Finnair Q3 net profit falls to $2.6 million

AP News
Posted: Oct 27, 2011 11:51 AM
Finnair Q3 net profit falls to $2.6 million

Finnair PLC on Thursday reported a plunge in third-quarter net profit to euro1.9 million ($2.6 million) despite a surge in sales as the airline was unable to meet savings targets.

Turnover in July through September grew to euro607 million ($845.4 million) from euro551 million a year earlier, the Finnish national carrier said. Net profit in the same period last year was euro32 million.

Finnair, which has been struggling with declining demand, competition from budget airlines and overcapacity in the European airline sector, said the fourth quarter would not be profitable.

CEO Mika Vehvilainen described the last period as "a positive result in the seasonally strong third quarter," but cautioned that Finnair would make further cuts, hinting at more layoffs, as it had only achieved "a smallish part," of a target to reduce annual costs by euro140 million ($195 million).

Finnair said that most of the changes caused by the cuts would take place next year and that the overall target "is expected to be achieved by the end of 2013."

Vehvilainen said that changes were needed "also because of the current uncertainty in the global economy." He said company managers would begin discussions "with employee representatives and analyze various alternative ways of carrying out the structural changes required to achieve these savings."

Vehvilainen cautioned that the airline would be in the red this year despite an expected 10 percent growth in revenue.

"We cannot be satisfied with the third quarter results, especially because ... the last quarter of the year will not be profitable," Vehvilainen said. "We have already begun taking measures in areas where it is possible to make savings quickly."

Earlier this year, Finnair announced more than 600 layoffs and the transfer of dozens of other jobs as it outsourced services.

Last year, Finnair cut hundreds of jobs and doubled an annual savings program to euro200 million with most cuts aimed at personnel costs.

Finnair stock closed up 1 percent at euro2.29 ($3.19) on the Helsinki Stock Exchange.

Finnair, which is 56 percent government-owned, flies to about 50 destinations with a fleet of 65 aircraft. It employs 7,500 people _ down from 7,600 a year earlier.