Published on June 14th, 2016 | by Jim Lee0
Finnair to accelerate its growth and focus on long-haul connectivity
As a part of its annual strategy review, Finnair’s Board of Directors has defined the focus areas for 2016–2018, in order to achieve the company’s strategic objectives. These are:
- Profitable growth – Finnair seeks to grow slightly faster than its previous targets and gain market share.
- Customer experience – the Company is developing its customer service, aligned with its vision of a Nordic customer experience.
- People experience – Finnair is focusing on human resources development as part of its growth and productivity strategy by developing leadership, workplace community and occupational health initiatives, competence and cooperation.
- Digital transformation – in developing its activities, Finnair will utilise opportunities provided by digital innovations and best practices in business transformation.
Opportunities in accelerated growth
Finnair sees opportunities in accelerated growth, which it believes, will support the airline’s profitability. This is because unit costs will decrease with the delivery of larger and more efficient aircraft, as well as declining average staff costs, due to new recruitment. Because of its geographical advantage, Finnair is also able to expand its Asian traffic in particular, more efficiently than its competitors.
The core of Finnair’s growth strategy consists of the renewal of the widebody fleet, for which Finnair is in the process of acquiring 19 state of-the-art Airbus A350-941 XWB aircraft in 2015 -2023. So far the airline has taken delivery of five of these aircraft, with the latest two OH-LWD (c/n 22) and OH-LWE (c/n 23), having been delivered on 25th March and 29th April respectively.
On 19th May, Finnair announced that it had secured financing, arranged by BNP Paribas, for OH-LWE. The transaction amounts to approximately €128 million, implemented using a Japanese Operating Lease with Call Option (JOLCO) structure. Earlier, on 23rd April, Finnair announced that it had secured financing for its fourth Airbus A350-941 XWB, OH-LWD, using a similar arrangement. The later transaction amounted to approximately €115 million, and was arranged by Credit Agricole. These transactions are part of a multi-year capital structure plan to renew Finnair’s widebody fleet, and according to Finnair’s CFO Pekka Vähähyyppä, “It is further proof that the continued improvement in Finnair’s financial performance is allowing us to access some of the most competitively-priced asset-backed financing available.”
Of the remaining fourteen A350s, two more will arrive this year, followed by four more in 2017. All 19 are expected to be in place by the end of 2023. Watch the review of the aircraft in the video below.
The new aircraft will entirely replace Finnair’s A340 fleet, which numbered seven aircraft last year, and supplement the current A330 fleet. Of its original seven-strong fleet, Finnair now operates three, on regular flights to Delhi Int’l, Nagoya Chubu, Osaka Kansai, and Singapore Changi. Once their service life is completed, the aircraft will be sold back to Airbus. Three of the A340s, OH-LQA (ex G-VFLY), OH-LQF (ex F-GNIF) and OH-LQG (F-GNIG), have been withdrawn from service. Despite this, Finnair said it would continue to grow its long-haul fleet, by retaining two of its eight A330-300s in service, beyond their original retirement date of 2017. Retaining the A330s will add to the airline’s growing widebody fleet which, by the end of next year, will consist of 19 aircraft – a mix of A330s and the new A350-900s being delivered. Two other A330s, scheduled to leave the fleet in 2020 – 21, might also be retained, as the airline has yet to make a final decision. Finnair would expect to deploy this additional capacity on new routes or new frequencies in its current long-haul traffic areas, Asia and North America. According to the strategy update approved by the Board of Directors, growth can be accelerated, if market circumstances remain favourable.
Finnair President and Chief Executive Officer, Pekka Vauramo, has also confirmed that the airline is adding more A321 aircraft to its regional European fleet. He was speaking on the side-lines of the annual IATA meeting in Dublin. Finnair’s need for new aircraft to boost its short-haul fleet is in contrast to other carriers, such as Lufthansa, who have seen reduced demand after attacks on Paris in November and Brussels in March.
Mr. Vauramo said that while there were concerns, customers had tended not to cancel but instead shift destinations to Spain and Nordic countries. “The impact has still been fairly small on us,” he added.
Finnair currently operates 11 A321-200s and has a total of six A321-200 (SL)s due for delivery from Singapore’s BOC Aviation Pte Ltd (‘BOC Aviation’), from the first half of 2017 onwards. Last November, Finnair announced the temporary damp-lease of two A321 aircraft, from summer 2016 onwards, with the first aircraft due to arrive in May 2016. Their lease was intended to cover the transitional period, until the delivery of the aircraft from BOC Aviation. These were originally due to come from Air Berlin’s subsidiary, NIKI, but two A321-211s, have been leased from Air Berlin itself. The aircraft involved are D-ABCN (c/n 6454) delivered on 25th April and D-ABCP (c/n 6629) delivered on 30th April.
Customer experience, people experience and digital transformation to support growth
Finnair’s vision is to offer its customers a unique Nordic experience. It believes that an outstanding customer experience improves customer satisfaction and loyalty, which promotes positive revenue development. Finnair is developing both its business and economy class products, as well as its customer service, focused on a high quality of customer service in all customer interactions.
The availability and retention of skilled personnel is key to the implementation of Finnair’s growth strategy. Last year, Finnair announced it would recruit approximately one thousand new employees between 2015–2020 to accommodate growth and to replace retiring personnel. New recruitment is mostly focused on pilots and cabin crew, while in support functions, the objective is to improve productivity. Since the announcement, the company has already hired over 500 employees and now estimates it will recruit a further 900 in 2016 – 2018. At the same time, the reduction in the average tenure of the flight crew will reduce average wage costs, as the wage level of the new staff will be significantly more moderate than presently. In addition, Finnair is taking new measures to improve leadership and wellbeing at work to secure the motivation and working capacity of its entire workforce.
The importance of digitalisation in the airline business is increasing, since customers increasingly engage with airlines through electronic and mobile channels. The connectivity of aircraft to information networks also provides significant opportunities for retail trade and the sale of services in-flight. In accordance with its previous plan, Finnair will install Wi-Fi throughout its whole wide-body fleet and its Airbus narrow-body fleet in 2016–2017. In addition to commercial digital services, the company is undertaking digital development of its entire operations to improve productivity.
In addition to the new focus areas described above, Finnair’s strategic and financial objectives remain unchanged, and efforts concerning the focus areas communicated a year ago for 2015 – 2017 continue. For further information from Finnair’s AGM 2016, including a review of 2015 by CEO Pekka Vauramo, in the video below.
Finnair’s Dublin to Helsinki service
This summer, the Helsinki-Dublin route sees an increase in frequency, from six to nine per week. There are morning services on Mondays, Wednesdays, Fridays and Sundays, which depart Helsinki, as the AY-929 at 07:25, arriving in Dublin at 08:35. The return flight departs Dublin, as the AY-930, at 09:15, arriving back in Helsinki at 14:15 (local). There is a two hour time difference between the airports. In addition to the morning services, there are evening services on Tuesdays, Wednesdays, Thursdays, Saturdays and Sundays, operating as the AY-931/2. Arrival times into Dublin vary with the Tuesday, Thursday and Saturday services arriving in Dublin at 17:25. The Wednesday service arrives earlier at 16:55, while the Sunday service arrives later, at 18:00. The departure times for the outbound service to Helsinki are 18:05, 18:10 and 18:40 respectively, and arriving in Helsinki at 23:05, 23:10 and 23:40 respectively. For direct flights, the flight time varies between 2 hours 55 minutes and 3 hours 10 minutes, for the 1,257 mile (2,023 km) journey.
Finnair unveils an easier way to book stopovers
With connecting travel such an important part of its business model, earlier this year Finnair announced a quicker and easier way for customers, to schedule their stopovers in Finland, and in effect discover two destinations during one trip. Customers are now able to book a stopover for their connecting flight, to or from Helsinki, on a dedicated stopover.finnair.com website. Finnair customers also have the possibility of selecting between a wide variety of activities and tours in Finland, thanks to the StopOver Finland project, which is led by Visit Finland and is operated in cooperation with Primera Holidays.
Stopover customers are able to enjoy the relaxed vibe of Finland’s capital, which is just half an hour away from Helsinki Airport, with its seaside atmosphere, design district, cosy cafés and unique restaurants and hotels. Untouched nature is never far away in Finland, and customers are also able to spend a day cruising through the Finnish archipelago, or exploring one of Finland’s many national parks. Visitors searching for something truly unforgettable, such as jetting off to northern Finland and experiencing the mystical landscapes of Finnish Lapland, can organise longer trips, thanks to the new initiative. The stopover packages, ranging from five-hour quick layovers to up to five day tours, are available through Primera Holidays’ website, at finlandtours.fi, from spring of 2016.
The StopOver Finland programme is one of the Team Finland growth programmes funded by Finland’s Ministry of Employment and the Economy, the project itself is led by Visit Finland, together with partners, such as Finnair and the tourism industry in Finland.
Finnair to sell its Finnish business travel agency
On 23rd May, Finnair signed an agreement to sell its Finnish business travel agency, SMT Oy, to American Express Global Business Travel (GBT). The transaction is expected to close during the third quarter of 2016.
SMT has been a partner within the GBT network for 27 years. As one company, SMT and GBT will strengthen the service provided to European and global customers while retaining the expertise and flexibility in the Finnish market to deliver a high standard of service to local customers. Companies and organisations in Finland and around the world will continue to benefit from SMT’s local expertise, and the advantages of GBT’s global scale and access.
“GBT as an owner guarantees SMT an innovative and dynamic growth environment. Travel management and meetings & events companies need to invest in fast-developing technology in order to stay competitive in their core business. GBT has all the right prerequisites to succeed and further develop SMT’s business in Finland. The Finnair Group decided to divest SMT now after its successful business turnaround and due to Finnair’s strategic target to focus on its core airline business,” said Juha Järvinen, Chief Commercial Officer of Finnair and chairman of SMT’s Board of Directors.
SMT was formed in 2013 after the merger of the two largest Finnish-owned business travel agencies, Area Travel Agency and Finland Travel Bureau. Under the leadership of Kirsi Paakkari, SMT has adopted an increasingly lean and entrepreneurial approach to the marketplace.
Paakkari said: “SMT’s main strategic objective is to be a leading provider of corporate travel services in Finland. Joining GBT accelerates our progress toward that objective. We have motivated, productive and innovative employees. Our dynamic business style, combined with GBT’s resources, will make us a powerful and effective business travel partner for companies across Finland.”
SMT is a travel agency specialising in corporate travel. It offers tailored duty travel services to companies of any size. The company has approximately 200 personnel located throughout Finland. As previously disclosed, SMT’s Baltic subsidiary Estravel was sold in December 2015 to local business partners.
GBT provides leading travel solutions, integrated consulting services, proprietary research, and end-to-end meetings and events capabilities. These innovative offerings enable clients to optimise the return on their travel and meetings investments. GBT has operations and network partners in nearly 120 countries worldwide with approximately 12,000 employees.