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Quiet quarter, as expected

In Q1, Finnair carried 259k passengers which is 90% decline compared to Q1’20. Average Seat Kilometers (ASK) decreased by 87.6% y/y and Revenue Passenger Kilometers (RPK) decreased by 95.6% y/y. Passenger Load Factor (PLF) declined by 47.1%-points y/y and was 25.5%. The pandemic situation worsened during the first quarter of the year and strict travel restrictions remained. We expect Q1E revenue of EUR 96m (-83% y/y) and adj. EBIT of EUR -155m.

Towards better times

Even though the coronavirus situation has continued severe in the beginning of the year, there is light at the end of the tunnel as the vaccination pace has slowly improved. However, it is still unclear when traveling can start to normalize and how to make it safe. Possible vaccination certificates could be a crucial solution to this as it is important that European countries, including Finland lift travel restrictions at the same pace. Currently, it is estimated that majority of Finnish people have been received the first vaccine dose by the late summer thus air travel is expected to remain in a low level also during April-June. Therefore, we have cut our Q2’21E estimates. Our H2’21E and 22E-23E estimates are largely unchanged at this point.

“HOLD” with TP of EUR 0.75 (0.60)

The hybrid loan by the State of Finland to Finnair (max. of EUR 400m) was approved by the EU Commission in March. Approx. EUR 350m of the loan can be used by Finnair if its cash or equity position drop below specific limits. The remaining approx. EUR 50m share needs the Commission’s approval at a later stage. The interest rate of the hybrid loan has not been specified. We expect the recovery of air travel to begin in H2’21 but highlight that there are still significant uncertainties due to the changing pandemic situation. We expect 21E revenue to increase by 72% y/y and adj. EBIT of EUR -336m. We keep our rating “HOLD” with TP of EUR 0.75 (0.60) ahead the Q1 result.

Source: Finwire News.