LONQ22006netti

Slide1: 

Finnair Group Interim Report 1 January – 30 June 2006

Sense is slowly returning, even in airline industry: 

Sense is slowly returning, even in airline industry Many airlines still in shaky financial shape Competition remains tough in Nordic countries Two airlines have withdrawn from Finnish market Successful airlines have strong economy, effective strategy and costs in check Strong airlines invest in new aircraft with low fuel consumption

Quarter of structural change : 

Quarter of structural change Finnair’s increasing role in Asia-Europe traffic is reflected in the company structure One-off adjustment costs of structural change 15.2 MEUR, result clearly under last year’s level Introduction of new aircraft temporarily weakened productivity in first half of year Average price of flight tickets decreased Good development in demand Record load factors

Personnel cuts agreed: 

Personnel cuts agreed 670 jobs will be cut in 2006-2007 Emphasis on Finnair Technical Services and support functions Planned efficiency measures to bring 80 MEUR annual cost benefits Efficiency measures everywhere in the organisation

Operations systematically rationalised: 

Operations systematically rationalised Personnel on average

Structural changeweighed on result: 

Structural change weighed on result Q2/2006 Q2/2005 Change % Turnover mill. € 494.6 469.4 5.4 EBITDAR 68.2 73.5 -7.2 EBIT excl. capital gains, fair values changes of derivatives and reorganization expenses 18.2 30.0 -39.3 Capital gains 1.9 1.8 5.6 Fair value changes of derivatives 0.6 3.5 -82.9 Operating profit/loss (EBIT) 5.5 35.3 -84.4 Profit after financial items 3.3 36.3 -

Fuel bill rose by over 50 MEURin first half of year: 

Fuel bill rose by over 50 MEUR in first half of year * excluding fair value changes of derivatives ATK = Available Tonne Kilometre

Slide8: 

2003: 10.2% of turnover 2004: 12.5% of turnover 2005: 15.6% of turnover 2006: ~20.0% of turnover at current price level and planned traffic growth Finnair scheduled traffic has hedged 62% of its fuel purchases for the next six months, thereafter for the following 18 months with a decreasing level. Finnair leisure flights hedged 60 % of winter traffic programme’s consumption. Fuel costs increasing

Slide9: 

Realized prices and swap prices

Development of average flightand fuel price 2001 - 2006: 

Development of average flight and fuel price 2001 - 2006

Unit costs +6.5%,without fuel +1.4%Change YoY: 

Unit costs +6.5%, without fuel +1.4% Change YoY % 2004 2005 2006 2003 2002

Most modern European fleet: 

Most modern European fleet Boeing MD-80 aircraft retired from parent company fleet in July Popular new Embraer 170/190 aircraft increase flexibility, decrease costs and are eco-efficient A new Embraer joins fleet monthly until end of year, four new aircraft next year (total 16) Eighth wide-body aircraft, Finnair’s first Airbus 340 took flight in July New Airbus A340/350 aircraft replace current wide-body fleet

Harmonised fleet: 

Harmonised fleet Embraer 170/190 Long haul - 12-18 aircraft - 250-314 seats Airbus A340/A350 Feeder traffic - 16 aircraft - 76-100 seats

Strong balance sheetEquity ratio and adjusted gearing: 

Strong balance sheet Equity ratio and adjusted gearing %

Group continues to have strong liquidity Cash flow January-June: 

Group continues to have strong liquidity Cash flow January-June

Asian success continues: 

Asian success continues Demand (Jan-June) grew 23.3%, passenger numbers 24.4%, load factors 3.3%, cargo 17.2% New route to Nagoya opened in June and Delhi will be launched in November. Next year Kuala Lumpur which is 11th Asian destination. Over 100 flights a month to China Capacity will grow by 30% in last half of year Lie-flat bed seats installed in long-haul business class

Finnair long haul network: 

Finnair long haul network Bangkok Singapore Tokyo Helsinki Beijing 2 7 7 6 Shanghai 7 5 7 Hong Kong New York 7 Nagoya Osaka 3 Guangzhou 4 41 flights to Asia per week

Slide18: 

Most preferred choice for passengers needing at least one stop-over. Examples: Stockholm Gothenburg Oslo Hamburg Dusseldorf Berlin Stuttgart Edinburgh Tallinn Krakow Sustainable competitive edge based on geography Asia Riga Vilnius Budapest Warsaw Prague Barcelona Madrid Milan Zurich Venice HEL CPH FRA LON PAR

Finnair favored in reservation systems: 

AN1A09SEP ARNPVG (=Stockholm-Shanghai) ** AMADEUS AVAILABILITY - AN ** PVG PU DONG.CN 1 AY 892 J9 C9 D9 RL UL Y5 B4 /ARN 2 HEL 2 1425 1620 E0/320 AY 057 J9 C9 D9 I9 RL UL Y9 /HEL 2 PVG 1700 0650+1E0/M11 10:25 2 SK 415 C9 D9 J9 Y9 S9 B9 M9 /ARN 5 CPH 3 1320 1430 E0/321 SK 997 A2 C9 D9 J9 Y9 S9 B9 /CPH 3 PVG 1515 0735+1 0/343 12:15 3 KL1110 J0 C0 Z0 S0 B0 M0 K0 ARN 5 AMS 1300 1505 E0.737 KL895 C4 D4 W4 Y9 T4 K4 H4 AMS PVG 1720 0845+1 0.74M 13:45 4 CA 912 C4 D4 Y4 B4 H4 K4 L4 ARN 5 PEK 1750 0800+1 0.767 MU 583 C4 Y4 V4 Q4 PEK PVG 1140+1 1335+1 0.320 13:45 => total travel time defines the order of alternatives Finnair favored in reservation systems

Slide20: 

Share of Asian traffic growing Scheduled traffic passenger and cargo revenues Q1-Q2/2006

Finnair significant playerin Europe-Asia traffic: 

Finnair significant player in Europe-Asia traffic Two new destinations in long-haul network this year and recruitment of pilots and cabin crew Size of long-haul fleet will grow to meet demand for Asian traffic 1-2 new Asian destinations per year, more frequencies to existing destinations New feeder lines in European network Demand remains strong at good price level Market share continues to increase, Finnair’s Asian sales have increased by 60% in Sweden

Assesments for future development: 

Assesments for future development Passenger and cargo demand continues to grow Competition remains tight Flexible capacity => load factors improve Focus on traffic expansion in Asia 2006 result still expected to be profitable, but below previous year’s level High load factors and strong booking situation give basis for improved price level Better productivity with structural change Good conditions for improving profitability in future

Appendices: 

Appendices

Slow quarter as predicted Change in EBIT per quarter (Excluding capital gains, fair value changesof derivatives and reorganization expenses): 

MEUR 2003 Slow quarter as predicted Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and reorganization expenses) 2004 2005 2002 2006

Average yield and costs  EUR c/RTK & EUR c/ATK: 

Average yield and costs EUR c/RTK & EUR c/ATK 2004 2005 2006 2003 2002

Development of Group Business Areas: 

Development of Group Business Areas

Investments and cash flowfrom operations: 

Investments and cash flow from operations MEUR

Aircraft operating lease liabilities have grown in line with strategyFlexibility, costs, risk management: 

Aircraft operating lease liabilities have grown in line with strategy Flexibility, costs, risk management On 30 June all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 30 June 2006 would have been 92,6%

ROE and ROCE Rolling 12 months: 

ROE and ROCE Rolling 12 months %

Finnair Group Business Units: 

Finnair Group Business Units SCHEDULED PASSENGER TRAFFIC Finnair Scheduled Passenger Traffic Finnair Cargo Aero FlyNordic Finnair Aircraft Finance LEISURE Finnair Leisure Flights Suntours Ltd AVIATION SERVICES Finnair Technical Services Northport – ground handling Finnair Catering Finncatering Finnair Facilities Management TRAVEL SERVICES Finland Travel Bureau Area Estravel Amadeus Finland FINNAIR GROUP

Slide31: 

Airline structure Finnair Scheduled Passenger Traffic Long-haul traffic European traffic Domestic trunk routes Finnair Leisure Flights Mediterranean, Asia, North and South America Aero Feeder traffic operator based in Tallinn, Estonia The Baltics and Southern Finland FlyNordic Low cost operator based in Stockholm Scandinavia and elsewhere in Europe

Superiority of product: 

Superiority of product Direct to 50 international destinations No time-consuming transfers at crowded airports Best schedules Morning-evening concept Most punctual in Europe with least cancellations Top class service in Europe oneworld – alliance with best quality and coverage New aircraft in European traffic

Finnair Financial Targets”Sustainable value creation”: 

Finnair Financial Targets ”Sustainable value creation” Operating profit (EBIT) EBIT margin at least 6% => 110-120 mill. € in the coming few years EBITDAR EBITDAR margin at least 17% => over 300 mill. € in the coming few years Economic profit To create positive value over pretax WACC of 8% Pay out ratio Minimum one third of the EPS Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 %

Finnair’s Financial Targets Description of targets: 

Finnair’s Financial Targets Description of targets

Slide35: 

www.finnair.com Finnair Group Investor Relations email: investor.relations@finnair.com tel: +358-9-818 4951 fax: +358-9-818 4092