Finnair - Dark winter ahead

Finnair will report its Q3 result on next week’s Wednesday, 28th of October. We have cut our 20E-21E estimates. We keep our rating “HOLD” with TP of EUR 0.38 (EUR 0.50) ahead of Q3 result.

Q3’20 ASK decreased by 87% y/y

In Jul-Sep, Finnair carried 454k passengers which is 89% decline compared to Q3’19. Finnair’s Q3 Available Seat Kilometers (ASK) decreased by 87% y/y but compared to Q2’20, ASK increased by ~380%. Revenue Passenger Kilometers (RPK) decreased by 94% y/y. Passenger load factor in Q3, was 38.7% (-47.5pp compared to Q3’19). Due to the strict travel restrictions and new infection waves, the company was not able to operate as many flights as it first anticipated. We expect Q3E revenue of EUR 157m and adj. EBIT of EUR -191m.

Aiming to fly ~75 daily flights during the winter season

The coronavirus has not shown signs of abating during the autumn and the travel restrictions have remained relatively tight, impacting negatively on demand. The company has been forced to adjust its traffic plans for several times and due to the current situation, the company now expects to operate approx. 75 flights per day from Nov’20 to Mar’21 (in 2019, ~350 daily flights) and will increase its destinations for summer 2021. During Q3, the company finalized a sale and leaseback arrangement for its A350 aircraft delivered in February this year. This had an immediate EUR ~100m positive cash effect. The company also issued a new EUR 200m hybrid bond (fixed interest rate of 10.250% p.a.).

“HOLD” with TP of EUR 0.38 (0.50)

We have further cut our 20E-21E estimates. We expect 20E revenue of EUR 1062m and comparable operating loss of EUR 609m. We expect the better recovery to start during ’21 spring but we highlight that the outlook is still very blurry. We keep our rating “HOLD” with TP of EUR 0.38 (0.50).

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