Translation: Original published in Finnish on 10/8/2026 at 8:00 am EEST.

Finnair's development has remained strong in Q3, and we believe its full-year figures will reach the upper end of the guidance ranges or surpass them. However, we have significantly lowered our forecast for next year, expecting earnings to decline due to lower payloads and higher fuel costs. We lower our target price to EUR 3.8 (was EUR 4) and reiterate our Sell recommendation.

Q3 development appears strong

Finnair's traffic performance in September, published yesterday, exceeded our expectations in terms of both passenger volumes and unit revenues. We understand that Finnair's Asian traffic has continued to benefit from the decrease in passenger numbers in the Persian Gulf region. Based on monthly reports, we estimate Q3 revenue at approximately 955 MEUR, compared to our previous forecast of approximately 920 MEUR. We also raised our Q3 adj. EBIT estimate to 87 MEUR from the previous 78 MEUR, which is a significant improvement from the comparison period (50 MEUR) and also slightly better than the strong Q2 earnings. Finnair had hedged around 80% of its fuel purchases for Q3 at the end of Q2, so we estimate that the increase in fuel prices seen during the fall will not yet significantly impact Q3 earnings.

Full-year guidance may be exceeded

Although Q3 has progressed strongly, we lowered our earnings estimate for Q4, primarily due to rising fuel prices. For the full year, however, both our revenue and adj. EBIT estimates are slightly above the company's guidance ranges. Thus, we believe the company will raise at least the lower end of its earnings guidance in connection with the Q3 report, and a slight upward revision to the upper end is also possible. This largely depends on the exact impact of fuel prices in Q4 and how the company can compensate for them in ticket prices.

Challenges ahead next year; we expect earnings to fall

According to our estimates, Finnair will face several headwinds next year. First, the exceptionally strong demand in Asian traffic will stabilize as passenger numbers in the Persian Gulf region likely return to more normal levels. This is reflected in our estimates as a decrease in the load factor of Asian traffic. Second, the company is increasing capacity for long-haul flights (e.g., the Melbourne route and increased frequencies to Japan), which could lower unit revenues. Third, fuel prices are rising, and as the effects of hedging diminish, they will begin to have a more pronounced impact on the company’s expenses, especially if prices remain at current levels. The impact will be milder if we assume that fuel prices will decline over the next year, as Bloomberg’s forecasts predict, which is the basis for our projections. In our view, the combination of these three factors puts pressure on the company's earnings. In this report, we have revised next year's earnings forecast downward to 150 MEUR. However, our forecasts show that the decline in fuel prices combined with revenue growth will support a recovery in earnings to approximately 190 MEUR by 2028. In our forecasts, Finnair's adj. EBIT margin will remain at around 5% in the medium term, while the company's target is 6–8% by the end of 2029.

Share prices reflect an overly optimistic outlook

Based on our estimates and adjusted for deferred taxes, Finnair's P/E ratios for 2026 and 2027 are approximately 6x and 12x, and adjusted EV/EBIT multiples are around 8x and 11x. Thus, based on this year's good earnings, the stock trades within our accepted ranges (adj. P/E: 6x-9x adj. EV/EBIT: 6x–9x) but clearly above them next year. Also, in our opinion, a P/B ratio above one is high, as our estimates indicate that the return on capital will remain below the required return. In addition, the stock’s DCF value is lower than the current price level. Therefore, in our view, Finnair's expected return remains weak, even though the earnings outlook for this year remains good.