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- Finnair Plc
Tietotie 11 A (Helsinki Vantaa Airport)
- Main hub
- Helsinki-Vantaa Airport
- Business model
- Full Service Carrier
- Domestic | International
- Airline Group
- Part of Finnair Group
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- Joined Alliance
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- Codeshare Partners
BRA - Braathens Regional Airlines
CSA Czech Airlines
Finnair is the national carrier of Finland and majority-owned by the Finnish government. Operating from its hub at Helsinki, the carrier and its subsidiaries handle the majority of domestic and international air travel in Finland. Finnair’s network includes regional services within Finland and Scandinavia as well as international services to Europe, Asia, United States and Canada. Finnair is a member of the oneworld alliance.
Location of Finnair main hub (Helsinki-Vantaa Airport)
Finnair share price
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Japan Airlines seeks approval to include Iberia into joint business with British Airways and Finnair
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Part one of this report on European airline market structure and consolidation highlighted that the top twenty airline groups in Europe hold 75% of seats. This is the same share as the top six groups in North America. This equivalence, in market share terms, between Europe's top 20 and North America's top six underlines the huge gap in consolidation progress between the two regions' airlines. It would take a large number of merger and acquisition deals to recreate North America's market structure in Europe, consolidating 20 into six.
This second part of the report is a kind of fantasy, a hypothetical. It suggests an illustrative series of combinations among Europe's top 20 that would approximately replicate the market shares, in terms of seat share, held by North America's top six.
This would require large merger and acquisition transactions involving pairings between members of Europe's smaller top six of Lufthansa Group, IAG, Ryanair, Air France-KLM, Turkish Airlines and easyJet. It would also mean several deals involving second-tier FSCs and LCCs. However, for now the larger deals in Europe remain relatively unlikely, and there are even hurdles to the smaller deals.
Consolidation among Europe's airlines has always been fitful, and truly sizeable deals have ground to a halt in recent years. By comparison, North America has become the benchmark of airline consolidation progress. The announcement that Alaska Airlines is to acquire Virgin America once again highlights the differences in pace between Europe and North America.
This first part of CAPA's analysis of European airline market structure and consolidation compares market concentration in Europe with that of other world regions and looks at the link with profitability. It mainly focuses on comparing Europe with the other two large aviation markets, North America and Asia Pacific, but also gives data on market concentration for all of the other regions: Middle East, Latin America and Africa.
Europe's fragmented airline market is less profitable than its much more consolidated North American counterpart (although, on most measures, Europe is less fragmented than Asia Pacific). Europe's top 20 airline groups have the same seat share as North America's top 6.
Part two of this report considers a possible set of combinations to reassemble Europe's top 20 into six groups matching North America's top six.
Airline seat growth from Europe is set to accelerate to 8% this summer, up from 6% in summer 2015, according to the latest schedules data from OAG. This will be the highest summer growth rate in six years. With summer 2016 starting in less than three weeks, the data are now fairly solid (although, of course, they are always subject to further change).
Capacity to Africa will fall and Asia Pacific will experience slowing growth from Europe, but every other region will experience an acceleration this summer. Intra-European seats will grow by 8%, with growth led by LCCs (including the low cost subsidiaries of the big legacy groups).The Middle East will continue to have the highest rate of capacity growth from Europe, but there will also be double-digit growth to Latin America and to North America.
This acceleration of capacity growth on the North Atlantic is partly due to the emergence of new competition, but also seems to be the result of incumbents switching capacity from elsewhere. This should perhaps be a source of some concern to the immunised JVs.
Finnair returned to profit in 2015, thanks in no small part to lower fuel prices. This was only its third positive result since before the global financial crisis, and it continues to lag the industry in its profitability. Nevertheless, its returns to profit and to both capacity and revenue growth are important markers on its financial progress. Perhaps more significantly, in a sector accustomed to thin margins where liquidity and balance sheet strength are vital, Finnair has moved into a net cash position.
However, Finnair's revenue was still below where it was in 2013, and its operational margin lagged far behind the rest of the global airline industry, which was collectively reaching an estimated new peak margin in 2015.
Finnair's return to profit and revenue growth is welcome, but it still has much to do. CEO Pekka Vauramo recognises this, saying, "we will now look to accelerate our profitable growth". Strong labour productivity improvements in recent years have provided a good basis for this. Finnair's fleet improvement programme, led by A350 deliveries that started in 2015 and will continue to 2023, should also be beneficial.
If a nation is not a country until it has a local beer and airline, then an extension may be that the carrier needs to fly to London. That is based on the constant theme for Asian carriers – such as Garuda, Philippine Airlines and Vietnam Airlines – opening routes to London and maintaining them despite financial pressures. But this does not apply to China. Chinese airlines have as many seats to Italy as to the UK; more Chinese tourists fly to New Zealand than to the UK. All seven of China's long haul carriers intend to fly to Australia but only four will fly to the UK.
This backwater issue is a problem for UK tourism - and for British Airways. Concurrent with President Xi's visit to the UK, visa restrictions will be loosened for Chinese nationals. But this is not enough; British tourism is hurt by the UK not being a member of the Schengen zone, where Chinese visitors can apply for one visa and visit multiple countries on one trip. The resulting limited Chinese interest in the UK hurts British Airways, which has the smallest presence of major European carriers in China. Finnair for one is bigger, furthering the case for deeper IAG-Finnair ties, or even a takeover. BA has a strong if quiet strategy to grow its China business, but still needs more support.
Finnair’s A350 delivery brings more growth to Helsinki-Vantaa Airport. Now to attract other airlines
Finnair on 07-Oct-2015 took delivery of its first A350 XWB, becoming the third operator overall – after Qatar Airways and Vietnam Airlines – and the first in Europe. The aircraft brings needed benefits to the airline: lower operating costs and an improved passenger product. The A350s also mark the start of more growth for Finnair’s home base, Helsinki Airport, which is expanding its terminal to support Finnair.
After replacing A340s, the A350s will permit growth, with Helsinki Airport telling CAPA it expects each aircraft to open one or two new destinations a year. Finnair’s strategy is to link Europe with Asia, focusing on Northeast Asia. Helsinki Airport has many of the main Asian markets covered, leaving open the opportunity for increased frequency – slots permitting – or exploring secondary cities. Finnair has announced Fukuoka and Guangzhou for new destinations in 2016.
Helsinki would like more North American routes, which Norwegian could consider. The LCC is testing longer flights from Helsinki with a Dubai service. Gulf carriers are absent from Helsinki – as are other long-haul operators excluding Japan Airlines. Helsinki Airport's challenge now will be to benefit from Finnair and attract new airlines.