Finnair Group half year financial report 1 January–30 June 2016

April-June 2016

• Revenue grew by 4.7% year-on-year to 569.6 million euros (543.9)*.
• Comparable operating result was 3.2 million euros (-12.9).
• Operating result was 0.2 million euros (-5.7)
• Comparable EBITDAR was 56.3 million euros (37.4).
• Net cash flow from operating activities totalled 119.6 million euros (88.4), and net cash flow from investing activities amounted to -149.0 million euros (-53.7).
• Unit revenue (RASK) decreased by 3.8% year-on-year.
• Unit cost (CASK) decreased by 6.5% and unit cost at constant currency excluding fuel increased by 0.1% year-on-year.
• Ancillary and retail revenue per passenger grew by 17.3% year-on-year to 10.89 euros.
• Earnings per share were -0.04 euros (-0.06).

January-June 2016

• Revenue grew by 3.8% year-on-year to 1,106.0 million euros (1,065.2).
• Comparable operating result was -12.2 million euros (-41.3).
• Operating result was -17.4 million euros (-13.9).
• Comparable EBITDAR was 92.7 million euros (56.5).
• Net cash flow from operating activities stood at 130.0 million euros (101.4), and net cash flow from investing activities totalled -396.3 million euros (89.2).
• Unit revenue (RASK) decreased by 3.0% year-on-year.
• Unit cost (CASK) decreased by 5.6% and unit cost excluding fuel at constant currency increased by 1.0% year-on-year.
• Ancillary and retail revenue per passenger grew by 17.3% year-on-year to 11.35 euros.
• Earnings per share were -0.19 euros (-0.16).

* Unless otherwise stated, figures in brackets refer to the comparison period, i.e. the same period last year.

Outlook

Outlook published on 12 May 2016

The demand outlook for passenger and cargo traffic in Finnair's main markets involves renewed uncertainty. Finnair estimates that, in 2016, its capacity measured in available seat kilometres will grow by approximately 8 per cent and that its revenue will grow at a slightly slower rate. The lower price of jet fuel supports Finnair's financial performance in 2016. Finnair will issue a forecast for the development of its full-year comparable operating result in conjunction with its interim report for January-June.

Outlook on 17 August 2016

Finnair's new estimate of capacity growth is approximately 7 per cent, while the previous estimate was a growth of 8 per cent compared to 2015. The revision is due to delays in the deliveries of A350 aircraft. The rate of revenue growth is estimated to be slower than the rate of capacity growth. Uncertainty regarding the demand and yield prospects of the airline industry has increased during recent months. Finnair estimates that its comparable operating result for 2016 will increase from the previous year (2015: 23.7 million euros).

CEO Pekka Vauramo:

Our comparable result for the second quarter was a good three million euros in the black, representing an improvement of some 16 million euros compared to the previous year, roughly equal to the year-on-year increase of our result in the first quarter. The past quarter was already the seventh consecutive quarter in which we achieved a year-on-year improvement.

Due to reasons such as lower fuel costs, higher capacity and growing ancillary and retail revenue, our updated outlook is that our full-year result for 2016 will show an improvement on the previous year. Nevertheless, it should be noted that last year's third quarter saw several factors contribute to a strong result that was an all-time record for Finnair, so the comparison period sets the bar high. With that in mind - and provided that the market situation remains unchanged - we expect that our performance developments will moderate somewhat in the second half of 2016.

In the second quarter, our organisation continued to prepare for accelerated growth in the longer term in accordance with our strategy. The training and supplementary recruitment of flight personnel progressed as planned. After taking delivery of two new A350 aircraft during the second quarter, we now have six of the new aircraft in our fleet. However, the deliveries of the new aircraft took place a little later than planned, which forced us to adjust our flight program. This meant that our capacity growth fell slightly short of our previous estimate.

Our capacity measured in Available Seat Kilometres grew during the quarter by approximately 9 per cent year-on-year, while traffic growth measured in Revenue Passenger Kilometres was slightly below 7 per cent. We achieved growth particularly in long-haul traffic, where we launched two new routes for the summer season, to Fukuoka and Guangzhou, and we also added more flights to Miami and Chicago. Filling aircraft on new routes and frequencies typically requires a breaking-in period, and the review period on these routes was largely in line with our expectations. In the second quarter of this year, long-haul traffic accounted for about 56 per cent of our capacity, while the corresponding figure for the comparison period was about 53 per cent. Since unit revenues are typically lower in long-haul traffic than in short haul, this change in our traffic structure was also reflected in our unit revenue.

Our unit costs excluding fuel increased slightly in the first half of the year, which is something we cannot be satisfied with. On the other hand, it is important to keep in mind that we are currently preparing for accelerated growth, which has a front-loaded impact on our cost structure. During the first half, we recruited over 500 employees. The training of our new crew, the roll-out of the new aircraft, launch of new routes and other preparations for growth burdened our results by some 6-8 million euros in each quarter. We must maintain tight control over costs even as we prepare for growth. We are also looking for new ways to improve efficiency; for example, through digitalisation.

Financial reporting

The publication dates for Finnair's interim reports in 2016 are as follows:

Interim report 1 January - 30 September 2016: 26 October 2016
Financial Statements Bulletin 1 January - 31 December 2016: 15 February 2017

FINNAIR PLC
Board of Directors

Briefings

Finnair will hold a press conference related to the announcement of its result on 17 August 2016 at 11:00 a.m. and an analyst briefing at 12:30 p.m. at its office at Tietotie 9. An English-language telephone conference and webcast will begin at 2:30 p.m. Finnish time. The conference may be attended by dialling your local access number +358 9 2310 1618 and using the PIN code 4146988. To join the live webcast, please register at: https://finnairgroup.videosync.fi/2016-08-17-q2