Finnair CEO denounces price dumping by competitors

Airline shows weakened second quarter result

Jukka Hienonen

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Jukka Heinonen, CEO of the Finnish airline Finnair, announced the company’s second quarter result on Friday, and took the opportunity to lash out at competitors, who he says are hurting the competitiveness of the whole air transport sector.
      “Airlines worried about short-term cash flow are cutting prices and undermining the profitability of the whole industry.”, Heinonen said.
      Heinonen also fears that countries may start subsidising their national airlines again. He does not mention any examples, but at least in Italy, there have been calls by politicians to use state money to keep Alitalia from going bankrupt.
     
The result of the early part of the year fell from last year’s EUR 33 million to EUR 16 million this year.
      “Despite its good fundamentals, Finnair has been unable to insulate itself from sector developments, indeed the second quarter was clearly weaker than the previous year. Moreover, the latter part of the year appears difficult and the operational result for the last six months may dip into the red.”
      In the second quarter, Finnair’s turnover increased by 1.5 per cent to EUR 546 million. Business profit at that time was EUR 5 million, and the pretax result was EUR 19 million.
      Fuel costs increased by 38 per cent in the April-June period . Finnair warns that the operational result of the second half of 2008 may be in the red, based on the price of fuel in late July, coupled with unchanged ticket prices.
     
“The situation in the sector is expected to remain extremely difficult, however, due to expensive fuel and uncertain demand development. Fuel costs accounted for around 25 per cent of Finnair’s turnover in the early part of the year.”
      Finnair is implementing a profit improvement programme aimed at savings of EUR 50 million. The company has launched discussions with personnel on the matter. Heinonen says that job cuts are a last resort.
      Finnair transported four million passengers in the early part of the year. Freight services grew form last year by more than 15 per cent to 50 million kilos.


Links:
  Finnair Group Interim Report, 1 January 1 - 30 June 2008

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