Finnair loses €20.7 million in third quarter, sees tough times ahead

A "steep fall" in fares and weak domestic demand helped sink Finnair to a €20.7 million ($30.6 million) third-quarter loss, widened 16.3% from a €17.8 million deficit in the year-ago period, and left the carrier admitting it "still has a long way to go before its corporate structures and the operating conditions they create are sustainably competitive."

The "poor demand and price levels" in Finland mean Finnair is dependent on its Asian business, which now accounts for more than half its scheduled traffic revenue. "The decline in demand for business travel has stabilized at a lower level, but overcapacity in the sector is continuing to keep ticket prices low, irrespective of the customer segment," it said.

Third-quarter revenue plunged 21.8% to €436.9 million while operating expenses were down 15% to €477.1 million. Operating loss improved slightly to €24.1 million from €25.5 million in the year-ago period. Finnair said the results were "in line with our predictions."

The airline in August launched its restructuring and reorganization program, which includes 200 job cuts and the impending departure of President and CEO Jukka Hienonen (ATWOnline, Aug. 17), and it issued a €120 million bond in September. It said capacity cuts and temporary labor agreements with maintenance, cabin service and catering employees have helped slow the bleeding (ATWOnline, Sept. 17). It has been unable to reach a deal with pilots but hopes to save €120 million in overall personnel costs. It said efficiency programs yielded €70 million in savings through the first nine months.

Scheduled passenger numbers fell 14% to 1.7 million as RPKs slipped 8%. Load factor rose 1.1 points to 79.3%, Finnair said. Full-year capacity is expected to decline nearly 10%. Third-quarter unit revenue dropped 12.3%.

Nine-month net loss of €65.3 million compared to a deficit of just €1.3 million in the year-ago period. EBIT plummeted to an €80.9 million loss from a €3.4 million profit in the first nine months of 2008.

"There are signs. . .that the decline in travel demand is coming to an end, but overcapacity will not allow significant or wide-ranging increases in prices," it said, predicting that operating results for the second half and full year will be "clearly negative."