Finnair - 20E profit hampered by coronavirus
Revised outlook for 2020E
Finnair revised its 20E outlook due to the larger than first estimated impacts of the coronavirus. During Q4’19 result, the company indicated that the impacts on Q1’20E result will be limited and expected 20E capacity growth of ~4% y/y. According to the new guidance, Finnair expects Q1’20E comparable EBIT to be lower than in the previous year. The company foresees decreasing demand also in Q2’20E, resulting in a negative impact on revenue. Q2’20E comparable EBIT is expected to be significantly lower compared to Q2’19. Therefore, comparable EBIT for 20E is also expected to be significantly lower than in FY19. In addition, the company withdrew its capacity (ASK) growth estimate (~4%) for 20E and aims to adjust its capacity to the current situation. Finnair has also commenced to seek how to adjust its costs by EUR 40-50m to mitigate the negative financial impact resulting from the virus.
20E estimates cut
We have made small adjustments to our Q1’20E revenue expectation and cut our already rather conservative Q1’20E comparable EBIT estimate by ~15%. We also cut our Q2’20E revenue estimate by ~4% and our comparable EBIT estimate by ~48%. Thereby, our FY20E revenue estimate is reduced by ~1% and comparable EBIT estimate by ~23%. We now expect 20E revenue growth of 1.8% y/y (EUR 3154m) while we expect comparable EBIT to decline by ~19% y/y (EUR 133m). We foresee 20E capacity (ASK) growth of 2.4% y/y (prev. estimate of 3.5% y/y). We expect negative impacts especially on Asian routes (Finnair suspended all the flights to mainland China, which might continue until the end of March) but also on European routes and on global cargo during H1’20E. We also expect weaker demand in travel services.
“HOLD” with TP of EUR 5.0 (prev. EUR 6.3)
We have kept our 21E-22E estimates intact as we don’t expect long-term financial impacts resulting from the coronavirus. However, as the visibility around the coronavirus and its development remain weak, there are uncertainties especially with our short-term estimates. We keep our rating “HOLD” with TP of EUR 5.0 (6.3).