Finnair Examines New Layer of China Routes as A350s Arrives

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Pekka Vauramo

Finnair Oyj chief executive officer Pekka Vauramo, at the carrier’s headquarters in Helsinki-Vantaa Airport, Finland. Photographer: Henrik Kettunen/Bloomberg

Finnair Oyj is looking at adding routes to Chinese cities not currently connected to Europe as it takes delivery of the region’s newest wide-body jet fleet.

Finnair, which will become the first European carrier to deploy the Airbus Group SE A350 in October, is “not that concerned” about recent economic turmoil in China, Chief Executive Officer Pekka Vauramo said in an interview.

“We really feel being a first mover has benefits,” he said. “There are some mega-cities there where we could add frequencies. We could also look into cities in China or South Korea that don’t have many connections, or don’t have any.”

Of Finnair’s first five A350 destinations, three -- Shanghai, Beijing and Hong Kong -- are in China, alongside Bangkok and Singapore. The carrier will take delivery of 19 of the twin-engine jets through 2023 to add capacity and replace seven four-engine Airbus A340s used on intercontinental trips.

Vauramo, who joined as CEO two years ago from Finnish cranemaker Cargotec Oyj, said Northeast Asia remains Finnair’s “sweet-spot” even after the market suffered setbacks including the Japanese earthquake, curbs on flights through Siberian airspace, a weakening yen and now the devaluation of the yuan.

The carrier’s strategy centers on establishing Helsinki as a bridge to northeast Asia from Europe, exploiting its position on the shortest great-circle routes between the regions. The CEO, based in Hong Kong before joining Finnair, said the network is sufficiently diverse to avoid over-exposure to China.

Extra Seats

“We are of course in many different markets in Asia and that’s one part of how we can manage this,” he said. “If we look at developments in China, developments in Japan, there are some differences in how these economies develop -- and South Korea. And I would say southern China, of which Hong Kong is a part, in a way has its own economy.”

Photographer: Balint Porneczi/Bloomberg

Finnair’s A350-900s will be fitted with 297 seats, as many as 40 more than its existing long-haul models, and will burn upwards of 40 percent less fuel. They’ll all be equipped with wireless connections. The airline is also spending 30 million euros ($33 million) to retrofit the rest of its Airbus fleet with Wi-Fi.

Vauramo is hiring 130 flight attendants, the first cabin crew additions since 2007, as he takes the new aircraft and seeks to double Asian traffic by 2020 from the 2010 level. To feed more passengers onto those flights -- vital to the hub model -- he’s also looking at adding direct links to Helsinki from further secondary cities in central and northern Europe.

Nordic Touch

Finnair also aims to attract more customers beyond its home country’s 5.5 million inhabitants by providing what the CEO calls a unique Nordic experience, including business-class menus created by Finnish chefs and tableware and textiles from retailer Marimekko Oyj.

“We are targeting in the future being the best European business class in our long-haul flights,” Vauramo said.

Vauramo has pursued cost reductions since taking over that helped narrow Finnair’s second-quarter loss to 12.9 million euros from 19.6 million euros a year earlier.

Finnair, which is 55.8 percent owned by the Finnish state, is targeting a 6 percent operating margin over the next two years. A key challenge for the airline is turning around unprofitable European connections after ending an unsuccessful joint venture with Flybe Group Plc to operate those connections.

“They are headed in the right direction,” said Jaakko Tyrvainen, an analyst at Evli Bank in Helsinki. “But the operating environment has always been, and is likely to remain, challenging for a player with such low local demand. Feeding the Asian traffic profitably is crucial.”

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