After seeing its operating loss plummet to €60.9 million ($80.8 million) in 2011 from €4.7 million the previous year, Finnair has announced that it plans to restructure its unprofitable short-haul operations and outsource them to an external partner.
The airline plans to establish a low-cost joint venture and is seeking a partner to take over its loss-making short-haul network. Finnair said that it is evaluating transferring "the entire narrowbody fleet or a part of it to the new company". The existing operations would then focus on long-haul routes.
Finnair's new short-haul venture is to have bases outside of Finland and "expand the company's network in the Nordic countries", the airline said.
Together with UK airline Flybe, the Helsinki-based carrier established its Flybe Nordic regional operations last year.
While the group's annual revenues grew 11.6% to €2.26 billion in 2011, increased fuel prices and the weakening of the global economy as well as the effects of Japan's earthquake and political uncertainty in the Middle East "more than offset" Finnair's cost savings, said chief executive Mika Vehvilainen.
The operating margin fell from -0.2% in 2010 to -2.7% in 2011.
Passenger numbers increased 12.2% to just over 8 million last year while available seat kilometres (ASK) grew by 16.8%.
After announcing a cost-cutting programme in August, which is to save €140 million annually by 2014, Finnair managed to slash costs by €10 million during the second half of the year. Unit cost excluding fuel decreased 6.1%.
This year, however, the company wants to save €80 million, which will mean redundancies and "big changes to the company's personnel", according to Finnair.
Finnair also wants to further reduce its in-house maintenance operations as well as other non-core activities. Early last year, the company decided to abandon low-margin airframe heavy maintenance in favour of high-value engine and component MRO. However, now Finnair also wants to find a "cost-efficient solution for equipment and engine maintenance".
Slashing maintenance and personnel costs will be the largest area of the savings programme, which will make up approximately a quarter of the €140 million target. Sales and distribution costs will be reduced by around 15% while IT, fleet and ground handling costs are to be cut by 30%.
While baggage handing and apron services have already been transferred to Swissport, Finnair is now also looking to outsource catering services.
Source: Air Transport Intelligence news
