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Finnair announces cost cuts of $200 million by 2014 amid Q2 net loss of $33 million
HELSINKI (AP) ' Finnair on Friday reported a second-quarter loss of $33 million (euro23 million) amid increasing competition and announced further cost cuts of $200 million (euro140 million) by 2014.
The airline said its net loss in April through June narrowed from a loss of euro28 million a year earlier, but said it continued to be hit by high fuel costs, the Fukushima disaster and disruptions in the Middle East. Revenue in the period grew 14 percent to euro540 million, from euro473 million in 2010.
The Finnish national carrier said that "profitability had not matched expectations," citing increased competition from budget airlines as "more efficient business models" had entered the market.
The company's share price plunged more than 10 percent in a depressed market on the Helsinki Stock Exchange, but bounced back over the day to close 1 percent lower at euro3.07.
CEO Mika Vehvilainen said talks with personnel on the euro140 million cost-cutting program would begin immediately.
"The situation faced by our mainline business, particularly European feeder traffic, is challenging. In the long term, our cost structure compared with many of our competitors is simply unsustainable," Vehvilainen said. "In order to build a sustainable future Finnair, we must improve our operational efficiency."
Finnair has been struggling to cut costs amid declining demand, competition from budget airlines and overcapacity. Last year, it was plagued by several strikes, including by cabin crews, that cost it more than euro25 million in lost earnings.
The airline has laid off hundreds of workers, including 450 in technical services, outsourced operations and doubled an annual savings program to euro200 million with most cuts aimed at personnel costs.
Finnair said although it expects a profit in the second half of the year the full-year result will still be in the red.
Finnair PLC, 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.