Finnair cuts costs to fund fleet renewal

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Finnair hopes to make annual savings of €60 million by the end of 2014 through a new cost-saving programme which will run in parallel with its existing "structural change" and cost-cutting initiative that was launched in August 2011.

The Oneworld carrier says although it hopes to return an operating profit in 2012 on the back of the existing programme, which is targeting savings of €140 million, fleet renewal commitments require the additional efficiency drive, it says.

It has orders in place for five Airbus A321 narrowbodies, due for delivery in 2013 and 2014, and handovers of its 11 ordered A350-900s will commence in 2015. Finnair values these commitments at a total of €1.2 billion.

The new cost-cutting drive will focus on "streamlining operations and processes in different business and support functions" in order that they are configured to meet the carrier's future requirements "as it undergoes a major structural transformation", it says.

Although the ongoing programme of change - which has seen the outsourcing of MRO operations to SR Technics and the transfer of 12 Embraer 190s to Flybe Nordic to cover its regional operations - is proceeding to plan, it says, the airline is still "far off" from it's long-term target of achieving a 6% operating profit margin.

"In addition, high fuel prices, tightening competition and cost-saving measures implemented by our competitors urge further measures from us, because we want to emerge as winners from the current turmoil in the airline industry," says chief executive Mika Vehviläinen.

He says management will engage with the workforce to drive the new programme and "operate more efficiently and increase our labour productivity".

"I am convinced that it is possible to achieve savings in those areas where our cost level compared to [our] peers is still high and hasn't decreased," says Vehviläinen.

Finnair will announce further details of the new savings programme as plans progress.