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Finnair boss expects 'pent-up demand' to drive recovery

Essi Lehto
·2-min read
FILE PHOTO: FILE PHOTO: A Finnair Airbus A320 aircraft prepares to take off from Manchester Airport in Manchester

By Essi Lehto

HELSINKI (Reuters) -Finnair posted another quarter of steep losses on Tuesday after most of its planes remained grounded by the COVID-19 pandemic but is hopeful for improving demand in the coming months.

As vaccinations continue and countries look to remove travel restrictions, Chief Executive Topi Manner said he expects the aviation sector's recovery to gather pace later this year.

"Demand will start to recover significantly later in the summer. Customer surveys have long showed signs of pent-up demand," Manner told Reuters, adding that countries must introduce travel certificates quickly to facilitate a meaningful return to the skies.

The airline's first-quarter operating loss widened to 149.1 million euros ($180 million) from 95.6 million a year earlier. Cargo sales, meanwhile, rose by two thirds to 60.9 million euros, accounting for more than 50% of revenue.

"Cargo demand was supported by supply chain challenges caused by the pandemic," Manner said, noting that cargo prices tripled from last year after delays on the Suez Canal trade route caused by a giant container ship blocking the waterway.

Shares in the Finnish flag carrier were up 4.5% at 0.77 euros at 1022 GMT.

The airline said it expects an operating loss of similar magnitude in the second quarter but would seek additional cost savings in areas such as real estate, administration and salaries, raising its annual cost savings target by 30 million euros to 170 million euros.

Advance bookings made in the first quarter amounted to 51.8 million euros, which represents only 15% of bookings made in the same period last year.

Inderes analyst Antti Viljakainen said it remains clear that savings measures alone will not lower losses significantly and that revenue growth is key, adding that he believes Finnair has enough liquidity to last 12 months.

In March the European Commission authorised a 351 million euro loan from the Finnish government to compensate for Finnair's losses during the pandemic.

Finland, which holds a 55.9% stake in Finnair, has also participated in a share issue and granted a 90% pension loan guarantee.

Other Nordic airlines have also been shoring up their finances. SAS has secured a rescue package from its main owners, Sweden and Denmark, while Norwegian Air plans to increase its debt to ride out the pandemic

($1 = 0.8282 euros)

(Reporting by Essi LehtoEditing by Kirsten Donovan and David Goodman)