Good day, ladies and gentlemen. I'm Erkka Salonen from Finnair Investor Relations, and it's my pleasure to welcome you all to this Finnair's third quarter 2024 earnings call. I have here with me our CEO, Mr. Turkka Kuusisto, and he is joined by our CFO, Mr. Kristian Pullola, for the Q&A session. I will now turn this call over to you, Turkka. Please, go ahead.
Thank you, Erkka. Third quarter 2024 , we saw our comparable EBIT to fell short of the strong comparison period of last year due to lower unit revenue. However, we are still maintaining our full year expectation unchanged, that I will cover later in this presentation. When we take a bit more detailed view that how did the most important quarter and peak season materialize in our numbers, we did see that the number of passengers increased by some 9%, which was pretty much aligned with our capacity increase. So we started to see more parallel development with the number of passengers versus the capacity that we have put into the market.
However, at the same time, we did witness a ticket price decrease of 9% that led into situation in which our passenger revenue decreased a bit. That was then offset by two very positive revenue components. Our ancillaries grew by some 26% versus last year, and also the positive development in the cargo business continued by a 28% growth. However, because of this ticket price increase, our RASK decreased by 8%, that led into comparable EBIT falling behind the strong compare of 2023, landed at EUR 72 million .
When we look into our passenger load factors, we did see improvement, especially in the North American and North Atlantic traffic, but then it decreased, especially in the Europe and domestic routes and networks. Overall, the load factor for the quarter was 79.5%, which was some 1.5 percentage points below last year. On-time performance was 77%, which was pretty much according to our expectations. However, also decreased a bit from the comparable period of 2023, and that was mainly impacted by the airspace and air traffic control capacity restrictions in Europe, and that's something that basically all carriers saw during this quarter.
Looking into the P&L, in a bit more detail, as already mentioned, based on our strategy and our commercial efforts, we are very happy to see that the ancillary revenue is increasing by 26%, and also the cargo revenue by 29%, which is mainly driven by the e-commerce originated shipments from Asia to U.S. and Europe, and also still... we still have some sea freight bottlenecks in the supply chain that is giving positive tailwind for air freight. All in all, as already discussed, the revenue remained flattish year over year, and then the comparable operating result was EUR 72 million . Having said this, we can be satisfied with the operating expense management, even though the total operating expenses increased.
But at the same time, the unit costs increased slower based on the capacity because of good cost management. Cash costs actually 5.2 percentage points below last year. At the same time, we start to see positive development also in the P&L when it comes to the balance sheet improvements, and for instance, our financial expenses were reduced by some EUR 10 million in this quarter. We are continuously obviously following the jet fuel price development that was below the comparison period, but there is a lot of volatility around the oil price development as we speak, and we need to also acknowledge that the oil price is still quite a lot higher than it was in 2019 .
But all in all, when we factor all in, including the financial income and expenses, the bottom line result was actually better than it was in the third quarter of 2023 . Another positive from the third quarter numbers is our capability of continuously generating operating cash flow, which was some EUR 4 million above last year, which is thanks to a strong investment discipline, and mainly the cash generated was then used to buy back the outstanding bond that we had. So now finally, we have been capable of repaying all the investment facilities and vehicles that were deployed during the double crisis time.
At the end of the period, the cash funds were again on a good level and pretty much along to the target of having one third of our annual revenue as cash funds. In addition to cash funds, we do have also at our disposal the EUR 200 million revolving credit facility. Thus, the funding position of the company is solid as we speak. Moving on with the balance sheet perspective. We continue to gradually improve our equity ratio, but at the same time, the gearing ratio is becoming a bit more quickly down, and we do have some EUR 300 million less interest-bearing debt and net debt currently in our balance sheet versus last year.
On the strategy implementation side, now we start to see the balanced route network being stabilized and successfully refocused. This has been a pivotal component of recreating future prospects for Finnair, given the fact that the Russian airspace has been closed now for since 2022 . Now the network has been successfully refocused, and our fleet has been successfully redeployed, which supports our revenue management on offering and also yield optimization as we move forward. Earlier in this autumn, we did launch a organizational change that will further strengthen our focus on understanding customer needs and customer experience. That is an area of development as we move forward to the next chapter of Finnair.
We need to understand the various needs of our various customer groups in greater detail to secure our commercial competitiveness and value creation to our customers, so therefore, I'm happy to report that our Net Promoter Score continued to increase during the third quarter up to 40%, and it was 39% in the comparable period. And when we look into the details of this number, we do recognize that the most frequent flyers of Finnair are actually rating us even higher, so that's definitely a positive evidence of our commercial agenda moving forward. And this is especially supported by the wide-body cabin renewal completion. All of our wide-body aircraft, 25 of them, are now equipped with this new cabin.
At the same time, we did launch the new Schengen lounge early July this year, and that's also getting positive feedback from our customers. In terms of our go-to-market strategy, the share of modern sales channels grew up to 71%. Then, when we look into the components of it, it's approximately 60% of our tickets is currently sold through finnair.com. Then the rest, 11%, when it comes to the modern channels, are deployed by the NDC capabilities among our partner network. And this is in the peer-to-peer comparison, actually a relatively high number in global benchmark.
Also, during this quarter, we finally got validation for our science-based targets for emissions intensity reduction, and on the next slide, we have details around it. So earlier this year, in March, we submitted our emission intensity reduction targets for validation for the Science Based Targets initiative. And now the target setting and calculations have been validated, by which we aim at reducing our emission intensity by some 34.5% by the end of 2033. That translates into 30% absolute reduction in the emissions. I want to here especially highlight that this is a long-term roadmap, and the development on this front won't be linear.
Because all the tools and solutions are not yet available when it comes to achieving those goals, and especially in the earlier years, we need to secure the availability and affordability of sustainable aviation fuel that plays pivotal role in terms of reducing CO2 intensity in our industry. In 2025 , the EU mandates for SAF blending starts to apply, and it will be 2%, so therefore it will be a gradual start, but then the pace will, the velocity will increase towards the end of the decade and then by 2023 . When we look into our offering, and the forthcoming seasons, as already mentioned, we are now better positioned to optimize both the short-haul and long-haul network, and destinations of ours.
I want to specifically pinpoint the two additional daily frequencies to London and also the successful opening of the Dallas route. We will be adding one weekly frequency to Dallas for the winter season, so we'll be flying there daily. In the summer season of 2025, there will be actually 11 weekly frequencies to Dallas. Also, we are flying our wide-body aircraft to Gran Canaria and Dubai, and also, we will increase capacity to our flights to Lapland, and basically already started the winter schedule to Lapland one month earlier than previously.
When it comes to the collaboration with Qatar Airways between Stockholm, Copenhagen, and Doha, those routes will be ended in mid-January next year, and those aircraft will be allocated to Finnair's own traffic. One could spot those planes, for instance, flying to Miami or Dubai. In addition to some routes that we will be adding daily and weekly frequencies to the North American traffic, we will be adding capacity and frequencies to Japan for the summer season of 2025. Today, we have kept a vast majority of the guidance as it was earlier when we discussed with you.
We are reiterating that our capacity measured by ASK will increase by some 10, 10% during this fiscal year, and we are also reiterating our revenue guidance, which is at EUR 3.0-EUR 3.2 billion . But at the same time, we are specifying the previous estimate when it comes to the comparable EBIT. We have narrowed the range both from the upper and lower end, and currently we are guiding the market with EUR 120-EUR 170 million in terms of comparable EBIT. We will update our outlook and guidance in connection with the final financial statements bulletin early 2025, when we will disclose the numbers for the full year. With this, Erkka, I would be ending my presentation.
Yes. Thank you, Turkka. So now would be a convenient time to present any questions you may have. Please follow the operator's instructions to present them.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Jaakko Tyrväinen from SEB. Please go ahead.
Hi, good afternoon. It's Jaakko from SEB. I would like to start on the ticket liabilities, which were significantly up 21%, if I recall correctly, versus previous year. How much of this owes to possibly longer booking curve? Or can we assume your kind of passenger revenue also for Q4 to be nicely up based on the current bookings?
So if you look first and foremost to the profile of 2023 , which was a very good year for the whole industry and also for Finnair. But the profile was such that the first three quarters were exceptionally good. But then we started to see the market normalization into the fourth quarter of the 2023. Currently, our unflown ticket liability is some 20% higher than it was last year this time. So based on that, we are actually indicating that there should be a more hectic winter quarter ahead of us than it was in 2023 .
Okay. So, so to some extent, it, it owes to longer booking curve versus previous year, if I got you correctly?
Yeah, yes, but at the same time, we have started to see closer bookings. The trend started to change somewhere early mid-September, so that is also normalizing a bit.
Okay, good. Thanks. Then on the yields, which were, or the yield, which was quite significantly down during the quarter. If I look previous year, Q4, it is already down year on year. Is the comparable figure for Q4 much easier? And what you can say in terms of the yield visibility currently for Q4? Should we expect still a similar decline year over year that we saw in Q3, or is the comparison period easier?
I think as Turkka said, last year, now with the benefit of hindsight, we had you know a super strong Q1 to Q3. The situation started to normalize already during Q4 last year. So in that sense, we will be having an easier compare now going into Q4. Having said that, you know, clearly the normalization of yields that we've seen during the year will also have an impact on Q4, but the comparison point is now easier.
Okay, good. That's helpful. Thanks. Then a bit, looking toward 2025, what is your visibility now on the competition? I mean, the competition in Helsinki, your main base, Helsinki. At least I've seen that in the press, that Norwegian is at least increasing capacity for the next year. But what you can comment on the competition?
It's still, of course, early days. We are seeing, you know, same indications as you are seeing. How much of that will be, you know, carried through remains to be seen. As Turkka indicated on his slides, you know, we are focusing on the actions that impact our business. You know, following the consumer trends and also kind of putting more capacity into those places where you know, demand is up, such as Lapland now for the winter season.
So I think we feel good about our ability to continue to be a strong player in the market here by using Helsinki as a hub for doing that, and then also doing it all year round. Whereas, you know, others come in during, you know, busy periods but not on a, you know, sustainable and long-term basis.
Okay, thanks. Still a couple of questions, if I may. On the cost side then. I'm still looking ahead to 2025. What kind of inflationary pressures you are seeing for 2025? Meaning excluding fuel costs.
So, as you have seen in our cost development this year, there are some kind of regulatory cost items which have been increasing more than our capacity, and there's clearly pressure on that side, also going into, you know, the next years. Then we have, you know, ongoing dialogue with the employees when it comes to, you know, their expectations about future compensation. Having said that, you know, we are, as a team, really focused on also continuing to drive productivity improvements, which will offset the pressures on the cost side.
In general, inflation has come down, and it is visible when we talk to suppliers that the, you know, cost pressures across the board are not there to the same extent as they were, you know, six to 12 months ago.
Excellent. And finally, on 2025 expectations or the outlook for the year, what about CapEx? How much the renewing cabins for Embraer fleet will cost, and could you remind us of kind of a normalized maintenance CapEx level?
I don't think there is any update to what we've said in conjunction with the rights issue and bond issue. We are not guiding for 2025 today, but you know, the levels that we've discussed earlier are you know, good proxies for maintenance related CapEx going forward. You know, while the Embraer investment is important for customer experience going forward, it's not a material kind of financial effort by the company.
Okay, excellent. All from my side. Thank you very much.
Thank you.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Joonas Ilvonen from Evli. Please go ahead.
Hi, it's Joonas from Evli. I have just one question on your feeling for Q4 passenger load factors in Europe. I mean, I guess we will see soon enough, but, I mean, the passenger load factors in Europe declined by some three hundred basis points in Q3, and still ticket prices, average ticket prices were down, like, something like 10%. It's actually the same, I think, as in Asia, but meanwhile, in Asia, the load factors were relatively stable. So what is your feeling on it? Have we now seen, like, the bottom of load factors in Europe, and how do you... Can you give some feeling on how those might develop during the rest of this year?
No, I guess it connects back to what Kristian just mentioned, that the comp of fourth quarter will be lower or easier in terms of load factors as well. So, it remains to be seen, but, as already mentioned, the bookings for the fourth quarter look a bit better than they looked a year ago at this stage.
Right. Good. That's all for me.
There are no more questions at this time, so I hand the conference back to the speakers.
As there are no further questions, we may conclude the call. Many thanks for the excellent questions and joining this session. We wish you a nice day.
Thank you
Good
and have a nice afternoon.
Thank you. Bye.