FINNAIR : AY : FIN

Finnair Eyes Structural Changes

Finnair could become involved in airline consolidation activities, the management announces in reporting a 2010 loss and projecting a profit for 2011.
The guidance comes as the airline once again has had to declare an operating loss for the full year just passed, although the loss at €13.3 million (on turnover of €2 billion) was sharply down from the €114.9 million loss of 2009. For 2011, Finnair sees a 10% increase in capacity over 2010 levels with turnover growing commensurately to deliver a full-year profit. That is despite an outlook for a loss in the first quarter.
Finnair, which has been in a major restructuring mode and is planning now announcing further steps in its technical services operation, also may have bigger plans to change the makeup of the airline. Finnair president and CEO Mika Vehvilainen says that “the consolidation trend in the sector is expected to continue in Europe. Finnair is assessing its own role in developments and is seeking to take advantage of the best options from a shareholder perspective. Developing the cooperation network will strengthen Finnair’s market position.”
Finnair has had a heavy focus in recent years on growing its network to Asia, and is looking to do more on that front as well in 2011, with capcity growing 20%.
Despite the generally positive outlook, Vehvilainen notes that the full-year fuel bill will be higher in 2011, because of increased capacity and higher costs. Unit revenue is projected to be flat.
Meanwhile, the Finnair Technical Services and Finnair Engine Services operations are undergoing a shakeup. In a statement, company senior vice president for technical services Kimmo Soini notes that “international competition in aircraft maintenance activity is continually intensifying. Our own competitiveness has weakened as costs have grown and we have had to consider a complete restructuring.”
Coupled with fleet changes at the airline, Finnair has decided that in the case of its technical services “to discontinue mainly external, unprofitable aircraft base maintenance work,” Soini says, adding that “our objective is to focus on quality, cost-effective technical support of Finnair’s own fleet.” The move could see 450 jobs shed.

Finnair May Outsource Narrowbody Flying

Finnair plans to outsource all or part of its narrowbody flying to a new affiliate company. The airline said today that it is in talks with possible partners for a joint venture that, it hopes, would be able to operate European services at much lower costs. A partner is expected to be selected by the middle of this year, and the new airline should be flying in the first half of 2013, according to CEO Mika Vehvilainen

The Finnish carrier’s losses grew in 2011 despite a €140 million ($186 million) cost-savings program. The airline’s full-year net loss was €87.5 million, up from a loss of €23 million a year earlier. Finnair expanded capacity by almost 17% last year even though some of its important Asian routes were hit by slowing demand after the earthquake and tsunami in Japan, Also traffic growth started to decline in other markets in the second half. Demand was up 11.8%, but that came at the expense of a 3.1% reduction in unit revenues. Finnair’s turnover was up 11.6% at €2.25 billion.

The airline already has a joint venture for regional routes with FlyBe, FlyBe Nordic, but is not talking to the British carrier about expanding the service to narrowbody flying. Vehvilainen also ruled out Norwegian Air Shuttle and SAS, its two primary competitors in the region, as possible partners.

Finnair to tie up with IAG, JAL

Japanese news agency Nikkei says Finnair will build closer ties with both JAL and IAG, to facilitate faster business travel between Japan and Europe. A consistent pricing policy is reported be part of the scheme. | Photo: Flickr by Ponte1112

Nikkei says Finnair and British Airways is going to have a closer cooperation “in place during this fiscal year”, whereas negotiations for closer ties between Finnair and JAL would also possibly imply a joint venture with JAL.

Finnair also announced code-share agreement with TAP, one of the airlines speculated to be on the shopping list for IAG.