Welcome to Finnair Capital Markets Day 22 May 2014, Helsinki 1 © Finnair | Capital Markets Day, 22 May 2014 Today’s Agenda Topic Presenter Time Pages Welcome by the Chairman of the Board Klaus Heinemann, Chairman 13:00 - Delivering on Strategy Pekka Vauramo, CEO 13:20 6-25 Greg Kaldahl, SVP Resource Network development and JBA's 14:00 26-54 Management Break 14:30 Commercial Strategy- Closing the revenue gap Allister Paterson, CCO 15:00 55-65 Juha Järvinen, Managing Cargo’s role in Asian growth 15:30 66-76 Director of Finnair Cargo Break 15:45 Fleet and funding strategy Erno Hildén, CFO 16:00 77-100 Closing remarks Pekka Vauramo, CEO 16:40 - Cocktails and informal discussion 17:00 2 © Finnair | Capital Markets Day, 22 May 2014 The Finnair opportunity Our strategic targets and roadmap to reaching them Pekka Vauramo, CEO Finnair Capital Markets Day, 22 May 2014 3 © Finnair | Capital Markets Day, 22 May 2014 Finnair is a network airline connecting Asia and Europe North- Leisure Atlantic 11 % More than Over 5 % 9 million 60 European Fleet of 77 Finland passengers and aircraft, of 4 % and MEUR which 44 Asia 15 long-haul 49 % operated by 2,400 in destinations Europe revenue in Finnair. 31 % 2013 (Summer 2014) 2013 ASK split 4 © Finnair | Capital Markets Day, 22 May 2014 Major achievements since CMD 2012 Cost structure Commercial Operations Network Financing 5 © Finnair | Capital Markets Day, 22 May 2014 We have built one of the best operational airlines in the world... By focusing on: 2013 performance European Finnair benchmark* • Structure, size, governance Punctuality 84.2% 89.4% • Commitment to quality and safety Regularity 98.9% 99.8% • Operational processes Bags (/1000 pax) 9.6 8.1 • Hub management Connection reliability 98% 98.8% Safety 1st-3rd** • Vendor management * Source: AEA ** JACDEC 2013 safety ranking. JACDEC =Jet Airliner Crash Data Evaluation Centre. 6 © Finnair | Capital Markets Day, 22 May 2014 ...and improved cost efficiency & asset utilization Improved CASK Higher utilization 0,08 16 0,071 0,070 0,071 0,069 +0.6% 0,07 +3.6% 14 +1.3% +14.9% +1.6% +6.0% 0,06 12 0,05 -4.6% 10 -4.1% -3.3% 0,04 +8.4% 8 +7.8% +7.6% €cents 0,03 6 0,02 4 0,01 Block hours/day 2 0 0 2010 2011 2012 2013 2010 2011 2012 2013 CASK ex-fuel Fuel Narrowbody Widebody 7 © Finnair | Capital Markets Day, 22 May 2014 Finnair share and bond price development Finnair share price development Finnair Bond price development 1 Jan 2012-16 May 2014 since 27 Aug 2013 Finnair 3,50 market 1 800 000cap 105,5 Finnair MEUR 378 3,30 market cap (16 1May 600 2014) 000 105,0 3,10 MEUR 295 1 400 000 (31 Dec 2011) 104,5 2,90 1 200 000 104,0 2,70 1 000 000 2,50 103,5 800 000 2,30 103,0 Finnair 600 000 2,10 market cap 102,5 400 000 1,90 MEUR 283 (3 Dec 2012) 102,0 1,70 200 000 1,50 0 101,5 Volume, shares Close, EUR 8 © Finnair | Capital Markets Day, 22 May 2014 Delivering on strategy for profitable growth Doubling Asian revenues by 2020 from 2010 level Growing traffic via Helsinki by optimising its strategic location Creating shareholder value - delivering 6% operational EBIT 9 © Finnair | Capital Markets Day, 22 May 2014 Doubling Asian revenues by 2020 10 © Finnair | Capital Markets Day, 22 May 2014 Doubling Asian revenue – Where are we now? Asian traffic revenue, MEUR 42% of 2013 passenger revenue from Asian traffic CAGR 2014–2020 6.96% 3% 9% 9% 42% 37% Asia Europe Domestic Leisure North Atlantic * Based on guidance given on 7 May 2014:”Finnair estimates 2014 turnover to be close to 2013 levels.” 11 © Finnair | Capital Markets Day, 22 May 2014 Europe-Asia travel expected to increase more than 100% by 2020 Passenger flows and hub throughput (Asia and Europe, 2020E) 2010 PAX flows: 130 million Europe – Middle East /Asia (pax/yr) 2020E CAGR (2020E) 60 million +6.3% PAX throughput at major (2010) international airports (pax/yr) M=million M-East 180M China's Notes: top 3 1. Pax throughput includes both domestic, international and terminal passengers. Figures hubs include both inbound and outbound pax calculated on basis of country-region pairs. BKK 2. Data available for Mainland China airports does not disaggregate domestic and 300M international passengers. 90M 3. PAX throughput Middle East includes Dubai airport (112m); Doha (38m); Abu Dhabi KUL (26m). China includes Beijing (155m); Guangzhou (88m); Shanghai Pudong (83m) HKG Source: 80M IATA, ATI database, BCG analysis; IATA Country Forecasts; BCG Analysis; World Bank. SIN 120M 90M 12 © Finnair | Capital Markets Day, 22 May 2014 China’s second tier cities offer great potential 2010 GDP for urban clusters Urban clusters in China and their hub USD Billions cities Shanghai 527 Changchun- Switzerland 527 Harbin Jingjinji Liao central- Huhehaote Jingjinji 475 south Taiyuan Shandong Central Belgium 469 Guanzhong BylandHefei Yangzi mid-lower Nanjing Chengdu Shanghai Shandong 418 Chongqing Hangzhou Nanchang Changzhutan Coast West Austria 378 Kunming Shenzhen Guangzhou (includes Foshan) Guangzhou 357 Nanning 0 200 400 600 Source: Dominic Barton, 2013. 13 © Finnair | Capital Markets Day, 22 May 2014 Joint Business Agreement in Europe-Japan traffic strengthens our position in Japan 35% JAPAN 30% 25% 20% 15% 10% 5% Market share in EUR-JP vv Traffic* 0% • After joining the SJB we are now a part of the largest joint business in Europe–Japan vv. traffic * Source: SRS Q2 2014. 14 © Finnair | Capital Markets Day, 22 May 2014 Our strengths in Asia – Europe transfer traffic Shortest and fastest Asia-Europe route Early mover in Europe-Asia direct flights One of world's most punctual airlines Helsinki airport hub Strong Nordic brand appeal On-going long-haul product development 15 © Finnair | Capital Markets Day, 22 May 2014 Growing traffic via Helsinki 16 © Finnair | Capital Markets Day, 22 May 2014 Highly efficient Helsinki hub supports Asia- Europe traffic growth Room for growth in Helsinki-Vantaa... ...with 24h rotation benefits to Asia • 3 runways • Sustainable competitive advantage and cost • 35 min minimum connection time benefits: • Uncongested airspace – Fastest connections between North- Eastern Asia and Northern Europe – Very high aircraft utilisation in long-haul traffic – Less need for additional crew members due to flight time restrictions – Smaller fuel consumption due to shorter flight times © Finnair | Capital Markets Day, 22 May 2014 17 Cost competitive European feeder network a necessity for Asian traffic growth European competitive landscape We focus on • Lowering cost base in short-haul flying – Labour costs – Possible alternative measures • Continuing Flybe cooperation • Decision on short haul fleet renewal in the next 18-24 months 18 © Finnair | Capital Markets Day, 22 May 2014 Creating shareholder value 19 © Finnair | Capital Markets Day, 22 May 2014 Our key mid-term priorities The Tools Fleet strategy Financing Strategic partnerships The Building Blocks New Digital Finnair Network Strategy Cargo The Foundation Competitive Cost Leading Commercial Safe, Efficient Structure Strategy Operations 20 © Finnair | Capital Markets Day, 22 May 2014 We are well on track in achieving cost savings – flight crew labour costs still under negotiation Savings reached by 22 May 2014: MEUR 167 Total target Phase I: MEUR 140 MEUR 200 Other 136 4 23 Phase II: MEUR 60 Pilots 17 Cabin 18 Technical & ground services 4 8 Other employee groups 17 Phase I realised Phase I additional saving reached Phase II realised Phase II remaining target 21 © Finnair | Capital Markets Day, 22 May 2014 We are building the foundation for growth • Competitive cost structure will be key Growth for profitable growth, therefore cost 2016 savings remain in our focus. 2015 • As a vital part of our topline growth, we continue to implement our new Revenue enhancement A350s Commercial strategy and closing the identified revenue gap. 2014 • First A350s enter our fleet next year, and we are ready to grow our traffic Cost savings building on our existing strengths. 22 © Finnair | Capital Markets Day, 22 May 2014 Thank you! Questions? 23 © Finnair | Capital Markets Day, 22 May 2014 Finnair Network Development The Role of Schedule, Partnerships and Route Development In Building the Silk Road Greg Kaldahl, SVP Resource Management Finnair Capital Markets Day, 22 May 2014 24 © Finnair | Capital Markets Day, 22 May 2014 Silk Road Revisited In CMD 2012 we shared... What Have We Done Since Then • Industry complexity and changing • Opened two new seasonal routes to demographics Xi’an and Hanoi • The strength of Helsinki’s geographic • Entered joint business arrangements position for Atlantic and Japan flying • Finnair’s strategy to win in dynamic • Taken delivery of five A321 Sharklets times and retired our small B757 fleet • Our methodology for entering new – Operating cost advantage from commonality routes • Established our baseline long-haul fleet plan – Allows for more/less growth based on market conditions 25 © Finnair | Capital Markets Day, 22 May 2014 Today’s Agenda • Schedule Structure – Helsinki Plan • Joint Business Agreements – What are they? – What do they mean for Finnair? – How do we get the most from these agreements? • Route Development – Are there any good markets left? – Where do we go from here? – Will we double Asian revenues by 2020? 26 © Finnair | Capital Markets Day, 22 May 2014 Schedule Structure A Passenger Friendly Hub 27 © Finnair | Capital Markets Day, 22 May 2014 Helsinki offers Finnair a competitive advantage... HEL LHR FRA AMS CDG Ease of transfer Uncongested airspace Runway capacity Cost competitiveness Geographic location to Asia Departure punctuality 28 © Finnair | Capital Markets Day, 22 May 2014 ...but our growth has created some congestion ASIA & NORTH AMERICA 0700 12001700Hub 2000 2400 congestion EUROPE & DOMESTIC Europe double daily flights (incl.