Oneworld carrier Finnair posted a 2019 third-quarter net profit of €57.6 million ($64.3 million), down 18% from €70.2 million in the year-ago period, primarily driven by higher fuel costs and adverse exchange rates.

During the three months ended Sept. 30, Finnair carried 4.1 million passengers, marking 12% growth. A 9.5% capacity increase was met with 11.6% year-over-year (YOY) demand growth, pushing the airline’s load factor up 1.7 points to 86.2%.

This demand growth caused revenue to rise 8% YOY to €870.3 million. However, exchange rate headwinds and higher fuel costs caused operating profits to fall 17.8% YOY to €94.9 million.

Finnair’s fuel costs for the period were up €27.4 million (+16.8% YOY), although half of this additional cost was driven by fuel hedges. Unit revenue (RASK) for the period fell 1.5%, or 2.5% at constant currency, while unit costs (CASK) were up 2%. Unit costs at constant currency, ex-fuel, decreased 0.8%. 

“On the whole, Q3 developed according to the expectations we set out in our Q2 report,” Finnair CEO Topi Manner said, announcing the results Oct. 22. “Our European traffic performed strongly both in terms of growth and yields, and new North American route to Los Angeles has been well received. In selected Asian routes, most notably Hong Kong, lower demand was experienced.”

Speaking to reporters and analysts, Manner said Hong Kong accounted for 50% of the decline in Finnair’s Asian RASKs. Meanwhile, Europe picked up against the comparable quarter in 2018.

However, he added that Finnair is in the Asian market “for the long term” and will continue to build its presence, while monitoring capacity allocations to the region.

“We see a shift in operating environment where global uncertainties have translated into slower economic growth. In this environment, we will pay more focus on value creating growth and cost efficiency. On-time performance, fuel efficiency and automation of processes are examples of this agenda. We will elaborate on this in the upcoming capital markets day on Nov. 12,” he said.

Manner also wants to increase ancillary revenue. “We have higher ambitions and we want to grow faster in terms of ancillary income passenger revenue going forward,” he said.

Finnair’s full-year guidance remains unchanged, with 11%-12% capacity growth and “somewhat slower” revenue growth.

“While the current outlook for Finnair’s seasonally strongest third quarter remains robust, we have started to see increased uncertainty especially in cargo demand. Finnair estimates its comparable operating result will be between 4.5%-6% of revenue in 2019, assuming no material changes in fuel prices and exchange rates,” he said, adding the performance is more likely to be at the lower end of that range.

“Going forward, it is about sustainable profitable growth for us,” Manner said.

Victoria Moores