Finnair exanding Far East faster than planned

By Bjorn Fehrm

May 26, 2016, ©. Leeham Co: Finnair could tell the participants on its Capital Markets Day yesterday that its Asia expansion plans are going better than planned. Being the Finnish national flag carrier, Finnair has had its slew of legacy airline problems, fighting the up-and-coming LCCs on its European network.

Figure 1. Finnair’s Airbus A350-900 taking off from Toulouse. Source: Airbus

After a restructuring period 2008 to 2012 to adjust costs, things have turned for the better. The company announced a revised strategic plan 2014, which would build on the strategic position of its hub, the Helsinki Vaanta airport, for traffic to the Far East.

Finnair CEO, Pekka Vauramo, could yesterday announce that this strategy is working better than planned.

The gateway to Far East
The strategy which was launched 2014, built on the fact that the shortest way to China, Korea, Japan and several other Asian countries for Northern European citizens goes via Helsinki, Figure 2.

Figure 2. Finnair’s strategic advantage versus competing carriers. Source: Finnair. Click for better view.

The plan was to double the 2010 traffic to Far East until 2020. This is now expanding faster than predicted and is planned to be achieved by 2018, Figure 3.

Figure 3. Finnair’s traffic growth to Far East. Source: Finnair

Part of the plan has been an aggressive upgrade of the long haul fleet with new more economical and comfortable aircraft. Finnair has historically used Airbus A340-300 for these flights but is now rapidly exchanging these for new Airbus A350-900.

The company was the first European airline to induct the A350 and has to date taken delivery of 4 aircraft out of a total order of 19, Figure 4.

Fleet

Figure 4. Finnair’s fleet and fleet age. Source: Finnair. Click for better view.

A350 with new cabins
The strategy with new aircraft offering an improved cabin experience combined with an improved service is working according to Finnair. The passenger experience surveys shows that the lie-flat seats in business and the roomy economy section scores high with those that have flown their A350s, Figure 5.

Figure 5. Passengers ratings of Finnair’s fleet. Source: Finnair

Keeping A330 in fleet gives extra capacity
Finnair has decided to cater for the extra growth in their Far East business by keeping the presently operated Airbus A330 longer than planned. The A330 is used on the European and North American network, the carrier can thereby free long haul capacity so that the A350 can be focused on the profitable penetration of the Far East market, Figure 6.

Figure 6. Long haul fleet capacity expansion by keeping A330 longer than planned. Source: Finnair

Long haul feeds short haul
As for ANA, the increased long haul traffic will feed Finnair’s short haul network, Figure 7.

Longhaul feeds shorthaul_

Figure 7. The long haul network feeds the Finnair short haul expansion. Source: Finnair

The result is that the mix of short haul aircraft going forward gets shifted towards larger A320 models. The A321 is the seat capacity leader from 2016 onward. For long haul the A350 will be the dominant seat capacity supplier from next year, Figure 8.

Fleet capacity_

Figure 8. Seat capacity for long haul and short haul. Source: Finnair

Finnair’s results over the years
The Capital Markets day was held in a running fiscal year. Hence no firm forecasts could be given for the results for the year but the Finnair team exuded confidence. The historical results for Finnair is shown in Figure 9.

Results over the years

Figure 9. Finnair’s results over the years. Source: Wikipedia

19 Comments on “Finnair exanding Far East faster than planned

  1. Bjorn, nice article. How about doing one on Southwest Airlines in the US. The most successful airline on this planet.

    • Low oil prices are not helping Finnair any more than the others. Actually vice versa is true since they still have (now) expensive fuel hedging in place.

  2. Interesting. The disadvantage of hubbing via Dubai was a good point (hubs really are a lousy model, in terms of distance/fuel cost and passenger time/experience).

    The last figure shows a steady decline in employee numbers from 2008 onward, yet passengers and # of aircraft increase. Can you expand on this a bit… are they converting jobs into contract positions, using more automation, or was the airline simply carrying lots of excess employees?

    • Hi Jeff,

      the flag carriers were set up during regulated air travel like in the US. Hence they had full departments for everything and very good terms for their personnel. That has slowly changed in the face of LCC competition, its been a hard trip for all the legacy carriers and Finnair was no different. They have used all the methods you listed.

    • Arguably Finnair is still using the hub model to cater to the Far East destinations, but for those, the geographic location of Helsinki is much more effective than anywhere in the Middle East. For connecting India, for example, to southern Europe, the reverse will be true.

      • All the widebodys for sale now can fly direct from Europe to far east. Why should a stop over in Helsinki , of all places, be necessary?
        Why Hamburg doesnt have direct service to Tokyo, is because of Lufthansa concentration in Frankfurt and Munich and neglect of the other major german cities. Published one stop flight times only give a few minutes advantage to Helsinki over Amsterdam and it would be in Lufthansas interest in the future to look at Hamburg, Berlin, Dusseldorf for long range service to North America and Far east.

        • Certainly that could change the competitive situation. But today Finnair has an advantage and they’re building a business on it.

    • It would have been interesting if they had tread water with the plane instead of killing it. It’s been discussed to death but it would have been fascinating to see how a 757MAX would have fared in the market.

      • Prices would have to be in the neighbourhood of mass produced A321s. Undoable, that’s why it was ended.

      • #757: We’ve previously reported that a major reason Boeing discontinued the 757 was the production method, in 2001, was old and outdated. It was not automated and it cost more to build the airplane than they could sell it for.

        • “Cost more to produce than they could sell it for”-
          Aircraft production profitability is especially sensitive to production rate. Up till 9/11 production rate was about 45 per year but fell off quickly and Boeing had to cut costs and this was a convenient project to end quickly.
          747-8 is in exactly this situation now so cant be long for the chop, and of course production end will mean all deferred production costs will have to written off. The money is long spent but will affect the amount of share buybacks when it does
          There could be over $5 bill of 747 costs still to come.
          So far Boeing is only writing off 747 costs that are below their ‘normal production rate’

  3. I just flew a couple Delta 767 segments, on in a 26 year old frame, and the other was 28 1/2 years old. Both flights were quite fine, cabins updated, and the ETOPs flight had winglets.
    This and the 757 seem like quite robust airframes. I realize that D checks get expensive, but is there any reason beyond maintenance cost (and fuel cost if oil rebounds), that for specialized missions like JFK-ARN, or niche operators like La Compagnie that these craft can’t fly for another 15 years (later build craft in particular)?

    • The KC-135 are rather old today. The reason is rare use.

      Aircraft age is measured by flying hours and cycles and not years.

      • If fuel costs stays low they are fine.

        Well supported with FedEx and AF (though AF version differs considerably than the current 300F)

        767 was my favorite wide body. I got to fly in most of them of that day (including an A300). Nice solid, I liked it a lot

        Of course that was before max seat cramming.

        DC10 the least, its flopped on takeoff, scary

        L1011 oddest with the aisle slant at cruise. Also very solid.

        • Regarding the Lockheed L1011, the best of the early widebodys in many ways, they dont build them like this anymore.

          “On October 18, 1985, a Jordanian Airlines L-1011 experienced an inflight fire at 24,000 feet while on approach to Singapore. The fire burned through the rear pressure bulkhead, causing explosive depressurization of the cabin. The air rushing out of the cabin extinguished the fire, saving the aircraft.”

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