Finnair - Blue skies at least for now
Finnair reports Q4 results on Feb 11. FY’25 was challenging due to labor issues, but right now the operating environment is mostly quite favorable so that EBIT should rebound well. Yet earnings multiples already reflect the positive trends.
At least some EUR 150m EBIT should be expected this year
Labor issues meant Finnair’s FY’25 wasn’t great in terms of profitability, but Q4 should already have been a clean performance. We estimate Q4 revenue to have grown 2% y/y and expect adj. EBIT flat at EUR 48m; we note Q4 faces a high comparison figure, but we believe Finnair could even beat it since lately its Asian volumes have grown well while such ticket prices increased about 3% y/y over the summer season. European ticket prices remained flat over the same period, yet Finnair’s European PLFs gained by almost 300bps y/y in Q4. Finnair faces low comparison figures for most of FY’26, and we expect the company to again post around 5% EBIT margin this year.
EBIT could be trending above EUR 200m if trends persist
Jet fuel prices are still relatively low, even if slightly up in the past few months. In our view all these favorable trends imply Finnair should be well-positioned to reach some EUR 150-200m EBIT again this year; together Europe and Asia still account for some three-quarters of Finnair’s revenue so that their positive development should compensate for the North Atlantic weakness. The mostly favorable current operating environment should help Finnair’s asset utilization at least in the short-term; Finnair could even be headed above EUR 200m EBIT by next year should the trends persist, but right now it’s early to extrapolate so far.
Earnings multiples already imply relatively high expectations
Last year marked a new record-high for airline profits, and the sector is expected to see more profitable growth also this year. Finnair is now clearly well-positioned to see a strong rebound in earnings after the recent challenges, and its updated strategy aims to improve RASK through better service experience. Finnair’s EBIT could well improve to about EUR 250m in the coming years if the operating environment doesn’t deteriorate and the company is able to deliver on its commercial strategy. We however find the valuation already quite optimistic about such prospects as Finnair is valued around 8-9x EV/EBIT on our FY’26-27 estimates, or some 15% above peer median multiples. Our new TP is EUR 2.7 (2.6) as we retain REDUCE rating.