEO, Turku Kuusisto, and our CFO, Pi-Aaltanen Forssell. After the presentation, you may ask questions either by dialing in or using the webcast chat function. But with these words, I hand it over to you, Turku.

Thank you, Erkka. Very good afternoon also on my behalf. Earlier this morning, we published, in my opinion, a strong Q1 report, especially given the fact that the Q1 is typically low season for our sector and also for Finnair. While, of course, at the same time, when reporting stronger results, we do see that the risk related to the operating environment have increased. And we aim at also describing that how do we see the current situation, especially when it comes to the war in Middle East area. But if I very briefly summarize the Q1 results and Pia will get you through more of the details. But if I start with the operating results, we were almost at break even. And I think that this is a remarkable improvement from Q1 last year. although we did face the industrial action already in Q1 2025. But the direct impact of the industrial action at the time was somewhat 22 million euros, and the kind of the comparable operating result was minus 40 million euros. So over the past 12 months' time, we've been capable of improving the operational platform, our commercial capabilities, and executing the new strategy so that the result actually improved by some 40 million euros in Q1 to Q1 comparison. Revenue increased by double digit number, especially driven or fueled by the strong demand that we especially did see towards the end of the quarter in Asian traffic, given the situation in Middle East, the closing of air spaces of Doha and Dubai airports, of course, consequently increased the load factors of our Asian flights, but at the same time, January and February already performed very strong in terms of Helsinki Asian traffic, so this was kind of a final boost towards the end of the quarter. The number of passengers increased by some 7.3%, and that then resulted also in increased load factors basically in all of our traffic areas except Middle East. Pia will discuss in greater detail when it comes to our hedging policy, but when we started this fiscal year or calendar year, our hedging profile was actually rather supportive for what we have now witnessed. 86% of the fuel purchases were hedged in the beginning of this fiscal year, and at the end of this quarter, 82% of the Q2 hedges fuel price is already hedged, and then 69% for the rest of the year. And then when we take the customer perspective, something that we are really now focusing on investing in when it comes to the new strategy that we launched mid-November last year, the customer satisfaction is on the rise. Across the total population, we did see in international comparison, in my opinion, a good Good result is 36. That was a two points improvement from a year ago. And then when we double click into the core customers of ours, those who applies us with the most, cold card holders, platinum and Lumo tier members, we are already scoring well above 40. So that's something that we can be rather satisfied with and In my opinion, the strategy implementation has only started. And then I will revert back to this one, but over the last running 12 months timeframe, the number of FINRA Plus members, active FINRA Plus members, has increased significantly. Speaking of the traffic areas, if I start with Middle East, which is of course the most drastically changed area, we need to keep in mind that in the Comper quarter of 25, we still had until mid-January also operation from Stockholm to Doha and from Copenhagen to Doha, but then of course the rather drastic change in terms of ASK and revenue is mainly explained by the fact that we did stop our operation from Helsinki to Doha and Dubai when this geopolitical situation escalated late February. But we need to continuously keep in mind or put this into a perspective that the Middle East traffic area has been some 3% of our capacity or annual revenue. And then taking the very positives, starting from Asia, ASK grew by some 9% but the revenue and RASK actually grew even more so and also the load factors up by some 7% and which is a consequence of strong investment capacity allocation to Asian traffic and we have also We continue to see kind of the activation of Japanese travelers flying to Europe and also activation of the business travelers. But as I already mentioned, the last mile or the final push is pretty much because of the closed air spaces or hubs in the Middle East. And we did get some spillover effect to our Asian flights. Domestic pretty much stable, part of it last year, but also Europe did perform a bit better than we expected. ASK crew by some 4%, but revenue 8%, and again, load factors developing rather positively. So we are in good position when it comes to starting the summer season during which we have more than 90 destinations in the Europe. North Atlantic traffic, something that we've discussed very frequently with you or even intensively. We did see a increase of capacity, but at the same time now the revenue development follows the capacity add-ons, so therefore at least the decline has stopped and we start to see some positive signals when it comes to forward-looking bookings and also business travel when it comes to origination or OD USA. And then, very briefly, just again reconfirming that the capacity is growing steadily according to our plans, except the Middle East traffic area, and then the market shares are pretty much stable, so we don't see anything drastic when it comes to our position at the Helsinki Airport or Helsinki Europe traffic, and also we continue to be very relevant player in the Europe-Asia, especially in Europe-Japan roots. And then maybe a few words related to the fuel supply chain issues and of course even what's taking place or happening in the Middle East and straight of Hormuz that has influenced First and foremost, the price of jet fuel and crude oil. But if this situation prolongs, there might be also issues when it comes to fuel availability. If I start with our home market being the Helsinki airport and Helsinki hub, we do have a rather solid situation. And based on the discussions of our main supplier here in Finland, we do see that the availability of fuel is extended until the end of our summer season. and also some extra capacity, so therefore if we need to tanker when it comes to short-haul flights in Europe, we do have enough fuel capacity in Helsinki to do so. Some 80% of our European destinations can be flown by utilizing the tankering option. In North America, we don't see a big risk when it comes to the supply. And then, of course, the Far East Asia is the question mark and something that we work very intensively with on daily basis to understand that what's the situation. But based on the information that we have today on the destinations and ODs that are relevant for us, we don't see short-term issues or short-term shocks There's also related to potential few availability. But maybe with these words, I would hand it over to Pia to continue on the financial figures.

Thank you, Tuukka. Good afternoon, ladies and gentlemen, and if we haven't met, my name is Pia Altonen-Forssell, I'm the CFO of Finner. And, of course, looking at the Q1 performance, I completely agree with you, Turta. I really see a seasonally weak quarter where our results have still been greatly improving. And in the graphs that you can see here, we have brought a bit of a quarterly perspective on some of the key figures over a longer period of time, And maybe if you look at the revenue, just for a slight moment, I think, first of all, obviously, you do see that there's a big sort of uptick compared with the first quarter of last year. As Turka said, there were some disruption impacts there already at that point, the 22 million on the result. So you could say, okay, you know, what about the comparison period? but maybe you can in this graph also have a look back at 24, which was a sort of more stable year, and also there you can see that we do have a great improvement. I want to talk a little bit about the result in the same context, in the same way obviously a big improvement compared with last year, and if we look at sort of how the year has started. I think particularly March was impacted by the war in the Middle East through both the fuel costs, obviously, as well through these shocks. That kind of went through the world, including then the supply-demand balance. So clearly we have seen a very strong demand, for example, in Asia, but not only in March. So I do say that our year has started in a good way, and I think particularly our cost controls have really been in place. And I'll still come back to that in my next slide. And finally, our cash flow was strong. I'll take the opportunity to come back to some of the details around that in one of my later slides. So first, I'll go next to look a bit at the unit revenue and the unit cost for the RASC and the CASC. And I think this is important because we have a strategy where we are foreseeing growth. We are foreseeing capacity growth, passenger growth, and we are, of course, very keen to do that in a profitable way to ensure that we can reach our strategic target of a 6% to 8% EBIT margin in 2029. So looking at some of the elements, obviously here first, if we look at the unit revenues, we can see that in this quarter they were supported. So we had good load factors. Yields, if you look historically, were somewhat improving. And, of course, we have as well sort of been able to navigate and manage the capacity growth that we saw in the quarter. So this is a good development, and particularly if you kind of compare quarter to quarter, quarter one growth, of last year to quarter one now, it's a really strong development. But please have a look at the cost as well. The fuel costs have really been sort of top of mind for a good reason. I mean, the prices, the spot prices have, of course, really, really been spiking. But if you look at sort of the proportion of the fuel costs to the overall cost profile, you know, even normally we would be sort of 25 to 30 percent. And so this is a very significant part. But you can see that thanks to our risk management, this sort of early part of the situation has been well managed. And actually, the cost development holistically has been under control, including the other costs. While we have been growing, of course, we have been adding some costs, but proportionally, we managed to keep this under control. So, you know, I think I'm happy with the development during the quarter there. Next, I'll turn to a few of the topics around our balance sheet. So first, I'll highlight the unflung ticket liabilities. And why I'm doing that is that I think it's, of course, you know, it's a big balance sheet item, of course. You can see it's 762 million. But what it also talks about is that we have seen bookings coming in. And sometimes when someone is like asking that are people booking, kind of what's happening, I think this is sort of the euro or the balance sheet way for a CFO to answer that yes. it's up 10% compared with a year ago. And you can see that if you go further back in history, it's up even more. So we do see those summer bookings coming in right now. And this is, of course, one reason contributing to the strong cash flow that you could see earlier, the 274 million operating cash flow in the quote. Another thing that, of course, has been greatly supporting our strategic journey is the strong cash flow. We have an investment program. You can see that the capex in this quarter was around 100 million. That did include 20 million of the new embryos. So when positioning the order, we also have taken some early costs or early cash out relating to that. But I want to say that this is also, you know, a pretty good description of sort of the balance between the cash flow and the capex going forward. I mean, we had a particularly strong cash flow right now, but also in our CMD we said we would expect, you know, at least sort of a 500 million-ish operating cash flow per year. And obviously with sort of the finalized plans for investments that we have made right now, it seems likely that we are somewhere north of 400 million per year, but maybe only slightly north of that. So this 100 million sort of per quarter is a fairly good proxy for that. I just wanted to say that because when you then look at our capital structure, I mean, our equity was strong in the quarter. Our net debt keeps going down. Our leverage was 1.2 times. And our cash ratio to sales is like 30%. So I think we are well positioned to operate sort of in a thoughtful way in this rather complex environment right now. And I think we are also well positioned to continue to execute on our strategic journey. And my final slide is really some details on the hedging. I wanted to bring this up. Turka already did speak about the fact that we have a good hedging ratio for Q1, for Q2, 82%. We have 69% for the remaining part of the year. And you can also see here that we are still sort of having a cost level of less than $700 per ton on these, which sort of for our cost structure is, sort of very close to, I would almost say normal. But obviously, we also know that the hedging ratio is going down over time. There are still some hedges in 27. Nonetheless, of course, the percentage is going down. But I think this is giving us sort of plenty of time to react and prepare for the situation. So with that, Tuukka, I would hand back to you.

Thank you, Pia. A few remarks related to the execution of the strategy that we launched. in connection with the CMU mid-November last year. And I'm actually rather happy when it comes to how the execution has started and in my opinion, proceeds pretty much as planned. And as a very big kind of strategic element or component, we did launch the resolution when it comes to the partial renewal of our narrow-body fleet a month ago. when we communicated that in order to support the growth, efficiency, profitability, and customer experience objectives of ours, we did confirm an order of 18 E2 next-generation Embraers with some options and purchase rights. But parallel with that announcement, we also communicated that up to 12 second-hand Airbuses 320s or 321 COs will be acquired from the market and that those aircraft are expected to join our fleet between 2027 and 2029. As I mentioned in connection with the analyst call around this subject, I think that this is a perfect combination of new aircraft and then somewhat used secondhand aircraft that provides us with the needed flexibility and optionality to develop our kind of big or total fleet plan towards the end of the decade. In the meantime, as already communicated in conjunction with the capital markets update when we discussed the so-called mid-term capacity or pre-solutions, since then we have agreed to add to current generation E190s, E1 embryos into our fleet and also additional two ATR72-600s that will be already operative in 2026 to further strengthen our regional capabilities and capacity. And thanks to this fleet plan, we have already communicated some new openings and also extended some of the summer season routes to be all year round. so that we can meet the growth ambitions that we have communicated. In addition to network or the convenience part of our strategy flywheel, also the other elements or other areas in our updated strategy are proceeding according to the plans. Reliability and efficient operations in Q1, the flight regularity was at 98.3 and it's actually increasing increasing further more during the second quarter. So very happy with the operational reliability and punctuality of the Finnair platform as we speak. Also, the choice-based product offering and commercial strategy is also progressing with double-digit growth. The ancillary revenue per passenger during Q1 grew by some 12.5%, and the total volume of ancillary revenue grew by 20% because in addition to passenger growth, we had more passengers, so more than 50 million euros of revenue were collected from ancillaries. And we continue to push for the growth of modern sales channels and even more efficient sales to enable this modern retailing and personalization. And then the fourth component being the engagement over the past 12 months timeframe, the number of active Finner Plus members has increased by some 27%. Again, very concrete proof point to communicate that the strategy execution has started on the front foot. And with these activities as communicated by the end of 2029, We aim at improving our profitability by some 100 million euros. And today when we are describing the situation, we have identified the initiatives and the euro values across some 110 projects so that we secure the, let's say, the delivery capability and we will meet the number by the end of the strategy period. And then at the final slide, the outlook and guidance. The outlook section has been specified and the specified section is the capacity growth measured by ASKs. Earlier we said 5%, but because of the capacity and operational kind of a halt when it comes to Middle East traffic, today say approximately 3% for 2026. And then the guidance, it is unchanged. we estimate the revenue range to be from 3.3 to 3.4 billion euros, and the comparable operating result to be within the range of 120 up to 190 million euros. And this guidance is based on the assumption that there will be no significant disruptions in fuel availability. But maybe with these words, Erkka, I guess we are ready for the Q&A section.

Yes. Yes. Thank you, Turku. So, indeed, now would be a convenient time for any questions you may have. Please follow the operator's instructions to present them or use the chat function.

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The next question comes from Jocko Terweinen from SEB. Please go ahead.

Good afternoon, Jocko from SEB. I'll start on the ticket liability, which you highlight that was up 10% year-over-year. Could you elaborate a bit more on this, and how much of this growth reflects the continued demand on A-10 flights in Q2? Are you seeing the bookings very strong for April, May, and especially on Asian flights, or does this tell more about the overall demand growth across the geographies?

Well, it's Pia here. I think sort of broadly what I can comment on this, I don't think that this is just April and May. I mean, clearly we see the booking curve sort of also through the summer period. And furthermore, when you ask about the different regions, I still think there's as well, you know, there's a good spread. I mean, obviously, you know, even in Europe, we have 90 destinations. You know, there's a lot of new destinations. They are getting some interest, et cetera. So I would not sort of highlight any area. And I think picking a little bit on some of the comments that Turka made on the regions, I think even on the North Atlantic, you know, there was a little bit of positive signs from the Q1 numbers.

Good, thanks. Then a follow-up on Turka's comment on the jet fuel availability. Could you talk a bit kind of scenarios, which kind of scenarios you are seeing the jet fuel availability being limited, first in Europe, then in Asia, and lastly in Helsinki?

So basically based on the information that we have today, the dialogues that we have on weekly basis with our suppliers, I need to start from the Helsinki perspective because that is also very related to the European perspective. We do see and we've been confirmed that there is some solid availability at Helsinki airport until the end of the summer season. and some capability and capacity to actually acquire a bit more. Because that then opens up the opportunity for tankering so that we can fuel the aircraft at Helsinki with the needed amount of fuel to fly back and forth if we face partial fuel shortages or limitations in the sum of the European destinations. Some 80% of our European destinations are feasible for a tankering option so that we can fly back and forth with the fuel that we have loaded at Helsinki. Based on today's information or visibility, we don't recognize clear or significant issues at any of the destinations that we operate. And that same applies to our long haul network. US is maybe, I don't know, the most on the safe side, but also when it comes to the far east Asian routes, our partners and suppliers haven't communicated that there would be severe challenges during the weeks or let's say one to three months to come.

Okay, and then the negative scenario that the threshold is being limited, how would you react and how would you assume the whole market being react? Is it just so that you and the other players would just cut the most unprofitable routes?

I guess that's how it goes. It's a game of optimization and of course this is speculation, but it would also depend on to which extent let's say in destination X, Y, or Z, that do you get 80% of the fuel if you previously get 100% or are there more drastic changes? So it's a rather complex environment, should be faced up, but I wouldn't like to speculate about it today. But that's something that I think Finnair is famous for, that when it comes to contingency plans or running a scenario, scenario planning and scenario management. Let's see if the day comes. I think that we are operational and ready for it.

Okay. Then are you already selling higher ticket prices for the second half of the year? And what about then the competition, especially the rivals who may have had a bit lower fuel hedges in place? Are you seeing them hiking prices faster than you are?

That's a complex question, Jakko, as we discussed earlier also. The prices are set by the market, and then the pricing algorithms are pricing the tickets as we speak here today. So we need to have a bit more backward-looking statements once we have closed the next quarter and the third quarter. But what we can see from the Q1 results, that the unit prices increased mainly in Asia. Was it some 5%? and a slight increase in the US traffic. But if the situation or the supply chain issues when it comes to fuel availability will prolong, of course that will at some stage will be visible in the ticket prices as well. What is beneficial for us as Pia described very well in my opinion, that the hedging policy and the risk management framework that we apply gives us a lot of time and oxygen to adapt to the changing situation. And of course, we are following pretty closely how the competition has approached the same topic, risk management and hedging. And then let's see what happens. But I think that in relative terms, Finnair is well positioned for the Q2 and early Q3

Exactly, thanks. Then one more, if I may. On the travel services, we saw a decline of 4% year over year in top line. A bit surprising to me. What was driving this, and how do you see the summer looking this year for you in terms of Alrikumatka, Torsanturs?

Nothing drastic. That is mainly explained by the Canary Island supply issues or constraints. At Canary Islands, the hotel supply has been constrained. So we were to some extent, we needed to limit or cap our capacity and sales to Canary Islands. But in big scheme of things, Aurenko Markkator centers are doing well. And also the same booking pattern or customer behavior pattern that Bia described in conjunction with the parent company applies also to Aurenko Markkator.

Okay, excellent. That's very helpful. Thanks all from my side.

Yes, thanks, Jakob.

Please state your name and company. Please go ahead.

Hi, this is Kurt from Aviation Week from Austria. Greetings all who are here. Hope you are well. Yes, we are. Hi. I realize the closure of some of the Middle East traffic helped your long-haul routes. Can we see where the additional traffic is coming from? You have now a lot of connected passengers, let's say, from India to the U.S. or something like this. Maybe you can give me an update on that as my first part.

So basically, there can be up to 2,000 different OD combinations on our flights, so I would say that our population of our transfer passengers is very wide and rich in my opinion. But as we discussed also previously, Indian travelers connect via Helsinki to U.S. A lot of Japanese travelers connect via Helsinki to 90 destinations in Europe. And then, of course, various kind of nationalities that have now utilized the opportunity of traveling via Helsinki to Far East Asia. while the major hubs at the Middle East area have been closed or capacity constrained.

Yeah. As you fly very long routes now regarding the closed airspace of Russia, and now I have seen you very well hatched. That helps really a lot. Do you think that the fill issue will have an effect, if you're looking ahead, the extensive fill on your very long

long-haul sites or so far so good as you hedged with the hedging terms yes so basically the hedging policy and the hedging position that we have 82 percent for the second quarter and then 69 percent for the rest of the year gives us time to let's say view or evaluate how the market and the demand will develop so we don't have urgent need to adjust anything when it comes to traffic from Helsinki to Japan, for instance, is 28 weekly frequencies. But, of course, it's pure mathematics that the longer you fly, the more fuel you burn. But at the same time, it's kind of the same situation for the European carriers and the Japanese carriers as well. So, in a way, long answer to your good question, but too early to speculate. Currently, we are well-hinged, and demand from Europe to Asia is doing well.

It's doing well. Do you think that one day, if the hubs in the Middle East will return to kind of normal, do you think they will, Emirates and Qatar and so on, do you think they will start a kind of price dumping to regenerate, you know, their capacity to fill the aircrafts up with life? Do you think there will be a kind of price dumping coming up?

I don't tend to like to discuss competitors' activities and actions, but I would assume that if an airline company faces a situation that you need to ground the aircraft and it's kind of a severe disruption, the day the operation starts to ramp up, you need to fly the aircraft to keep them airworthy. You need to also get the opportunity to fly so that you avoid extensive simulator training and such so that the training pipeline doesn't become a bottleneck. So probably someone starts to price to the cash flow so that you can start to fly with the aircraft.

Yeah. Just two short points, if I may. Regarding the narrowbody order you have with the same tent, AC-20s and 321s, do you know already the share? How many 321s you will take and how many 320s?

Too early to tell, yeah. It's, of course, always to some extent an opportunistic approach when you go to the secondary market and when the demand and supply meets and there is a good deal to be signed off. So time will tell.

I think there are a lot of good deals coming up now with many airlines probably to reduce the overfix maybe.

What do you think? Let's see. Let's see. So I haven't seen any deal yet.

Yeah, and Australia, the plans going on as planned for Melbourne, I think. No changes on this?

Yes, it is based on the information that we have today. So I guess the maiden flight is the 26th of October, anyhow, late October, and really looking forward to this opening and connecting Helsinki to Down Under.

Yeah, sounds good. Thank you very much. Thanks.

Thank you, Kurt.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad.

The next question comes from Jonas Ilvenen from Evli. Please go ahead.

Hi, it's Jonas from Evli. If I may come back to this unfunded ticket liability question. Can you disclose to what extent this 10% year-on-year increase was driven by higher prices versus volumes?

It is a mix, Jonas, I mean clearly, but if we just sort of look backward at the stats that we have shared from the first quarter, then you still see that yes, indeed, on Asian routes, the yields were improving a bit. But, I mean, we were not talking about sort of two-digit numbers. So still, you know, assuming that, hey, we have increased capacity, you have seen the, you know, rather big increase in passenger volumes, it is clear that volumes play a significant role here. And then there's a little bit of the yield as well. So I wouldn't say that this is driven by price. That would be an exaggeration.

Okay thanks and then another question so you already kind of discussed this ticket pricing situation I know it's a complex question but if you can add just a little more other for example I just recently saw like an ad or offer from Finnair to wait to get to Boston starting from 350 euros I guess you would have to I agree that's quite cheap. I'm not sure how representative that is of the like overall situation, but you see like opportunities for more aggressive pricing in some places I mean I think more basically all airlines are raising their prices but let's say if you were to expect that jet fuel prices are going to decline soon would you be in essence be kind of ready to bet against these relatively high jet fuel prices if you were to like expect they decline soon by aggressive pricing tickets?

As mentioned earlier, the pricing is very complex and the pricing algorithms and dynamic pricing optimizes the ticket prices in real time. And then, of course, especially in the European traffic, it's a rather tight competition. So time will tell how the price development and yield development will turn out. But then, as I said earlier, if the situation prolongs and the fuel price stays at the elevated level, of course that needs to be offset by, let's say, profitable flying or sustainable flying. And then, of course, you shouldn't draw too much conclusions from a single campaign. What was it, Helsinki-Boston? That's only one example and without knowing the data and what we try to optimize. Sounds like a nice deal. Maybe we should go to Boston. It's a nice sound.

Yes. Actually, yes, I understand. Thank you. That's all from me.

Thank you, Joonas. Thank you.

Then some questions online. So the first one comes from . Will rising aviation fuel costs and the low supply for Spinner to cancel flights in the next quarter, especially in the flights toward Asia and the European sector?

Short answer, no. We don't intend to cancel our flights. We have committed to the summer schedule that we have published. So you don't need to speculate or be worried about our flight cancellations because there won't be such related to this situation in the Middle East.

Yes. And the next question is from Matteo Salcedo. You said that Finland and Europe have relatively good fuel supply for the time being. Could you translate this into months slash weeks? Are some European destinations in which the risk of potential supply disruption is more present than in others?

I cannot comment all of our European destinations. We have nine of them. So based on the information that we update on weekly basis or daily basis, we haven't been flagged severe issues at any of the destinations as we speak. And the most confident I am when it comes to the situation at the Helsinki airport, where we've been confirmed that the fuel availability won't become a bottleneck or issue before the end of the summer season.

Yes. And the last question comes from Juho B. So does Finland have better availability of kerosene during 2026 than most of the European countries?

That's difficult to evaluate because we don't have transparency or visibility to the, let's say, reserves or national supply across the European countries. But what gives me a lot of confidence that in Finland, at Helsinki, thanks to the Torvo refinery of Neste, we are well positioned also on this one.

Okay, thank you. So I guess we're out of questions, so we can conclude the call. Many thanks for joining on the excellent questions. We wish you a great day.

Thank you so much for joining today, Janza. See you again. You too. Thank you.