As long as the flight suspensions don't last too long, Finnair thinks the impact of the coronavirus outbreak should be fairly limited. The problem is at the moment no one knows exactly how quickly, or how easily, it will spread across the rest of Asia and possibly the world.
Finnair CEO Topi Manner expects the coronavirus outbreak to have a “relatively limited” impact on the airline’s financials and believes the aviation market will be pretty quick to recover once the situation is under control.
Like other airlines, Finnair canceled flights to the country last week. For the Beijing Capital and Shanghai routes, the stoppage is until end of February and for Guangzhou, Beijing Daxing and Nanjing routes, it is the end of March. In total this will affect around 200 flights.
Manner said the reason he expects the impact to be relativity small is that the period after Chinese New Year is typically the slowest of the year and the “weakest in terms of profitability.”
“The way the situation will unfold from here and develop from here remains to be seen. The visibility is low, and then it can swing basically either way. And that is something that we are taking into consideration in our guidance for this year,” Manner told analysts on an earnings call on Friday.
“What is clear, however, is that eventually, this will pass. And if we look at the experiences from SARS and similar viruses in the past. I think that the conclusion is clear at the conclusion is that the situation is of temporary nature. And when the recovery starts, then the recovery will also be relatively fast in terms of global aviation.”
China is Finnair’s third largest market after Finland and Japan with around 9 percent of capacity.
“[We] want to keep our slots in China, and we want to maintain our long-term presence in China. If this situation prolongs, and that we really do not know at this point in time. I don’t think that, that assessment can be made. As of now, we will make some smaller tweaks, tactical adjustments, if you will, to our summer season schedule with individual flight frequencies and so forth,” he said.
One response is that the airline has delayed delivery of a new Airbus A350 due to arrive in April. It has now been pushed back by a couple of months.
The coronavirus outbreak originated in the city of Wuhan in China and has spread throughout the country. Last week the World Health Organization declared a a global emergency. So far the virus has killed more than 630 people and infected over 31,400.
Finnair endured a difficult 2019 with pre-tax profit falling 27 percent to $102 million (€93 million) for the twelve months to the end of December. Revenue increased 9 percent to $3.4 billion (€3.1 billion). The fall in profitability was down to rising costs across the business with expenses relating to aircraft materials and overhaul up 24 percent and fuel up 18 percent.
“Due to the uncertain environment, 2019 was a volatile year for us, but it ended with a strong quarter as the market situation improved,” Manner said.
Finnair is one of Europe’s remaining state-owned airlines with the Finnish Prime Minister’s Office having a 55.8 percent shareholding. It has carved out a niche for itself, operating between Europe and Asia, thanks to its advantageous geographical position. The carrier is part of a transatlantic joint venture with Oneworld alliance partners American Airlines, British Airways and Iberia.
At the end of 2019, Finnair had a fleet comprising off 59 aircraft — 22 wide-body and 37 narrow-body jets.
Photo credit: A Finnair A350 at Helsinki airport. The airline, like many others, has canceled flights to China. Valentin Hintikka / Flickr