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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
- Joined Alliance
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- Codeshare Partners
CSA Czech Airlines
The national carrier of Finland, Finnair is based in Helsinki and is majority-owned by the Finnish government. The airline and its subsidiaries dominate the domestic and international air travel market in Finland. Finnair’s network includes regional services within Finland and Scandinavia as well as flights 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
1,228 total articles
101 total articles
A new MoU between Air China and the Lufthansa Group to establish a joint venture covering Europe-China routes still awaits many – in fact, nearly all – details. But it is not difficult to see this JV enhancing the position of each airline, assuming it meets EU competition requirements. Competitors will seek to grow existing JVs while establishing new ones. In some instances they will be responding to the Air China-Lufthansa JV, and in other instances they have been ready but held off due to an uncertain regulatory environment. Allowing another JV potentially increases the pressure for more to follow.
But more immediately, and closer to the purposes of Air China and Lufthansa, the JV will at least partly remove lingering tensions between Air China and Lufthansa Group, the two largest carriers between Europe and China. Air China has overshadowed Lufthansa, with more growth to come as Air China sits astride what will be the world's single largest aviation market. But Air China requires precious beyond traffic that Lufthansa can control, as well as more extensive international experience. Between them, the two account for 35% of Europe-China flights, and 84% of Germany-China flights.
For Lufthansa, a China JV adds to those in Japan and North America, while this is the first long-haul JV for Air China. Meanwhile Gulf carriers are not this JV's primary target; their access in China is relatively restricted and routes to Europe via the Gulf are circuitous.
China's "Go West" economic drive continues to deliver results as United Airlines becomes the latest international carrier to open service to China's west via a 787-8 service from San Francisco. Much growth is still to be unlocked from the growing economic prosperity of Chengdu and neighbouring Chongqing, but now Beijing is considering a new economic development plan that will boost the economy, and ultimately air services, of other regions.
The so-called "Silk Road" plan focuses on areas outside of China's eastern coast that has seen strong economic growth. Many of the regions under the "Silk Road" plan were former posts on the historic Silk Road. This includes Xi'an, the eastern terminus of the Silk Road, which is already experiencing international and long-haul growth. Xi'an's only scheduled (albeit seasonal) long-haul route is from Finnair, which launched service from Helsinki in summer 2013. China Eastern plans to launch Xi'an-Moscow service while Hainan Airlines will launch a Xi'an-Paris service.
Chengdu and Chongqing are also expected to fall under the "Silk Road" plan, ensuring growth continues there. Urumqi, already a hub for West Asia, will also likely feature in the plan and continue to grow. New regions including Gansu (home to Lanzhou) and Tibet (Lhasa and Xining) will also likely benefit, boosting their international services.
European airlines face overcapacity & resurgent labour. Recent profit warnings make alarm bells ring
A recent bout of profit warnings from a number of European airlines are ringing alarm bells and providing a reminder of the fragility of profitability in the industry. Airlines of different sizes, shapes and geographies have been prompted to announce a lower outlook for 2014 earnings, including Lufthansa, Finnair, Aer Lingus and Icelandair. Notably, these are all legacy carriers.
Although the details differ in each case, two broad themes emerge from these announcements. The first relates to signs of overcapacity in some markets, leading to revenue weakness. This is also linked with the growing competitive threat posed by alternative business models to Europe's legacy carriers, whether by LCCs on short-haul or Gulf carriers on long-haul.
The second theme is the impact that labour has on profitability, whether damaging it through industrial action, or assisting it through cost savings.
Announcing his first set of annual results as Flybe CEO, Saad Hammad declared that the airline had been "reborn" in FY2014. It was certainly a year of great significance in Flybe's 35 year history. The company returned to profit after three years of losses and successfully raised GBP150 million in fresh equity, avoiding what was starting to look like a looming bankruptcy and buying more time to complete its restructuring.
The return to profit was built on network rationalisation and a seat capacity reduction in the core Flybe UK airline. This was accompanied by a significant headcount reduction which led to lower costs. Load factors were driven up by the capacity cut and lower fares, leading to higher revenues per seat and a slight increase in total revenues. Losses were also reduced at Flybe Finland, the joint venture with Finnair.
Importantly, too, Mr Hammad and the rest of the new management team seem to be bringing about a cultural change in Flybe, with a brand re-launch and his talk of 'Purple Power'.
A recent profit warning by Finnair highlights the challenge in converting an operationally successful niche strategy, based on capturing Europe-Asia connecting flows via its Helsinki hub, into sustainable profit. In spite of the advantages of its geographic location for this strategy, its strong performance on punctuality and reliability and a well regarded brand, Finnair has perhaps lacked scale to compete profitably in the global market. In addition, its short haul feeder operations have felt the sting of LCC competition. Against a weak revenue backdrop, it is rightly prioritising cost savings in 2014.
The long haul operation should benefit from the newly commenced joint venture with JAL and BA on routes to Japan and there is at least some aspirational legitimacy in Finnair's confidence that it can tap into China's vast potential. Moreover, from 2016, Finnair will become the first European operator of the A350, providing it with a considerable unit cost advantage over its existing A340 fleet. Meanwhile, it has crucial negotiations to conclude over labour cost savings and must also make a decision about short haul fleet renewal.
An impending three day strike by Lufthansa pilots – described by the carrier as "one of the biggest walkouts" in its history – highlights what continues to be a challenging labour relations environment for Europe's legacy carriers. In spite of years of competition from LCCs and cost efficient long-haul players, and after significant progress with restructuring programmes, such disputes remain common.
Labour-related issues are affecting a number of other airlines, including Austrian Airlines, Air France, Aer Lingus, SAS and Finnair. Even LCC Norwegian Air Shuttle faces key strategic questions in connection with the use of low-cost labour to grow its nascent long-haul business. In general, however, LCCs enjoy a less unionised environment and greater labour flexibility.
It is not uncommon for labour unions to become more militant as the profit cycle picks up, but airlines cannot always hide behind this excuse. As IAG CEO Willie Walsh has said*, "it is not about unions, but management. Management needs determination and can do it if it wants to…Cost creep is requested by unions, but made by management”.
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