Finnair - Gloomy Q2 figures ahead

Historically gloomy traffic
Finnair’s April-June traffic figures were extremely weak, as expected. Passenger numbers decreased by 97% y/y as Finnair carried only ~100k passengers during this time. ASK decreased by 97% y/y and RPK decreased by 99% y/y. The were no flights to North Atlantic nor to Asia during most of the quarter and the remaining operations have been mainly related to cargo. Finnair has estimated that its daily comparable operating loss will be approx. EUR 2m throughout Q2. We expect Q2’20E revenue of EUR 54m and adj. EBIT of EUR -177m.

Jet fuel prices dropped during Q2
Jet fuel prices have dropped significantly during Q2. The average price in both, USD and in EUR dropped by 49% on a q/q basis compared to Q1’20. On a y/y basis, the average price in USD fell by 62% and in EUR by 61%.

Flights starting gradually to recover
Finnair has gradually started to add frequencies and routes to its network as many travel restrictions have now been removed and the pandemic situation has improved, at least in Europe and Asia. The company estimated earlier that it aims to fly some 30% of its normal amount of flights in July. Some 70% of the normal capacity is expected to be operated by the end of the year. The company should be able to expand its offering relatively quickly depending on the country specific restrictions and demand.

“HOLD” (“SELL”) with TP of EUR 0.60
As a result of Finnair’s rights offering issued during the summer, Finnair receives net proceeds of approx. EUR 501m. The total number of Finnair’s shares increased to 1.4b. There are no major changes in our 20E-22E estimates. We expect 20E revenue of EUR 1595m and adj. EBIT of EUR -304m. We expect the traffic slowly to recover during 21E-22E but we don’t expect to see levels reached prior the pandemic any time soon. We keep our TP of EUR 0.60 and upgrade to “HOLD” (“SELL”).