Finnair - Guidance cut
Finnair’ Q3 adj. EBIT came in at EUR 108m, above our estimate (EUR 102m) and consensus (EUR 105m). However, Finnair cut its FY18E guidance and now expects adj. EBIT to be somewhat below last year’s level of EUR 170m, vs. flat previously. Finnair states it is experiencing increased competition in its main markets. We have expected EUR 159m adj. EBIT in 2018E, ie below last year’s EUR 170m. Consensus has been EUR 160m. However, separately released discontinuation of incentive plan for pilots will have a positive EUR 11m adj. EBIT impact in Q4, which with new guidance seems to imply underlying estimates for Q4 adj. EBIT may be too optimistic.
- Q3 adj. EBITDAR was EUR 184m vs. EUR 177m our view.
- Q3 adj. EBIT was EUR 108m vs. EUR 102m/105m Evli/cons views. Compared to our estimates the beat comes from lower fuel and staff costs in the quarter.
- Absolute costs: actual fuel cost (incl. hedging) was EUR 163m vs. EUR 166m our view. Staff costs were EUR 109m vs. 116m our view. All other OPEX combined were EUR 363m vs. 359m our view.
- Unit costs: CASK was 6.01 eurocents vs. 6.06 our view, while CASK ex fuel was 4.60 eurocents vs. 4.62 our view. CASK in fixed FX and excl. fuel declined by 6.4% y/y. After Q1-Q3’2018 CASK in fixed FX and excl. fuel is down by 6.9%.
- 2018E guidance cut: Finnair expects capacity growth at least 15% (intact), passenger volume growth of 12- 13% (prev: in line with capacity growth) and revenue growth of 10-11% (prev: slightly lower than capacity growth). Adj. EBIT is expected to be somewhat below last year’s level of EUR 170m (prev: to remain broadly flat). Finnair is experience increased competition in its main markets. We have expected 11% revenue growth and adj. EBIT of EUR 159m for 2018E.