Good day. Welcome to the Finnair Q1 Result Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kasper Joukama . Please go ahead, sir.
Good day, ladies and gentlemen. I am Kasper Joukama from Finnair IR. It's my pleasure to welcome you to this Finnair first quarter earnings release conference call. I have here with me Finnair's CEO, Topi Manner, and CFO, Pekka Vähähyyppä. They will be joined by Christine Rovelli, Head of our Treasury, for the Q&A session. I'd like to turn the call over to Topi Manner now.
Thank you, Kasper. This is Topi Manner speaking. Hello, everybody, and welcome to this earnings call also on my behalf. The main headline for our Q1 is that this was a seasonally weak quarter for us. There's hardly any news for you that this tends to be the situation in the airline industry at large. That applied to us also during this quarter. Our revenue increased with 5% while our capacity increased with 10%. Due to the increase in the operating cost resulting from the capacity increase and due to the fuel cost, including hedges, increasing a bit our operating result, EBIT landed at minus EUR 16 million, which was pretty much as we expected it to be during Q1.
When looking forward, the good news is that we see the sales developing well and according to our expectations during Q2 and Q3. That is why we are reiterating our guidance for the full year, basically, that our capacity is estimated to increase with the 10% in terms of ASK. Our revenue is estimated to increase somewhat less than that. When going forward in the presentation and looking into the next page, we experienced varied demand between the geographical areas, between the different markets that we serve during Q1. On the overall, the uncertainty in the global economy affected the market conditions. We are looking at a more challenging market than we have been used to during the last couple of years. Of course, also the fact that Easter moved from March to April should be taken into account when interpreting the numbers for Q1.
Our Japanese and North American routes performed well during the quarter, and that also seems to be the case when we look into Q2 and Q3. In China, we experienced a slow start of the year, and that was impacted by a number of factors. First one was the overall macro situation in China and the uncertainties related to, for example, U.S. and China trade talks and the impact on consumer behavior. The second one was more related to the calendar this time around. The Chinese New Year was very early on this year in early February and then the start after that, the pickup was slower than usual. Then also the Chinese National Congress was a little bit longer version this time around, lasting a couple of weeks.
This longer version of National Congress takes place every five years, and that impacted negatively the government-related travel, especially on some routes like Beijing and also the government-owned companies pretty much stayed in China. Then finally, in China, about a year ago, we also sort of made the decision to test and focus more on individual travel out of China, especially in some cities. That hypothesis has only partially been successful for us and therefore we are sort of reanalyzing our sales and general focus and also taking into consideration the travel agencies and group travel and focusing more on that one going forward. Now during the last couple of weeks, we see some pickup in the Chinese demand pretty much in sync with the slightly positive macro indicators that we also see coming out of China.
It seems that the stimulus in China is working at least to some extent. In Europe, the competition remains tight. As you know, there's a lot of narrow-body capacity on the market, and that impacted our circumstances also during the Q1. The situation with Norwegian and the MAX 8 grounding and their plan to focus more on profitability, cutting back capacity, did not impact Q1 numbers materially. Toward end of March, we saw some sales impact in the numbers, and that seems to be the case also for Q2 and Q3. As stated, the fuel cost including the hedges, increased during the quarter. What is also notable that whereas there typically is a negative correlation between oil price and U.S. dollar, that wasn't the case during Q1, and therefore, the currencies also impacted our Q1 result just a bit.
I think the net impact was something like EUR 2 million. Moving on, when we look at the Q1 numbers, as stated, the revenue increased with the 5%, leading to a record high passenger number for Q1 for us altogether, 3,147,000 passengers during Q1. The capacity increase of 10% stemmed especially from the receivable or the reception of two new A350s, one in December and another one in beginning of February. When we look at the Q1 on isolated basis, this of course means that we had a little bit too much capacity for that quarter alone. At the same time, we see a lot of good usage and good demand for these aircraft during the summer season and onwards. Of course, the delivery schedule of the A350 is driven by the OEMs and in this case, Airbus.
On the cost side of things, our operational cost increased with 8.9%. If we take that excluding fuel, that would be 7.6% increase to the cost. We had sort of a little bit of a technicality where we sort of shortened some of the depreciation periods that we had and the impact of that one was EUR 4 million of additional depreciations for the quarter. If we exclude that one, the operational cost increase was a little bit less than 7% during the quarter. That of course means that we need to work with productivity going forward, and that we are certainly doing. We will be receiving one additional Airbus A350 now during the upcoming days. That means that our A350 fleet will be substantiated, and that of course will be having the corresponding impact on CASK going forward.
That is one element of our productivity agenda. On top of that, we are looking into the overheads. We are prioritizing and reprioritizing our project portfolio. We are utilizing automization, robotics, artificial intelligence, shared service centers, also in terms of nearshoring going forward, and thereby on a continuous basis, increasing our productivity. All in all, we will be putting a very close scrutiny on our fixed cost, on our overheads and also limiting recruitment going forward and thereby addressing the cost growth going forward. In terms of NPS development, it is worthwhile to note that during the quarter we changed the methodology of measuring the NPS. Previously, our NPS figure has been based on the population of Finnair Plus customers to loyalty program customers.
Now we have included all customers to the population and therefore now disclosed NPS figure is not directly comparable to the figures that you would have seen in the past. If we look at the like-for-like comparison of NPS, our NPS dropped with two points predominantly driven by punctuality issues caused by a record snowfall in Helsinki during January and February, and also the fact that there is a lot of construction work going on in the Helsinki airport currently, meaning that especially for those travelers traveling from Helsinki, the airport experience is not entirely optimal. At the same time, we will need to remember that the investment to Enlarge Helsinki Airport is a long-term positive for Finnair and something that enables our longer-term growth and also top-notch customer experience and very fast travel times and switch times at the airport.
Going forward, when we look on the next page, on page five, a little bit more detail in terms of our revenue. As stated, the Japanese market and the North American market developed well during the quarter. Our ancillary sales increased with some 4%. Here we will need to remember that during the quarter, we let go of our online booking fee, which is, of course, good news for customers. If we take that into consideration, our ancillary income basically developed in line with our passenger revenue, and thereby the ancillary euros per customer basically stayed at the same level on like-to-like basis. In terms of cargo, we have been investing quite a bit on this business, and we are very happy about that investment because we are competitive on the market.
The revenue is increasing with some 17%, although here we will need to remember that the comparison period last year was subdued because we took the sort of new way of working and the new terminal into use. Even putting that aside, we are moving forward very well on the cargo business and increasing our market share, basically going against the tide on the cargo business. On the next page, when we look at the loads for Q1, and the Q1 load number was 78.3%, to be exact. When we look at that number, it is important to keep in mind that Q1 last year was record high for us in terms of loads and in terms of business momentum. Actually, in the history of Finnair, that was the best Q1 ever. That is one factor to be taken into consideration when interpreting this picture.
Another one is the added capacity and the new A350s, especially directed to the Asian markets. The third one is that, as we have mentioned previously, Q2 last year, we took into use the new revenue management system, which is optimizing a little bit differently between revenue and load, favoring revenue more than previously. Those factors are something that should be kept in mind when looking at these numbers. As stated, the forward-looking sales for Q2 and Q3 looks positive for us, and therefore, we would expect that to be reflected in the loads also during the summer season.
When we break down the passenger revenue, we see that the passenger revenue is especially growing in Asia and in Europe, where, of course, we have been allocating most of our capacity increase, and that is a sign of our main strategy of connecting Europe and Asia via the short northern route remaining intact and strong going forward. When we look at the operating costs, I also already covered the cost increase of close to 9% and the breakdown of that also in terms of the depreciations and fuel. What is also worthwhile to note is that during the quarter, we changed our reporting structure a bit, moving toward a more transparent cost structure and introducing a new cost category, namely passenger and handling services, which is the third biggest cost category for us.
This category is basically driven by the number of passengers, also the volume of the cargo, and the number of routes. Thereby, it is growing a little bit more than the number of passengers percentage-wise than the PAX growing percentage-wise, something like 4.3%. When we look at the cost breakdown, otherwise probably in terms of delta, what catches the eye is the aircraft materials and overhaul. There we will need to keep three things in mind. One is the seasonality, the timing of things. The other one is simply the cost escalations of our vendors. The third one is that we are making material provisions, and in doing those provisions, we are doing the calculations using the USD rate. Pound rate, exactly.
During this quarter, it did not develop to our favor. That impacted things a bit negatively. Moving on, when we look at our transformation, we did a number of things for our customers during the quarter. We introduced new menus to our flights, also new Marimekko textiles, amenity kits for the business class, continued with our Wi-Fi installments now have started also the refurbishing of our ATR fleet, the 12 ATRs that we are having. We are constantly focusing on sustainability. During the quarter, we launched the so-called Push for Change initiatives, which also enable our customers to do carbon offsetting of their flights. The reception of this service has been positive from the customer side. It is still early days, we of course need to continue.
We are also introducing new partners to this program, basically enabling our customers to have even more options going forward to offset their carbon emissions. In terms of digitalization, some new launches, a new own vacation app in our Suntours part of the business. We are proceeding with our finnair.com renewal, the results of that are encouraging. The digital sales is increasing, clearly, and that also we have some encouraging results in terms of increased ancillary sales stemming from the new finnair.com launch. Altogether, 2.5 million customers are using our digital channels on monthly basis at this point of time. Also, the recruitments are continuing. We increased the number of our employees with 170 during this quarter. Going forward, it is about sustainable, profitable growth. The sustainability issues I largely covered already.
When it comes to profitability, we will use all levers of profitability going forward. It will be about the income mix, increasing the proportion of ancillary income out of our total revenue base. Also focusing on unit revenue going forward. In terms of costs, it will be about continuous improvement of productivity with the measures that I already covered. Of course, capital efficiency is always on the agenda, optimizing our balance sheet structure going forward making most efficient use of our capital, for example, in terms of aircraft utilization. In terms of growth, we are introducing new routes. Next winter, we will be opening the Sapporo routes in Japan, which will be our fifth destination in Japan, making us the biggest European airline between Europe and Japan in terms of destinations, in terms of frequencies.
This summer, we are opening the double daily connection to Hong Kong. In Osaka, we have recently opened three night shifts on top of the one daily that we have, bringing our Osaka frequency to 10 frequencies per week. We are also opening the Guangzhou route, an all year round route. It has been for summer until now, that we will be flying with two frequencies next year. There are things also happening in North America as well as in Europe.
In terms of strengthening the team, we last week announced the appointment of two key members to our executive leadership team. Ole Orvér as the Chief Commercial Officer. He has an extensive background in international aviation, 30 years of experience in aviation, in many airlines.
Originally from SAS, but during the past decade, especially from LOT, Etihad, Air Berlin, where he participated in Air Berlin rescue operation at the later stages of the life of the company. He has been also with Qatar earlier. Having the background, especially in strategy, network and fleet management, but of course, having significant exposure to all aspects of commercial side of the business. Nicklas Ilebrand is joining the team as the head of strategy, having previous background in McKinsey, in financial industry in Nordea, and also some board experience in a couple of companies. I think that as stated, the Q1 developed pretty much according to our expectations, and the sales outlook for Q2, Q3 is according to our expectations as well, and thereby we are reiterating our guidance as stated.
I think that that was what I was going to say. Kasper, do we take questions right now, or do we move directly to Pekka?
We will continue with Pekka.
Okay.
Thank you, Topi. Good day to everyone. I think Topi very much and thoroughly explained the results, but a couple of highlights from financial point of view also. In this slide, maybe interesting is to look at the breakdown of passenger revenue on the left side. Capacity growth contributed much to our passenger revenue. However, the fact, like Topi explained, our load factor declined somewhat, so those both included we ended up to EUR 27 million increase in revenue. No major changes in Forex, no major changes in yield. The other revenue lines, like Topi also highlighted, we were happy to deliver EUR 7 million increase in cargo, which was different from the market in general, partly explained by the fact that we had a ramp-up period last year. All in all, our cargo operations are in very good shape. Moving on, next page. The cost side.
Here is the bridge from 2018 Q1 to this year's Q1. Total revenue grew 32 million EUR. All other cost lines except fuel developed pretty much as planned and anticipated, so no major need to comment on those. Looking at the fuel, the cost grew 18 million EUR. In the next page, you can see that volume generates 14 million EUR of that cost. Price including hedges were negative all in all for this quarter. Maybe to highlight here on the right-hand side, our hedges, as I think many of you remember, we have constantly followed and do constantly follow our hedging policy that is hedge forward 24 months. Currently for H1, our hedging ratio is 76%, and H2, 69%.
I think everyone has been following jet fuel prices, which has been on the rise more or less since January, so we're happy about have this kind of a hedging policy right now. Moving on to unit revenues. Topi already explained our total cost, but our unit revenue development over the last first quarter to this first quarter decreased by 4.9%, and at constant currencies, the decrease was 5.3%. Looking at unit cost including fuel, including everything, our CASK decreased 0.4%, and at constant currencies including fuel, that decline was 2.8%. Moving on to balance sheet. Here I want to highlight that this is the first time when we report our figures with IFRS 16, and as stated in the restated figures which we disclosed for a month ago, our total balance sheet is roughly one billion EUR bigger than it was earlier.
That is coming from the fact that we now report the leases as assets and also as interest-bearing debt. Looking at the balance sheet, which is 4.1 billion EUR, majority on the asset side is fleet, 2.2 billion EUR, and this quarter we have added one A350 into our fleet. Looking at the Liability side, our equity ratio is now 22%, pre IFRS 16, that was 35%. Due to the fact that we have a bigger balance sheet now, the equity ratio has gone down. Gearing, on the other hand, is pretty much in line with the figure which we have previously disclosed, that is adjusted net gearing, which includes the lease liabilities. Our cash flow investment for this year are mainly to fleet related and approximately 440 million EUR, and that includes the advanced payments.
Looking at and then talking about cash, and looking at cash flow in the next slide. We can here see that we had nice EBITDA development, and also working capital was developing very positively, and that is reflecting partly to the fact that we have received advance payments of tickets, and that indicates also or confirms what Topi was mentioning in his part when he spoke about the future Q2 and Q3. Investment, like I said earlier, we have paid for one A350 during first quarter. Looking at on the right-hand side, all in all, our cash funds, they are pretty much unchanged, roughly 1.1 billion EUR at the end of the quarter. With this, folks, I think I want to thank you and open for questions.
Yeah. Thank you, Pekka and Topi. We have now time for questions as Pekka stated. Just a reminder, we have also Christine Rovelli here to take them as well.
Thank you, sir. If you would like to ask a question, please press star one on your telephone keypad. Please ensure your mute function is turned off to allow your signal to reach our equipment. To ask a question on the web, simply type your question into the bottom right-hand corner on your screen. To get a star one to ask a telephone question, we'll pause for just a moment to allow everyone opportunity to signal. As a reminder that a star one to ask a telephone question. There appears to be no telephone questions over the phone at this time. As a final reminder, it's star one to ask a question.
Yes. This one.
We now have a question over the telephone from Andrew Lobbenberg from HSBC. Please go ahead. Your line is open.
Oh, hi there. Thanks Topi for the introduction and briefing on your plans. Can you just explain a little bit more. You talked about the tough competitive pressure in Q1 in terms of capacity, specifically on China and short-haul Europe, but who specifically was adding capacity into your market specifically? I get that we've got growth on a macro basis. Who's putting capacity into your markets?
Yeah. Thank you for the question. The line was a little bit interrupted, so in order for me to really grasp the essence of the question, could you please repeat the question? I'm not sure whether I fully got it.
Who added capacity in markets in Europe and China that hurt you in Q1?
Who added? Okay. Thank you for that. Thank you for the clarification. When we compare year-on-year, then of course the capacity increases of Norwegian are still very visible in European short-haul on routes relevant to us. That is one thing to take into consideration. When we consider what will happen next, then of course, we will need to take into consideration what Norwegian has been already communicating about their profitability focus going forward. When we look at the Chinese market, then the picture is more fragmented in a sense that we, of course, have the European competition, we have Lufthansa, KLM, and so forth, but especially the Chinese carriers are increasing capacity and introducing new routes connecting China and Europe. That basically goes for all Chinese carriers, especially Air China, China Eastern, and then China Southern
The routes into other points in Western Europe, not into the Nordics, right?
Correct. That is our definition of the competition. Given that our strategy is connecting Asia and Europe, we are calculating the full market and the capacity in routes connecting Asia and full Western Europe.
Yeah, sure. Fair enough. Can I ask also just about the domestic situation in Finland? I think you had an election that led to an uncertain situation around coalition-building, or I'm not precisely sure. How is the political situation, how does that impact business confidence, consumer confidence, and indeed any other way that it might play out on you, if we get any new aviation taxes or anything like that?
Yes. Well, I think that the outcome of the election that took place just recently was effectively a three-way tie between the populist party, the Social Democratic Party, and the conservative party. When we do the math for potential government coalitions, keeping in mind that Finland has a long-standing tradition for majority governments, it is clear that some major compromises will need to be made between various parties, and the government formation process is not likely to be entirely straightforward. From government coalition perspective, it seems unlikely that the populist party will end up in the government, though the most likely scenario is that the core of the government will be formed by the Social Democrats and the Conservatives. It will be supplemented with a couple of additional smaller parties.
If we look at the tradition of Social Democrats and Conservatives and what is their sort of governing track record from a business perspective, I think that that record as such is relatively good. I think that from a business perspective on the overall, also from the Finnair perspective, we are basically in wait-and-see mode. Currently the situation is neutral, the way we see it. We wouldn't be expecting a significant change on government stances related to business.
Okay, great. Presumably in terms of the debate around potential privatization, that doesn't look very likely given a sort of left-right coalition. That doesn't sound like it's likely to be on the agenda, does it?
Sorry, once again, I missed a part. What does not seem likely?
Further sell-down of the government stake in you.
Further sell down. Okay. Yeah, sorry. Yeah, I think that for the time being, you will need to remember that in order for the government to sell down below 50% of its stake in Finnair, that decision would need to be taken in the parliament. It would be a parliamentary vote. I see it as unlikely that the government would be decreasing below 50% at this point in time.
Yeah. That sounded like what you were saying. Look, thank you very much. Sorry for the sound quality. I am out and about, as you will gather. Thanks very much. Look forward to meeting you.
Thank you. Look forward to meeting you as well.
As a way to ask a telephone-
There is a question in the chat. I don't know if everyone can read it, but there is a request for more details about ATR refurbishment plan timelines and suppliers. I think we have disclosed this in the release last November. We expect the refurbishment to be completed within a year from now. That investment is included in our investment guidance, which we have given.
As a way to ask a telephone question, please signal by pressing star one. We will now take our next question from Akash Dua from HSBC. Please go ahead.
Yeah. Hi. Sorry, joined late, I think Missed more of part and then mainly because of time confusion. Anyway, just wanted a bit of clarification. One thing which I'm probably not very clear on is about the softness in Asia. Basically, I wanted to understand a couple of things on this part. One is that, despite having the softness in Asia, you're still saying that the most of the capacity growth, which will be sort of focused on Asia. Why is that where you are planning to focus on Asia, and how do you see the softness which you have reported and you're seeing going forward? I mean, you reported softer demand, you reported softer yield. Yet, you are increasing your presence in Asia. How the overall situation looks like in Asia? That is something which I want to understand.
Obviously, related to the network, I also wanted to understand on the North Atlantic. You reported about 10% or nine% RASK improvement in the North Atlantic. In the overall scheme of things, I mean, how do you say that? Do you see that strength continue or was that a one-off? Just want to understand a bit on that part, please.
Okay. Thank you. Thank you very much. I will repeat some of my comments that I made earlier on potentially substantiate a bit.
Sure.
First of all, when we look at Q1, it is important to note that our Japanese as well as North American routes performed well, that is also visible in the RASK development of North America. When we look at our forward-looking sales for Q2 and Q3, that situation seems to continue. That was Japan and North America. In China, what we experienced was a slow start of the year, a number of factors impacted that. One was the overall macroeconomic uncertainty, for example, the U.S.-China trade talks and the impact on consumer behavior in China. The other one was simply driven by calendar. The Chinese New Year was very early on this year, early February, and the peak-up after the Chinese New Year was slower this time around than we have been seeing in the past.
The sort of National Congress of the Communist Party of China that took place from end February to mid-March, was a little bit longer than normally this year. The longer version of the convention takes place every five years, that impacted the government-related travel, especially on routes like Beijing. Not only the government and the civil servant travel, but also the travel of government-owned companies. That was one. Thirdly, about a year ago, we made a decision to focus more on individual travel, given the higher yields of individual travelers, we tested that on some routes, on some cities. That hypothesis did not completely hold, especially because we saw restrictions in Chinese individual travelers getting visas and passports in the EU. Therefore, we are rebalancing our channel focus going forward, also focusing more on travel agencies and group travel going forward.
Lately, during the past couple of weeks, we have been seeing some pick up in China, which seems to go hand in hand with the latest macro news coming from China, where the overall headline is that the stimulus seems to be working. When we look at our forward-looking sales for Q2 and Q3, we see China picking up. We see Japan being strong. For example, the new emperor coming into power and the additional vacation days for Japanese customers in May are visible. In European traffic, the situation with Norwegian, the MAX 8 grounding is visible. This makes us comfortable with our capacity estimations for the full year, including our capacity allocations to Asia.
Right. Perfect. In terms of Asia, you said that most of the focus would be on Asia. Is that broadly across Asia or are you looking more expanding into China or Japan, or is there any specific regions where we can expect some bit of capacity growth, or is it across Asia?
Yeah. It is across Asia, and I think that when we talk about Asia, we will need to differentiate between the megacities of Asia, the first-tier cities, the Tokyos, Beijings, Shanghais, Hong Kongs of the world. There, the capacity allocation is basically driven by market access and slot availability. The secondary cities, especially in China, to some extent in Japan, they are a little bit different market, and that we will be looking at on a case-by-case basis going forward.
Right. The other thing I wanted to understand, to be honest, I tried to find out by bite my fingers, but I didn't get exactly when you say the markets out of your bases are getting more competitive, though it is, Helsinki to Europe, Helsinki to China. I'm not too sure if I understood that correctly. If you could please give us more color on who you think is growing out of your bases, Helsinki to Europe and Helsinki to China, which carriers are you talking about?
When we talk about increased competition, we are not talking increased competition from China or Japan to Helsinki alone. The way we define the market is between Asia and Europe, our main strategy being connecting Asia and Europe via the short northern route. What we especially see is that Chinese carriers, all the three big ones, but also some of the smaller ones, are introducing new routes from China to various places in Western Europe, especially, and that is increasing the competition.
Right. Okay. Understood. Sorry, taking a bit of more time. If you could please talk a little more about the ancillary going forward. How do you expect the ancillary revenue to behave? I understand you are doing a lot on that, but how should we expect ancillaries going ahead?
We have ambitions around ancillary, our earlier targets have not been fully met. We will need to ramp up our efforts. When we now look at Q1, our ancillary business and ancillary income per customer basically stayed intact if we take into consideration that we let go of the online booking fee. That is impacting numbers a bit. Basically, the ancillary is developing currently hand in hand with the PAX numbers. finnair.com introduction is a key lever for us to improve the ancillary sales. When we look at our ancillary sales today, it is very much digital sales. 60% of it is digital sales. Our ancillary business is clearly better in those markets where the share of direct channel in terms of sales also for the tickets is higher.
Basically, the method of selling ancillary via the direct channel in digital sales is very different from selling through the indirect channel. When our traffic has been increasing from markets like China and Japan, where the indirect channel is having a bigger role, then that is impacting our ancillary sales. First and foremost, we will focus on digital sales and further penetrate the increasing ancillary product with the existing ancillary products because our product coverage in terms of ancillary is in a good place. Going forward, we will be putting more focus on how to do ancillary sales in the indirect channels, for example, directing the customers to landing pages and thereby accessing our digital assets to buy the ancillaries.
Right. Understood. I have a few questions regarding basically the simple accounting, I can connect offline if that's fine.
That's fine.
Sure. Thank you.
Thank you. Topi, should we take the answers from the board? The question is that, is there any signs that the market would start to price the higher fuel price, especially the carriers with lower fuel price hedge levels?
Pekka, perhaps you can substantiate on this one. For the time being, we see this behavior to a very limited extent. In Japan, there is a market mechanism to factor in the higher fuel price, and that will certainly be used for our Japanese traffic. Other than that, I think that this is something that we will need to live and learn.
About the hedging policies, I think those companies who have decided to use, say, not to hedge, they have their own, say, reasons for that. I think that does not directly impact on the ticket prices.
The question about travel services and the declining revenues for two quarters now. Here, I think that what we will need to keep in mind is that last summer in Finland and throughout the Nordics was record hot. All of the travel agents basically booked the capacity for this summer, the next summer, prior to last summer. Therefore, for the time being, there is a little bit of capacity on the market. Clearly, the customers are still having the sort of last good summer in their minds, and they are basically considering whether they would be booking their travel or not. There's a tendency of customers booking their travel and vacations closer to the departure. That's one thing.
The good news is that while the market is subdued and while there is a lot of capacity on the market now when we look at the sales during the last couple of weeks, it has been picking up for the summer. The jury is still a little bit out there that what kind of summer will this be in terms of travel services.
I think that the fourth question is that can you give an update on how Norra is performing since its change of ownership? Norra has been now 60% owned by the Danish Air Transport for a while, and then we are owning 40%. On the overall, when we look at that model, that AOC, it is serving a purpose both for DAT as well as for Finnair as part of our network.
As an operating platform for regional flights, this is something that we see as feasible. From our perspective, we are committed to continue with the structure, and to our understanding, that is also the stance of DAT.
We will now take our next question from Victoria Moores from Air Transport World. Please go ahead.
Good morning. Excuse me. Yeah, that was my question on Norra. Are you able to give a little bit more of an update as to how that's performing financially? Then I also have a follow-on question on fleet. If I could cover that as well.
Yeah. When it comes to financials of Norra, those questions would need to be directed to Norra itself as a company. We cannot comment on their behalf.
Okay. Thank you. Previously on other financial calls, we've talked about the potential for your narrow body replacements. There was sort of talk about it being a little way off yet, but that you were looking to potentially enter commercial discussions, start those off around about the beginning of this year. I was wondering if you had an update on that.
Yeah. We are looking into the narrow body replacement. We are doing our analysis. We will do careful preparations on this one, and then we will come back to it in due course. At this point of time, I have nothing more to say and no specific timeline to give.
Okay. Thank you. My final question is, late on last year, there was the U.K. competition investigation into your partnership with American Airlines and IAG. I was wondering if you'd heard any more on that and when you're expecting an outcome?
I think the authorities have their process ongoing, and we have nothing to tell about that. We don't know the timeline when there will be the resolution. From our point, we have provided all the necessary information required and nothing to tell about that.
Okay. Thank you.
There are no further questions over the telephone. I'd like to hand the conference back to the host for any additional or closing remarks.
I guess we're okay from our side. If there's no further questions, I would like to thank you for participating in this call and wish you a happy and a good day.
Thank you.
Talk to you next time. Thank you. Bye-bye.
Bye-bye.
This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.