Finnair Stock Plunges as Terrorism Anxiety Hurts Travel Demand

Finnair CEO on Terrorism, Travel Demand, and Brexit
  • Airbus A350 delays also drive carrier to scale back growth
  • Airline launches cost-savings plan as it awaits improvements

Finnair Oyj shares fell the most in almost three years after the carrier scaled back plans to add flights this year as terrorism in Europe hurt demand for travel.

Finnair dropped as much as 10 percent, the steepest intraday drop since October 2013, and was down 7 percent at 4.89 euros as of 11:33 a.m. in Helsinki. The Finnish airline will increase seating by 7 percent this year instead of a planned 8 percent, with the slowdown also prompted by Airbus Group SE’s delivery delays of A350 planes, the carrier said in a statement.

The airline has been more optimistic about increasing traffic than competitors including Deutsche Lufthansa AG and Air France-KLM Group, saying in May that it would increase capacity by as much as 10 percent annually through 2018. Terrorist incidents in French cities, Brussels and Istanbul this year have deterred U.S. and Asian travelers from making trips to Europe, prompting airlines to reduce expansion plans.

“With all the activity in Europe, with the incidents that have taken place, we’ve seen some group cancellations, and it’s reducing our revenue forecasts,” Chief Executive Officer Pekka Vauramo said Wednesday in an interview with Guy Johnson on Bloomberg Television. At the same time, the effects of terrorism on demand are likely to only be short-term, he said.

Finnair posted a second-quarter comparable operating profit of 3.2 million euros ($3.61 million), versus a year-earlier loss, while revenue increased 4.7 percent to 569.6 million euros. The airline said separately that it’s planning a cost-reduction project targeting 20 million euros in annual savings by the end of June 2017 as it waits for a better operating environment.

Air France-KLM said in July that the number of groups from China planning trips to France has plunged 50 percent and Japanese travel to the country has dropped sharply following terrorist attacks. Finnair has been building its home base in Helsinki as a hub linking Europe with Japan, South Korea and China.

Airbus said in June that it will struggle to meet a goal of delivering 50 A350s to customers this year. The French manufacturer plans to review the target by late summer once it’s clear whether suppliers for the widebody model’s interior fittings have overcome delays.

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