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Finnair - Strong Q4 traffic supports revenue growth

Finnair will report its Q4 result on next week’s Friday, 7th of February. The company’s Q4’19 traffic was in line with our expectations thus we have made only minor adjustments to our estimates. We expect Q4 revenue of EUR 740m and EBIT of EUR 8.2m. We keep our rating “HOLD” with TP of EUR 6.5 ahead of Q4.

Good Q4 traffic data

Finnair’s traffic met the expectations in Q4. Capacity (ASK) grew by 10.6% vs. our 9.4% expectation, while sold capacity (RPK) grew as much as 13.6% vs. our 9.4% expectation. Thus, passenger load factor (PLF) increased by 2.1 percentage points to 79.0% in Q4. PLFs grew in all the market areas but especially in Europe (+3.4pp) and in Finland (+3.4pp). Total passenger number rose by 11 % y/y. Cargo development continued soft as the global uncertainty in world trade continued to press the global air freight market, especially in Asia. We expect Q4 revenue of EUR 740m (Q4’18: 684m) and EBIT of EUR 8.2m (Q4’18: 26.5m).

Slight increase in jet fuel prices

Jet fuel prices slightly increased towards the end of the year. The average price in USD moved up by 1% and in EUR by 2% on a q/q basis compared to Q3’19. Yet the average price in Q4’19 was still -7% lower y/y in USD and -4% lower in EUR.

Coronavirus hampers share price

Finnair’s share price has slumped after the fears around Coronavirus rose. In order to control the situation, China has restricted traveling and day-to-day business in some areas, which affects Finnair’s operations in Asia. The impacts for Finnair’s financial outlook are still unknown thus we have not made changes to our estimates. We expect to get more color on this with the Q4 result.

“HOLD” with TP of EUR 6.5 intact

We have kept our estimates largely intact ahead of Q4 result. For FY19E we expect revenue of EUR 3077m (FY18: EUR 2850m) and adj. EBIT of 140m (FY18: EUR 218m), resulting in EBIT margin of 4.6% which is at the lower end of the guided adj. EBIT margin level of 4.5-6.0%. We expect Finnair to propose a dividend of EUR 0.11 per share for ’19. We keep our rating “HOLD” with TP of EUR 6.5 intact ahead of Q4.

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