Finnair making progress with its savings plans

Finnair is proceeding with the planning of savings targets, announced earlier in connection with the second-quarter interim report. As reported at the beginning of August, Finnair is seeking annual cost savings of 140 million euros by 2014 to halt losses.

Planning of structural changes has been divided according to the company’s main cost centres, namely sales and marketing, fleet costs, personnel costs and maintenance activity. Planning work is proceeding in all areas.

In sales and marketing, the goal is to focus more in future on digital marketing, internet sales and corporate sales in markets strategically important for Finnair and thereby to improve cost-efficiency significantly.

Finnair has been negotiating aircraft leasing agreements which are about to expire to bring them more in line with the current leasing market situation. These negotiations are continuing. At the same time, Finnair is evaluating the optimum size of its fleet in European air traffic.

In personnel costs, which make up around one fifth of the company’s overall costs, the objective is also to achieve a significant increase in work productivity by 2014. Employer-employee (YT) consultations, however, have not been initiated at this time, because the planning of savings is still in its early stages. Nevertheless, the company aims to discuss the different savings options openly with all employees.

In maintenance operations, where Finnair has sought to offer repair and maintenance services for aircraft, aircraft parts, engines and landing gear to external airlines as well as its own flight operations, the company will initiate an analysis of technical service suppliers as well as possible partners and means to increase productivity. The analysis will cover Finnair Technical Services (Finnair Technical Services Ltd and Finnair Engine Services Ltd) and may last several months.

“Although we in Finnair have achieved cost savings in recent years, our profitability development has been unsatisfactory and we have reported losses. Our cost structure is considerably higher than that of many of our competitors, and this means we must re-evaluate our operating practices and structure. As we stated in connection with the reporting of the second-quarter result, we must find solutions for our structural problems in order to achieve sustainable profitability. Although the coming changes are likely to be painful, only with their help can we build a future Finnair and sound operations,” says Finnair CEO Mika Vehviläinen, explaining the change process.

“Based on a cost analysis we have carried out, it is evident that Finnair Technical Services’ cost competitiveness is significantly weaker than that of its competitors. As part of Finnair’s profitability programme, we will explore measures to close this cost difference. As yet, we do not know what kind of options we will identify, but we will analyse in the near future, through a competitive tender, the opportunities offered by various maintenance service companies. Finding a good solution in terms of price-quality ratio is essential for Finnair’s future. In this field of operations, too, we must be able to find a cost-effective but at the same time quality solution,” says Ville Iho, Finnair’s Senior Vice President, Operations and Member of the Executive Board.

In addition, Finnair has initiated, and is initiating, numerous smaller savings measures throughout the company. Finnair will purposefully continue to explore savings options and will report on the progress of this work as required.