LONDON — Finnair is one of those airlines that pundits a decade ago predicted would not survive.
A medium-sized national carrier (it currently has a fleet of 18 wide-bodied Airbus A330/340/350s and 30 single-aisle A320 family aircraft), many thought that it would be caught between the millstones of giant airline groups such as IAG and Lufthansa on the one hand and the fast-expanding European low-cost carriers (LCCs) such as Ryanair, EasyJet and Wizz on the other.
The majors would take the long-haul business, and the LCCs, the short-haul European traffic.
The loss of a carrier like Finnair would be painful to aviation. One of those airlines that has traditionally gone quietly about its business, it has always had a hard row to hoe.
The Finnish capital Helsinki, on the northern extremities of Europe, is not the most obvious location for an airline hub. Finnair has tried to turn this negative into a positive by marketing itself since the 1980s as an ‘over-the-Pole’ long-haul specialist to North Asian destinations such as China, Japan and South Korea, a routing that cuts valuable hours compared to more conventional flightplans.
But, while Finnair has managed to avoid the fate of other medium-sized flag-carriers such as Sabena or the former Swissair, it has faced serious challenges in recent years. Like its neighbor Scandinavian Airlines, it has had to embark on a series of cost-cutting campaigns to keep its head above water.
Those initiatives, which included selling off a catering division and a stake in Norwegian Air Shuttle, have saved substantial sums, but as recently as 2014, when the major U.S. carriers were starting to drown in profits, Finnair recorded a net loss of $93 million.
Among the factors: a $22 million write-down in value after UK-based regional Flybe pulled out of a loss-making partnership with Finnair to provide short-haul services. Finnair had to temporarily take on the entire burden of the operation before offloading 60% of the shares to other Finnish companies. And it faced a weakening in the economies of some Asian nations to which it operated.
This is where Finnair’s modest size makes it vulnerable. Its Asian services are vital to its profits, but if Asian economies sneeze, the Finnish flag-carrier risks catching pneumonia. As CEO Pekka Vauramo said in 2014, “our finances cannot take even the smallest of surprises, due to problems with our cost structure.”
The airline risked becoming “market driftwood”, buffeted by external factors, added chairman Klaus Heinemann. That cost structure has meant that Finnair’s management in recent years have made it brutally clear to staff that the good old days are over and that salary and conditions packages have to be more realistic to cope with changing markets.
Painful adjustments have helped pull things around; the airline went from its 2014 loss to a $100 million after-tax profit last year.
Finnair was the first European airline to receive the Airbus A350-900, and the impact of the new aircraft cannot be under-estimated.
Apart from being exceptionally well-received by customers, the A350 – the carrier has six on strength from an order for 19 – is allowing Finnair to dispose of its elderly A340-300s, some of which are being flown to the US for parting out, while others have been sold back to Airbus.
But with Finnair, few advances come without attendant problems. Delays in the A350s’ delivery schedule is causing the flag-carrier pain, with the company admitting earlier this month that it had been forced to wet-lease in capacity at extra cost, as well as tackling problems with crew rosters.
And while the carrier believes that its full-year result for 2016 will be a further improvement on 2015, it has warned that increases in revenue will be outstripped by capacity growth and that there is renewed uncertainty for both passengers and cargo demand in its main markets.
Uncertainty, however, is par for the course at Finnair. For passengers that like their airlines to have a human face rather than be bland corporate monoliths, its continued survival until its centenary in 2023 would be more than welcome.