Expensive oil and slower growth in demand will weaken Finnair’s result

Jukka Hienonen, Finnair President & CEO, said, “Factors troubling the entire sector – rapidly rising oil prices and a sharp fall in passenger load factors – are also clearly weakening Finnair’s profit-making capacity. With the current outlook, we can assume that the operational result for January-June and therefore the full year will fall short of last year’s levels.”

At the beginning of the year, jet fuel cost 850 dollars per tonne. Now the price is clearly above 1,300 dollars. For the whole year, fuel costs are expected to rise, despite price hedging, to more than 600 million dollars, which is more than a quarter of estimated turnover. Last year Finnair’s fuel bill was around 440 million euros. Fuel is the company’s largest single cost item.
 
Finnair scheduled traffic’s passenger load factor in April was six percentage points below last year’s level. In May, traffic is expected to grow further, but capacity will grow greater than demand, so passenger load factor continue to fall.

Hienonen, added, “The effects of the world economy on air transport are already evident as a trend that will decrease passenger demand. We are now planning to reduce capacity, particularly in Europe. Due to the short advance booking horizon, it is difficult to make forecasts far into the future.”

© Centre for Asia Pacific Aviation. Date posted: 22-May-08


 

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