Finnair Expects Significant Loss After Competition Intensifies

Finnair Oyj (FIA1S) predicted a “significant loss” for the full year after second-quarter earnings declined as increased competition on long-haul routes and a stronger euro weighed on sales.

The airline had a net loss of 24 million euros ($32 million) compared with profit of 17.9 million euros a year earlier, the Helsinki-based company said today in a statement. Revenue declined 7.2 percent to 565.7 million euros.

“The impact of the weak economic prospects in Finland on domestic demand and intensified international competition, particularly in long-haul traffic,” hurt sales, Chief Executive Officer Pekka Vauramo said. Expenses paid in U.S. dollars and revenue in Japanese yen also took a toll as the euro strengthened.

An uncertain economic outlook for Europe and Asia weakened demand, the company said. The 18-nation euro bloc posted zero growth last quarter as its three biggest economies failed to expand. Restructuring at the carrier’s aviation service unit and the sluggish performance of its tour operator Aurinkomatkat Suntours also hurt results. Finland’s biggest airline is looking to trim annual costs by 200 million euros this year.

Finnair shares fell 2.8 percent to 2.45 euros at 11:54 a.m. in Helsinki, taking the decline to almost 12 percent this year and giving the airline a market value of 314 million euros.

Outsourcing

The carrier, which is 55.8 percent state-owned, had about 5,800 employees at the end of last year, down from about 9,660 in 2007. It has terminated positions and outsourced functions including catering, engine services and ground handling.

Finnair said today that it plans to outsource cabin services on as many as three routes this year and a total of about 20 routes within the next two years.

With 115 flights a week over Siberian airspace, the carrier also has more to lose than other carriers should Moscow elect to curb flights. Finland’s Transport Ministry said on Aug. 12 that it’s conducting studies into potential effects of an airspace shutdown as Russia threatens to widen its retaliation against the European Union in a tit-for-tat sanctions dispute.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net Robert Valpuesta, David Risser

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