ANNUAL REVIEW 2007 www.finnair.com/group +100% America-Asia: 16 million passengers now, 32 million in 2017. +100% Europe-Asia: 30 million passengers now, 60 million in 2017. CONTENTS From pole posITIon to ASIA Finnair is the fastest growing airline in traffic between Europe and Asia. Key figures ............................................................2 Traffic information and Fleet .................................3 The shortest routes, and therefore those that load the environment least, Review by the President & CEO ..............................5 Vision ...................................................................6 Asian markets .......................................................9 pass through Finland. Finnair as an investment ......................................14 Scheduled passenger traffic ................................. 15 Most passengers travelling between Europe and Asia change flights Aviation services .................................................18 Leisure traffic ......................................................20 somewhere in Europe, because there are direct connections only from Travel services .....................................................21 Flight preparation ...............................................22 Fleet ...................................................................24 13 cities. Helsinki is one of these. When flying with Finnair the journey Personnel ............................................................26 Corporate social responsibility ............................28 goes quickly, because from the very start passengers are travelling in Board of Directors ..............................................30 Group Management ............................................32 the right direction, towards a morning arrival in Asia. This is best under- The Financial Report 2007 is published separately stood by looking at a round globe rather than a flat map. The geography works in Finnair’s favour also in traffic between North America and Asia. The world is not a pancake. That’s why the smartest intercontinental links in the northern hemisphere are in Finnair’s hands. 2 KEY FIGURES KEY FIGURES 2007 Turnover Operating prot (adjusted), Result before taxes Return on capital employed Unit revenues and costs EBIT* Unit revenue, c/RTK % of turnover Unit costs, c/ATK EUR mill. EUR mill. % EUR mill. % Change % 2,500 120 6 200 16 4 2,000 80 4 150 12 0 1,500 40 2 100 8 -4 1,000 0 0 50 4 -8 500 -40 -2 0 0 -12 0 -80 -4 -50 -4 -16 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 03 04 05 06 07 Adjusted gearing Revenue tonne kilometres Key figures 2007 2006 2005 % Mill. tnkm Turnover EUR million 2,181 1,990 1,871 150 2,500 Operating profit (adjusted), EBIT* EUR million 97 11 70 120 2,000 Operating profit (adjusted)*, % turnover % 4.4 0.6 3.7 90 1,500 Operating profit, EBIT EUR million 142 -11 82 60 1,000 Result before taxes EUR million 139 -15 88 30 500 Unit revenues on flight operations cents/RTK 72.6 74.0 73.7 0 0 03 04 05 06 07 03 04 05 06 07 Unit costs on flight operations cents/ATK 43.5 46.0 45.3 Earnings per share EUR 1.04 -0.14 0.66 Number of passangers Passanger load factor Equity per share EUR 7.70 6.14 6.91 International Domestic Gross investment EUR million 326 252 58 Mill. passangers % Interest-bearing net debt EUR million -222 43 -155 10 100 Equity ratio % 47.0 37.2 42.2 8 80 Gearing % -22.5 7.1 -25.1 6 60 Adjusted gearing % 35.1 112.8 66.8 4 40 Return on capital employed (ROCE) % 14.2 -0.1 11.1 2 20 Average number of employees 9,480 9,598 9,447 0 0 03 04 05 06 07 03 04 05 06 07 * excluding capital gains, non recurring items and changes in fair value of derivatives TRAFFIC INFORMATION AND FLEET 3 TRAFFIC INFORMATION AND FLEET Finnair group fleet 7 January 2008 seats NUMBER OWNED LEASED average age Airbus A319 105–123 11 7 4 6.2 Airbus A319 Airbus A320 111–159 12 6 6 5.4 Airbus A321 136–196 6 4 2 6.9 Airbus A320 Airbus A340 269–295 3 3 0 4.8 Boeing MD-11 282 7 2 5 13.6 Boeing B757 227 7 0 7 8.6 Airbus A321 Embraer 170 76 10 6 4 1.7 Embraer 190 100 6 4 2 0.6 Total 62 32 30 5.9 Airbus A340 The ATR 72 aircraft were flown by Aero Airlines. Aero discontinued its operations on 6 January 2008 and the ATR 72 aircraft were sold at the same time. The six Boeing MD-80 aircraft owned by the Group were in the use of FlyNordic on 31 December 2007. Finnair sold FlyNordic in July 2007. The average age of Finnair scheduled traffic’s European fleet is 4.4 years. Finnair traffic information 2003–2007 Boeing MD-11 2007 2006 2005 2004 2003 OH-LBR Flight hours 228,487 211,813 202,070 196,795 172,884 Boeing 757 Flight kilometres 1,000 147,094 133,890 125,410 121,027 113,892 Available seat kilometres mill. 26,878 23,846 23,038 21,907 18,644 Revenue passenger kilometres mill. 20,304 17,923 16,735 15,604 12,971 Embraer 170 Passenger load factor % 75.5 75.2 72.6 71.2 69.6 Available tonne kilometres mill. 4,074 3,602 3,400 3,162 2,636 Embraer 190 Revenue tonne kilometres mill. 2,365 2,100 1,940 1,791 1,470 Overall load factor % 58.0 58.3 57.0 56.6 55.8 Passengers 1,000 8,653 8,792 8,517 8,149 6,849 Cargo and mail 1,000kg 98,684 93,807 90,242 86,245 73,416 REVIEW by THE presIdent & ceo 5 RevIEW by THE PresIdent & CEO Finnair’s 2007 passed favourably. Our aircraft flew more often At the end of last year we strengthened our balance sheet Aircraft manufacturers and fuller than ever before. The company’s result was by many with a 248 million euro share issue directed at shareholders. The measures at a record level. Our market share has risen and our success of the share issue means that Finnair’s financial health is order books are full, but Asian strategy has proved to be the right choice. among the most robust in the airline world. We have set out boldly into the world, into markets for which Aircraft manufacturers’ order books are full, but Finnair has Finnair has ensured the demand from Finland, our domestic market, is insufficient, but ensured the availability of aircraft long into the future. The con- which geography gives us excellent opportunities to manage well. tinuation of our fleet programme is clear: Finnair has orders and availability of aircraft The shortest route from Europe to Asia more often than not options to acquire 15 of the next-generation Airbus 350XWB long into the future. passes over Finland. That’s why Helsinki is the natural place to long-haul aircraft. With current orders, our long-haul fleet could build a hub from which passengers can continue by the shortest grow to 30 aircraft. route to their chosen destinations. The most direct route also loads the environment least. SECTOR CHALLENGES TOUCH EVERYONE. Air transport is a com- Success as a growing network airline requires constant work plex industry in which surprises can deeply affect demand and and effort both from Finnair and our key partners. This calls for airlines’ results. The sensitivity of flights to disruption has increased. seamless scheduling, efficient structures and competitiveness. In The strong growth in passenger numbers during the upswing in contrast with local traffic, our extensive network offers Finnish cus- demand has overstretched many airports. The difficulties encoun- tomers incomparably more diverse connections from Finland. tered by the sector at the turn of the millennium reduced the level In the Baltic area Finnair is a popular brand, but in the large of investment in airport infrastructure. Moreover, airlines have markets in Europe and Asia we still have a lot of work to do to inevitably had to use their resources more efficiently, which has increase brand awareness. A competitive product, the fastest contributed to a deterioration in flight punctuality. connections and efficient service mean that we can, however, rise Growing pressure has been directed towards our industry’s to become the airline of choice in these markets, too. environmental impacts. We have prepared for the fact that air transport will become part of the international emissions trading A NEW VISION TO BECOME HEMISPHERE’S LEADING AIRLINE. scheme, at least in the EU area, by 2012 at the latest. An airline’s At the start of the millennium, Finnair launched a vision “Best in best environment work lies in making investments in newer and Northern Skies, European Excellence”. We worked very hard to less environmentally loading fleet. By selecting the shortest routes fulfil this and now it has been achieved. Now it is time to elevate our and modern aircraft, customers can reduce the environmental goals and pursue new visions. In 2017 we want to be the leading load of their journeys. intercontinental airline and the airline of choice in the northern Air transport’s share of greenhouse emissions is only two per hemisphere for quality and environmentally conscious custom- cent, but airlines must assume their responsibility for it. Finnair ers. The leading airline is the one, from whom the rest take their supports an open emissions trading scheme for air transport. At measure – and example. the same time we hope that these principles can become a com- Last year we embarked on the biggest project in our history. mon global standard in air transport, because the atmosphere, We intend to change the whole of our present wide-bodied fleet too, is shared by all. to Airbus aircraft by spring 2010. The investment programme is around one billion euros, which is a major commitment for an Jukka Hienonen airline of Finnair’s size.