Finnair Group Interim Report 1 January–30 September 2016

Regulatory News:

Finnair Plc (HEX:FIA1S)

Improved comparable operating result in an increasingly difficult market; implementation of Finnair´s strategy continues

July–September 2016

· Revenue grew by 3.1% year-on-year to 640.9 million euros (621.7)*.

· Comparable operating result was 65.7 million euros (64.2).

· Operating result was 115.5 million euros (50.7) including gains on the sale of one A350 widebody aircraft.

· Comparable EBITDAR was 118.3 million euros (115.1).

· Net cash flow from operating activities totalled 59.1 million euros (62.6), and net cash flow from investing activities amounted to 161.5 million euros (-2.8).

· Unit revenue (RASK) decreased by 4.9% year-on-year.

· Unit cost (CASK) decreased by 4.8% and unit cost at constant currency excluding fuel increased by 1.2% year-on-year.

· Ancillary and retail revenue per passenger grew by 16.9% year-on-year to 11.31 euros.

· Earnings per share were 0.66 euros (0.29).

January–September 2016

· Revenue grew by 3.6% year-on-year to 1,746.9 million euros (1,686.8).

· Comparable operating result was 53.5 million euros (22.9).

· Operating result was 98.0 million euros (36.7).

· Comparable EBITDAR was 211.0 million euros (171.7).

· Net cash flow from operating activities stood at 189.2 million euros (164.0), and net cash flow from investing activities totalled -234.8 million euros (86.4).

· Unit revenue (RASK) decreased by 3.7% year-on-year.

· Unit cost (CASK) decreased by 5.3% and unit cost excluding fuel at constant currency increased by 1.1% year-on-year.

· Ancillary and retail revenue per passenger grew by 17.1% year-on-year to 11.34 euros.

· Earnings per share were 0.47 euros (0.13).

* Unless otherwise stated, figures in brackets refer to the comparison period, i.e. the same period last year.

Outlook

Outlook published on 17 August 2016

The demand outlook for passenger and cargo traffic in Finnair’s main markets involves renewed uncertainty. Finnair’s new estimate of capacity growth is approximately 7 per cent, while the previous estimate was a growth of 8 per cent compared to 2015. The revision is due to delays in the deliveries of A350 aircraft. The rate of revenue growth is estimated to be slower than the rate of capacity growth. Uncertainty regarding the demand and yield prospects of the airline industry has increased during recent months. Finnair estimates that its comparable operating result for 2016 will increase from the previous year (2015: 23.7 million euros).

Outlook on 26 October 2016

The demand outlook for passenger and cargo traffic in Finnair’s main markets continues to involve uncertainty. Finnair reiterates its previous assessment that its capacity will grow by approximately 7 per cent compared to 2015 and that revenue grows more slowly than capacity.

Market conditions are increasingly challenging; fuel price has turned upwards and market capacity growth continues to cause pressure on yields. Finnair estimates that its comparable operating result for 2016 will increase from the previous year (2015: 23.7 million euros).

CEO Pekka Vauramo:

Our comparable result for the third quarter exceeded last year´s record result by 1.5 million euros; hence, we achieved what was already the eighth consecutive quarterly result improvement. Our capacity as measured by available passenger kilometres increased by 8.4 per cent during the quarter, in line with our target for the next few years.

Considering the current market environment, we are satisfied about breaking the record result posted in the comparison period. Intense competition across the North Atlantic put pressure on our yields and affected our earnings performance somewhat. Furthermore, the flow of leisure travel – from China in particular – was impacted by concerns about the security conditions in Europe. This led to reduced materialisation of group reservations, which was reflected in our Asian load factors. We continue to believe that our full-year result will be in line with our previous guidance but point out that the rest of the year involves a lot of uncertainty and cost pressure.

During the third quarter, we succeeded in attracting more Asian tourists to the Nordic region rather than Southern or Central Europe; for example, Copenhagen recently surpassed Paris as the number one destination for our Chinese tourist groups. In addition, we are promoting Finland as a stopover or holiday destination, particularly during the winter months, when we are adding more capacity to Lapland. Furthermore, at the beginning of October, we also introduced an A350 service to London five times weekly, which provides both an attractive product for our Asian transfer passengers as well as an outstanding entry point from our home markets to the global network of our oneworld and joint business partners from London. In addition, it strengthens our cargo network considerably.

Our costs increased in the third quarter reflecting our preparation for traffic growth in line with our strategy, driven by our new A350 aircraft. However, due to changes in the delivery schedule of these aircraft, there is considerable uncertainty related to the training of our flight personnel. As a result, we are adjusting our traffic plan and leasing additional fleet with crew in order to be able to train our own staff as rapidly as possible. Our growth is also supported by the increase in the capacity of pilot training in Finland. Preparation for growth will cause extra costs over the next few years.

On the bright side, in Europe and in the domestic market, there were moderate increases in capacity utilisation and yields. Ancillary sales continued to be solid; we expect that they will be supported further in the near term by the renewal of our website and inflight sales system.

In connection with the release of our previous quarterly result, we announced a EUR 20 million efficiency-improvement programme. Preparation of the programme is proceeding, and recent changes in the overall market further highlight the importance of efficiency. At the same time it helps us keep our strategy and medium-term growth plan on course.

Financial reporting

The publication dates of Finnair’s financial reports for 2016 are as follows:

Financial Statements Bulletin 1 January – 31 December 2016: 15 February 2017

FINNAIR PLC

Board of Directors

Briefings

Finnair will hold a press conference related to the announcement of its result on 26 October 2016 at 11:00 a.m. and an analyst briefing at 12:30 p.m. at its office at Tietotie 9. An English-language telephone conference and webcast will begin at 2:30 p.m. Finnish time. The conference may be attended by dialling your local access number + 44 20 3059 8125 and quoting "Finnair” to the operator. To join the live webcast, please register at: http://www.investis-live.com/finnair/57fb74bf0397821c00021187/7w2r2

Distribution:

NASDAQ OMX Helsinki

Principal media

Finnair is a network airline specialising in passenger and cargo traffic between Asia and Europe. Helsinki’s geographical location gives Finnair a competitive advantage, since the fastest connections between many European destinations and Asian megacities fly over Finland. Finnair’s vision is to offer its passengers a unique Nordic experience, and its mission is to offer the smoothest, fastest connections in the northern hemisphere via Helsinki and the best network to the world from its home markets. Finnair is the only Nordic carrier with a 4-star Skytrax ranking and a member of the oneworld alliance. In 2015, Finnair’s revenues amounted to EUR 2,255 million and it had a personnel of 4,800 at the year-end. Finnair Plc’s shares are quoted on Nasdaq Helsinki.

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