Finnair Investor Presentation November 2012 1 Finnair Investor Presentation - Nov 2012 Content • Company highlights • Strategy implementation yielding results • Positive trend in business performance strengthens market position • Outlook • Fleet and investments • Dedicated and experienced management team • Appendices 2 Company highlights • European network airline connecting Asia and Europe, listed in the Nasdaq OMX Nordic • Finnair has an attractive, geographic niche between Northern Asia and Northern Europe with sustainable competitive advantage: – Finnair is the 3rd largest carrier in its Asian destinations, estimated market share of 5.9%.* – Market size of 20 million transfer passengers annually, globally one of the fastest growing traffic areas. – Traffic between Europe and China forecasted to triple during the next 30 years. • Cost advantage in long haul traffic due to short distance to Asia: Higher aircraft and crew utilisation compared to peers – Helsinki airport selected one of the best transfer airports in the world, minimum connection time of 35 min – The small size of domestic market limits the competition, Finnair benefits from it’s well established position and network coverage with over 60% market share • Stable financial position: 402.9 M€ in cash reserves (approximately 18% of annual turnover), net cash flow positive at 136,8 M€ ytd. *Based on weekly frequencies. 3 Finnair Investor Presentation - Nov 2012 Strategy implementation yielding results 4 Finnair Investor Presentation - Nov 2012 Our vision Double our revenue between Europe and Asia by 2020 Become the most desired option in travel between Europe and Asia Become number one airline and grow in the Nordic countries 5 Finnair Investor Presentation - Nov 2012 Finnair offers the fastest connections between over 50 11 Asian European mega-cities destinations • Tokyo • Nagoya • Osaka • Beijing • Chonqing • Shanghai • Hongkong • Soul • Bangkok • Singapore • Delhi 6 Finnair Investor Presentation - Nov 2012 Sustainable competitive advantage through geographical location • Faster connections with more comfort in travelling – Helsinki-Vantaa hub with minimum connection time of 35 minutes – One long and one short leg instead of two 6-7 hour legs • 24h rotation to Asian destinations and back • Operating cost advantages in many areas It's faster via Helsinki - time saved vs. other European hubs Via Vienna Via Munich Via London Via Istanbul Average time saved via Helsinki Beijing – Europe* 22.1% 33.1% 19.1% 16.2% 22.6% Shanghai – Europe* 26.6% 13.3% 14.5% 11.6% 16.5% Tokyo – Europe* 34.4% 24.3% 32.3% 31.7% 30.7% Osaka – Europe* 29.4% 25.4% 27.1% 20.3% 25.6% *Finnair operated European non-hub cities. 7 Finnair Investor Presentation - Nov 2012 Steady growth in Asian traffic Finnair is growing faster than Number of passengers the market in terms of seat growing steadily capacity Million passengers 160% 1,6 140% 1,4 120% 1,2 100% 1,0 80% 0,8 60% 0,6 40% 0,4 20% 0% 0,2 0,0 2005 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 2005 2006 2007 2008 2009 2010 2011 1-9 2012 AY seat growth Market seat growth 8 Finnair Investor Presentation - Nov 2012 Asian traffic revenues 51% of total passenger revenue – target to double Asian revenue by 2020* Finnair passenger revenues Asian traffic revenue annual by traffic area, %, growth 20% on average 2008 – Jan-Sep 2012 100% 90% 32% 33% 80% 40% 44% 45% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 1-9 2008 2009 2010 2011 1-9 2012 2012 Leisure Atlantic Domestic Europe Asia *From 2010 level. 9 Finnair Investor Presentation - Nov 2012 Finnair has strong presence in Asian key economies, weekly frequencies* China Japan 50 28 24 21 34 27 29 16 24 Finnair Lufthansa Air France KLM Finnair Lufthansa Air France KLM IAG Singapore Republic of Korea 12 13 7 77 77 6 Finnair Lufthansa Air France KLM Finnair Lufthansa Air France KLM • *Finnair is the 3rd largest carrier in its destinations, estimated market share of 5.9%. • Market size of 20 million transfer passengers annually, globally one of the fastest growing traffic areas. • Traffic between Europe and China forecasted to triple during the next 30 years. Finnair Investor Presentation - Nov 2012 10 Structural change advancing – from business segments to core business focus and supporting the efficient execution of business strategy and operations Action taken and/or on-going: 1 Strategy & Business development Network design and markets • Business strategy definition Fleet structure and size • Allocation of resources Product & customer experience Brand 2 Group support functions Financial & business services • Realization of synergies Procurement • Shared Service IT 3 Airline feeder traffic and support services Regional & feeder traffic Outsourced to service partners for: Catering • Cost efficiency Engine & component • Flexibility maintenance • Core business growth support Ground handling 11 Finnair Investor Presentation - Nov 2012 €140 million savings program well on track new target for 2012 cumulative savings €90 million (up €10 million from original target), leaving €50 million for 2013 Target €140 million Savings progress to target 3% 8% maintenance 26% 74% 25% 8% staff 43% 57% 9% other 102% lease 105% 10% sales 109% 24% catering 148% 14% ground handling 38% 62% maintenance staff other lease fuel 155% sales catering ground handling fuel 0% 100% 12 Finnair Investor Presentation - Nov 2012 Achievements so far • Fleet optimisation in European traffic: €11.5 million savings – Discontinuation of four A320 series aircraft lease agreements and subleasing five E170 aircraft – Fleet leasing contracts renegotiated and renewed • Improved route planning and aircraft utilisation – Low performing routes discontinued, average aircraft utilisation up by over an hour a day to 9 hours • Partnerships for improved cost efficiency and flexibility • Support functions streamlined • Savings through centralized procurement – Cost savings so far €16 million 13 Finnair Investor Presentation - Nov 2012 New €60 million savings programme launched • New cost savings programme published with the aim of achieving a permanent reduction in costs of a further €60 million by the end of 2014 – Despite the good advancement of the structural change and cost reduction programme launched in 2011, Finnair has not progressed as planned in all its savings categories – New savings are aim at reaching Finnair’s long-term target of 6% EBIT profit margin – In the face of high fuel prices, intensifying competition and significant fleet investments in the coming years, the company must achieve a marked improvement in profitability. • The new programme complements the existing €140 million structural change and cost reduction programme launched in 2011 14 Finnair Investor Presentation - Nov 2012 Positive trend in business performance strengthens market position 15 Finnair Investor Presentation - Nov 2012 Strong Q3 performance • All time high Q3 Turnover and Operational EBIT – Turnover €650.3 million (+7.1%), EBIT €48.9 million (+77.2%) • Stable financial position – Net cash flow from operations €44,5 million in July-September – €402.9 million short-term cash and cash equivalents (approx. 18% of annual turnover) • Notable improvements in traffic performance: – Load factor +3.9% -p – RASK +7.8% – Top performance in punctuality, over 90% of flights arrived on time 16 Finnair Investor Presentation - Nov 2012 Turnover growth continued while operational EBIT improved by 77.2% Quarterly turnover, € million Quarterly Operational EBIT, € million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 700 60 600 40 500 20 400 0 300 200 -20 100 -40 0 -60 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Operational result (EBIT) = EBIT excluding non-recurring items, capital gains and changes in the fair value of derivatives and in the value of foreign currency denominated fleet maintenance reserves 17 Finnair Investor Presentation - Nov 2012 Unit revenue improvement ahead of peers* • Unit revenue per available seat kilometre (RASK) up by 7.8% in Q3 as both passenger load factor (PLF, +3.9%-p) and yield per revenue passenger kilometre (RPK yield, +2.3%) improved y-o-y Q3 RASK +7.8% PLF RPK yield +3.9%-p +2.3% * Other European legacy carriers. 18 Finnair Investor Presentation - Nov 2012 Strong traffic performance in Q3 2012 Asian share 52.3% of the total capacity North America Europe Asia ASK 1,3 % ASK -0,5 % ASK 4,3 % RPK 1,9 % RPK 9,2 % RPK 6,4 % PLF 0,5 %-p PLF 6,9 %-p PLF 1,6 %-p Traffic revenue* 8,1 % Traffic revenue* 12,2 % Traffic revenue* 11,4 % Leisure traffic Domestic Total traffic ASK 23,6 % ASK -9,5 % ASK 3,4 % RPK 29,9 % RPK 2,6 % RPK 8,6 % PLF 4,5 %-p PLF 7,4 %-p PLF 3,9 %-p Traffic revenue* 24,2 % Traffic revenue* -9,4 % Traffic revenue* 11,0 % Passenger revenue split 7 % 5 % 5 % Cargo Asia ATK -41,7 % Europe RTK -26,3 % 51 % Domestic 32 % OLF 17,0 %-p North Atlatic Traffic revenue -30,3 % Charter * passenger revenue 19 Finnair Investor Presentation - Nov 2012 Airline business: RASK & CASK development Q3 2012 • Unit revenue per available seat kilometre (RASK) up by 7.8% • Unit cost per available seat kilometre excluding fuel (CASK, excl. fuel) down by 1.1% Change, y-o-y, % -15% -11% -7% -3% 1% 5% 9% 13% 17% 21% 25% RASK, unit revenue 7,8 % CASK, unit cost 6,1 % CASK, excl. Fuel -1,1 % 24,6 % Fuel cost Personnel -1,4 % Depreciation & leasing -9,6 % Traffic charges 9,5 % Maintenance 3,4 % Ground handling -6,4 % Catering -10,6 % Other costs 1,5 % 20 Finnair Investor