Finnair Group Interim Report 1 January – 30 June 2007.

Finnair GroupInterim Report 1 January – 30 June 2007

Flight travel growing, infrastructure under pressure

European airlines’ performance improved in the early part of the year by an average five per cent, Finnair growth was over 20%Asian traffic overall grew by less than five per cent, Finnair’s Asian traffic grew 30%European airlines’ growth is now directed towards South AmericaFuel prices were high and rose slightlyThe industry is expecting its first profitable year since the beginning of the millenniumIn the difficult years, system investments have fallen behind growth in traffic

Baggage chaos in Europe

Increased travel and security measures have delayed baggage at large European airports => also reflected in Finnair’s customer service.Strongly growing Asian traffic creates challenges for the service level of Helsinki-Vantaa Airport => temporary arrangements together with FinaviaPreparations made for summer challenges; sharp tightening of security regulations in UK was a surpriseLong delays, lots of problems for customersTerminal extension ready in 2009 will raise infrastructure to an excellent standard at Finnair’s home station

Finnair heading in the right direction

Strong demand in scheduled traffic continuesIn addition to Asia, European traffic is also growingFinnair’s market share growing in international traffic departing from Finland Unit revenues on last year’s levelUnit costs have fallen due to efficiency measuresProfitability of scheduled traffic has improvedFlyNordic joined Norwegian Air Shuttle, creating a strong Scandinavian airline

Finnair sold FlyNordic to Norwegian

Deal was signed at the end of JunePayment in shares, Finnair’s holding in Norwegian Air Shuttle rose over five per cent Options allow Finnair to increase its ownership up to ten per cent by the end of 2008FlyNordic’s charter traffic revenue divided 50/50 until October 2008Cooperation agreement between Finnair and Norwegian in Asian feeder traffic

Result improved as expected

Q2/2007 Q2/2006 Change %

Turnover mill. € 538.1 494.6 8.8

EBITDAR 74.0 68.2 8.5

EBIT excl. capital gains, fair values changes of derivatives and reorganization expenses

27.2 18.2 49.5

Reorganization expenses - -15.2 -

Capital gains 5.0 1.9 -

Fair value changes of derivatives 4.9 0.6 -

Operating profit/loss (EBIT) 37.1 5.5 -

Profit after financial items 34.4 3.3 -

Scheduled Passenger Traffic and Technical Services improved

Profitability of scheduled traffic has improvedUnit revenues have stabilisedUnit costs have fallenFinnair Technical Services and FlyNordic have also clearly improvedNorthport still loss-makingDue to tighter competition, average prices for cargo have fallen

Unit costs decreased more than yield Change YoY

-20

-15

-10

-5

0

5

10

15

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

% Yield (EUR/RTK) Unit costs (EUR/ATK)

2004 2005 200620032002 2007

Efficiency programme yields concrete results

Target EUR 80 million, of which half from personnel expensesTargets specified in fullSavings weighted towards end of yearProfit impact for 2007 over EUR 40 millionFull financial impact will begin in 2008Jobs cut by around 600 in 2006-07More than 300 people recruited into Flight Operations Group

Business growing, number of staff maintains

0

2000

4000

6000

8000

10000

12000

14000

1999 2000 2001 2002 2003 2004 2005 2006 Q2 2007

Personnel on averagePersonnel

Key efficiency areas

Technical Services competitiveness programmeFlight personnel agreements Savings from support functionsMore efficient crew utilisation through network reformManagement of irregularity processesFeeder traffic reformMergers in travel agency network (SMT+Area)Cutting distribution costs

Unit costs decreasingQ2/2007 2006

Unit costs of flight operations* c/ATK -3,8% +1.8 %

Unit costs of flight operations excl. fuel* c/ATK

-5.3% -3.5 %

Personnel expenses c/ATK -5.0% -4.1 %

Fuel costs c/ATK +1.3% +24.1 %

Traffic charges c/ATK -3.1% -3.9 %

Ground handling and catering €/passenger +3.3% -1.0 %

Sales and marketing €/passenger +7.3% -7.9 %

Aircraft lease payments and depreciation c/ATK

-14.4% +1.9 %

Other costs c/ATK -2.9% -3.1 %

* excluding fair value changes of derivatives ATK = Available Tonne Kilometre

Productivity improved

Productivity (incl. Aero and FlyNordic) (ATK/ person) 12 m rolling sum

240

290

340

390

440

490

540

01

/01

04

/01

07

/01

10

/01

01

/02

04

/02

07

/02

10

/02

01

/03

04

/03

07

/03

10

/03

01

/04

04

/04

07

/04

10

/04

01

/05

04

/05

07

/05

10

/05

01

/06

04

/06

07

/06

10

/06

01

/07

ATK1000/ person

Higher jet fuel prices

Fuel costs a fifth of turnover2003: 10.2% of turnover2004: 12.5% of turnover2005: 15.6% of turnover2006: 19.4% of turnover2007: ~20% of turnover (over 400 mill. euro)

Finnair scheduled traffic has hedged 66% of its fuel purchases for the next six months, thereafter for the following 24 months with a decreasing level. Finnair leisure flights hedged 60% of summer traffic programme’s consumption.

Liquid funds used for investments

Cash flow statement (EUR mill.) Q1-Q2/2007 Q1-Q2/2006

Cash flow from operations 114 24

Investments and sale of assets -195 -113Investments -245 -119Change of advances and others +50 +6

Cash flow from financing -46 72

Change in liquid funds -35 -17

Liquid funds at the beginning 273 339

Liquid funds at the end 238 322

Cash flow January-June

Strengthening the capital structure under evaluation Equity ratio and adjusted gearing

0

20

40

60

80

100

120

140

2002 2003 2004 2005 2006 Q2 2007

Equity ratio Adjusted Gearing%

Expansion to Asia continues

Demand grew during Jan-Jul07 by 30.5%, passenger numbers 24.6%, cargo 18.9%Passenger load factor 77,7%Indian traffic quadrupled in June, new destination Mumbai59 flights a week to AsiaNon-stop flights to 10 destinations, six out of which dailyGrowth in different markets in Asia diversifies riskCapacity will grow by over 30% this yearSeoul in South Korea as new destination in 2008

Most rapid growth in Asian traffic

China 2001:3 flights/week2007:22 flights/week

Japan2001:2 flights/week2007:15 flights/week

India2006:3 flights/week2007:12 flights/week Aasian fleet increased from two to nine in six years

Long-haul network – summer 2007

7 New York

Tokyo 4Nagoya 4

Osaka 7Beijing 7Shanghai 7Guangzhou 4Hong Kong 7Bangkok 7

Delhi 7Mumbai 5

Helsinki

Share of Asian traffic growing

45 %

37 %

4 %14 %

Asia America Domestic Europe

Scheduled traffic passenger and cargo revenues H1/2007

In 2007-14• A330/A340 fleet of maximum 15 planes in

total

In 2014-16• A350 fleet of maximum 15 planes in total

New planes enable future growth

Most modern European fleet

Average age of European fleet four years29 Airbus A320 family aircraftA total of ten smaller (E170) and four larger (E190) Embraer in fleet, six larger aircraft coming 2007-09New aircraft increase flexibility and improve load factors, decrease costs and are eco-efficient

oneworld energized

oneworld a high quality and only profitable alliance. Three new members as of April 1st

• Japan Airlines, largest in Asia and the Pacific region

• Royal Jordanian, complementing our network in growing Middle-East market

• Hungary´s Malev will serve as partner in Central Europe

Future outlook

High degree of hedging and dollar exchange rate will stabilise fuel costs in latter part of yearRenewal of the wide-bodied fleet has begunNew route openings will put pressure on traffic load factors and price levelsUnit costs still decreasingRestructuring proceedingSix out of seven of the Finnair Group’s agreements with labour unions are due to expire in SeptemberThe operational result for the full year is expected to exceed 70 million euros

Appendices

Profitability development

-50

-40

-30

-20

-10

0

10

20

30

40

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

MEUR

2003 2004 20052002 2006 2007

Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and reorganization expenses)

Average yield and costs EUR c/RTK & EUR c/ATK

0

20

40

60

80

100

120

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Yield (EUR/RTK) Unit costs (EUR/ATK)

2004 2005 200620032002 2007

Segment results

2007 2006Q2 Q2

MEUR Scheduled Passenger Traffic 27.7 21.7Leisure Traffic 1.1 1.1Aviation Services 1.3 -1.3Travel Services 1.2 0.9Unallocated items -4.1 -4.2Total 27.2 18.2

Excluding capital gains, fair value changes of Derivatives and reorganization expenses

Investments and cash flowfrom operations

0

50

100

150

200

250

300

2002 2003 2004 2005 2006 Q2 2007

Operational net cash flow InvestmentsMEUR

Aircraft operating lease liabilities

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 Q2 2007

MEUR Flexibility, costs, risk management

On 30 June all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments byseven, the adjusted gearing on 30 June 2007 would have been114,6%

ROE and ROCE Rolling 12 months

-4

-2

0

2

4

6

8

10

12

14

Q1 200

2

Q2 200

2

Q3 200

2

Q4 200

2

Q1 200

3

Q2 200

3

Q3 200

3

Q4 200

3

Q1 200

4

Q2 200

4

Q3 200

4

Q4 200

4

Q1 200

5

Q2 200

5

Q3 200

5

Q4 200

5

Q1 200

6

Q2 200

6

Q3 200

6

Q4 200

6

Q1 200

7

Q2 200

7

% ROE ROCE

Emissions trading for air traffic

EU air traffic accounts for only 0.5% of all CO2 emissions in the worldFinnair in favour of emissions trading principlesEU proposal sets airlines at somewhat unequal footings depending on route network structureShould be globalCompetitively neutralInvestments already made in new technology should be taken into accountOpen emissions trading

Customers can make environmental choices when flying

Choose an airline with a modern fleetFly in the right direction all the way, without unnecessary stopovers. Shorter flight routes result in less emissionsAvoid large, congested airports

By making these choices, fuel consumption and emissions can drop by at best 30%!

Finnair Financial Targets

”Sustainable value creation”

Operating profit (EBIT)

EBIT margin at least 6% => over 120 mill. € in the coming few years

EBITDAREBITDAR margin at least 17% => over 350 mill. € in the coming few years

Economic profit

Pay out ratio Minimum one third of the EPS

Adjusted Gearing Gearing adjusted for aircraft lease liabilities not to exceed 140 %

To create positive value over pretax WACC of 8,5%

Finnair’s Financial Targets

Description of targets

Operating profit (EBIT)

EBITDAR

Economic profit

Pay out ratio

Adjusted Gearing

Turnover + other operating revenues – operating costs

Result before depreciation, aircraft lease payments and capital gains

Operating profit EBIT – Weighted Average Cost of Capital

Interest bearing debt + 7*Aircraft lease payments – liquid funds) / (Equity + minority interests)

Dividend per share / Earnings per share

www.finnair.comFinnair Group Investor Relationsemail: [email protected]

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