* Q2 adjusted EBIT -20 mln euros vs 3 mln in Reuters poll
* Cuts full-year view, sees significant 2014 loss
* Expects deal with pilots by September
* Declines to comment on Russia risk
* Shares fall 1.2 pct
(Adds CEO, analyst comments, Russia risk)
HELSINKI, Aug 15 Loss-making Finnair
cut its full-year profit forecast on Friday after posting a
weaker-than-expected quarterly result due to delayed cost-cuts
and tough market conditions.
Stiff competition from discount carriers, high fuel prices
and unfavourable exchange rates put pressure on the
state-controlled airline while it struggled to implement planned
cost cuts in the face of strong labour union resistance.
"Due to delays in the personnel cost reduction negotiations
and the unfavourable market conditions driving the decline in
unit revenue, Finnair estimates that its 2014 operation result
will show a significant loss," it said in a statement.
The company had already cut its sales guidance in June,
forecasting a significant fall in turnover from 2013, but
declined at that point to update its profit outlook until it saw
how negotiations with staff over cost cuts proceeded.
Finnair shares were down 1.2 percent at 2.49 euros by 1307
"This was quite a gloomy guidance. It indicates the company
has rather low expectations for the second half of the year
too," said Pohjola analyst Jari Raisanen.
Finnair's second-quarter core operating result fell to a
loss of 20 million euros ($27 million) from a profit of 7.5
million euros a year ago, also missing analysts' average
forecast of a shrinking profit.
Finnair has in recent years expanded its flights to Asia,
but that strategy would backfire if Russia were to ban European
flights through its airspace.
Prime Minister Dmitry Medvedev last week said Moscow was
considering such a move in reaction to EU's latest sanctions
owing to Ukraine crisis, but some analysts consider such a step
"This would be a major negative for Finnair, which gets more
than 40 percent of its revenues from Asia ... if that ban were
to continue longer, the company would have to make significant
strategic changes," Pohjola analyst Jari Raisanen said.
"I doubt that would really happen. It would have so much
negative impacts to Russia itself."
Finnair declined to comment on the Russia question.
The airline said it had in June reached 176 million euros of
annual cost savings since 2010 and that it was committed to hit
its target of 200 million euros by the end of the year.
After failed talks with cabin crew, it recently decided to
outsource some 500 staff. Now it said it was making progress in
its plans to cut pilots' wages, and expected to strike a deal
soon with their union.
"Negotiations with pilots are proceeding, and we expect to
have a deal in early September," CEO Pekka Vauramo told Reuters.
Finnair has ordered 11 A350 aircraft from Airbus as
it looks to replace planes in the coming years. Its weak
profitability had not yet put that plan at risk, Raisanen said.
"It would be good to show some results to help with the
financing ... But it will take some more years anyway, and they
will probably use sale and leaseback type of arrangements," he
said, adding that Finnair would be good to cut costs by
outsourcing more of its short flights.
(1 US dollar = 0.7485 euro)
(Reporting By Jussi Rosendahl and Sakari Suoninen; Editing by
Sophie Walker and David Evans)