Finnair - Soft traffic continued

Finnair’s traffic came in below our (and consensus) expectations in Q4 and the company appears to have slightly missed its FY2018 guidance ranges for capacity growth (14.8% vs. guidance “above 15%”) and passenger growth (11.6% vs. guidance 12-13%). We have cut Q4 estimates with weaker than expected traffic, whereas our 2019E estimates remain largely unchanged.

Q4 traffic softer than we expected

Finnair’s traffic continued soft in Q4. Overall Q4 capacity (ASK) grew by 9% vs. our 12% expectation, while sold capacity (RPK) grew by only 4% vs. our 10% expectation. Thus passenger load factor (PLF) declined quite notably by 3.4 percentage points in Q4 to 76.9%. This was driven by weakening PLFs in European (- 3.6pp), Asian (-3.5pp) and domestic (-3.0pp) traffic. Finnair flagged in Q3 that competition had tightened especially in the Nordics, which is a likely contributor to soft traffic performance. Finnair stopped reporting unit revenue (RASK) with end-quarter monthly traffic, but we expect it to have continued to decline in Q4.

Fuel price eased somewhat q/q in Q4

As a positive the price of jet fuel eased in November and December, after climbing to a multi-year high in October. On a q/q basis average price moved by -5% in USD and by -3% in EUR compared to average price of Q3. Yet average price for Q4 was still 15% higher y/y in USD and 18% higher in EUR.

Q4 estimates cut

We have cut Q4 estimates and expect Finnair’s Q4 revenue to be EUR 671m (4% growth), while foreseeing adj. EBIT at EUR -9m (margin -1.4%). We foresee FY2018 revenue growth at the low-end of the guided “about 10-11%” range. Our rating (“Hold”) and TP (EUR 6.8) remain intact, with 2019E estimates largely unchanged.

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