Finnair Closes Sale-Leaseback Agreement on A350; Plans 1,000 Redundancies and €100 Million Savings
Finnair Announced on Tuesday the closing of a sale and leaseback transaction for one of their Airbus A350s. The carrier also announced plans to reduce 1,000 jobs and an increase in their cost base reductions by €100 million from 2022 onwards.
In a series of announcements on Tuesday (August 25, 2020), Finnair reported that they have completed a sale and leaseback transaction on one of their Airbus A350s, a plan to cut 1,000 jobs and an increase in their savings target for a permanent cost base reduction of around €100 million by 2022. First, the carrier reported that the sale and leaseback arrangement on the Airbus A350 was finalized with Nomura Babcock & Brown Co., Ltd. (NBB) and BBAM Aircraft Management LP as the arranger and lease service provider. The new Airbus A350 was delivered to Finnair in February 2020 and as part of the transaction the carrier sold the aircraft to NBB and leased it back for their own operation for an initial period of 12 years. Finnair has ordered a total of 19 Airbus A350-900s, of which 15 have been delivered and the sale-leaseback transaction has resulted in a positive immediate cash effect of over €100 million.
Finnair further announced today the start of negotiations to reduce 1,000 jobs and long-term temporary layoffs for Finnair employees due to the impact of the global COVID-19 pandemic. The cooperative negotiations involve approximately 2,800 employees working in Finland and similar processes are being conducted at the carrier’s units abroad. Finnair employees approximately 6.700 employees, 6,200 which are based in Finland, the majority of whom have been temporarily laid off for part of the spring and summer. In addition to the planned redundancies, the carrier expects to continue the temporary layoffs to nearly all employees in Finland for either a fixed term or until further notice. To ensure the continuity of operations as the market recovers, Finnair is not currently planning flight deck and cabin crew reductions in Finland. In Tuesday’s announcement, Finnair’s CEO, Topi Manner said,
“COVID-19 is the deepest crisis of aviation. The pandemic and the exceptionally tight travel restrictions in Finland have impacted flight demand and we will operate only a small part of our capacity compared to last year. A rapid turn for the better in the pandemic situation is unfortunately not in sight. Our revenue has decreased considerably, and that is why we simply must adjust our costs to our new size. We want to build a competitive future for Finnair and retain as many jobs at Finnair as possible. Also, we want to be able to offer good connections to the world for Finns and the Finnish economy in the future. Unfortunately, this requires measures we announced today. As the timeline for aviation’s recovery is unclear, our plan is also to implement significant temporary layoffs to adjust our resources.”
Additionally, Finnair announced an increase in their savings target from €80 million to €100 million (including the previously mentioned redundancies) of permanent cost base reductions by 2022 onwards, compared to 2019 levels. The carrier continues to evaluate further cost reductions in areas such as real estate, aircraft leasing, IT, sales, distribution, administration and compensation structures as well as digitalization and automation of customer processes. Finnair will also renegotiate supplier and partner agreements. Currently, the airline expects traffic to recover to pre-pandemic levels in approximately 2-3 years, though the outlook for the industry remains uncertain.