Board of directors' report

Board of directors' 2006 Finavia group organization The deveploment of Finavia's business environment in 2006 Finavia's service objectives Finavia's environmental work Profit deveploment Financial effects of the separation of the flight safety authority Finavia group profit 2006 Finavia income distribution Capital investments 2006 Financing 2006 Personnel Changes in administration Operating risks and risk management Group structure and changes in the group relationships during the financial year Material events after the financial year and prospects for 2007 Income statement Balance sheet Cash flow statement Signatures of the financial statements and annual report Auditors' report

THE DEVELOPMENT OF FINAVIA’S BUSINESS ENVIRONMENT IN 2006

The trends in aviation

Air traffic continued its positive growth in 2006. According to statistics drawn up by Statfor, Eurocontrol’s Statistics and Forecast Service, air traffic in Europe grew by 4 % in 2006 measured by the number of flights. According to Statfor, the main factors for the positive development were low-cost carriers and the strong growth in business flights, the drop in the price of oil, a levelling out of price changes as well as the cost of air tickets which continued to fall during the year under review. The Airports Council International, ACI Europe, reported that the number of passengers in Europe had increased by 5.2 % on 2005. Domestic traffic grew 4.2 % and international traffic by 5.5 %.

The development of air traffic in Finland was stronger than in Europe: there were 8 % more air traffic passengers than in 2005. International traffic increased by as much as 10.2 % and domestic traffic rose by 4.2 % compared with the European average. The strong growth resulted in records being broken in air traffic during 2006. For the first time ever, Finavia’s airports handled over 16 million passengers. The number of passengers at Helsinki-Vantaa Airport grew by 9.1 % and for the first time exceeded the 12 million passenger barrier.

Measured as the number of operations, the growth in Finnish air traffic was slightly slower than the European average. Commercial aviation operations were up 3.0 % compared with the previous year. The growth in domestic traffic was 2.7 % and in international traffic 3.4 %. Commercial aviation includes, scheduled, charter and air taxi traffic and both take-offs and landings are included in operations.

Overflights continued their growth that began in 2000. The number of overflights in 2006 was 5.9 % higher than in 2005. Overflights using the Transpolar route that connects Europe and the Far East, and which is important to Finland, increased by 6.3 % on 2005. Cargo traffic also increased and the amount of cargo traffic (tonnes) was 7.2 % higher than in the previous year.

Change (%) comp. to previous year	2004	2005	2006
Passengers (all)	10,8 %	3,6 %	8,0 %
Commercial aviation operations	5,1 %	-0,2 %	3,0 %
Overfl ights	10,3 %	5,7 %	5,9 %

Key events during the financial year

In addition to the strong growth in air traffic, continuously changing security regulations resulted in cost pressures and new operational challenges for Finavia. The greatest individual change took place at the start of October when security checks started to restrict the volume of liquids that could be taken onboard as hand luggage and to demand that they be shown at the security inspection. In spite of the major operational change, the process went smoothly, and there were relatively few delays at Helsinki-Vantaa Airport as a result of the security checks. At the end of the year, the security inspection at Helsinki-Vantaa Airport passed the European Union’s inspection of safety operations as one of the first major airports to do so.

The State Enterprise Act enacted in 2002 (1185/2002) was applied to Finavia for the first time in 2006. The official functions were separated at the start of 2006 into the newly established Civil Aviation Authority. The operationally and financially significant change went off smoothly.

Finavia made the largest individual investment decision in its history during the financial year when it decided in August 2006 to expand the non-Schengen terminal. The cost estimate of the extension together with its baggage handling equipment is around EUR 143 million. In this way, Helsinki-Vantaa Airport will be able to respond to the increasingly stiff competition in transit traffic between the Far East and Europe.

The Board of Directors of Finavia decided in August on a new strategy for Finavia. The key message of the strategy
is the important role played by Finavia in creating and maintaining Finnish competitiveness. Through its operations,
Finavia enables effective connections for business with the rest of the world and at the same time provides opportunities for a variety of forms of travel.

In July 2006, the old section of the terminal building at Kittilä Airport was destroyed by a fire. The amount of damage was estimated to be around EUR 4.0 million. The final economic impact of the damage will only become clear during 2007. Finavia’s insurance will cover the damage that occurred.


Finavia (the former Civil Aviation Administration) is an enterprise as referred to in the State Enterprise Act (1185/2002).

The sphere of authority and tasks of Finavia are specified in section 2 of the Civil Aviation Administration Act.

Finavia and its subsidiary companies Airpro Oy, Lentoasemakiinteistöt Oyj, Koyj Lentäjäntie 1, Koyj Lentäjäntie 3, Koy Turun Lentorahti and IP-Kiinteistöt Oy make up a state enterprise group as specified in section 3 of the State Enterprise Act.

2006 was Finavia’s 16th year as a state enterprise.

In May 2006, the Civil Aviation Administration adopted a new logo and auxiliary name, Finavia. The Civil Aviation Administration is retained as the offi cial name but the name Finavia will used in the main.