The Finnish national airline Finnair has announced an average 7.5% increase in ticket prices by the end of this year. The first price hikes are to be enacted next week.
The announcement was prompted by higher fuel costs. Finnair CEO Keijo Suila said on Tuesday that higher oil prices are costing his company an extra EUR 50 million in aviation fuel this year.
Finnair’s competitors SAS and British Airways have already announced price hikes as a result of higher oil prices.
Suila did not speak of a price increase, but rather a "correction". He notes that airline ticket prices have gone down by nearly 25% in the past year.
The higher fuel costs also pushed down Finnair’s result for the early part of this year. After financial items, the company showed a loss of more than EUR three million. In the first half of last year the company sustained a loss of more than EUR 20 million.
In spite of the shrinking loss, the result was a considerable disappointment to investors.
Contrary to previous forecasts, Finnair issued a warning on Tuesday that its result for the whole year would be in the red. The bad news pushed the company’s share price down by nine percent to EUR 4.80 in Tuesday’s trading.
In the second quarter of this year Finnair increased its sales by more than ten percent. The company also reports a 20% increase in passengers and freight.
CEO Suila says that the cyclical crisis in the civil aviation industry is already a thing of the past, but price competition prompted by excessive supply is eating at the airlines’ profitability.
Suila notes that there are several loss-making airlines in the Nordic Countries, and that not all of them have the wherewithal to survive the competition.
