Finnair balances its route network, shrinks the fleet as part of a strategic reassessment
FINNAIR announced on Wednesday plans to “rebalance” its route network and shrink its fleet as part of a strategic shift necessitated by the closure of Russian airspace.
The Finnish state-owned airline stated that the measures are aimed at reducing its unit costs by 15 percent from the 2019 level and returning earnings before interest and taxes to the pre-pandemic level, starting at at least a five percent level. Mid 2024.
Topi MannerFinnair’s CEO said that the airline must create significant additional savings to restore profitability to pre-pandemic levels. The airline has implemented cost savings of around 200 million euros in the past 30 months.
“We need savings of the same size,” he comment For Helsingin Sanomat. “We are talking about an ambitious goal because we have achieved very significant cost savings during the pandemic.”
The airline had based its old strategy on its ability to offer convenient connections from Helsinki to Asia. However, the strategy has been overturned by the airspace restrictions imposed by Russia, when the distances between its main hub and most important destinations have increased by 30-40 percent. Its new strategy is designed to restore profitability despite airspace constraints.
“The changes in our operating environment require a new strategy and a significant renewal of Finnair, especially in terms of costs,” he stated in the press release. press release on Wednesday.
Finnair said it will start negotiations with staff representatives about changes to the terms of employment and will evaluate other measures, such as outsourcing cabin crew services on certain routes and outsourcing certain operational functions and functions to make common functions more efficient.
Cost savings are also sought through renegotiation of contracts with suppliers, functional structural changes and optimization of the use of facilities.
Finnair stated that its new flight network is geographically more balanced and connects Europe to Asia, India, the Middle East and North America via Helsinki-Vantaa. The network will also have a “strong” domestic presence.
“Nothing from the single market will replace the Asian market,” Manner explained to Helsingin Sanomat.
In Asia, the airline continues to fly to Bangkok, Hong Kong, Shanghai, Singapore, Seoul and Tokyo. Flights to Beijing, on the other hand, will continue after the easing of China’s coronavirus restrictions.
“We maintain connections to the most important cities in Asia, but we reduce the number of flights to the so-called second-class cities in Asia. It is not possible to make these routes profitable, because the distance to these destinations is 30-40 percent longer when you have to go around Russian airspace, he stated.
Before the pandemic, Finnair offered flights to almost two dozen Asian cities.
The Middle East will become an increasingly important market for the airline, as he suggests the long-term strategic partnership it announced last week with Qatar Airways. The partnership will establish 28 weekly flights to Qatar Airways’ main hub in Doha from four destinations in Europe.
Manner pointed out that before the pandemic, the airline did not have as many weekly flights to mainland China.
“The Doha route will be very important for us and, in general, the importance of the hubs in the Middle East will be emphasized in the new geopolitical situation,” he told the daily newspaper.
Finnair also announced plans to downsize its fleet of 80 aircraft to optimize the fleet for the new network. The airline has revealed that in the last quarter of last year, it had around 80-85 percent of its pre-pandemic capacity in use.
The extent of the fleet reduction depends on the demand for flights and the reopening of China, for example.
Minister of European Affairs and Ownership Management Titti Tuppurainen (SDP) said on Wednesday that a strong and profitable Finnair is important for Finland.
The Finnish government, he tweeted, is ready to consider its role in revitalizing the company on the condition that other stakeholders also participate in the company’s renewal. The state owns 55.9 percent of Finnair’s shares.
Aleksi Teivainen – HT