Finnair - Outlook appears relatively stable

FY’24 EBIT likely to be roughly EUR 150m

Finnair’s Q3 traffic data was quite close to what we expected as capacity grew slightly more than we estimated while load factors were still on the soft side. We expect unit yield development to have been a bit more stable as we estimate Q3 RASK down by less than 300bps y/y (so that ticket prices were on average down by roughly 150bps). We estimate Q3 adj. EBIT at EUR 85m, down by EUR 10m y/y due to the softness in ticket prices and load factors. In our view Finnair’s FY’25 EBIT has potential to gain some EUR 20-30m y/y assuming the operating environment stays relatively stable. Jet fuel prices have been trending down for the past year, and although there’s now a risk of unfavorable price turn in our view Finnair could again start to see its EBIT gain y/y in Q4. 

In our view EBIT could again begin to gain y/y in Q4

Jet fuel spot prices are still down by double digits in the past three months despite the recent brief spike due to the flare-up in the Middle East. Current fuel prices are around the same they were back in the summer of 2023, when the aviation industry was in a very favorable spot as fuel prices had just declined while unit yields were still improving. Finnair should again be well-positioned for earnings gains in the current environment as long as ticket prices remain rather stable and load factors begin to increase. We expect Q4 load factors to improve y/y, while ticket prices may still decline a bit, so that RASK would then gain 100bps y/y.

Earnings gains are widely expected for next year

Airline valuations have gained whereas earnings estimates have remained basically unchanged. The higher multiples imply market expectations of improving earnings going towards next year, for which we see very realistic potential assuming fuel prices will stay around their current levels. In such a scenario Finnair especially should have room to improve due to its current relatively low load factors. Finnair is now valued at around 9x EV/EBIT on our FY’24 estimates, which is only slightly above peer multiples. The 8x EV/EBIT on our FY’25 estimates is similarly a bit higher than peers’, but the valuation isn’t too high particularly if key factors develop favorably in Q4. We retain our EUR 2.5 TP and HOLD rating.