Finnair seeks partners for aircraft maintenance

Airline looking for new ways to cut costs

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The Finnish national airline Finnair plans to form a separate company for its technical operations by the end of the year. The company might even divide the activities into two separate companies. One of them would concentrate on engine maintenance, and the other on maintenance of other parts of the airline’s fleet.
      The move is prompted by a constantly declining economic situation and resulting demands for greater efficiency. In Finnair’s technical operations, this led to a stability pact, which is aimed at guaranteeing industrial peace, or according to Kimmo Soini, Senior Vice President of Finnair Technical Services, at least it should guarantee a competitive level of productivity.
      According to Soini, the agreement was an absolute prerequisite for allowing Finnair to take on new and big clients. The old model would have led to a shrinking of operations in maintenance of Finnair’s own planes.
     
The stabilisation has taken a toll on personnel. More than one in three have had to leave, as the number of employees at Technical Services has declined from 2,500 to the present 1,600.
      The stabilisation agreement will leave the jobs of the remaining personnel secure until the end of next year.
     
Co-determination talks on cutting personnel costs are underway in all other parts of Finnair. The goal has been to cut EUR 70 million of the personnel costs of about EUR 500 million. The stabilisation agreement led to savings of EUR 17 million at the outset.
      Anssi Komulainen, Finnair’s Senior Vice President, Human Resources, is engaged in negotiations for another EUR 53 million in savings. Temporary layoffs have been implemented among in-flight personnel.
      Komulainen is also negotiating with several labour unions, including Finnair’s largest, the IAU, on pay hikes demanded by existing contracts. Komulainen says that there is no room for higher pay, as Finnair’s operative result for the early part of the year was EUR 57 million in the red.
     
In the current situation Komulainen is like a juggler keeping many balls in the air at the same time. He says that the overall willingness to negotiate has increased significantly in recent weeks.
      The obvious reason was the dramatic announcement by CEO Jukka Hienonen three weeks ago that he would resign. Hienonen said that he was leaving because he had been unable to change the rigid structures of the company in the way required by an economic emergency.
      Soon after Hienonen’s resignation announcement, Finnair unilaterally started changing the rigid structures of its 750 pilots by outsourcing flight work to cheaper pilots. At least in the early phases, they are being sought in the cockpits of Finncomm Airlines.
      The management is also considering the merger of two loss-making travel agencies that it owns - Area and Finland Travel Bureau.
     
Soini says that there are no plans for outsourcing. However, the company is looking for partners in the field through various arrangements. One possibility would be a shareholding in a new technical services company. There have been discussions on various options, “not the least with Russia”, as Soini says.
      The turnover of a new company or companies would be EUR 200 million. Growth is being sought specifically in work done for others, which could grow to about half of turnover, from today’s approximately 25 per cent.
     
One big contract is reportedly ready, with the German charter company Condor as the client. Finnair would install the winglets on Condor’s Boeing 757 aircraft and make changes to the passenger cabin. However, the contracts have not been signed, so Soini is not yet confirming the news.

More on this subject:
 Decreasing demand brings decline in Finnair services

Previously in HS International Edition:
  Finnair to start outsourcing domestic flights this autumn (7.8.2009)
  Finnair CEO Jukka Hienonen resigns; new co-determination talks imminent (7.8.2009)

Links:
  Finnair Plc Press release 7 Sept 2009 Finnair adjusts its fleet to changes in demand structure

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