We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
04 November 2020
The primary Finnish airline company, Finnair, has announced that it will discontinue five of its domestic routes by Spring 2021. Finnair's decision was heavily influenced by the COVID-19 crisis and related travel restrictions, although the cancelled routes had already been challenging in terms of profitability before the pandemic. Previously, the Finnish government, the majority shareholder of Finnair, had publicly expressed that domestic routes might not be restored after the COVID-19 outbreak eases (for further details please see "Fate of domestic routes post-COVID-19 hangs in balance").
The Ministry of Transport and Communications set up a working group to secure flight connections to the five domestic cities where Finnair announced it will discontinue flying. On 30 September 2020 the working group proposed that the state should purchase air services for the five domestic routes until the end of 2021. The aid proposed by the working group would be temporary and a permanent solution must be considered in the national long-term transport plan in Spring 2021 (eg, by putting out the routes to an EU-wide tender in accordance with EU Regulation 1008/2008 on common rules for the operation of air services).
In late August 2020 the Finnish Transport and Communications Agency (Traficom) suspended the flight connection between Skopje and Turku for two weeks. After the suspension, flights on the route were cancelled on commercial grounds. However, the flight connection was later restored by Wizzair. The Institute for Health and Welfare has noted that the targeted testing of passengers arriving from Skopje remains justified in the current situation, but that continuation of flight suspensions to Skopje could result in passengers using other means of travel which would complicate testing.
At the end of September 2020 Finnair began cooperating with Terveystalo Oyj, a private Finnish healthcare service company, to offer its customers simple access to COVID-19 testing before travelling. Together, the companies launched a service that schedules tests and results in a way that fulfils the destination requirements. Finnair customers get speedy testing and even receive a discount on the test price.
An interesting pilot project has also been started at the Helsinki-Vantaa airport where four dogs are now sniffing samples to detect COVID-19. According to the preliminary tests conducted at the University of Helsinki, trained sniffer dogs appear to recognise COVID-19 from samples quickly and they may be more sensitive than many of the tests currently available on the market. At present, such testing is voluntary. Mandatory and official COVID-19 testing with sniffer dogs would require a change in the applicable legislation.
The impact of the COVID-19 pandemic and the exceptionally strict restrictions on travelling in Finland have been clearly visible in Finnair's traffic figures. According to a press release by Finnair, the company carried 91.0% less passengers in September 2020 than the corresponding period of 2019 and 40.1% less than in August 2020. However, the cargo load factor is still clearly higher than in the corresponding period of 2019.(1) Finnair has trimmed its flight schedules but continues to maintain critical air connections for transfer passengers and domestic Finnish routes. From 25 October 2020 to 31 March 2021, Finnair will serve 45 domestic and European destinations with reduced weekly frequencies on almost all routes. The company aims to increase its flight network and frequencies during Spring 2021.
Earlier in May 2020, Finnair announced that it was targeting nearly €80 million in permanent cost base reductions by 2022. In August 2020 Finnair increased its savings target to €100 million. According to Finnair's CEO Topi Manner, as there is no swift improvement in sight, Finnair is adjusting its cost reduction targets to better address the situation. Further, in August 2020 Finnair announced that it will commence cooperation negotiations which could result in reducing an estimated 1,000 jobs and in addition, long-term temporary lay-offs for thousands of Finnair employees.
In August 2020 Finnair announced a voluntary tender offer of its outstanding capital securities issued in 2015 and also issued a €200 million hybrid bond. The aggregate principal amount of the capital securities validly tendered by the holders for purchase pursuant to the tender offer was €157.8 million and Finnair redeemed the outstanding share of its 2015 €42.2 million hybrid bond. The new €200 million hybrid bond remains outstanding. Finnair's CEO noted that refinancing Finnair's existing hybrid bond further supports its balance sheet strength and that the airline maintains a diversified investor base through such equity instruments as it seeks to mitigate the impact of the COVID-19 pandemic on its capital structure.
Finnair has also been active on the sale and leaseback market. In late August 2020 an Airbus A350 aircraft was leased back to Finnair for its operation for the initial 12-year period, with an immediate positive cash effect in excess of €100 million in a sale and lease back transaction involving, among others, Nomura, Babcock & Brown as purchaser and lessor and BBAM Aircraft Management as arranger.
For further information on this topic please contact Maria Lehtimäki or Ville-Veikko Vänttinen at Waselius & Wist by telephone (+358 9 668 9520) or email (firstname.lastname@example.org or email@example.com). The Waselius & Wist website can be accessed at www.ww.fi.
(1) Please see here.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.