Finnair Oyj

Good day, ladies and gentlemen. I'm Erkka Salonen from Finnair Investor Relations, and it's my pleasure to welcome you to this Q1 2026 earnings call.

I'm joined by our CEO, Turkka Kuusisto; and our CFO, Pia Aaltonen-Forsell. [Operator Instructions] But with these words, I hand it over to you, Turkka.

Thank you, Erkka, and a very good afternoon also on my behalf. Earlier this morning, we published in my opinion, a strong Q1 report, especially given the fact that Q1 is typically a low season for our sector and also for Finnair.

While, of course, at the same time when reporting stronger results, we do see that the risk related to the operating environment have increased. And we aim at also describing that how do we see the current situation, especially when it comes to the war in Middle East area.

But if I very briefly summarize the Q1 results and Pia Aaltonen will get you through more of the details. But if I start with the operating results, we were almost at breakeven.

And I think that this is a remarkable improvement from Q1 last year. Although we did face the industrial action already in Q1 2025, but the direct impact of the industrial action at the time was somewhat EUR 22 million.

And the kind of the comparable operating result was minus EUR 40 million. So over the past 12 months' time, we've been capable of improving the operational platform, our commercial capabilities and executing the new strategy so that result actually improved by some EUR 40 million in Q1 to Q1 comparison.

Revenue increased by double-digit number, especially driven or fueled by the strong demand that we especially did see towards the end of the quarter in Asian traffic given the situation in Middle East, the closing of aerospaces of Doha and Dubai Airports, of course, consequently increased the load factors of our Asian flights. But at the same time, January and February already performed very strong in terms of healthy Asian traffic.

So this was kind of a final boost towards the end of the quarter. The number of passengers increased by some 7.3%, and that then resulted also in increased load factors basically in all of our traffic areas, except Middle East.

Pia will discuss in greater detail when it comes to our hedging policy. But when we started this fiscal year or calendar year, our hedging profile was actually rather supportive for what we have now witnessed.

86% of the fuel purchases were hedged in the beginning of this fiscal year. And at the end of this quarter, 82% of the Q2 fuel price is already hedged and then 69% for the rest of the year.

And then when we take the customer perspective, something that we are really now focusing on investing in when it comes to the new strategy that we launched mid-November last year. The customer satisfaction is on the rise.

Across the total population, we did see in international comparison, in my opinion, a good result, 36. That was a 2-point improvement from a year ago.

And then when we double click into the core customers of ours, those who flies us with the most Gold cardholders, Platinum and Lumo-tiered members, we are already scoring well above 40. So that's something that we can be rather satisfied with.

And in my opinion, the strategy implementation has only started. And then I will revert back to this one, but the -- over the last running 12 months time frame, the number of Finnair Plus members -- active Finnair Plus members has increased significantly.

Speaking of these traffic areas, if I start with Middle East, which is, of course, the most drastically changed area, we need to keep in mind that in the compared quarter of '25, we still had until mid-January also operation from Stockholm to Doha and from Copenhagen to Doha. But then, of course, the rather drastic change in terms of ASK in revenue is mainly explained by the fact that we did stop our operation from Helsinki to Doha and Dubai when this geopolitical situation escalated, late February.

But we need to continuously keep in mind or put this into perspective that the Middle East traffic area has been some 3% of our capacity or annual revenue. And then taking the very positives starting from Asia.

ASK grew by some 9%, but the revenue in RASK actually grew even more so. And also the load factors are up by some 7%.

And which is a consequence of a strong investment capacity allocation to Asian traffic. And we have also -- we continue to see kind of the activation of Japanese travelers flying to Europe and also activation of the business travelers.

But as I already mentioned, the last mile or the final push is pretty much because of the closed aerospaces or hubs in the Middle East, and we did get some spillover effect to our Asian flights. Domestic is pretty much stable, part of it last year, but also Europe did perform a bit better than we expected.

ASK grew by some 4%, but revenue 8%, and again, load factors developing rather positively. So we are in a good position when it comes to starting the summer season during which we have more than 90 destinations in the Europe.

North Atlantic traffic, something that we've discussed very frequently with you or even intensively, we did see an increase of capacity. But at the same time, now the revenue development follows the capacity and also, therefore, at least the decline has stopped and we start to see some positive signals when it comes to forward-looking bookings and also business travel when it comes to origination or the U.S.A.

And then very briefly, just again, reconfirming that the capacity is growing steadily according to our plans, except the Middle East traffic area and then the market shares are pretty much stable. So we don't see anything drastic when it comes to our position at the Helsinki Airport or Helsinki Europe traffic.

And also, we continue to be a very relevant player in the Europe, Asia, especially in Europe, Japan routes. And then maybe a few words related to the fuel supply chain issues.

And of course, given what's taking place or happening in the Middle East and Strait of Hormuz that has influenced first and foremost, the price of jet fuel and crude oil. But if this situation prolongs, there might be also issues when it comes to fuel availability.

If I start with our home market being the Helsinki Airport and Helsinki Hub, we do have a rather solid situation and based on the discussions of our main supplier here in Finland. We do see that the availability of fuel is extended until the end of our summer season and also some extra capacity.

So therefore, if we need to tanker when it comes to short-haul flights in Europe, we do have enough fuel capacity in Helsinki to do so. Some 80% of our European destinations can be flown by utilizing the tankering option.

In North America, we don't see a big risk when it comes to the supply. And then, of course, the Far East Asia is the question mark and something that we work very intensively with on a daily basis to understand what's the situation.

But based on the information that we have today on the destinations and all these that are relevant for us, we don't see short-term issues or short-term shocks related to potential fuel availability. But maybe with these words, I would hand it over to Pia to continue on the financial figures.

Thank you, Turkka. And good afternoon, ladies and gentlemen.

And if we haven't met, my name is Pia Aaltonen-Forsell, I'm the CFO of Finnair. And of course, looking at the Q1 performance, I completely agree with you, Turkka.

I really see a seasonally weak quarter where our results have still been greatly improving. And in the graphs that you can see here, we have brought a bit of a quarterly perspective on some of the key figures over a longer period of time.

And maybe if we look at the revenue just for a slight moment, I think, first of all, obviously, you do see that there's a big sort of uptick compared with the first quarter of last year. As Turkka said, there were some disruption impact there already at that point, the EUR 22 million on the result.

So you could say, okay, what about the comparison period. But maybe you can, in this graph also have a look back at '24, which was a sort of more stable year.

And also there, you can see that we do have a great improvement. I want to talk a little bit about the result in the same context.

In the same way, obviously, a big improvement compared with last year. And if we look at sort of the how the year has started.

I think particularly March was impacted by the war in the Middle East through both the fuel costs, obviously, as well through like the shocks that kind of went through the world, including then the supply-demand balance. So clearly, we have seen a very strong demand, for example, in Asia.

But not only in March, so I do say that our year has started in a good way. And I think particularly, our cost controls have really been in place, and I'll still come back to that in my next slide.

And finally, our cash flow was strong. I'll take the opportunity to come back to some of the details around that in one of my later slides.

So first, I'll go next to look a bit at the unit revenue and the unit cost of the RASK and the CASK. And I think this is important because we have a strategy where we are foreseeing growth.

We are foreseeing capacity growth, passenger growth and we are, of course, very keen to do that in a profitable way to ensure that we can reach our strategic target of a 6% to 8% EBIT margin in 2029. So looking at some of the elements, obviously, here first, if we look at the unit revenues, we can see that in this quarter, they were supported.

So we had good load factors, yields, if you look historically, we're somewhat improving. And of course, we have as well sort of been able to navigate and manage the capacity growth that we saw in the quarter.

So this is a good development and particularly if you kind of compare quarter-to-quarter, quarter 1 of last year to quarter 1 now, it's a really strong development. But please have a look at the cost as well.

I guess the fuel costs have really been sort of top of mind for a good reason. I mean, the prices, the spot prices have, of course, really, really been spiking.

But if you look at sort of the proportion of the fuel cost to the overall cost profile. Even normally, we would be sort of 25% to 30%.

And so this is a very significant part. But you can see that thanks to our risk management, this sort of early part of this situation has been well managed.

And actually, the cost development holistically has been under control, including the other costs. While we have been growing, of course, we have been adding some costs, but proportionately, we managed to keep this under control.

So I think I'm happy with the development during the quarter there. Next, I'll turn to a few of the topics around our balance sheet.

So first, I'll highlight the unfunded liability. And why I'm doing that is that I think it's, of course, it's a big balance sheet item, of course.

You can see it's EUR 762 million. But what it also talks about is that we have seen bookings coming in.

And sometimes, when someone is like asking that are people booking kind of what's happening? I think this is sort of the euro or the balance sheet way for a CFO to answer that.

Yes, it's up 10% compared with a year ago. And you can see that if you go further back in history, it's up even more.

So we do see those summer bookings coming in right now. And this is, of course, one reason contributing to the strong cash flow that you could see earlier, the EUR 274 million operating cash flow in the quarter.

Another thing that, of course, has been greatly supporting our strategic journey is the strong cash flow. We have an investment program.

You can see that the CapEx in this quarter was around EUR 100 million. That did include EUR 20 million of the new Embraers.

So when positioning the order, we also have taken some early cost or early cash out relating to that. But I want to say that this is also a pretty good description of sort of the balance between the cash flow and the CapEx going forward.

I mean, we had a particularly strong cash flow right now, but also in our CMD, we said we would expect at least sort of a EUR 500 million-ish operating cash flow per year. And obviously, with sort of the finalized plans for investment that we have made right now, it seems likely that we are somewhere north of EUR 400 million per year, but maybe only slightly north of that.

So this EUR 100 million sort of per quarter is a fairly good proxy for that. I just wanted to say that because when you then look at our capital structure, I mean, our equity was strong in the quarter.

Our net debt keeps going down. Our leverage was 1.2x.

And and our cash ratio to sales is like 30%. So I think we are well positioned to operate sort of in a thoughtful way in this rather complex environment right now.

And I think we are also well positioned to continue to execute on our strategic journey. And my final slide is really some details on the hedging.

I wanted to bring this up. Turkka already did speak about the fact that we have a good hedging ratio for Q1, for Q2, 82% and we have 69% for the remaining part of the year.

And you can also see here that we are still sort of having a cost level of less than $700 per ton on this, which sort of for our cost structure is sort of very close to, I would almost say normal. But obviously, we also know that the hedging ratio is going down over time.

There are still some hedges in '27. Nonetheless, of course, the percentage is going down, but I think this is giving us sort of plenty of time to act and prepare for the situation.

So with that, Turkka, I would hand back to you.

Yes. Thank you, Pia.

A few remarks related to the execution of the strategy that we launched in connection with the CMU mid-November last year. And I'm actually rather happy when it comes to how the execution has started.

And in my opinion, proceeds pretty much as planned. And as a big kind of strategic element or component, we did launch the resolution when it comes to the partial renewal of our narrow-body fleet a month ago.

when we communicated that in order to support the growth, efficiency, profitability and customer experience objectives of ours, we did confirm an order of 18 E2 next-generation Embraers with some options and purchase rights. But parallel with that announcement, we also communicated that up to 12 [indiscernible] Airbuses 320s or 321ceos will be acquired from the market and that those aircraft are expected to join our fleet between 2027 and 2029.

As I mentioned in connection with the analyst call around this subject I think that this is a perfect combination of new aircraft and then somewhat used second hand aircraft that provides us with the needed flexibility and optionality to develop our kind of big or total fleet plan towards the end of the decade. In the meantime, as already communicated, in conjunction with the capital markets update when we discussed the so-called midterm capacity or bridge solutions.

Since then, we have agreed to add to current generation E190s, E1 Embraers into our fleet and also additional 2 ATR 72-600, that will be already operative in 2026 to further strengthen our regional capabilities and capacity. And thanks to this fleet plan, we have already communicated some new openings and also extended some of the summer season routes to be all year round.

So, that we can meet the growth ambitions that we have communicated. In addition to network or the convenience part of our strategy flywheel, also the other elements or other areas in our updated strategy are proceeding according to the plans.

Reliability and efficient operations in Q1. The flight regularity was at 98.3%, and it's actually increasing further more during the second quarter, so I'm very happy with the operational reliability and functionality of the Finnair platform as we speak.

Also, the choice-based product offering and commercial strategy is also progressing with double-digit growth the ancillary revenue per passenger during Q1 grew by some 12.5%. And the total volume of ancillary revenue grew by 20% because in addition to per passenger growth, we had more passengers, so more than EUR 50 million of revenue were collected from ancillaries.

And we continue to push for the growth of modern sales channels and even more efficient sales to enable this modern retailing and personalization. And then the fourth component being the engagement.

Over the past 12 months' time frame, the number of active Finnair Plus members has increased by some 27%. Again, very concrete proof point to communicate that the strategy execution has started on front foot.

And with these activities, as communicated by the end of 2029, we aim at improving our profitability by some EUR 100 million. And as today, when we are describing the situation, we have identified the initiatives and the euro values across some 110 projects so that we secure the, let's say, the delivery capability, and we will meet the number by the end of the strategy period.

And then as a final slide, the outlook and guidance. The outlook section has been specified and the specified section is the capacity growth measured by ASKs.

Earlier, we said 5%, but because of the capacity and the operational kind of a halt when it comes to Middle East traffic, today it say approximately 3% for 2026. And then the guidance, it is unchanged.

We estimate the revenue range to be from EUR 3.3 million to EUR 3.4 billion and the comparable operating result to be within the range of EUR 120 million up to EUR 190 million. And this guidance is based on the assumption that there will be no significant disruptions in fuel availability.

But maybe with these words, Erkka, I guess, we are ready for the Q&A section.

Yes. Thank you, Turkka.

So indeed, I would be a convenient time for any questions you may have. Please follow the operator's instructions to present them or use the chat function.

It's Jaakko, from SEB. I'll start on the ticket liability, which you highlighted that was up 10% year-over-year.

Could you elaborate a bit more on this? And how much of this growth reflects the continued good demand on Asian flights in Q2.

Are you seeing -- basically asking, are you seeing the bookings very strong for April, May and especially on Asian flights? Or does this tell more about the overall demand growth across the geographies?

It's Pia here. I think sort of broadly what I can comment on this.

I don't think that this is just April and May. I mean clearly, we see the booking curve sort of also through the summer period.

And furthermore, when you ask about the different regions, I still think there's as well. There's a good spread.

I mean, obviously, even in Europe, we have 90 destinations. There's a lot of new destinations they are getting some interest, et cetera.

So I would not sort of highlight any area. And I think picking a little bit on some of the comments that Turkka made on the regions, I think even on the North Atlantic, there was a little bit of positive signs from the Q1 numbers.

Good. Then follow-up on Turkka's comment on the jet fuel availability.

Could you talk a bit kind of scenarios, which kind of scenaries you are seeing the see availability being limited first in Europe, then in Asia and lastly in Helsinki?

So basically, based on the information that we have today and the dialogue that we have on a weekly basis with our suppliers, I need to start from the Helsinki perspective because that is also very related to the European perspective. We do see and we've been confirmed that there is some solid availability at Helsinki Airport until the end of the summer season and some capability and capacity to actually acquire a bit more because that then opens up the opportunity for tankering so that we can fuel the aircraft at Helsinki with the needed amount of fuel to fly back and forth if we face partial fuel shortages or limitations in some of the European destinations.

Some 80% of our European destinations are feasible for tankering options so that we can fly back and forth with the fuel that we have loaded at Helsinki. Based on today's information or visibility, we don't recognize clear or significant issues at any of the destinations that we operate.

And that same applies to our long-haul network. U.S.

is maybe the most on the safe side, but also when it comes to the Far East Asian routes, plan -- our partners and suppliers haven't communicated that there would be severe challenges during the weeks or, let's say, 1 to 3 months to come.

Okay. And then the negative scenario that the jet fuel is being limited how would you react?

And how would you assume the whole market being react? Is it just so that you and the other players would just cut the most unprofitable routes?

I guess that's how it goes, it's the game of optimization. And of course, this is speculation, but it would also dependent on that to which extent, let's say, destination x, y, z that do you get 80% of the fuel, if you previously get 100%?

Or are there more drastic changes? So it's a rather complex environment.

Should we face that, but I wouldn't like to speculate about it today. But that's something that I think Finnair is famous for that when it comes to contingency plans or running scenario planning and scenario management.

So let's see if the day comes, I think that we are operational ready for it.

Okay. Then, are you already selling higher ticket prices for the second half of the year?

And what about then the competition, especially the rivals who may have had a bit lower fuel hedges in place? Are you seeing them hiking prices faster than you are?

That's a complex question, Jaakko, as we've discussed earlier also. Prices are set by the market and then the pricing algorithms are pricing tickets as we speak here today.

So, we need to have a bit more backward-looking statements once we have closed the next quarter and the third quarter. But what we can see from the Q1 results that the unit prices increased mainly in Asia, was at some 5% and a slight increase in the U.S.

traffic. But if the situation or the supply chain issues when it comes to fuel availability, will prolong, of course, that will, at some stage, will be visible in the ticket prices as well.

What is beneficial for us, as Pia described very well in my opinion, that the hedging policy and the risk management framework that we apply gives us a lot of time and oxygen to add up to the changing situation. And of course, we are following pretty closely how the competition has approached the same topic risk management and hedging and then let's see what happens.

But I think that in relative terms, Finnair is well positioned for the Q2 and early Q3.

Exactly. Then one more, if I may.

On the Travel Services, we saw a decline of 4% year-over-year in top line, a bit surprising to me. What was driving this?

And how do you see the summer looking this year for you in terms of Aurinkomatkat-Suntours and tours?

Nothing drastic, that is mainly explained by the Canary Island supply issues or constraints. At Canary Islands, the hotel supply has been constrained.

So we were, to some extent, we needed to limit or cap our capacity and sales to Canary Islands. But in a big scheme of things, our Aurinkomatkat-Suntours are doing well and also the same booking pattern or customer behavior pattern that Pia described in conjunction with the parent company applies also to Aurinkomatkat-Suntours.

This is Kurt from Aviation Week from Austria. Realized the closure of some of the Middle East traffic to help your long-haul routes.

Can we see Well, the additional traffic is coming from. You have now a lot of connected passengers, let's say, from India to the U.S.

or something like this? Maybe you can give me an update on that?

That's my first part.

So basically, there can be up to 2,000 different [indiscernible] combinations on our flights. So I would say that our population of our transfer passengers is very, very wide and rich in my opinion.

But as we've discussed also previously, Indian travelers connect via Helsinki to U.S., a lot of Japanese travelers connect by Helsinki, the 90 destinations in Europe. And then, of course, the various kind of nationalities that have now utilized the opportunity of traveling via Helsinki to Far East Asia, while the major hubs at the Middle East area have been closed or capacity constraint.

Yes. As you find, very long routes now regarding the closed air space of Russia and now I have seen you very well hedged, that helps really a lot.

Do you think that the fill issue will have an effect if you're looking ahead, the expensive fill on your very long-haul flights or so far so good as you had with the hedging terms, yes?

So basically, the hedging policy and the hedging position that we have, 82% for the second quarter and then 69% for the rest of the year gives us time to let's say, view or evaluate how the market and the demand will develop. So we don't have urgent need to adjust anything been announced to our traffic to -- for Helsinki to Japan, for instance, is 28 weekly frequencies.

But of course, it's pure mathematics that the longer you fly the more fuel you burn. But at the same time, kind of same situation for the European carriers and the Japanese carriers as well.

But -- so in a way, a long answer to your good question, but too early to speculate. Currently, we are well hedged and the demand for -- from Europe to Asia is doing well.

Is doing well. Do you think that one day the hubs in the Middle East will return to kind of normal?

Do you think they will -- Emirates and Doha and Qatar and so on, do you think it will start a kind of price dumping to regenerate their capacity to fill the aircraft up with life? Do you think there will be a kind of price dumping coming up?

I don't tend to like this competitors' activities and actions, but I would assume that if an airline company faces a situation that you need to ground the aircraft and and it's kind of a severe disruption. Today, the operation starts to ramp up.

You need to fly the aircraft to keep them airworthy. You need to also get crew the opportunity to fly so that you avoid extensive simulator training and such so that the training pipeline doesn't become a bottleneck.

So probably someone starts to price to the cash flow so that you can start to fly with the aircraft.

Yes. Just 2 sub-points, if I may.

Regarding the narrowbody order you have with the [indiscernible] A320s and 321s. Do you know already the share how many is 321s you will take and how many is 320s?

Too early to tell. It's, of course, always to some extent, an opportunistic approach when you go to the secondary market and the when the demand as supplies and there is a good deal to be signed off.

So time will tell.

I think there are a lot of good deals coming up now with many airlines probably to reduce the older fees, maybe -- what do you think?

Let's see. Let's see.

So I don't see any big deal.

Yes. And Australia, so the plants going on as planned for Melbourne, I think.

No changes on this?

Yes, it is based on the information that we have today. So I guess, the maiden flight is the 26th of October, anyhow late October, and really looking forward to this opening and connecting Helsinki to down under.

Joonas Ilvonen from Evil. If I may come back to this [indiscernible] ticket liability question, can you disclose to what extent this 10% year-on-year increase was driven by higher prices versus volumes?

It is a mix, Joonas. I mean, clearly, but if we just sort of look backward at the stats that we have shared from the third quarter, then you still see that, yes, indeed, on Asian routes the yields were improving a bit.

But I mean we were not talking about sort of 2-digit numbers. So still assuming that, hey, we have increased capacity, you have seen the rather big increase in passenger volumes it is clear that volumes play a significant role here.

And then there's a little bit of the yield as well. So I wouldn't say that this is driven by price.

That would be an exaggeration.

Okay. And then another question.

So you already kind of discussed this ticket pricing situation. I know it's a complex question, but if you can add just a little more for example, I just recently saw like an ad or also from in 2 ways to get to Boston starting from EUR 350, I guess you would have to add, I agree that's quite cheap.

I'm not sure how representative studies of the like overall situation, but do you see like opportunities for more aggressive pricing in some places? I mean, I think basically all airlines are raising their prices.

But let's say, if you were to expect that jet fuel prices are going to decline soon, which would you be in essence, be kind of ready to bet against these relatively high jet fuel prices, if you were like expect the decline by aggressively pricing tickets?

As mentioned earlier, the pricing is very complex, and the pricing algorithms and dynamic pricing optimizes the ticket prices in real time. And then, of course, there's -- especially in the European traffic, it's a rather tight competition.

So time will tell how the price development and yield development will turn out. But then as I said earlier, if the situation prolongs and the fuel price stays at the elevated level, of course, that needs to be offset by let's say, profitable flying or sustainable flying.

And then, of course, you shouldn't draw too much conclusions from a single campaign. What was it Helsinki has in Boston, that's only one example.

And without knowing the data and the what we try to optimize. But it sounds like a nice deal.

Maybe we should go to Boston.

It's a nice town, yes.

Then some questions online. So the first one comes from [indiscernible].

Will rising aviation fuel costs under low supply for Finnair to cancel flights in the next quarter, especially in the flights towards Asia and the European sector?

Short answer, no. We intend to cancel our flights.

We have committed to the summer schedule that we have published. So you don't need to speculator be worried about our flight cancellations because there won't be such related to this situation in Middle East years.

And the next question is from Mateo Salcedo. You said that Finland and Europe have relatively good fuel supply for the time being.

Could we translate this into months, since last weeks are some European destinations in which the risk of jet fuel supply disruption is more present than in others?

I cannot comment all of our European destinations. We have 9 of them.

So based on the information that we update on a weekly basis or a daily basis, we haven't been flagged severe issues at any of the destinations as we speak. And the most confident I am -- when it comes to the situation at the Helsinki Airport, where we've been confirmed that the fuel availability won't become bottle-neck issue before the end of the summer season.

Yes. And the last question comes from [indiscernible].

So does Finland have better availability of Kerosene during 2026 than most of the European countries?

That's difficult to evaluate because we don't have transparency or visibility to the, let's say, reserves or national supply across the European countries. But what gives me a lot of confidence that in Finland at Helsinki, thanks to the Porvoo Refinery of Neste, we are well positioned also on this one.

So I guess we're out of questions, so we can conclude the call. Many thanks for joining and the call, and the excellent questions.

We wish you a great day.

Thank you so much joining today, and see you again, Q2.

Thank you.