Good afternoon, everybody, and welcome to Finnair's Q3 pre-silent call. My name is Sophie Jolly, and I am new here at Finnair. Started the 1st of September as IR director. I am really looking forward now to continue Erkka's and Emilia's good work. Today, Pia, our CFO, is here to talk about a little bit what has been happening, giving you a slight update. Without any further talks from me, Pia, I hand over to you.
Thank you, Sophie, and good afternoon or good morning, depending on where you are, ladies and gentlemen. Let me start with a few remarks. I will talk briefly about market, obviously about fuel situation and hedging, couple of words about our fleet, and that probably rounds up my commentary. That will be rather brief, and after that, we will open up for questions and answers. First on the market situation. What we have seen in July and August, and you have also probably seen our traffic performance releases, really it has continued to show positive momentum. Our passenger volumes increased by 9.3% in July, by 2.3% in August year-on-year. Let us remember, last year there were still some extraordinary conditions. Maybe most importantly, that we still had industrial actions, during parts of July in 2025.
Anyway, if you would ask me what the market momentum is right now, when I use that word, I would really say that the market is still showing resilience despite this world that we are living in, despite everything that is going on. We still see the growth year-on-year. We still see a resilient situation. Obviously, Middle East merits a few comments. As you recall, our direct exposure is very limited. It is a low single-digit share of our capacity and passenger traffic that we used to have there. Right now, obviously we are not flying to Middle East area. But the situation still continues to impact the whole market. It impacts the industry through safety, through capacity, through passenger flows, and obviously as well through fuel markets.
Holistically, the impact is big, but the direct exposure in terms of flights is limited and that direct exposure as well, you will see now come through in that there is no flying to the Middle East. A little bit about load factors. Our load factor was high, 85% in July. It really, in July, it improved in all traffic areas operated by us. In August, the passenger load factor remained high. It was 80.3%, and it improved in the European and North American traffic. Unit revenue development has remained clearly positive. I am going to quote to you just the improvements or the delta. In July, RASK increased by 8.9%, and in August, RASK increased by 12.3%. What is supporting this? It is of course good load factors, but it is as well higher yields.
In the background we have continued the good work with optimizing our network capacity allocation and pricing to capture demand. Obviously there's a lot of differences or market flows out of Middle East, that we have seen some flow still to our Asian traffic here. Overall, a resilient market situation has continued. I also want to give a bit of credit and a shout-out to cargo. I think their performance has been really strong, and it has supported Finnair's performance as well, also as well through the Q3. Let's talk a little bit about fuel. It remains a really important point, especially in terms of the cost escalation. Most importantly from Finnair's perspective, we have not canceled flights because of fuel.
With this I mean fuel shortage, and I mean that when we first discussed the war in Iran and the situation early in the spring, of course there were then some fears of fuel shortages across the industry. Indeed, the jet fuel market has remained constrained, and this has impacted the prices that stay at a very elevated level. The jet fuel supply across Finnair's network is expected to still remain stable in Q4. It's supported by the continued close cooperation with our fuel suppliers. A few more detailed comments about more market view, where we see it right now on fuel. Supply in Southeast Asia and the U.S. remains relatively good. Europe is more constrained but still stable. Europe is partly supplied by overseas products from the U.S., Africa, and Southeast Asia.
Holistically, winter typically reduces jet fuel demand, which should support overall availability. As before, we really continue to monitor the market very closely, and we also work with our suppliers to secure reliable fuel availability for Finnair's operations. Let's discuss hedging a bit. At the end of the second quarter, Finnair had hedged 81% of its fuel consumption for Q3, 71% of its fuel consumption for Q4. Looking into next year, 58% for the fuel consumption in the first quarter of 2027. I'll still quote the second quarter of 2027, that's 40%. You can see that there was, let's say, a window during the summer when we actually saw lower prices and that was a good moment to increase some of the hedging.
However, holistically, if we look at now the market throughout Q3, the fuel market prices have been rising and been very elevated, and the opportunities to do hedging have not been that many. I think here, just as a reminder of Finnair's fuel hedging policy, we have a spread or a collar within which we can move with our hedging and clearly as you can see, those hedging ratios into next year are a bit lower now than what we have seen all through 2026. We will keep you posted, and in the next report, we will again quote the most recent hedging levels. It's really when we are looking ahead, the market conditions are currently looking very volatile. There's no immediate easing in sight, given the continued hostilities in the Middle East and the lack of visibility on clear diplomatic off-ramp to deescalate the current conflict.
We are constantly following the developments in the Middle East, and then we are planning to act accordingly. So obviously staying extremely on top of any opportunities for hedging also going forward. I would like to round up my comments, just very briefly, relating to our fleet. The development of our fleet has been a significant part of our strategy and you are well aware of the longer-term commitments that we have made. I just want to say things are moving according to plan. However, in the third quarter, there was no new capacity added really to our commercial fleet. But we have some additions coming in. The one I, of course, want to mention is the Airbus A350 that we are still getting towards the end of the year, even though commercial flying will start next year.
So we continue on the set strategic path when it comes to our fleet. And with that, Sophie, I would like to end my comments.
Thank you, Pia. I think we can jump to questions and so please, operator, if you can help us with that.
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.
Yes, good afternoon. It's Jaakko from SEB. Thanks for the presentation. Would like to ask on the situation with airBaltic and their Chapter 11 process. Have you seen airBaltic cutting their Finnish routes yet, or is there any of such activity visible?
Hi, Jaakko. Thanks for the question. Indeed, from at least the headlines that we all can follow, of course, they are now entering into this Chapter 11 and I couldn't comment yet on such competitor movement. But obviously what we have been reading in their statements is that they are cutting down their fleet, et cetera. So definitely something to follow.
Okay, good. Thanks. Then on the kind of market activity, what becomes to hiking ticket prices. Noticed that some of your low-cost carrier peers and competitors have not been hiking their prices based on their monthly reports. Are you seeing the markets being rational, what becomes the need to pay higher fuel cost to the ticket prices?
I could only refer to some broader statistics, Jaakko. When it comes to individual companies, that would be a bit difficult to comment on. But I think if we follow broader statistics also on European level, I think there it's still visible that the higher fuel prices have also resulted in higher ticket prices from where we can follow it. And where we can follow it is historic data. So I think this is still up to where there's actual data, the situation.
Okay. Thanks. Then on a big kind of a demand side of things, and perhaps looking toward 2027, are you seeing the underlying kind of a demand in the markets being enough? Is there enough demand, or is the demand strong enough in order to hike the prices in the magnitude you need to offset the rising fuel bill?
Mm. Jaakko, you are asking me a sort of a complex question because as you know, the market price is set so often. I cannot even say daily. It is like minute by minute. It is supply and demand, and it continues to be set by the market. But I can comment on some of the kind of broader dynamics behind that. I think when I use the word resilient for the market, I still want to say I think that is a very positive word, sort of given where the world is right now. The thing that I am obviously, that we are really following is as well, with higher interest rates, with maybe more inflation, how will the consumer feel this in their wallet? What will this mean for demand? I think, if we talk about this demand side, we have still seen it robust.
People are still planning to travel, still booking flight tickets. The demand side of the equation still seems to hold up at this point in time. Then we can, of course, debate kind of what the supply side is, and is there anyone who would sort of not be feeling the consequences of these higher fuel costs. I think, at least from a hedging position, Finnair has-- we are very well-positioned. I think we have a strong hedging position, as strong as you may kind of possibly imagine to have right now. This, of course, is something that can change day by day, but from where we stand today, I think we are it seems that the market is still resilient.
That is helpful. Thanks for the color, Pia. All from my side.
Thanks, Jaakko.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Well, if we don't have any more questions for this time, then I thank you, and everybody online, and hope to see you the 27th of October when we publish our Q3 results. Thank you very much. In due time, if there are anything or if you need to contact, please contact me at sophie.jolly@finnair.com. Thank you very much.