Finnair’s strategy review: Finnair to accelerate its growth

Regulatory News:

As a part of its annual strategy review, Finnair's Board of Directors has defined the focus areas for 2016–2018 in order to achieve the company’s strategic objectives. These are:

· Profitable growth – Finnair seeks to grow slightly faster than its previous targets and gain market share.

· Customer experience – the Company is developing its customer service, aligned with its vision of a Nordic customer experience.

· People experience – Finnair is focusing on human resources development as part of its growth and productivity strategy by developing leadership, workplace community and occupational health initiatives, competence and cooperation.

· Digital transformation – in developing its activities, Finnair will utilise opportunities provided by digital innovations and best practices in business transformation.

Opportunity in accelerated growth

Growth will support Finnair’s profitability, as unit costs will decrease with the delivery of larger and more efficient aircraft as well as declining average staff costs due to new recruitment. Because of its geographical advantage, Finnair is able to expand its Asian traffic in particular more efficiently than its competitors.

The core of Finnair’s growth strategy consists of the renewal of the widebody fleet, for which Finnair is in the process of acquiring 19 state-of-the-art Airbus A350-900 XWB aircraft in 2015–2023. The new aircraft will entirely replace Finnair’s A340 fleet, which numbered seven aircraft last year, and supplement the current A330 fleet.

According to the strategy update approved by the Board of Directors, growth can be accelerated if market circumstances remain favourable. Finnair would expect to deploy this additional capacity on new routes or new frequencies in its current long-haul traffic areas, Asia and North America.

Customer experience, people experience and digital transformation to support growth

Finnair’s vision is to offer its customers a unique Nordic experience. An outstanding customer experience improves customer satisfaction and loyalty, which promotes positive revenue development. Finnair is developing both its business and economy class products, as well as its customer service, focused on a high quality of customer service in all customer interactions.

The availability and retention of skilled personnel is key to the implementation of Finnair’s growth strategy. Last year, Finnair announced it would recruit approximately one thousand new employees between 2015–2020 to accommodate growth and to replace retiring personnel. New recruitment is mostly focused on pilots and cabin crew, while in support functions, the objective is to improve productivity. Since the announcement, the company has already hired over 500 employees and now estimates it will recruit a further 900 in 2016–2018. At the same time, the reduction in the average tenure of the flight crew will reduce average wage costs, as the wage level of the new staff will be significantly more moderate than presently. In addition, Finnair is taking new measures to improve leadership and wellbeing at work to secure the motivation and working capacity of its entire workforce.

The importance of digitalisation in the airline business is increasing, since customers increasingly engage with airlines through electronic and mobile channels. The connectivity of aircraft to information networks also provides significant opportunities for retail trade and the sale of services in-flight. In accordance with its previous plan, Finnair will install wi-fi throughout its whole widebody fleet and its Airbus narrowbody fleet in 2016–2017. In addition to commercial digital services, the company is undertaking digital development of its entire operations to improve productivity.

In addition to the new focus areas described above, Finnair’s strategic and financial objectives remain unchanged, and efforts concerning the focus areas communicated a year ago for 2015–2017 continue. These current objectives and other focus areas are described in a stock exchange release issued on 7 May 2015: http://www.finnairgroup.com/mediaen/mediaen_7.html?Id=xml_1886686.html.

Finnair Plc

Communications

Distribution:

Nasdaq 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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