Finnair announces new drastic cost-cutting measures

Third course of belt-tightening in short time

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The financially strapped Finnish airline Finnair is launching a third extensive cost-cutting programme within a relatively short period of time.
      The aim of the most drastic austerity programme in recent history is to achieve savings of EUR 100 million, 70 million of which is to be in personnel costs.
      Finnair is suffering from falling demand for its scheduled services and a decline in average ticket prices. The main reason for the latter phenomenon is the increasing trend of business travellers to opt for tourist class, or to not travel at all.
     
“About 15 per cent of revenue has been wiped off the top line of the balance sheet. We have to find cost reductions of about 15 per cent”, says the company’s deputy CEO Lasse Heinonen.
      Costs have been cut within the framework of two previous austerity programmes by about EUR 100 million. More than 6,000 employees will be temporarily laid off for varying periods of time, and about 600 have been terminated.
      Finnair employs slightly more than 9,000 people. The cutting of nearly 1,000 person work-years will bring savings of more than EUR 50 million, Heinonen says.
     
The savings target of EUR 70 million that was announced on Friday requires the cutting of 1,200 person work-years, or a 15 per cent cut in labour costs. The goal is very difficult to achieve, if flight operations are to be maintained at approximately the current level. So far, flights have been cut by eight per cent.
      The airline plans to hold discussions with personnel on how to improve productivity. No decisions have yet been made on co-determination talks for actual job cuts. Finnair would nevertheless make labour market history if the savings programme is implemented without resorting to the co-determination process.
     
Finnair’s personnel costs are about half a bllion euros a year, Heinonen said. Another major cost item is fuel, which is out of the company’s control.
      The third obvious target of savings is big investments. Finnair is spending and has spent EUR 400 million on new aircraft this year, and a further EUR 300 million is slated for next year.
      Heinonen said that this year’s cost-cutting programme will be carried out as planned, and the same goes for next year as well.
     
In previous belt-tightening programmes, Finnair managers complained that the company’s personnel did not have the crisis consciousness required to make difficult decisions. Esa Suokas, head shop steward of the Finnish Aviation Union (IAU), which represents technical personnel and ground service staff, and Timo Willberg, chairman of the Finnish Airline Pilots Association, both say that the awareness now exists.
     
Suokas says that there is no less work to be done. The need to service Finnair’s own planes has not grown, because the planes are flying less than before.
      However, more work is being subcontracted than before.
      “Misery needs to be distributed equitably, which means that the present group of people simply have to work more”, Suokas says.
      The pilots are also negotiating on a new labour contract after the previous one expired already last autumn.
      Willberg echoes the views of a number of outside analysts, casting doubt on the effectiveness of continued massive belt-tightening.
      “Finnair cannot succeed by saving money alone. Revenue needs to be acquired from somewhere”, he says.


Previously in HS International Edition:
  Finnair to lay off its entire cabin crew staff for two weeks as cost-cutting measure (3.12.2008)
  Finnair plans extensive outsourcing to make up for financial losses (29.4.2009)
  Slump in aviation not slowing Finnair investments (30.3.2009)
  Finnair cuts over 120 jobs (16.1.2009)

Links:
  Finnair Plc Company Announcement FINNAIR SEEKS FURTHER COST CUTS OF 100 MILLION EUROS

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