Finnair’s longstanding strategy has been based on connecting Europe and Asia via the short northern route over Russian airspace. Since that is no longer possible, flights times are longer and less profitable. Therefore, the company is introducing a new business strategy.
On Wednesday (September 7, 2022), Finnair announced that they will introduce a new business strategy, in light of Russia’s invasion of Ukraine. The carrier’s longstanding strategy has been based on connecting Europe and Asia via the short northern route over Russian airspace. Since that is no longer possible, the company will refocus their strategy to return to profitability regardless of the closed Russian airspace. With a different competitive situation and the changing weight of the markets served, Finnair will undertake significant structural renewal to remain competitive.
In Wednesday’s announcement, Finnair’s CEO, Topi Manner, said,
“The changes in our operating environment require a new strategy and significant renewal of Finnair, especially related to costs. We have, however, an excellent foundation to build on: our excellent, differentiating product, strong safety culture, strong brand, our high-quality execution capabilities, our commitment to sustainability and our track record of adapting and renewing ourselves.
“The target is to build a leaner Finnair that can return to the pre-pandemic levels of profitability. Reaching this will require profound change throughout the company. Especially during the hard pandemic years, the Finnair team has proven its ability to adapt and renew under the most challenging circumstances, and I am confident that we will reach our target as we now continue this journey. Together we can rebuild a Finnair that employees, customers and all Finns can continue to be proud of.”
Finnair’s new strategy will focus on building a competitive airline with the goal of reaching pre-pandemic level EBIT of at least 5.0 percent from mid-2024. The carrier will operate a geographically more balanced network connecting Europe to Asia, India, the Middle East and North America via Helsinki, while maintaining a strong domestic presence. Finnair will also optimize their fleet size and enhance unit revenues through improved digitalization, competitive products and customer choice. Additionally, by further leveraging partnerships, including oneworld and joint businesses, the carrier hopes to strengthen distribution, network reach and product offering. The company also aims to build a sustainable balance sheet, allowing investments in the future. Finnair remains committed to being among the sustainability leaders in the aviation industry.
To achieve the desired outcome, Finnair will require the support of all key stakeholders. The company will begin implementing their transformation immediately, including discussions with all key stakeholder groups on the changes that will be necessary. The company’s unit cost reduction target will cover all categories, including labor. Finnair will begin discussions with team members on adjustments in employment terms, and will also evaluate additional measures such as route-specific outsourcing of cabin service, potential outsourcing of certain operational activities and actions to improve the efficiency of shared functions. The company will also seek savings in other areas through contract negotiations with suppliers, structural changes in operations and optimization of facilities.
Source: Finnair