Finnair Group Interim Report 1 January 30 June

Finnair Group Interim Report 1 January – 30 June 2006

Sense is slowly returning, even in airline industry • Many airlines still in shaky financial shape • Competition remains tough in Nordic countries • Two airlines have withdrawn from Finnish market • Successful airlines have strong economy, effective strategy and costs in check • Strong airlines invest in new aircraft with low fuel consumption

Quarter of structural change • Finnair’s increasing role in Asia-Europe traffic is reflected in the company structure • One-off adjustment costs of structural change 15. 2 MEUR, result clearly under last year’s level • Introduction of new aircraft temporarily weakened productivity in first half of year • Average price of flight tickets decreased • Good development in demand • Record load factors

Personnel cuts agreed • 670 jobs will be cut in 2006 -2007 • Emphasis on Finnair Technical Services and support functions • Planned efficiency measures to bring 80 MEUR annual cost benefits • Efficiency measures everywhere in the organisation

Operations systematically rationalised Personnel on average

Structural change weighed on result Q 2/2006 Turnover mill. € Q 2/2005 Change % 494. 6 469. 4 5. 4 68. 2 73. 5 -7. 2 18. 2 30. 0 -39. 3 Capital gains 1. 9 1. 8 Fair value changes of derivatives 0. 6 3. 5 -82. 9 Operating profit/loss (EBIT) Profit after financial items 5. 5 3. 3 35. 3 36. 3 -84. 4 - EBITDAR EBIT excl. capital gains, fair values changes of derivatives and reorganization expenses 5. 6

Fuel bill rose by over 50 MEUR in first half of year Q 2/2006 Q 1 -Q 2/2006 Unit costs of flight operations* c/ATK +6, 5% +8, 3 % Unit costs of flight operations excl. fuel* c/ATK +1, 4% +2, 1 % Personnel expenses c/ATK +8, 4% +5, 4 % -29, 7% +37, 4 % Traffic charges c/ATK -4, 5% +0, 1 % Ground handling and catering €/passenger -4, 8% -3, 5 % Sales and marketing €/passenger -5, 2% -5, 7 % +13, 3% +5, 8 % +9, 5% +8, 8 % Fuel costs c/ATK Aircraft lease payments and depreciation c/ATK Other costs c/ATK * excluding fair value changes of derivatives ATK = Available Tonne Kilometre

Fuel costs increasing • 2003: 10. 2% of turnover • 2004: 12. 5% of turnover • 2005: 15. 6% of turnover • 2006: ~20. 0% of turnover at current price level and planned traffic growth Finnair scheduled traffic has hedged 62% of its fuel purchases for the next six months, thereafter for the following 18 months with a decreasing level. Finnair leisure flights hedged 60 % of winter traffic programme’s consumption.

Realized prices and swap prices

Development of average flight and fuel price 2001 - 2006

Unit costs +6. 5%, without fuel +1. 4% 2002 % 2003 Change Yo. Y 2004 2005 2006

Most modern European fleet • Boeing MD-80 aircraft retired from parent company fleet in July • Popular new Embraer 170/190 aircraft increase flexibility, decrease costs and are eco-efficient • A new Embraer joins fleet monthly until end of year, four new aircraft next year (total 16) • Eighth wide-body aircraft, Finnair’s first Airbus 340 took flight in July • New Airbus A 340/350 aircraft replace current wide -body fleet

Harmonised fleet Airbus A 340/A 350 Long haul - 12 -18 aircraft - 250 -314 seats Airbus A 319/A 320/A 321 Mid haul - 29 aircraft - 126 -181 seats Embraer 170/190 Feeder traffic - 16 aircraft - 76 -100 seats

Strong balance sheet Equity ratio and adjusted gearing %

Group continues to have strong liquidity Cash flow January-June

Asian success continues • Demand (Jan-June) grew 23. 3%, passenger numbers 24. 4%, load factors 3. 3%, cargo 17. 2% • New route to Nagoya opened in June and Delhi will be launched in November. Next year Kuala Lumpur which is 11 th Asian destination. • Over 100 flights a month to China • Capacity will grow by 30% in last half of year • Lie-flat bed seats installed in long-haul business class

Finnair long haul network 7 2 Tokyo Nagoya 3 Osaka 6 Beijing 7 Shanghai 7 Guangzhou 4 Hong Kong 5 New York Helsinki Bangkok Singapore 41 flights to Asia per week 7 7

Sustainable competitive edge based on geography Most preferred choice for passengers needing at least one stop-over. Examples: Stockholm Gothenburg Oslo Hamburg Dusseldorf Berlin Stuttgart Edinburgh Tallinn Krakow Riga Vilnius Budapest Warsaw Prague Barcelona Madrid Milan Zurich Venice HEL LON PAR CPH FRA Asia

Finnair favored in reservation systems AN 1 A 09 SEP ARNPVG (=Stockholm-Shanghai) ** AMADEUS AVAILABILITY - AN ** PVG PU DONG. CN 1 AY 892 J 9 C 9 D 9 RL UL Y 5 B 4 /ARN 2 HEL 2 1425 1620 E 0/320 AY 057 J 9 C 9 D 9 I 9 RL UL Y 9 /HEL 2 PVG 1700 0650+1 E 0/M 11 10: 25 2 SK 415 C 9 D 9 J 9 Y 9 S 9 B 9 M 9 /ARN 5 CPH 3 1320 1430 E 0/321 SK 997 A 2 C 9 D 9 J 9 Y 9 S 9 B 9 /CPH 3 PVG 1515 0735+1 0/343 12: 15 3 KL 1110 J 0 C 0 Z 0 S 0 B 0 M 0 K 0 ARN 5 AMS 1300 1505 E 0. 737 KL 895 C 4 D 4 W 4 Y 9 T 4 K 4 H 4 AMS PVG 1720 0845+1 0. 74 M 13: 45 4 CA 912 C 4 D 4 Y 4 B 4 H 4 K 4 L 4 ARN 5 PEK 1750 0800+1 0. 767 MU 583 C 4 Y 4 V 4 Q 4 PEK PVG 1140+1 1335+1 0. 320 13: 45 => total travel time defines the order of alternatives

Share of Asian traffic growing Scheduled traffic passenger and cargo revenues Q 1 -Q 2/2006

Finnair significant player in Europe-Asia traffic • Two new destinations in long-haul network this year and recruitment of pilots and cabin crew • Size of long-haul fleet will grow to meet demand for Asian traffic • 1 -2 new Asian destinations per year, more frequencies to existing destinations • New feeder lines in European network • Demand remains strong at good price level • Market share continues to increase, Finnair’s Asian sales have increased by 60% in Sweden

Assesments for future development • • • Passenger and cargo demand continues to grow Competition remains tight Flexible capacity => load factors improve Focus on traffic expansion in Asia 2006 result still expected to be profitable, but below previous year’s level • High load factors and strong booking situation give basis for improved price level • Better productivity with structural change • Good conditions for improving profitability in future

Appendices

Slow quarter as predicted Change in EBIT per quarter (Excluding capital gains, fair value changes of derivatives and reorganization expenses) MEUR 2002 2003 2004 2005 2006

Average yield and costs EUR c/RTK & EUR c/ATK 2002 2003 2004 2005 2006

Development of Group Business Areas Excluding capital gains, fair value changes of Derivatives and reorganization expenses 2006 2005 Q 2 MEUR Scheduled Passenger Traffic 21. 7 25. 2 1. 0 2. 4 -1. 5 10. 6 0. 9 2. 0 Unallocated items -3. 9 -10. 2 Total 18. 2 30. 0 Leisure Traffic Aviation Services Travel Services

Investments and cash flow from operations MEUR

Aircraft operating lease liabilities have grown in line with strategy Flexibility, costs, risk management On 30 June all leases were operating leases. If capitalised using the common method of multiplying annual aircraft lease payments by seven, the adjusted gearing on 30 June 2006 would have been 92, 6%

ROE and ROCE Rolling 12 months %

Finnair Group Business Units FINNAIR GROUP SCHEDULED PASSENGER TRAFFIC Finnair Scheduled Passenger Traffic Finnair Cargo Aero Fly. Nordic Finnair Aircraft Finance LEISURE Finnair Leisure Flights Suntours Ltd TRAVEL SERVICES AVIATION SERVICES Finland Travel Bureau Finnair Technical Services Area Northport – ground handling Estravel Amadeus Finland Finnair Catering Finncatering Finnair Facilities Management

Airline structure • Finnair Scheduled Passenger Traffic • Long-haul traffic • European traffic • Domestic trunk routes • Finnair Leisure Flights • Mediterranean, Asia, North and South America • Aero • Feeder traffic operator based in Tallinn, Estonia • The Baltics and Southern Finland • Fly. Nordic • Low cost operator based in Stockholm • Scandinavia and elsewhere in Europe

Superiority of product • Direct to 50 international destinations – No time-consuming transfers at crowded airports • Best schedules – Morning-evening concept • Most punctual in Europe with least cancellations • Top class service in Europe • oneworld – alliance with best quality and coverage • New aircraft in European traffic

Finnair Financial Targets ”Sustainable value creation” Operating profit (EBIT) EBIT margin at least 6% => 110 -120 mill. € in the coming few years EBITDAR margin at least 17% => over 300 mill. € in the coming few years Economic profit To create positive value over pretax WACC of 8% Adjusted Gearing adjusted for aircraft lease liabilities not to exceed 140 % Pay out ratio Minimum one third of the EPS

Finnair’s Financial Targets Description of targets

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