Finnair 4Q loss widens, seeks Nordic joint venture

HELSINKI (AP) — Finnair PLC on Thursday reported that losses deepened in the fourth quarter as it struggled against stiff competition and said it was discussing a joint venture in the Nordic region with several partners.

The Finnish airline's loss of euro32.6 million ($43.27 million) compared with a euro6 million shortfall a year earlier. Net revenue in the period grew 12 percent to euro577.4 million, from euro517 million in 2010.

CEO Mika Vehvilainen said Finnair had begun talks with about a half-dozen airlines and hoped to have the joint venture operational in 2013.

"We started months ago and were positively surprised by how many airlines were interested in the idea," Vehvilainen told The Associated Press. "We have quite an ambitious target and are aiming to have a framework agreement by summer and to have the new company in operation during the first half of 2013."

Vehvilainen said the Finnish national carrier needs to improve competitiveness on European routes.

"We really compete on two fronts at the same time — in long-haul traffic against large European airlines flying regular routes, where our competitiveness is fairly good, and then in the regional series ... where our price competitiveness is very poor," Vehvilainen said. "Our European traffic is causing major losses now and we have to find a way to break that spiral."

The airline saw 12 percent revenue growth in the full year but profits continued to tumble as it was hit by high oil prices and increased competition from budget airlines. It warned that continuing uncertainty in the world economy, seasonal fluctuations and high fuel costs would hurt the company during the first half of the year, expecting it to be in the red.

Finnair's share price closed down 4 percent at euro2.53 ($3.36) on the Helsinki Stock Exchange.

The company predicted 5 percent growth in passenger traffic in 2012, mainly in Asia and said it expects to reach euro80 million in savings by year-end of a total goal of euro140 million.

The airline flies to 65 destinations in 30 countries and is based in Helsinki which it uses as a gateway for Asian destinations that saw huge growth in demand until the March tsunami in Japan followed by a weakening of the global economy during the second half of 2011.

Vehvilainen said Finnair will continue to focus on Asian routes with the aim of grabbing passengers from the planned joint venture.

"This is our aim. In a way once we solve the problem of local (European) traffic ... we will be able to be more efficient with the feeder traffic for Asia," Vehvilainen said in a telephone interview.

Last year, Finnair joined forces with Europe's largest regional airline, Flybe, to form a joint venture in northern Europe to further expand into Sweden, Denmark, Estonia and Latvia.

Vehvilainen said the move was an important step in getting a "firmer foothold" in Europe.

"We have started on that road already with FlyBe Nordic. The new (planned) joint venture is really a continuation of what we have already done," he said.

Finnair is 56 percent government-owned and employs some 7,500 people. Last year, more than 8 million passengers flew the airline, up from 7.1 million a year earlier.

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Online:

http://www.finnair.com