Earnings Call: Q3 2020

Oct 28, 2020

Good day, ladies and gentlemen. I'm Herke Salonen from Finnair IR, and it's my pleasure to welcome you all to this Finnair Q3 2020 earnings call. I have here with me Finar's CEO, Mr. Toppy Mannner, and he is joined by the CFO, Mr. Mikael Styrkinen, for the Q and A session. I will now turn this call over to you, Toppy. Okay. Thank you, Erika, and hello, everybody, also on my behalf. Welcome to this Q3 earnings call. Thank you for putting the time aside. When we look at the Q3 of Finnair, it is clear that the pandemic continued to weigh heavily on us. But at the same time, it is important to acknowledge that we proceeded well in terms of our savings targets, and we are now in a position to exceed or increase our saving target. And we also progressed well in terms of strengthening our cash position and our equity. All in all, we have significant headwinds in terms of the surrounding environment and all of those things that we cannot control. On the other hand, those things that we can control are progressing well. And that two sidedness is visible in the quarter. So moving forward, when we look at the Q3, I mean, our run rate of daily passengers during Q3 was approximately 10%, visavis the 2019 levels. The travel restrictions continued to limit our possibilities to operate in a significant fashion because Finland, as our domestic market, has one of the most stringent, if not the most stringent travel restriction regimes in Europe. The demand that we experienced in the cargo side of business was still on good level, and the proportion of cargo out of our total turnover is clearly bigger than in normal times. We also some time ago, we released our winter traffic program. And according to that, we are during the wintertime, we will be flying to some 50 destinations. On average, flying 71 75 daily flights. And that corresponds approximately 20% of the flights that we flew in 2019 and translates into a little bit less than 15% of our capacity measured with available seat kilometers. What is important to note is that we maintain readiness to increase the amount of flying as soon as the demand recovers if, for example, the travel restrictions are being lifted. And that is indeed something that we would hope to see in the near future. So our guidance for the Q3 was that we will see a similar operating loss of similar magnitude than we saw in Q2, and that is indeed how it turned out to be. Our operating loss landed at minus €167,000,000 so approximately €1,800,000, €1,900,000 per day. Our revenue fell with 89%. So the run rate of revenues is 11%, as I mentioned earlier, and our capacity decreased with 87%, pretty much hand in hand with the revenue. During the quarter, we decreased our costs significantly with immediate measures to adapt to the new environment. We took out approximately €500,000,000 of cost also during the Q3 as we did during Q2. And with that, during the course of the pandemic, we have been reducing our cost with more than €1,000,000,000 The bright spot of the quarter was the increase of net promoter score to all time high levels. So our Net Promoter Score during the quarter was 56. And the sample size is similar to the sample size that we had in Q2 last year and Q3 last year when our Net Promoter Score hovered between 3840. We see this clearly as a vote of confidence from our customers in terms of how we are handling the health safety measures onboard our aircraft. And customers clearly think and, more importantly, feel that they can fly safely also in terms of the virus concerns. And this is certainly something that we will hope will bring customers back rather sooner than later once the virus situation clears out. In terms of customer service, another big theme during the quarter was the refund processing. Starting from March, when we were forced to cancel flights on the back the border closures, we have now handled refunds of approximately 1,000,000 customers. We have been adding resources to refund processing. We have been developing new tools like robots to handle some of the refunds automatically. And now we are back to normal handling times in terms of refunds. Altogether, we have been paying more than €400,000,000 of refunds cash refunds to our customers. As stated, we made good progress in terms of our cost savings and permanent cost savings. And therefore, we are in a position to increase our target from €100,000,000 to €140,000,000 with full run rate impact in year 2022. It's clear that when we are now reviewing our organization and our operational processes, changing our way of working, this is yielding to structural cost savings across Finnair and especially on the land side of our operations. We have made better than anticipated progress and identified new opportunities for savings in areas like maintenance and repair, real estate, IT cost. And then we have been renegotiating and doing some competitive biddings generally with our suppliers, and this is clearly yielding results. And given these steps forward, we now increased the target to 100 €40,000,000 In terms of personnel implications, during the quarter, we handled the so called co determination process, leading to reduction of people of 700 across our operating countries. This corresponds to approximately 30% reduction in our landside operations, especially in the headquarter and support functions. Altogether, when we take retirement into account, when we take the natural churn into account And after these redundancies, during this year, we have been reducing the amount of our personnel with 1100 approximately. At the same time, we have been in intense talks with our unions in terms of agreeing upon savings. And we have been agreeing upon permanent cost savings with some of our employee groups, with some of our unions. And those unions, those employee groups will be eligible for a rebuild incentive that will be paying out in 3 years if our rebuild targets will materialize. Some of the unions, some of the employee groups have agreed on fixed term savings. And then those are certainly also very welcome in terms of our rebuild planning and savings targets to be met. Finnair has a pension fund, predominantly for flying personnel, for pilots and capping crew and especially for more senior staff. And as part of the talks with the unions, we have now agreed about index removal for those pensions, for those additional pensions. And that will be leading to a reduced pension liability for Finnair. And on the back of that, during Q4, we will be making a one off positive booking that amounts to €85,000,000 That €85,000,000 will not be part of our comparable EBIT, but it will be contributing to the EBIT number in the items affecting comparability. And therefore, it will be flowing through the P and L, and ultimately, it will be strengthening the equity in our balance sheet. Beyond this €85,000,000 we have potential other similar measures that will materialize during Q4. We have a negotiation result with our unions, but some of these arrangements are pending regulatory approval. And once we get those regulatory approvals, we will get back to this and announce the result during the course of Q4. As part of the job redundancies, we introduced a next program for our people that is aiming to support those who will lose their jobs in finding their next chapter in their professional careers. And this is something that we feel is very important to us in terms of us being a responsible employer and offering social support for those who are in need. In terms of cash, we started the quarter with a cash balance of €851,000,000 The comparable EBITDA was €82,000,000 The change in working capital was quite significant during the quarter because we especially handled the backlog of refunds that amounted to €129,000,000 And then there was additional working capital elements, especially coming from various hedge and derivative impacts during the quarter. Going forward, it should be noted that the working capital changes should be clearly smaller, especially when we look at the refunds because the outstanding refund backlog currently is €40,000,000 And therefore, this particular item will be clearly different in the quarters to come. We took delivery of 1 Airbus 350 based on earlier arrangements prior to the pandemic and therefore, invested the remainder of the purchase price to that aircraft. We did one divestment of sale and leaseback arrangement of 1 Airbus 350 aircraft. The remainder of the rights issue came in, in July. Hybrid bond net proceeds impact the cash, and we also drew €200,000,000 out of our pension premium loan during the quarter. We paid back the revolving credit facility of €175,000,000 but the revolving credit facility remains at our disposal at this time. And that basically led to the quarter end cash balance of €725,000,000 And I stated the revolving credit facility and €200,000,000 of pension premium loan remain undrawn in terms of liquidity at this point of time. We continue to negotiate financing arrangements, especially aircraft transactions and thereby raising debt. And once those discussions mature, we will be coming back to that with separate announcements. When we look at our balance sheet, the equity ratio is on year end 2019 levels, thanks to the rights issue that we conducted during the summer. And now looking into Q4, the one off bookings out of the pension fund will be supportive for our equity as well. Gearing levels remain at Q1 levels at this point of time. All in all, when we look at our balance sheet, the balance sheet is healthy, and it provides a solid platform for us to rebuild Finnair during the quarters to come when the pandemic develops and hopefully gradually starts to ease. In terms of fuel cost, I mean the price development was basically compensated by currency and hedging deviations. So fuel bill basically pretty much developed hand in hand with our volume. In the IFRS accounting, we still were in an over hedged position during the quarter, and we dismantled and unwound those over hedges, and that resulted into net financial expenses of €54,000,000 during the quarter. Now our sort of level of hedging is relatively small going forward, and therefore, these net financial effects are expected to be limited in Q4 and beyond. When we look forward, the winter traffic program, I already covered. We estimate that the ramp up in terms of the demand starting to pick up will materialize in bigger scale at the start of the summer season, so basically end of March, April, next spring. And we will be making sort of further decisions related to the summer traffic program in early next year. At this point of time, we are flying some of our aircraft, approximately half of our fleet to winter storage in warmer countries. And one of those is Czech Republic and Prague, where we are also doing some maintenance for our aircraft. But we maintain adequate fleet in our home base so that if the demand is picking up, we can react to that quickly and increase the amount of our flights. During the quarter, we have been working on our revenue program as well. And in an effort to find all revenue pockets that can be found in this challenging marketplace where we find ourselves in. Suntours, Aureko Matkad launched package travel options, not to Mediterranean countries where they are flying typically, but to Finnish Lapland, where the sun also shines during the wintertime. And then those travel options have been received well by our customers. Another pilot that we have been doing is a Taste of Finnair. So we are selling premium packaged fruit inspired by our business class to local supermarkets. And this has been received really, really well, and we are looking at possibilities to scale up this fast. When we announced the initiative some time ago, the news went viral and then actually the news was covered in more than 60 countries across the globe. So this is an example of how we are staying relevant in the minds of our customers and how we are keeping up the brand value of Finnair, which indeed is a great asset for us during this time. We have been also doing travel responsible campaigning, reminding our customers that we are ready to fly when they are ready to fly. And there is also an important message to governments across Europe in this one, and that message is a message of travel restrictions. What the travel industry needs is consistent and predictable travel guidance and especially common standards, common testing regimes based on rapid testing. And we do hope that across Europe, governments will be harmonizing their practices and take steps forward in this very, very important matter in order to save jobs in the travel industry in Europe during the winter. And that brings me to the guidance of the quarter. So looking ahead, we see the Q4 operating loss to be of similar magnitude than we had during Q2 and Q3. This one off booking out of the pension funds is not included in comparable operating profit as such. And as stated, that €85,000,000 and potentially some more will flow into the P and L as part of the operating result and thereby will be strengthening the balance sheet and equity. Based on our current assumptions, we estimate that revenue and the capacity will both decrease more than 70% in 2020 compared to 2019. So this pretty much sums up the Q3 from Finnair perspective. And as stated, what we have been able to accomplish during the quarter is especially the progress in the permanent savings, in adopting our business to new reality And also, the measures in terms of cash and equity have been high on our agenda. And then progress on those fronts has been according to our plans. So thank you. Thank you, Toppy. And now would be a convenient time for any potential questions you may have. So please go ahead. Our first question is from Pasi Vazinan of Nordea. Go ahead. Your line is open. Great. Thanks. This is Posse Vazni at Nordic Bank. Well, we can start with some kind of cash position. I mean, I would like to know what is your current run rate for the cash burn? And what's your kind of hurdle rate or the base gas position you actually need to run your ordinary operations? And secondly, I'm looking at the kind of these reductions, you actually laid off some 700 people, if I read right, from the ground personnel. So is there now kind of a mismatch between the flying personnel and the ground personnel? So are we going to see kind of somehow kind of are you going to call back to people in the Q1? Or are we going to see the next round in the layoffs regarding flying personnel in the Q1 or next year? And if we start with these two ones, I have a follow-up also coming on this. Thanks. So if you, Mikael, take the first one, I can take the second one. Operating cash flow. We guided that the comparable EBIT is at Q2, Q3 levels. And hence, EBITDA will be around €80,000,000 to €90,000,000 per quarter. And then on top of that, we guided that the refunds will be the estimated refunds are €40,000,000 during Q4. And then after that, we anticipate that there wouldn't be any refunds in Q1, Q2. On top of those two items, we will have on operating cash flow financial expenses paid net line. And over there, we have the interest expense and hedging costs. So you can do the math over there. And then on top of those, we have the debt repayments and costs of investments sorry, investment cash flows. So that answers, hopefully, your question on the cash flow. Yes. And in terms of the second question about the mismatch of redundancies, there is no mismatch, and we do not have any further plans for people reductions either. When we look at the headquarter and support functions, we are changing the processes, we are changing the way of working, and there is a true productivity gain out of the structural changes in those units. And then when we look at the flying crews, what we will need to remember is that the furlough legislation in Finland is very flexible, so meaning that we can do furloughs until further notice. And when we do furloughs until further notice, we get rid of the entire salary cost of those employees. And in flying crews, we will utilize those furloughs until further notice. And some of these furloughs will be relatively long. I mean, they might be 2 years or even 3 years at times. By doing the redundancies the way we have done, we aim to safeguard the possibility for us to increase the amount of flying relatively fast post pandemic, while improving the efficiency into support functions significantly. And this is part of our rebuild plan. This is part of our plan to come out strong from the pandemic. Great. Thanks. I hear you. And just if I may continue with the decision kind of the cash issue and investments. So well, what you are going to do for this kind of a multi $1,000,000,000 per investment program, which actually supposed to start in couple of years of period. Is it going to be postponed or kind of canceled? Or are you going to run it in any case? And when looking at the investments, I mean, this year you have had a quite high investment figure. And are you able to reduce the investments in next year compared to this year? And lastly, regarding kind of the recovery kind of period, you were speaking about the 2 to 3 years period and kind of traveling would be kind of close to the more normal levels or at least into year 2019 levels. But some carriers in Europe have actually highlighted 3 to 4 years recovery period. So I would like to know where these Finnex estimates are coming from and to what they are based at? Yes. I mean, if we start from the investments, comparing the investments this year and next year, We are based on our order book, we have still 3 Airbus 350s coming up, and they constitute the bulk of our future investments during the upcoming 2 years. Now we have been in intense talks with Airbus about the deferral of these 3 Airbus 350s, and we are at finalizing stages of those discussions. And based on the current status, we see it possible to defer these 350s, so that the investment number, the CapEx number would come down for next couple of years. Once these discussions mature, we will come back with further information and more specific information. In terms of the narrow body investment, that is not actual at this point of time. So we are postponing it, but we are keeping it on our agenda. So eventually, once the pandemic clears out, then we see a need for narrow body renewal. And therefore, we will take up that investment possibility at that point of time. But for the time being, we don't have usage for those aircraft that we have in our fleet. So therefore, any CapEx to new aircraft at this point of time is not advisable. And then when it comes to the 3rd part of your question about the recovery time of Aviation, we are estimating that aviation will be coming back to 2019 levels in 3 years. That is our base case estimate. We see that some airlines are saying the same, then some are talking about 3 to 4 years. If we look at our situation and our plans, it does not really matter whether we are saying whether the recovery will take in 3 years or 4 years. All the actions that we are doing will need to be done in any case. And then that is something that should be noted in connection to this particular issue. Great. And lastly, if I may, for Mikael Styril, I still ask about the cash position. So what is that ordinary base cash you need to run operations? Is it €400,000,000 €450,000,000 or €350,000,000? This is an interesting question. What do you actually mean by that? So that on a monthly basis, we might need approximately €100,000,000 The valuation during the month might be something like that. But then the question is that what do you mean by that? So typically, you have cash in and cash out. So within a month, as I said, it's 1 100,000,000 is the difference between max and min. So but we let's say that we it feels comfortable if we have cash balance of in excess of €400,000,000 let's say. Yes. I was looking at the 10, 15 years average and it is pretty close to EUR 350,000,000, EUR 450,000,000 last 10, 15 years as average. Yes, I can reveal the inner feelings of myself and Toppi. So we like more cash is better. So. Surprisingly. Okay. Thanks. That's all from my side. Yeah. Our next question is from Jens Harelve from OP Financial Group. Please go ahead. Your line is open. Yes. Hi, it's Johan Sverdrup from OP. Firstly, could you update us on the sale and leaseback market? Is the market still functioning in a relatively normal fashion? Or has it changed in any way recently? It was almost completely frozen, let's say, in May. Then it started to open up again. The market is still there, although naturally, it's not as deep as, let's say, in 2019. We are in the progress of finalizing a 1 sale at leaseback transaction, and we are in final stages of another aircraft financing transactions. And hopefully, we are able to come out with a stock exchange release on those two transactions rather soon. Okay. Thanks. And then another one on CapEx. You talked about this already a little, but could you elaborate perhaps what is kind of the minimum level? How low could CapEx go if needed with this level of flying? I guess the maintenance and other items similar to that are not needed in a same fashion than normally? So it's less than 100. It really it's a function of the operations. So we will we need to have some overhaul, especially engine overhauls. So if we anticipate more flying, the maintenance investment will be a bit bigger. But in any case, that's below €100,000,000 Let's say, between €50,000,000 €80,000,000 would be the ballpark. And we are working very heavily to postpone A350, fifty investment cash flows as well as other investment cash flows related to fleet. So all the other than maintenance investments are pushed back a lot as much as possible. Okay. Thanks. That's all I have at the moment. Once more, so we our target is to come out with the both Airbus transaction news, then news on the A350 aircraft financing, 2x and then potentially other fleet related investment news. But those are not mature enough to be announced. And all of these actions would support our cash flow. Next question is from Jakob Durerveinen. Please go ahead. Your line is open. Yes. Good afternoon. Jakar here from SEB. Regarding the recovery and the possible advanced testing method for COVID, meaning the rapid testing, Do you see that the travel restrictions could be lifted if we could deploy this testing across the Europe, for example? And then how do you see this kind of a testing would or common methods across the Europe would impact your demand? Yes. I mean, this is a $1,000,000 question or more than $1,000,000 question, perhaps $1,000,000,000 question in Europe right now. I mean if we start from the EU, I mean one of the basic principles and pillars of EU is the free movement of people. And therefore, what EU countries need to do relatively soon now is to find new practices because the border controls on EU internal borders will cease to exist relatively soon. The so called Schengen exemption that for many countries was taken into use in March at the start of the pandemic expires relatively soon. In the case of Finland, that expiry will take place on the 23rd November. And therefore, the Finnish government, for 1, is in a hurry to come up with new legislation related to testing and related to travel restrictions. And this basically goes across countries in Europe. So our view is, and this is in line with IATA and this is in line with airlines for Europe, is that rapid testing, especially prior to departure, is the means to implement across Europe a common testing regime. And once that testing regime would be in place and once that would be based on rapid testing technology, then it would be less clearly less cumbersome to be an airline passenger. And we think that it is possible to take care of health, safety and control the spread of the virus with rapid testing. Because based on the data that aviation industry has collected across Europe and the health authorities have collected across Europe, and this goes also for Finland, There is no wireless transmission effectively on board aircraft. And then also when looking at people entering, for example, Finland from the high risk countries, the number of infected people is very low. In case of Helsinki Airport, 0.9% of passengers from high risk countries are COVID positive, and vast majority of those passengers are not in a stage where they could be anymore infecting other people because they have been having the virus and the disease previously. So therefore, we feel that this testing regime is possible and that would be a key enabler for aviation to start to recover and the amount of passengers to start to increase. Okay. Very helpful. Another one. In your report today, you stated that in your laser bookings, you are seeing relatively strong demand towards summer 2021. Does this tell you that there is a significant pent up demand after the staycation period in 2020? I mean what we saw during the course of the past summer is that whenever travel restrictions were lifted on certain routes, then the demand was relatively quick to come back. And then that to us is a clear indication that there is a strong pent up demand out there. There's a big social need for flying. I mean many people, for example, have families in other countries and then this kind of travel is not enabled for the time being. Businesses need travel and people do want to travel, people do want to experience new things. So therefore, we think that there is pent up demand, and we do think that travel restrictions play a key role in terms of enabling the demand to come back. Thanks. Still referring to your report out today, you are expecting that the competition to be fierce once the recovery starts. Could you elaborate a bit more around this view? Are you seeing that the rivals are likely to prefer cash flow over the profit rather than building rebuilding their equity. So do you see overcapacity once the recovery starts? Yes. I think that during the next 1 or 2 years when we the aviation climbs back to demand levels of 2019, by definition, there will be overcapacity on the market, even though fleets are optimized, even though aircraft are retired and so on and so forth. But after that, the equation can change because clearly, airlines are not making investments to new aircraft and then that will be impacting the competitive dynamics going forward. When it comes to the question of whether airlines how airlines will behave in the future. It is clear that airlines will accumulate a lot of debt right now and that debt needs to be paid back. So there would need to be some discipline in terms of profitability and pricing going forward. So that is one of the driving forces. On the other hand, history tells us that this industry is a very competitive industry. And at times, airlines are prioritizing sales intake and cash flow over profitability. And that is a driving force that points to the opposite direction. And then how exactly this will be playing out remains to be seen. But I mean, our logic is that set your sales for storm, but hope for good weather. And we want to be prepared for tough competition out there in the marketplace post pandemic. And we want to come out strong from the pandemic, and we would rather be on the winning side obviously, post pandemic. Right. Thanks. If I may, one more on your own current fleet and capacity planning. Given the current situation, will you be downsizing your own fleet over the next few years? And should we expect any kind of a material financial impact from the possible divestment of the oldest aircraft? We will be optimizing our fleet. So some of the things that we will be doing, we start with couple of our older narrow bodies. We start the part out and then that is an example of the measures that we are taking. We are observing the aircraft market at this point of time, And we maintain readiness to do both narrow body as well as wide body sales if we find the right deals out in the marketplace. So optimization of fleet means that we are getting ready to reduce number of aircraft in our fleet. But that process is like to be stepwise and gradual and no drastic moves as such. And when it comes to the balance sheet values of those aircraft, I mean based on the deals that we can find, there might be some sort of booking needs in this one. But I mean, in terms of order of magnitude, they shouldn't be that material. And Mikael Styrkne here. So and yes, the potential sales value won't be huge and the potential write off won't be huge. However, the key driver here is that we want to avoid the potential maintenance cost for those individual aircraft and that maintenance cost would materialize next year. So that's the key driver here in our contemplation of exiting certain units of our fleet. So all in all, when we look at our balance sheet, we think the balance sheet is solid. Yes, understand and agree. If I still may, could you disclose that do you have any leases maturing in 2021? Nothing material. All right. Excellent. That's all from my side. Thank you very much. Thank you. Our next question is from Achal Kumar from HSBC. Please go ahead. Your line is open. Hi. Thank you for taking the question. I had a few questions. First of all, basically, I wanted to understand the trading environment. So basically, you have you already have opened few flights to Asia. So basically what I wanted to understand from you is that, of course, although the demand is slow, but what kind of change or what kind of change in the behavior, pattern of the bookings you are noticing at the moment? And what is the sort of time line for opening the China market for the passengers? And then how the fares look like? So if you could please talk about that, the overall trading environment as such. Yes. The whole I mean, of course, the whole trading environment is very, very subdued given the external factors that we are seeing. And when we look at the long haul traffic especially, I mean, the load factors on some of the long haul routes are low. They are in teens. Approximately, it could be seed load factor of 20%. So that is the sort of order of magnitude that we are talking about, meaning that when it comes to long haul routes, those routes are cash positive because of the cargo impact on those routes. When it comes to China, in particular, I mean, the Chinese routes, and we are currently flying once per week to Shanghai, once per week to Nanjing, they are the best performing long haul routes that we are currently having. The seat load factors are approximately 70%. So under this environment, relatively good. And this is, of course, on the back of the overall capacity of international flights being very, very limited to China at this point of time. But what kind of this is so what kind of behavior change or booking pattern? What kind of change are you noticing at the moment? And what kind of change in the kind of mix of traffic basically on Chinese routes? That's what I want to understand. Yes. I mean, as stated, when we look at the overall traffic and the overall trading environment, all routes included, what we clearly see is a late booking behavior. So the bookings come in very late in general, and I think that this is the behavior that many airlines have been mentioning in their commentary recently. When we talk about China specifically, I think that what we need to remember here is that we are effectively talking about 2 flights per week, 1 to Shanghai, another one to Nanjing. And therefore, we cannot really talk about trading environment as such. We can talk about anecdotal evidence related to couple of flights. But as stated, the load factors on those two flights are good. The profitability of those flights is good. So we would definitely want to fly more to China if we would be allowed by the Chinese authorities. Is there any time line given by Chinese authority for market to open? Or is that still not very clear? And you are referring specifically to China now? Yes, exactly. There is no communicated I mean CAAC, the Civil Aviation Authority in China has not communicated a specific time line on this one. I think that they are observing the virus situation, both in China as well as in Europe and elsewhere in the world. And they have had this policy of 1 flight per 1 airline per 1 country per week. And under that policy, we got our aviation right to Shanghai. And then when we performed well, especially in terms health and safety, effectively not bringing the virus to China, because you would need to remember that all of those passengers are being tested in China, then we got this other permit to Nanjing. Right. And then that broadly you talked about the long haul and then specific to China. How about the short haul within the domestic within Europe? Yes. In terms of the short haul, what we are seeing is that as so many other airlines out there, the domestic traffic is the one that comes back first, not being restricted in terms of travel restrictions, and that is the case with us as well. In terms of short haul in Europe, it is clearly clear that the travel restrictions are prohibiting us quite significantly. But wherever you are operating, what kind of environment are you facing? I mean, is there any particular routes or probably within Nordic? I mean, so I just want to understand, is there any particular way where you are enjoying very strong demand or you're open to fly or is it across is it same across Europe? Yes, it is pretty much the same at this point of time because as stated, the travel restrictions in Finland have been among the most stringent in Europe. And that means that there is there are no green list countries effectively for Finland right now. So there is no unlimited travel or unrestricted travel at this point of time. So therefore, what we see in the European short haul landscape is basically pretty evenly spread across the routes. Maybe the exception here is that the longer domestic routes are performing rather well. So Oulu and Lapland destinations. So Domestic routes are performing, yes. Yeah. But still over there also the capacity is lower than last year. Right. Moving on, I also wanted to understand about the cargo flying. So basically, of course, the demand has been strong, but as the market reopens, do you expect some bit of fall in the demand and the pricing? And how profitable the cargo flying is? If you could please talk about that. I mean, the price of cargo per tonne has been coming down a bit from the peak levels in Q2 in the midst of the pandemic. But the profitability of cargo is still good, and it is contributing well to our to the cash positivity of our flying. And then of course, seasonally, Q4 is by far the strongest in cargo traffic. And therefore, that seasonality pattern we see to hold also during this year. So there will be increasing demand for Q4 in terms of cargo. Right, right. Okay. On the cost, could you please explain a little bit more about your cost cut target? So you've increased the target. So basically, where these targets are coming from? Are they mainly coming from the labor side, the salary side or what exactly how the mix looks like? And if they are coming from mainly from the salary side, what kind of challenges do you expect to achieve these targets? Or do you expect all everything to be smooth and then you'll be able to cut costs? So just want to if you could please talk about a bit more on the cost side that will be helpful. Thank you. So in terms of cost and in terms of permanent cost savings, we are turning every stone. We are looking at every cost item that we have. And we are looking at sales and distribution cost. We are looking at real estate cost. We are looking at IT cost. We are looking at processing cost. We are looking at administration. We are looking at compensation. We have been agreeing these savings agreements with our unions, we have been reducing the number of our personnel. So we are looking at all of it. No sort of stone is remaining unturned. And as stated, the people reductions, that math you can probably make yourself when you look at how what is the sort of number of people that we are reducing during the course of this year on the back of retirement, natural churn and job redundancies. So the role of that out of the total savings that we aim to materialize is definitely significant. But equally well, there's much, much more to it. And we continue to pursue those savings as we speak. But do you expect any challenges to achieve those EUR 140,000,000 savings? Or do you think you should be able to achieve easily smoothly? Well, of course, it's hard work. And but we have been progressing well. I mean, our original permanent cost savings target that we announced during the spring was €80,000,000 Then we increased that to €100,000,000 And now we have been progressing so well that we feel comfortable to increase it to €140,000,000 It's not easy. It requires quite significant effort across the organization, and it also comes from small streams. So we will definitely push in order to reach that target. But at the same time, we have set the target so that we really feel that it is possible to achieve. But then, in terms of particularly in terms of employee costs, so how do we see employee cost evolving over the next 2 years? Because once you start increasing your size of operation, then don't you think you will need more employees and you'll be taking those back. So whatever savings your target you're aiming might not be able to might not be possible if you sort of if the size of the operations increases and then you need to take employee cost back? How does that work? No, this is very important and thank you for that question. What we are talking about here with the €140,000,000 is permanent cost savings with full run rate impact of 2022. So permanent means that we do not expect that cost to come back so that there will be long standing permanent productivity improvement in the organization on the back of changed organizational structure, on the back of changed processes, on the back of changed way of working, for example, moving into agile method in terms of our various units. So that's very, very important to say. And then the flying crews, pilots and cabin crew were not part of the people redundancies. And that means that I mean, these employee groups, well, there are high professional standards in these employee groups, and the training of these employee groups is also a relatively sizable investment. And therefore, we want to maintain flexibility that we can call back these employees back to work. And with that, we are able to scale the operations going forward once the demand starts to come back, a key component of our rebuild plan. Okay. Okay. Perfect. Couple of more, if I may. So one, basically, I also wanted to understand about the vaccine distribution, which you just talked about and there was a press release about it. So I just want to understand how much cash do you expect from vaccine distribution and how big it could go actually? The other thing, if you could please talk about the competitive landscape, how the competitive landscape is behaving and how do you expect that going ahead? And finally, I'm really sorry if I missed it and if you spoke about before about your CapEx commitment and debt repayment over the next 2 years, please. Okay. So when it comes to the cash impact of the vaccine distribution, the short answer is that it's too early to tell, too premature. We do not have yet estimates on that one. But of course, we hope to be able to help in the vaccine distribution, and we are positioning ourselves for that. Then in terms of the competitive landscape, yes, I mean, all airlines in Europe are scaling back their amount of flying at this point of time. If we look at the Helsinki hub during this time, our sort of normal market share in Helsinki Hub has been closer to 60%, and now we are above 70%. So at this point of time, our market position in this very sort of little volume that is out there on the market has been strengthening. And then the question is that how will this play out going forward? Will some of the competitors, like Norwegian, will they come back to Helsinki Hub? And if they will, to what extent? So the jury is out in that sense. And I think that it will be interesting to observe what will be happening during the coming months on that respect. We feel that in the relative game, when we look compare ourselves to those competitors who are relevant to us, we are well positioned in the relative game. And then Mikael, perhaps you can take the investment and CapEx. Investment and CapEx. So I guess we covered that. Yes, but you did not hear that. So you didn't hear about Airbus deferrals or? I think I missed that part. I'm really sorry for that. Okay. So we are in advanced stage with negotiations or in negotiations with Airbus. And we foresee that during the quarter during this quarter, we are able to come out with a stock exchange release on the Airbus contract deferrals. And as you might remember, we have 2 deliveries coming up next year and 1 in 2022. Additionally, we are working on other investment cash flow deferrals. And then the part of the investment cash flow, what will remain is the maintenance CapEx. And there, the maintenance CapEx is dependent on the anticipated volume of flying. So one could estimate that to be between €50,000,000 €80,000,000 and really, really, really depending on the amount of flying. Is that sufficient for you? Our next question is from Nicholas Cordain from Lexcor Capital. Please go ahead. Your line is open. Yes. Hello. Good morning. So when you did the rights issue early in the year, I think the thought process was to say, we might be burning €100,000,000,000 of cash this year. It's a tough year. We need to effectively come out of the crisis with a balance sheet that is as strong as what it was before entering the crisis. Guess, unfortunately, now it looks like we're going to have more than what we hoped for a few months ago in terms of cash burn. And so I guess is this sort of logical next step to say maybe not now, but when things look a bit better, there's a vaccine out there, etcetera. Should we be thinking about like a further strengthening of the balance sheet in terms of raising additional equity in order to compensate for the additional cash burn that you would have had compared to initial expectations? Thank you for that question. No, the answer is no. So further equity raising is not part of our plan. And when we look at the equity ratio, when we look at the gearing, we feel that they are in healthy levels at this point of time. And also the measures that we have been taking with the pension fund, they will be contributing to the equity, for example, the €85,000,000 that we announced today. So that, of course, will be helpful in terms of equity and balance sheet. So in terms of future financing steps, we especially focus on debt side of things. And there we are looking at aircraft asset based transactions. Our next question is from Pia Roskris of Carnegie. Please go ahead. Your line is open. Hi. Thanks for taking my question. It's Pia Rojas from Carnegie. I had a question on the possible rights issue, but that was already answered, but a few still. So with regards to your cost savings program of now EUR 140,000,000, You say every stone has been turned. Is it then fair to assume that from here on, it's very difficult to reinvent the cost base? Yes, of course. I mean, the further we go in the progress, the harder it gets to realize results. On the other side of things, what we have experienced during the last couple of months is that when we have been digging deeper and deeper into possibilities, we have been finding new things as well. So we think that the target of €140,000,000 is ambitious for us. But at the same time, we feel confident in terms of our possibility to reach that target. So that is how the target is set. That is the thinking behind the target. But you can rest assured that we won't be laying on our laurels on this one. So if we find new possibilities to reduce the cost, we will certainly take home those possibilities. So we keep on pushing and we keep on pushing and then we keep pushing once more on this thing. Mikael Styrkina here. So I've been here with Finnair for 21 years. And now we are doing things what we have never done before. So new type of processes, new cost cuts, what were impossible in the past. So because when you just have to do it, then you invent also. So it's we have some process development items, which were practically impossible in the past. And what you need to remember in this one is that when we are talking about the €140,000,000 target in terms of permanent cost savings, we are talking about that target net of inflation. So inflationary type of escalations would be netted out of this, so that the full outcome would be €140,000,000 And if you compare that €140,000,000 for example, to our EBIT in 2019, you would find that, that is a very significant number. And assuming that the demand comes back at least to great extent, then of course, assuming that when we have more normalized revenue, more normalized turnover that will be making the company clearly more profitable. Okay. Thank you. And then on your strategy, you have said you will return to your strategy at a later point. But today, how do you view your commitment to North America? You increased capacity prior to the pandemic outbreak. But what is your view today? The focal point of our strategy is connecting Europe and Asia. That is the raison d'etre for our airline. We have been increasing the North America traffic gradually over the past years, and we are committed to those routes once the demand will come back and the pandemic clears out. So we do not have any structural plans related to North America to either side, neither to reducing it or neither to materially increasing it. And one needs to remember that in the North Atlantic business, we are part of AJB, Atlantic Joint Business, and that supports our North Atlantic operations well. So giving us connections in the U. S. And feed. Okay. That's all for me. Thank you. Thank you very much. If there are no There are no further questions. Sorry. Yes. If there are no further I'll go back over. If there are no further questions, we can probably end the session. So thanks for all good questions, and thanks for joining the call. Thank you also on my behalf. Thank you. Bye bye.