Finnair's new chairman asks state to reduce stake

HELSINKI Wed Mar 27, 2013 2:19pm EDT

A Finnair airplane is docked at the Chopin International Airport in Warsaw February 6, 2012. REUTERS/Peter Andrews

A Finnair airplane is docked at the Chopin International Airport in Warsaw February 6, 2012.

Credit: Reuters/Peter Andrews

HELSINKI (Reuters) - The Finnish state should reduce its controlling stake in Finnair (FIA1S.HE), its new board chairman said, which would allow the airline to seek more alliances and merger and acquisition deals.

Finnair turned profitable for the first time in four years after cutting costs, but it faces tough competition from discount carriers.

Analysts say the state's controlling stake in Finnair has made it harder to consider more radical strategy changes, as labor unions pressure politicians to preserve the status quo.

Asked if Finnair would be better off if the state reduced its 55.8 percent stake in the company, chairman Klaus W. Heinemann said: "In order to give Finnair access to all available growth options in the global market, flexibility of the state ownership is good news," he said on the sidelines of the shareholder meeting that had confirmed his nomination.

He said the industry is moving away from government ownership, and most airlines where the state ownership has been gradually reduced have since performed positively.

Some members of the Finland's current government, led by the right-leaning National Coalition, are willing to lower the stake in Finnair to open doors for more alliances and M&A deals.

The six-party coalition has not yet agreed on any deal, but officials say the idea is getting closer to consensus.

In a bid to cut costs and focus on more profitable Asian flights, Finnair handed over a third of its European short-haul flights to low-cost British airline Flybe (FLYB.L) last year. But it has failed to find more such partnerships.

Finnair is seeking a new chief executive after Mika Vehvilainen announced he was leaving to become chief executive of cargo-handling equipment maker Cargotec (CGCBV.HE).

Heinemann said an announcement on a new boss could come in weeks.

(Reporting By Jussi Rosendahl; Editing by Louise Heavens)

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