Annual Report 2014
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Annual Report 2014 CEO’s review Megatrends Financial Performance p. 3 p. 12 p. 57 Contents About this report About this report 2 The Finnair Group’s main field of business is the provision of air tran- CEO’s review 3 sport and travel services. The purpose of the Annual Report is to Highlights of 2014 5 measure and account for the financial, economic, social and environme- STRATEGY & VALUE CREATION 6 ntal performance of this enterprise, and to identify and explain the stra- Responsibility at Finnair 14 tegic business ramifications of this performance. Shareholders, investors, analysts, media, customers, employees, other interested stakeholders and CUSTOMERS 17 Social indicators 24 the general public at large comprise the report’s intended audience. 46 OPERATIONS 28 Finnair sees sustainability as a critical and strategic aspect of business Environmental indicators 36 performance, thus the Annual Report embeds material sustainability EMPLOYEES 46 disclosures in its annual reporting framework. The scope of the report Social indicators 50 is defined according to the Finnair Group’s material activities in 2014 FINANCE 54 across all its units. For more information on how materiality is deter- Key figures 58 mined, see the materiality and stakeholder matrix on pages 14–16. The Report of the Board of Directors 60 Financial statements 73 Calculation of key figures 115 Auditor’s report 116 Financial indicators 118 Tax footprint 120 57 GOVERNANCE 121 Management principles 122 Corporate Governance Statement 2014 127 Risk management and major risks 137 Remuneration Statement 2014 141 Board of Directors 148 Executive Board 149 Social indicators 150 GRI 151 Reporting principles 152 GRI matrix 154 Information for shareholders 163 Glossary 164 Contact information 165 17 121 FINNAIR ANNUAL REPORT 2014 2 CEO’s review We had three focus areas in 2014: the conclusion Business Class on long haul flights have all been well of our cost-reduction program in cooperation with received by our passengers. I am proud that we have our personnel, the practical implementation of our been able to maintain our operational quality even commercial strategy – for example, in the form of in a period of difficult cost-reduction programs: we product renewal initiatives — and restoring the were the most punctual airline in Europe in 2014, and company’s profitability. Finnair was named Northern Europe’s Best Airline for the fifth consecutive time in SkyTrax’s World Airline We achieved success in the first of these three objec- Awards. Our passenger volumes grew and our aircraft tives: we took significant strides forward in 2014 load factors were higher than in the previous year. in developing our operations and overhauling our cost structure. In 2014, we also achieved – and even We are also pleased to have developed our reporting on slightly exceeded – the total cost reduction target of environmental responsibility. The Carbon Disclosure 200 million euros we set in 2011 and 2012. By the end Project (CDP) awarded Finnair a position on The A of the year, we had accumulated 217 million euros List: The CDP Climate Performance Leadership Index in annual cost savings compared to the cost level of 2014, for actions to reduce carbon emissions and 2010. The effect of our cost-reduction program will be mitigate the business risks of climate change. Finnair seen in full in 2015, with a further significant propor- is the only airline awarded an A grade. Our efforts in tion of the savings agreed with personnel to be real- the area of responsibility in 2014 were also recognised ised from 2016 onwards. We expect our unit costs in January 2015 when Finnair became one of the first excluding fuel to continue to decrease in 2015. two airlines to be certified as a Stage 2 operator in the IATA (International Air Transport Association) Envi- I am particularly pleased that we were able to reach ronmental Assessment (IEnvA) program. The system cost saving agreements with all of our personnel is designed to independently assess and improve an groups. Cost-consciousness has become a part of airline’s environmental management. Our aim is to everything we do, and it creates a solid foundation for develop continuously by improving our operations in our work as we begin to pursue revenue growth. This terms of all of the various responsibility indicators we puts us in a good position to work together to build measure. In September, we were the only airline to fly the Finnair of the future and strengthen Finnair’s to New York for the UN Climate Summit using a more culture. For this, I would like to express my warmest environmentally friendly biofuel mixture that was thanks to our personnel, who have a strong commit- partly manufactured from recycled cooking oil. ment to Finnair. Our third objective, a profitable result, was one that we We also worked very hard to improve the services we did not achieve. The full-year operational result, -36.5 provide to our customers. The most prominent of our million euros, was a disappointment to us at Finnair. A product and service renewals, namely the SkyBistro substantial factor contributing to the loss was a decline service on European flights, the Economy Comfort in turnover by 4.8 per cent compared to the previous product in long-haul traffic, and the full flat seats in year. This decline in revenue was mainly attributable FINNAIR ANNUAL REPORT 2014 3 Heading toward growth and the most modern long-haul fleet in Europe. to a substantial decrease in unit revenues in passenger as in 2014, but the lower price of jet fuel and the full two years’ time, we will have the most modern long- and cargo traffic, particularly in the first half of the effects of the completed cost-reduction program will haul fleet in Europe, comprised entirely of A330 and year. Further factors in the decline were the contrac- support Finnair’s financial performance in 2015. A350 aircraft. This is a source of inspiration to all of tion in the sales of Aurinkomatkat-Suntours, and the us at Finnair. loss of external turnover resulting from the restruc- The year 2015 marks a new beginning for us: we will turing of aviation services, such as the divestment of seek revenue growth through the product renewals I hope that our good cooperation and dialogue with Finncatering and the airport shops of Finnair Travel introduced in recent months as well as new services our various stakeholders will continue in 2015, and I Retail. However, this trend appeared to take a turn for for additional fees. We will continue to launch new thank you all for your trust in Finnair. the better in the fourth quarter, when our unit revenue services in 2015 that we expect to increase revenue as showed growth for the first time since the first quarter well as improve customer satisfaction. of 2013. Pekka Vauramo We will be the first European airline to roll out the CEO We can also be satisfied with the fact that our balance new Airbus A350 XWB aircraft in our long-haul sheet remains strong and our financial position is good. traffic. The first scheduled A350 flight is planned @pekkavau for late October 2015. The new aircraft will offer I am optimistic about the future, although there is our passengers a next-generation travel experience still a lot of uncertainty with regard to the demand for while facilitating the growth of our business: we will passenger and cargo traffic, and competition in the immediately obtain additional capacity in cargo and industry remains tight. Fuel prices have decreased passenger traffic, despite the fact that the first aircraft significantly, which is very good news for our industry. to be delivered are replacement investments. The new We expect our turnover in 2015 to be at the same level aircraft will also improve the customer experience. In FINNAIR ANNUAL REPORT 2014 4 Highlights 2014 A year of significant reforms improved cost-competitiveness and allowed us to focus on core business as we seek to grow revenues and improve profitability. New routes, new frequencies Sustainable developments Joint businesses grow and add Product upgrade drive Strong balance sheet In 2014 Finnair began operations to Personnel, media, loyal customers and customer value All but three Finnair widebody aircraft Finnair completed the sale and Tromsø in Norway, and increased corporate clients got a close look at the In April 2014, Finnair entered a joint – which are due to be retired from leaseback of four Airbus A330 aircraft winter flights to Finnish Lapland, in brand new Airbus A350 XWB aircraft, business with oneworld partners service gradually – now feature full flat in its long-haul fleet, announced sale particular to Kittilä, Ivalo and which visited Helsinki on a route-proving British Airways and Japan Airlines, seats in Business Class. The cabin and leasebacks of three Embraer 190 Kuusamo, for more connections mission. The aircraft has received type providing customers value with retrofit of the long haul fleet was part and six ATR 72 aircraft, and also between Asia and Lapland’s leisure certification and will begin service on expanded schedules and connections of an ongoing product upgrade drive. completed the sale outright of three destinations. Finnair also began Finnair routes in October 2015, between Japan and the EU. US Airways’ Read more about the product Embraer 170 aircraft that had been service to Kazan, Nizhny Novgorod and consuming approximately 25 per cent merger with American Airlines meant development in page 22. leased to and operated by other Samara in the Russian Federation, less fuel over the aircraft it will replace. that it joined the Atlantic Joint airlines. each being served three times a week. Business (with Finnair, American oneworld expansion Finnair also opened a new direct Finnair used biofuel made from recycled Airlines, British Airways and Iberia) on The oneworld alliance, which Finnair LSG Sky Chefs exercised its option to service to Miami.