Finavia’s interim financial report 1 January – 31 December 2007

Air traffic trends

Air traffic grew at an even rate in the last quarter of the year. The number of passengers increased by 6.4% compared with the corresponding period in the previous year, and there were 5.9% more passengers for the entire year compared with the previous year. Growth was more moderate than in 2006 when the total growth in the number of passengers was 8.0%.

The number of international passengers grew at a slightly slower rate in October–December than the average for all of 2007, but the growth was nevertheless slightly stronger than the last quarter of 2006: 10.5%, whereas the corresponding figure in the year before was 9.5%. International traffic has grown evenly during 2007, and the growth was over 10% for the entire year. Growth in the previous year was 10.2%. In international traffic, the number of gateway passengers 1 in particular has increased rapidly: by 42% in October–December and 34% for the year as a whole. There were almost 48.5% more gateway passengers than in November 2006. The number of domestic passengers has, by contrast, slightly decreased both in the last quarter of the year compared with the previous year and for the entire year compared with 2006: October–December -1.1% and -1.8% for the whole year.

According to ACI Europe, passenger numbers in Europe 2 grew by 7.2% in October–December and by 5.9% for the entire year, so the growth in Finnish air traffic continues to follow the European average.

The positive development in international traffic can also be seen in the change in the number of landings. International traffic landings have increased throughout 2007 and in October-December the growth was over 6%. International landings increased 5.8% for the whole of 2007. However, domestic and international commercial traffic landings together decreased both in the last quarter of the year (-1.1%) and in total (-2.1%) in 2007. This was due to the reduction in domestic landings: -8.4% in October–December, and -9.7% for the whole year. The average aircraft size in commercial traffic increased both in the last quarter and for the entire year: 6.2% and 6.7%, respectively. Statfor reported that flights in Europe increased by a total of 5.1% in 2007, so even if the trend in Finland, measured by passenger volume, is at the European average, the growth measured in the number of flights is clearly below the average trend in Europe. There were a record 10 million flights in Europe in 2007. Statfor is forecasting a growth of 4.2% in flights for 2008. The growth will be strongest in the Baltic countries and the states along the coast of the Adriatic Sea.

According to Statistics Finland, the prices of air tickets dropped in the last quarter of the year by an average of 9% compared with the corresponding period last year and by 0.1% for the whole year. International flights were 10% cheaper in October–December and domestic flights 4%. International flight tickets were 1.3% cheaper in the entire year compared with 2006, whereas the prices of domestic flights increased 6.1%.

Finavia Group’s finances

1.10.- 31.12.2007

The Group’s turnover increased by 10.6 % in October-December compared with the final quarter of the previous year. Turnover increased by a total of EUR 8.1 million. EUR 5.4 million of the increase in turnover is from air traffic and EUR 2.6 million from other commercial operations.

The Group’s expenses increased by 1.2% during the final quarter, by a total of EUR 0.9 million. Staff costs were at the level of the previous year's last quarter, depreciation and amortisation expenses increased by EUR 0.5 million and the EUR 0.4 million growth in other expenses was primarily due to the growth in expenses for security check services.

Group depreciation and amortisation expenses increased by 3.5% in October-December. A new maintenance centre and office building (EUR 11.4 million) were completed at Helsinki-Vantaa in November, as was the expansion and renovation of the terminal at Kittilä Airport (totalling EUR 5.1 million). Maintenance equipment totalling EUR 4.4 million in value was taken into operation during the last quarter of the year.

The Group’s operating profit in October–December was EUR 6.5 million higher than in the last quarter of 2006.

1.1.- 31.12.2007

The Group’s turnover increased by EUR 24.6 million (8.6%) compared with 2006. EUR 22.2 million of the growth is attributable to the growth in Finavia’s turnover, EUR 1 million to the growth in Lentoasemakiinteistöt Oyj’s turnover, and EUR 0.6 million to the growth in Airpro Oy’s turnover.

The Group’s expenses increased by 6.8% compared with 2006, and totalled EUR 17.7 million. Of this amount, staff costs accounted for EUR 6.6 million and other expenses accounted for EUR 9.4 million. Depreciation and amortisation expenses also increased by over EUR 1 million. EUR 15.5 million of the increase in Group expenses resulted from the increase in Finavia’s expenses and is attributable to an increase in staff costs and expenses related to security check services. Airpro Oy’s expenses grew by EUR 1.7 million from the beginning of the year.

Operating profit from the start of the year was EUR 6.5 higher than in 2006 (23.7%). Net financing costs were EUR 1.8 million higher than in 2006. The Group’s result was EUR 28.7 million, which was EUR 5.0 million higher than in 2006.

Finavia’s finances

1.10.- 31.12.2007

Finavia’s turnover grew by EUR 7.8 million (11.2%) in the last quarter compared with the corresponding period in 2006. Traffic revenues increased by EUR 5.4 million (11.9%) and other revenues by EUR 2.4 million (2.4%).

Finavia’s expenses increased by EUR 1.2 million (1.7%) in the last quarter. Staff costs dropped by 0.4%, other expenses increased by 3.2% and depreciation and amortisation expenses by 2.0%.

The average number of staff at Finavia dropped by 0.5% in October–December, but the salaries payable rose by EUR 0.8 million compared with October-December 2006. The salary raises came into effect at the start of October. A profit bonus of EUR 1.8 million (EUR 1.6 million in 2006) paid to the staff was entered against December, and a reduction in the provision for holiday pay of EUR 0.8 million.

Other expenses increased by EUR 1.1 million in the final quarter, of which the share accounted for security check services was EUR 0.6 million. Other sales purchases increased by EUR 0.6 million. Depreciation and amortisation expenses increased by 2%.

Finavia’s operating result in October–November was EUR 6.7 million higher than in the corresponding period in 2006.

Finavia’s result in the final quarter after financial items was EUR 6.1 million, which is EUR 4.5 million higher than in 2006.

1.1.- 31.12.2007

Finavia’s turnover increased in January–December by EUR 23.2 million (8.7%) compared with 2006. Traffic revenues increased by 9.9% and other revenues by 6.4%.

Traffic revenues increased by EUR 17.6 million. The revenue from international traffic excluding revenue from security charges increased by EUR 7.5 million (9.5%). By contrast, the revenue from domestic traffic fell by EUR 1.7 million (-4.7%) compared with 2006. The revenue from security charges totalled EUR 32. 5 million and increased by EUR 10.8 million. Revenues from route charges increased by EUR 0.3 million.

Finavia’s expenses increased by EUR 16.3 million (6.7%). Staff costs increased by EUR 4.5 million (5.2%). The average number of staff dropped by 0.5% compared with 2006. Salaries increased by 2.8% and indirect labour costs increased by 14.6%. The indirect labour costs include a supplementary pension contribution of EUR 1 million for 2006.

Other expenses were EUR 10.6 million higher (9.1%) than in 2006, of which the outsourced security check service accounted for EUR 7.9 million. Sales purchases increased by EUR 1.2 million and payments to the authorities by EUR 0.6 million. Depreciation and amortisation expenses increased by EUR 1.2 million (3%). The increase was due to replacing the stock of machinery and basic improvements to airport structures, especially at Helsinki-Vantaa Airport.

The operating result in 2007 was EUR 9.7 million (41.7%) higher than in 2006.

The result for January–December 2007 was EUR 31.4 million, which was an increase of EUR 8.6 million compared with 2006. If capital gains and losses on investments and other one-off items are deducted from the result, the adjusted result was EUR 26.5 million, and thus EUR 6.4 million higher than in 2006.

Airport operations

The turnover for airport operations comprises airport charges, which include, for example, landing fees, aircraft parking charges, passenger and security charges.

The number of domestic departing passengers decreased by 1.5% during the final quarter compared with the corresponding period last year. The revenue from domestic passenger charges fell during the corresponding period by 0.9%. The number of domestic departing passengers in January–December decreased by 2.3% and revenue correspondingly by 1.2%.

The number of domestic traffic landings in commercial aviation decreased by 8.4% in October–December compared with the corresponding period in 2006, and revenues correspondingly fell by 4%. From the beginning of the year, the number of landings decreased by 9.6% and due to a strong early part of the year revenues only decreased by 6%. The volume of landing aircraft in tonnes dropped by 6.5% on 2006.

The number of departing passengers in international commercial aviation increased by 6.3% in October–December and the number of departing passengers in international traffic was a total of 6.4% higher than in 2006. The revenue from passenger charges for international traffic increased in October–December by 5.7% and by 6.2% from the start of the year. Due to strong development in gateway passenger volumes, revenues from passenger charges for gateway traffic have also developed positively but only accounted for 7.3% of the total revenue from international traffic.

International traffic landings increased by 6.3% in the last quarter and by 5.9% from the start of the year. Revenues from landing charges for international traffic increased by 12% in October–December and by 11% from the start of the year. The average aircraft size has grown by 5% from the beginning of the year, which has an effect on both traffic growth and the growth in revenues.

Since the beginning of September, a security charge has also been collected from gateway passengers. The revenue collected from passengers from the security check for domestic and international traffic totalled EUR 32.5 million and was EUR 10.8 million higher than in 2006. The expenses for the security check have increased by EUR 10.5 million compared with 2006 and totalled EUR 36.8 million (preliminary data). The charge for the security check did not cover all the expenses in 2007. The security charge was raised from the start of 2007 from EUR 3.24 to EUR 4.51.

Since October, Airecon Oy, under an agreement with Lappeenranta Kaupunkiyhtiöt Oy, started operating a service between Lappeenranta and Helsinki-Vantaa airports. A scheduled service to Savonlinna and Varkaus airports will begin at the end of March 2008.

Air navigation operations

The turnover in air navigation operations comprises charges for the airport’s air navigation service (TN) and en route charges.

TN service payments by commercial traffic increased by 2.1% in the final quarter. Growth totalled 1.4% in January-December. TN service payments by domestic traffic dropped in every quarter and the total change was -7.6% compared with 2006. The overall growth in international traffic was 11%.

The revenue from domestic traffic air navigation reduced by 5% in the final quarter, and since the start of the year by slightly less than the payments, i.e. by 7%. The revenue from international traffic air navigation increased by 9% during October–December and by 8% from the start of the year.

TN service payments, which impact on the en route charge, fell -0.6% in October–December, after the growth in July–September. TN service payments only increased by 1.0% from the start of the year, which was due to the reduction in domestic service payments (-5.3%). The number of kilometres flown fell by 1.9% in October–December and the drop since January amounts to 0.9%. The number of overflights increased by 1% on 2006. The revenue from flight charges were at the level of 2006 in October–November and the revenue increased by 1.2% since the start of the year.

Other operations

Turnover for Finavia’s other operations mainly consists of income from car parks, rental revenue and sales revenue from shops and public service tasks sold to the State.

Other operations increased by 10.3% during October–December and by 6.9% from the start of the year. The growth, EUR 5.9 million, mainly came from revenue from car parks and Finavia’s own tax free sales.

Turnover from public service tasks sold to the State dropped by EUR 0.3 million (-8.4%).

Financing and investments

Group investments from the beginning of the year totalled EUR 93.5 million. The most significant project carried out by the subsidiary companies was the hotel developed at Helsinki-Vantaa Airport by Lentoasemakiinteistöt Oy. Finavia’s investments totalled EUR 74.4 million.

During the final quarter, a maintenance centre and office building were completed within the immediate vicinity of Helsinki-Vantaa Airport. The extension and renovation of the terminal at Kittilä Airport was also completed in November.

Finavia’s cash flow from operations has remained good. The total accrued from operations was EUR 5 million higher than in 2006. The EUR 50 million loan taken out in July has also increased cash flows because investments were not carried out as planned.
Organisational changes

Finavia's Board of Directors appointed Ari Haapanen, Director of the Finance Department, as the new Vice President and Deputy CEO of Finavia starting from 01 January 2008 when the previous vice president Martti Huomo retires.

Anne Ilola was appointed as director of air navigation operations as of 11 November 2007. Juha-Pekka Pystynen, Chief of Operations of the Finnish Air Force, was appointed as Director of Helsinki-Vantaa Airport as of 1 December 2007.

Internal appointments:

Raine Luojus was appointed Director of Operations, Air Navigation Department. Hannu Hervos was appointed Technical Director, Air Navigation Department. Matts-Anders Nyberg was appointed as Director, Staff Operations and Planning, Air Navigation Department. Heikki Jaakkola was appointed Director, International Affairs, Air Navigation Department.

¹ An international traffic transit passenger who arrives from an airport in another country and who continues to another foreign airport, a so-called INT-INT transfer passenger.
² The main 49 airports in Europe.