Finnair Q2 2024 results and Q&A

We published our second quarter interim report on 19 July. 

We carried 3.0 million passengers in April–June and revenue for the period increased by 2.3 per cent driven by higher ancillary and cargo revenue. However, unit revenue (RASK) decreased by 3.9 per cent in the quarter. Comparable operating result amounted to 43.6 million euros (66.2). The decrease was caused by lower yields and passenger load factor in the quarter. As a result of normalising demand and increasing industry capacity, average ticket fares have decreased from the previous record high levels. We continued good cost management in the quarter as our operating costs increased in line with capacity growth. Our operating cash flow remained strong and financial position improved supported by refinancing actions during the quarter.

Runway renovation at Helsinki Airport in April–June impacted negatively our on-time performance and increased costs in the form of re-routing customers to their connecting flights. The runway renovation has now been completed. Our on-time performance was 76.0 per cent (84.9). On-time performance was also affected by challenging weather conditions  - heavy snowfall in April and thunderstorms in June - that delayed flights and increased our costs.

Pent-up demand after the COVID-19 pandemic has largely been released and consumer confidence has been low for a long time. This is now being reflected also in travel demand, which is normalising after a period of strong demand during 2023. Based on the strong demand in 2023, we increased our Available Seat Kilometres (ASK) for 2024 by improving aircraft utilisation and by deploying aircraft that returned from British Airways wet lease outs into our own use. Additional capacity was allocated to European and domestic traffic. As travel demand is normalising, the capacity increase has not yet resulted in a respective  increase in our revenues, and our passenger load factor was 74.7 per cent (76.3). Passenger load factor improved in Asia, North Atlantic and Middle Eastern traffic but decreased in Europe and domestic traffic. Continuous capacity optimisation is a normal part of traffic planning and we continue to work every day to optimise our network and schedules.

Good demand for package holidays continued during the second quarter. Interest in Aurinkomatkat City Holidays continued to grow, and sales for the coming winter season are progressing well. The Middle East crisis has not had a significant impact on the demand for Aurinkomatkat package holidays.

Cargo and ancillary revenue grew compared with the previous year. The global freight market was impacted by the Red Sea situation, as related supply chain disruptions have benefitted air cargo. It has resulted in stronger demand for air cargo and, consequently, higher yields especially from Asia. Growth in ancillary revenue was mainly explained by the ticket reforms introduced in June 2023, which increased both customers’ freedom of choice and ancillary sales.

We successfully completed the rollout of our new long-haul cabins. This project included the launch of an entirely new Business class seat, introduction of a brand-new Premium Economy travel class, and a refreshed Economy class. We can now offer a consistent onboard experience on all our long-haul routes. Finnair’s Net Promoter Score (NPS) measuring customer satisfaction was at good level of 39, and air travellers voted Finnair the best airline in Northern Europe at the Skytrax World Airline Awards, for the 14th time in a row. We are grateful to our customers for this recognition. Our investments in customer experience continued as our new, larger Schengen lounge was opened at Helsinki Airport in July.

In connection with the second quarter result announcement, we published guidance for 2024. We now estimate that our revenue in 2024 will be within the range of 3.0–3.2 billion euros. We also estimate that our comparable EBIT will be within the range of 110–180 million euros in 2024. Finnair reiterates its previous guidance and plans to increase its total capacity, measured by ASKs, by c. 10 per cent in 2024. The capacity estimate includes the agreed wet leases. This growth will mainly focus on Asia and Europe.

Q&A

We have gathered some questions and answers related to our Q2 result here.

What explains your weaker second quarter comparable operating profit compared to the previous year?

In the second quarter, market normalised after a strong demand period. The decrease in comparable EBIT was also caused by lower yields and passenger load factor in the quarter. However, it is noteworthy that our operating cash flow was strong in the quarter. In addition, our balance sheet strengthened, which gives us a strong backbone to further implement the strategy.

Capacity increase was not reflected in result or revenue – why was this?

The increase in capacity was achieved through better utilisation of aircraft, it was not investment-based. 
The capacity increase has not yet resulted in an increase in our revenues as our passenger load factor decreased as a result of normalising demand. The passenger load factor decreased in Europe and domestic but improved in Asia, North Atlantic and Middle East. The situation as such is typical when more capacity is brought to the market. We reiterate our previous guidance and plan to increase our total capacity, measured by ASKs, by c. 10 per cent in 2024.

Why did operating expenses increase compared with the previous year?

Operating expenses increased by 6.2 per cent in the second quarter, which was in line with capacity growth of 6.4 per cent. So we succeeded well in managing costs.

How do you see the demand environment when looking at the third quarter?

We are constantly monitoring the development of the booking situation, and optimise our traffic programme accordingly. Ticket sales for the busiest period of the year have been in line with expectations. A normalisation of the demand environment can be observed after a strong period, when pent-up demand released after COVID-19 pandemic. In the comparison period, demand was exceptionally strong.

How do you see the yield development?

The demand for airline tickets and the market determine the price level. Cost pressures, industry capacity constraints and growing environmental requirements put pressure on ticket prices. On the other hand, normalising demand has a negative impact on ticket prices. Our goal is to offer competitive prices and also take care of the profitability of flying.