Flag carrier's new 10-year plan envisions more passengers flying through Helsinki
Finnair is planning more dramatic expansion of its Asian network as part of a new 10-year strategic plan.
The oneworld carrier unveiled in mid-October its "vision 2017", which predicts a more than 100% increase in passenger traffic from nine to 20 million annual passengers, driven by more new Asian services. Back in 2001 Finnair's long-haul network included only three widebodies and four Asian destinations. Today it has grown to 10 Asian destinations and 10 widebodies and Asia-Europe traffic accounts for about half of the carrier's revenue stream.
"We will take advantage of Helsinki's geographical location"
Chief executive, Finnair
Finnair plans to add its 11th Asian destination, Seoul, next June and is in talks with several more Asian airports. "Our goal is to open one to two Asian destinations yearly," says Finnair director of international relations Sverker Skogberg.
Finnair is not shy about playing the environment card and will promote its Asia-Europe connections as "most eco-efficient" because travelling through Finnish airspace offers the most direct route for many Asia-Europe city pairs. "The customers can already now make environmentally friendly decisions. The cornerstones of Finnair's environmental operations are a modern, low-emission fleet and the shortest routes," Hienonen says.
He adds Finnair is also working with Helsinki-Vantaa operator Finavia to expand and improve the airport to make travelling through Helsinki less complicated and more convenient than other European hubs.
Finnair in recent years has been growing its Asian traffic at an annual clip exceeding 20%, far outstripping the annual 6% growth rate in the Asia-Europe market. But its Asia-Europe market share, based on ASKs, is still only 2.2% (see chart). The carrier is confident this can be improved and to make this happen it plans to double its widebody fleet to 20 aircraft over the next decade. Finnair says it will invest almost €2 billion ($2.8 billion) on the expansion and hire 200 additional employees per year.
While most of the growth will be to Asia, Finnair also plans to expand its North American network. Currently it only serves New York but more routes may be opened, especially as Finnair expands its Indian network beyond Delhi and Mumbai. It says it can "open the fastest connections between North America and India because Finland is situated along the shortest route".
Finnair also plans to capitalise on Helsinki's proximity to Russia. The carrier plans to launch a new leisure product to meet the demand of Russia's fast-growing middle class and increase its flights to Moscow and St Petersburg, as well as open new routes to other Russian cities. A restrictive bilateral now prevents Finnair from expanding its Russian services but Hienonen "believes that sooner or later Russia's air traffic markets will open up".
The carrier is also now lobbying the Russian government to reduce its over-flight fees. Skokberg says Finnair now pays about €25 million per year in Russian over-flight fees and the high cost of over-flying Russia has slowed its expansion to North Asia. Russia also charges extra for flights that carry the codes of non-operating carriers and Skokberg says this has kept Finnair from adding codeshares. For example, Finnair currently does not codeshare with oneworld partners Cathay Pacific or Japan Airlines on its Asian flights because the extra revenues fail to offset the extra over-flight costs. "I've been dealing with Russian matters for five years and it's very tough," he says.
Finnair must also overcome increasing competition from rival SAS, which has just launched flights from Stockholm to Bangkok and will add a Stockholm-Beijing service in April. Most Swedes now flying to Asia go via Helsinki rather than backtrack through Copenhagen on SAS. In fact, Skokberg says, on an average flight from Helsinki to Asia, 20% of the passengers are from Sweden, matching the 20% which are from Finland. "Competition will be tougher," he says. "But we've been waiting for SAS to do something like this. We still trust the brand that we've built up."