Finnair - Waiting for better times

Finnair - Waiting for better times Equity Research Read full report here → Finnair’s Q4 figures were ugly, as expected. As the pandemic situation prolongs, we expect slow recovery to start during the summer but better improvement is expected to start in late 2021. We keep our rating “HOLD” with TP of EUR 0.60.

Revenue declined by 87% y/y

Once again, Finnair reported ugly quarterly figures, as the coronavirus situation is not showing any signs of abating. Strict travel restrictions remained, and there was an overall lack of demand during Oct-Dec. Finnair’s Q4 revenue decreased by 87% y/y to EUR 102m (94m/101m Evli/cons.). Adj EBIT was EUR -163m (-172m/-167m Evli/cons.). Q4 ASK decreased by 89% and PLF was 29.2% (-49.8pp). No dividend is distributed for 2020.

Recovery expected to start during the summer

According to the company, the comparable operating loss in Q1 will be of a similar magnitude as in Q2-Q4’20. The company continues to fly with limited network during Q1 and estimates that the travel begins to recover from summer 2021 onwards as the vaccination coverage increases and countries start lifting travel restrictions. However, the visibility remains weak and therefore the company is not giving revenue guidance for 2021. The company expects that traffic will recover to 2019 levels in 2023 (measured in ASKs). We expect Finnair is well positioned once the recovery starts and the profitability should improve notably due to the permanent cost savings target of EUR 140m from the beginning of 2022 (compared to 2019).

“HOLD” with TP of EUR 0.60

The State of Finland and Finnair are preparing an unsecured hybrid loan of up to EUR 400m which is expected to be finalized during the first quarter of 2021. As the company still has available funding, we are not concerned even if the pandemic situation continues throughout the summer. We expect H1’21E to remain extremely weak but slightly better recovery is expected to start in Q3E. We expect 2021E revenue of EUR 1545m and adj. EBIT of EUR -312m. We highlight that there are still significant uncertainties with our estimates. We keep our rating “HOLD” with TP of EUR 0.60.

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