Report 2012 FINNAIR 2012 / KEY FIGURES / CEO’S REVIEW / STRATEGY / BOARD of DIRECTORS’ REPORT / FINANCIAL STATEMENTS / GOVERNANCE

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Report 2012 FINNAIR 2012 / KEY FIGURES / CEO’S REVIEW / STRATEGY / BOARD of DIRECTORS’ REPORT / FINANCIAL STATEMENTS / GOVERNANCE Financial report 2012 FINNAIR 2012 / KEY FIGURES / CEO’S REVIEW / STRATEGY / BOARD OF DIRECTORS’ REPORT / FINANCIAL STATEMENTS / GOVERNANCE Financial report 2012 Contents Finnair in 2012 1 Key figures 2 CEO’s review 4 Strategy 5 Board of Directors’ Report 7 Finnair fleet 10 Shares and shareholders 14 Financial indicators 2008–2012 18 Calculation of key indicators 19 IFRS Financial Statements, 1 January–31 December 2012 19 Auditor's Report 47 Business risks 48 Corporate Governance Statement 2012 49 Finnair Plc Remuneration Statement 2012 56 Board of Directors 61 Executive Board 62 Information for the shareholders 63 Contact information 64 Photos: Asian strategy and Partnerships on page 2 by Tim Bird. Other photos by Finnair. 1 / 64 FINNAIR 2012 / KEY FIGURES / CEO’S REVIEW / STRATEGY / BOARD OF DIRECTORS’ REPORT / FINANCIAL STATEMENTS / GOVERNANCE Finnair’s year 2012 fleet investments of coming years still require significant Code of Conduct profitability improvements, and for this reason Finnair Finnair revised its Code of Conduct in 2012 and will organise launched an additional cost-reduction program of 60 related training for staff during 2013. Top management's million euros in October 2012. special bonuses and the CEO's housing transaction sparked a lively discussion both in the media and inside Finnair on ethical business behaviour. Return to profitability Safe and punctual airline Finnair was one of the top companies in its industry in Finnair improved its operational quality and was one of terms of unit revenue development, and its cost-reduc- the top airlines in the world measured by all operational tion program brought results. The return to profitability indicators. According to JACDEC’s* statistics, Finnair was was a great achievement in a challenging environment the world’s safest airline in 2012. and the first step towards attaining the company’s EBIT Partnerships target of 6%. Finnair and Flybe expanded their cooperation in Europe- an traffic when the operation of Finnair’s Embraer traffic Best in Northern Europe Finnair was the only Nordic airline classified in the four was transferred to Flybe. Finnair and LSG Sky Chefs Group star category by Skytrax. Passengers also voted Finnair made a five-year partnership agreement on catering ser- Northern Europe’s best airline at Skytrax World Airline vices, and, in addition, Finnair and SR Technics concluded Awards for a third year in a row. World Airline Awards™ a ten-year agreement on engine and component services. is the most extensive and valued commercial airline rat- Responsibility ing in the industry. Asian strategy Finnair is a leading airline in sustainability reporting and Finnair offers the fastest connections between Asia and reducing emissions. The company was the first airline to Europe, with more than 200 route pairs. During the be included in the Leadership index of the Carbon Disclo- summer season Finnair flew a record number of flights, 77 sure Project report. The CDP is responsible for the only per week, from Helsinki to Asia. A new route to Chongqing global climate change reporting system in the world. in China was launched in May. Finnair's Corporate Responsibility Report for 2012 was selected as "Investors choice" in the Domestic sustain- ability reporting competition. Xi'an and Hanoi Product renewal In December, Finnair announced that it will open two new Finnair simplified the purchase of flight tickets and offers summer destinations, Xi'an in China and Hanoi, Vietnam’s now five different ticket types for customers’ individual capital, in June 2013. Finnair is the first airline to begin Structural change and cost-reduction program needs. The Finnair Plus frequent flyer program was also scheduled flights between Xi'an and Europe and the first Finnair’s structural change and cost-reduction program renewed to be even more rewarding. In addition, the com- European airline on the route between Hanoi and Europe. progressed well, and Finnair achieved permanent, an- pany published an extensive design cooperation with Ma- nual cost savings of 100 million euros by the end of 2012. rimekko. With the cooperation, Marimekko’s classic prints The company was thus well ahead of its schedule. The will become part of the journey of Finnair's customers. * Jet Airliner Crash Data Evaluation Centre. 2 / 64 FINNAIR 2012 / KEY FIGURES / CEO’S REVIEW / STRATEGY / BOARD OF DIRECTORS’ REPORT / FINANCIAL STATEMENTS / GOVERNANCE Key figures Turnover Operational result, EBIT* Operating profit, EBIT Operational EBITDAR* Turnover Operational result, EBIT* Operating profit, EBIT Operational EBITDAR* € million € million % € million % € million € million € million % € million % € million 3,000 50 44.9 2 50 1.4 2 250 241.9 3,000 44.9 1.4 50 2 50 35.5 2 250 241.9 2,500 2,449 0 0 0 0 35.5 200 2,500 2,449 0 0 0 0 1.8 200 2,000 -50 1.8 -2 -50 -2 2,000 -50 -2 -50 -2 150 1,500 -100 -4 -100 -4 150 1,500 -100 -4 -100 -4 100 1,000 -150 -6 -150 -6 100 1,000 -150 -6 -150 -6 50 500 -200 -8 -200 -8 50 500 -200 -8 -200 -8 0 -250 -10 -250 -10 0 0 08 09 10 11 12 -250 08 09 10 11 12 -10 -250 08 09 10 11 12 -10 0 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 % of turnover % of turnover * EBITDAR excluding changes in the fair values * Operating % of turnover result excluding changes in the fair values % of turnover of* EBITDAR derivates excluding and in the changes value of in foreign the fair currency values of* Operating derivates resultand in excluding the value changesof foreign in currency the fair values denominatedof derivates and fleet in themaintenance value of foreign reserves, currency non-recurring denominatedof derivates and fleet in themaintenance value of foreign reserves, currency non-recurring itemsdenominated and capital fleet gains. maintenance reserves, non-recurring itemsdenominated and capital fleet gains. maintenance reserves, non-recurring items and capital gains. items and capital gains. Result before taxes Return on equity (ROE) and Equity ratio, gearing and adjusted gearing, % Airline Business: unit revenue and unit cost return on capital employed (ROCE), % (cents/Available seat kilometre) € million % % Cents 50 5 120 7.0 6.49 6.58 3.0 16.5 1.5 100 6.0 76.8 0 0 80 5.0 4.50 60 4.0 -50 -5 40 35.7 3.0 20 2.0 -100 -10 17.6 0 1.0 -20 0 -150 -15 08 09 10 11 12 RASK* CASK** CASK excl. 08 09 10 11 12 08 09 10 11 12 Equity ratio Fuel*** Return on Equity (ROE) Gearing 2011 Return on Capital Employed (ROCE) Adjusted gearing 2012 * Revenue per Available Seat Kilometre ** Cost per Available Seat Kilometre *** Cost per Available Seat Kilometre excluding fuel 3 / 64 FINNAIR 2012 / KEY FIGURES / CEO’S REVIEW / STRATEGY / BOARD OF DIRECTORS’ REPORT / FINANCIAL STATEMENTS / GOVERNANCE Passenger traffic structure, % Distribution of passenger revenue, % Number of employees 31 December 2012 Finnair’s customer satisfaction with flight as a whole in 2012 % % % 10,000 100 8,000 80 6,368 6,000 60 4,000 40 2,000 20 0 0 08 09 10 11 12 Inter- Inter- Europe Europe Asia 50% Asia 45% continental continental Business Economy Europe 29% Europe 34% Business Economy Class Class Leisure 12% Leisure 10% Class Class Domestic 4% Domestic 7% Very poor Poor Fair Good Very good North Atlantic 5% North Atlantic 4% Finnair Fuel consumption 1999–2017 Jet fuel consumption Direct CO2 emissions in passenger traffic litres/seat/100 km tonnes tonnes 4 1,000,000 3,000,000 2,473,304 785,176 2,500,000 3 750,000 2,000,000 2 500,000 1,500,000 1,000,000 1 250,000 500,000 0 0 0 1999 2009 2017 08 09 10 11 12 08 09 10 11 12 4 / 64 FINNAIR 2012 / KEY FIGURES / CEO’S REVIEW / STRATEGY / BOARD OF DIRECTORS’ REPORT / FINANCIAL STATEMENTS / GOVERNANCE CEO’s Review WE BUILT A FOUNDATION FOR SUSTAINABLE even difficult issues and together find genuine solutions PROFITABILITY - THE WORK CONTINUES for achieving the cost-reduction targets. Overall, 2012 was a gratifying year for Finnair. We achieved The efficiency of Finnair’s operations can and must be our goal of increasing turnover and improving profitabil- improved further. We will carefully analyse what activities ity. We were able to turn a profit for the whole year for the can be performed with greater efficiency and in ways that first time since 2007. The operational result for the entire are well adapted to our streamlined organisation. The part- year stood at 44.9 million euros and turnover grew by 8.5 nerships implemented in 2012 provide opportunities for per cent to 2,449.4 million euros. Improving our result by re-evaluating our functions and structures. The aim is to over 100 million euros is a particularly notable achieve- question existing practices and to rethink ways in which ment when you consider that our fuel costs increased by we could improve our profitability. 115 million euros over the same period. Implementing such changes is never easy, but we hope Our sales and marketing efforts brought results, and and believe that by discussing matters together and con- our unit revenue improved by a record 7.7 per cent com- sidering the different options it will be possible to reach pared to the previous year. Consumers have chosen Finnair solutions that are reasonable from the point of view of more often, which is satisfying as we have invested signifi- both the company and its personnel. cantly in improving the customer experience and opera- Additional cost reductions are absolutely necessary for tional quality over the past few years.
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