Finnair seeks closer partnerships with large players

HELSINKI Thu Mar 27, 2014 2:09pm 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) - Finland's flagship carrier Finnair (FIA1S.HE) will need closer partnerships with larger airlines and ownership changes to avoid becoming sidelined in the market in coming years, the chairman of its board said on Thursday.

Chairman Klaus Heinemann, addressing Finnair's shareholder meeting, noted that the state-controlled company must become more profitable and called for "open dialogue" on different ownership and financing options.

The airline finds leaseback arrangements attractive at the moment, its chief executive, but declined to give any details of ongoing negotiations.

"Finnair will in the coming years need closer partnerships with the largest players of the industry," Heinemann said. "Our profitability must ... be so good that it gives us a say in any potential partnership arrangements."

Chief Executive Pekka Vauramo told Reuters the company would not stand idle if its direct competitors were to merge, but declined to elaborate what its option were.

"If there was a wave of consolidation in the Nordic countries, staying alone would be the worst possible option," he said, adding Finnair planned to stay in the One World alliance, which includes British Airways and American Airlines.

The company has a strategy of owning about half of its planes outright and leasing the other half. "It has proved to be a good balance, also in risk-management perspective," Vauramo said.

Finnair recently agreed to sell and lease back two yet-to-be delivered Airbus A350 aircraft to GE Capital Aviation Services (GECAS). Vauramo would not comment on the talks for another two aircraft with the same company, but added conditions for such deals were very good.

"We seek to profit from the situation in the financial markets. Aircraft are very much desired at the moment and it makes sense to take advantage of that."

Loss-making Finnair, 56-percent owned by the Finnish state, faces tough competition from discount carriers. Earlier on Thursday, it announced a plan to cut 680 jobs if it could not agree to wage cuts with workers.

The airline would not compromise on savings, Vauramo said.

Finnair launched a cost-cutting program in 2011 targeting annual savings of 140 million euros by outsourcing operations and cutting jobs. In 2012, it said it would cut an additional 60 million euros in costs.

"We have to reach the cost savings whose targets we have announced earlier, it is really critical," Vauramo said. "Deadlines are approaching fast."

(Reporting By Jussi Rosendahl; Editing by Tom Heneghan)