LondonXtreme
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The business model of Finnair?

Tue Jan 15, 2019 6:07 pm

The strategy of Finnair is connecting passengers travelling between Asia and Europe. I somehow doubt the profitability of AY's most long haul routes to Asia.

-How about the premium O&D passenger actually travelling between HEL and Asia?
-Does AY make money in 2nd, 3rd tier cities, in particular China and Japan?
-Any growth in North America with more destination adding in future?
 
MalevTU134
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Re: The business model of Finnair?

Tue Jan 15, 2019 6:22 pm

LondonXtreme wrote:
The strategy of Finnair is connecting passengers travelling between Asia and Europe. I somehow doubt the profitability of AY's most long haul routes to Asia.

-How about the premium O&D passenger actually travelling between HEL and Asia?
-Does AY make money in 2nd, 3rd tier cities, in particular China and Japan?
-Any growth in North America with more destination adding in future?

I am puzzled by your comments.

Why would you doubt the profitability? AY's numbers are public. Or are you suggesting that they are cooking the books?

And if 2nd and 3rd tier cities weren't profitable, why would they keep adding more and more of them?
 
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PatrickZ80
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Re: The business model of Finnair?

Tue Jan 15, 2019 6:36 pm

Indeed numbers don't lie, they're proven to be profitable.

Many of those 2nd and 3rd tier cities only got one connection to Europe, that's Finnair. This means anyone flying between that city and Europe automatically ends up with Finnair, there is nothing else. At the major hubs there is far more competition so they got a lower market share. Besides that the fares they can ask on those routes are also limited by the competition, while on the destinations where they're the only one they can ask higher fares without consequences. If they do that on a major hub, it has consequences as passengers will walk away to the competition. It's the absence of competition that makes the 2nd and 3rd tier cities profitable for them.
 
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AirlineCritic
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Re: The business model of Finnair?

Tue Jan 15, 2019 6:45 pm

It is difficult to know the exact split between investments in one city or the other.

However, overall they are (somewhat) profitable. Obviously they aren't BA and in London. But, they seem to be running a decent operation.

Some anecdotal evidence:

HEL seems much, much more packed in the last two years than before. They need expansion...

Any time I have flown Finnair business class to Asia, it has been full.

Pricing seems often higher than competing flights, e.g., non-stop via MUC or ARN.

On AY European flights, they are less packed and business class is often not full.
 
sonicruiser
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Re: The business model of Finnair?

Tue Jan 15, 2019 6:47 pm

AY and SN are niche carriers in Europe that are unique in the sense that they are particularly well known in Asia and Africa respectively as compared to the EU legacies. AY has a much larger Asian network and SN has an equally sizable African network and this advantage allows them to thrive on connections from tertiary cities into Europe which effectively means they're not really competing with the big EU carriers as they're targeting a different market altogether.
 
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FlyRow
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Re: The business model of Finnair?

Tue Jan 15, 2019 6:50 pm

It's a big piramid sceme they use in Finland.
With the money from 4th tier cities they fund the fund 3rd tier cities who fund then 2nd tier, and finally the top brass run's away with the money.

Like really, why would a airline operate a business model for years on end if it wouldn't make financial sense? Do you think your doubts are better then a long established airliner?
You provide no arguments why you doubt it, just a gut feeling, then ask three random questions of which only one is related to the first statement.
F70-F100-RJ85-RJ70-E190-319-320-321-733-734-735-737-738-752-753-763-764-772-744-380
 
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SRQKEF
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Re: The business model of Finnair?

Tue Jan 15, 2019 7:16 pm

I've flown HEL-KEF on AY and the amount of Asian pax was impressive, it felt more like a regional flight in China or Japan! As others have said, they wouldn't be adding more smaller cities in Asia if the existing ones didn't work. Also, supposed "smaller" cities in China still have a population of millions and the average wealth there is rising.
Nothing compares to taking off in an empty 757 with full thrust!
 
a350lover
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Re: The business model of Finnair?

Tue Jan 15, 2019 7:41 pm

One could think they are putting most of their cards in just one market: Asia, but what a market! And considering where Finland is, they will always be a perfect spot to link Europe and North Asia, say Japan where they are truly leaders.

On top of that, it isn't exactly easy to "serve" Asian markets. From a simplistic Western point of view, we are very much used to fly in different carriers and pretty much "affected" by the same culture (read... in general terms!). That means that of course if I board a plane in Rio and they say "Hola" to me, it'll be feel nice and homey for me, but I am pretty open to receive just a general "hello" from any Western carrier without making much of a difference. I say this just to point out how particular and "different" the Asian markets are, and from a business proposal point of view, I'd say Finnair product is one of the best customized and presented for targeting the Asian markets where they are.
 
cityshuttle
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Re: The business model of Finnair?

Tue Jan 15, 2019 7:47 pm

AirlineCritic wrote:
Some anecdotal evidence:

HEL seems much, much more packed in the last two years than before. They need expansion...


They are actually expanding HEL right now ! :bouncy:
 
cschleic
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Re: The business model of Finnair?

Tue Jan 15, 2019 7:48 pm

LondonXtreme wrote:
The strategy of Finnair is connecting passengers travelling between Asia and Europe. I somehow doubt the profitability of AY's most long haul routes to Asia.

-How about the premium O&D passenger actually travelling between HEL and Asia?
-Does AY make money in 2nd, 3rd tier cities, in particular China and Japan?
-Any growth in North America with more destination adding in future?


Helsinki is their hub for to and from cities in Europe and Asia, not just O&D. It benefits from its location, similar to Dubai's location benefitting Emirates. Could Dubai O&D fill all of those 380s? No. There was an interesting Aviation Week magazine article about Finnair a few years back. One of the quirks of their model....overflight fees paid to Russia are an unusually large percentage of their operating expenses.
 
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HELyes
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Re: The business model of Finnair?

Wed Jan 16, 2019 11:41 pm

One thing that has supported Finnair in recent years are the joint ventures, Atlantic (AA/AY/BA/IB) in US market and Siberian (AY/BA/IB/JL) in Japan. I wonder if AY had opened SFO and LAX without the Atlantic JV, geography and the smallish home market work against them in N America. The Siberian JV has strengthen Finnair in Japan which is their key market, JAL especially is an important partner, JAL opening HEL was a big step. Finnair just announced Sapporo, their 5th destination in Japan.
 
RainerBoeing777
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Re: The business model of Finnair?

Thu Jan 17, 2019 12:10 am

sonicruiser wrote:
AY and SN are niche carriers in Europe that are unique in the sense that they are particularly well known in Asia and Africa respectively as compared to the EU legacies. AY has a much larger Asian network and SN has an equally sizable African network and this advantage allows them to thrive on connections from tertiary cities into Europe which effectively means they're not really competing with the big EU carriers as they're targeting a different market altogether.


NEVER compare an AY with SN! AY is an airline of a high level, its business class is one of the most praised, and it is preferable to be strong in Asia than in North America, Asia markets are stronger besides AY is consolidated in major airports in Asia such as NRT, BKK , SIN, ICN, HKG, PVG and PEK, plus AY is much more profitable than SN and also has a modern fleet of aircraft
CX - JL - LH - KE - KL - SQ - QR - QF - TG
 
skipness1E
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Re: The business model of Finnair?

Thu Jan 17, 2019 12:18 am

It’s geography, the easiest and quickest way from much of Europe one stop to certain key cities in Asia. The long haul fleet departs en masse in the afternoon after being filled with the connections from the arrivals bank, which are also on their way with the arriving pssengers from Asia. Like a mini Dubai but niche and sexier in blonde, great product and seems to work well.
 
MalevTU134
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Re: The business model of Finnair?

Thu Jan 17, 2019 12:27 am

HELyes wrote:
One thing that has supported Finnair in recent years are the joint ventures, Atlantic (AA/AY/BA/IB) in US market and Siberian (AY/BA/IB/JL) in Japan. I wonder if AY had opened SFO and LAX without the Atlantic JV, geography and the smallish home market work against them in N America. The Siberian JV has strengthen Finnair in Japan which is their key market, JAL especially is an important partner, JAL opening HEL was a big step. Finnair just announced Sapporo, their 5th destination in Japan.

I partly disagree with you on that. Finnair captures great part of traffic to N.America from Russia. It is almost always lost in discussions like this that AY's hub is an X-shaped hub, with the Western Europe-Asia leg being way larger than Eastern Europe-N. America leg, of course.
 
ewt340
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Re: The business model of Finnair?

Thu Jan 17, 2019 12:36 am

You see, sometimes it's better to make decent amount of profit out of 20 routes rather than make great amount of profits out of 3 routes.
You could say that Finnair is the mini Emirates of Europe.

Few of the things we need to understand is that Finnair are not a boutique airlines. They have good service and decent hard product, but they are not ME3.
If you look at their business class seat on A330, they use vantage seat, which is one of the tightest business class seat on the market. It allows them to increase the seat counts and lowering business class ticket prices.
Economy class pitch stands at 31" as well. Which is the standard.

They use mostly Airbus fleet with some ATR and Embraer for domestic and regional routes. So they are pretty efficient in terms of fleet commonality apart from the smaller regional aircraft that currently being operated and leased to Nordic Regional Airlines.
 
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HELyes
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Re: The business model of Finnair?

Thu Jan 17, 2019 1:17 am

MalevTU134 wrote:
I partly disagree with you on that. Finnair captures great part of traffic to N.America from Russia. It is almost always lost in discussions like this that AY's hub is an X-shaped hub, with the Western Europe-Asia leg being way larger than Eastern Europe-N. America leg, of course.


Yes you are right about Russia, last year showed a strong growth in Russia-HEL pax numbers and the majority are transfer pax. The market just is rather unpredictable, Russia is not what it could be for them but they are persistent.
 
MalevTU134
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Re: The business model of Finnair?

Thu Jan 17, 2019 1:29 am

HELyes wrote:
MalevTU134 wrote:
I partly disagree with you on that. Finnair captures great part of traffic to N.America from Russia. It is almost always lost in discussions like this that AY's hub is an X-shaped hub, with the Western Europe-Asia leg being way larger than Eastern Europe-N. America leg, of course.


Yes you are right about Russia, last year showed a strong growth in Russia-HEL pax numbers and the majority those are transfer pax. The market just is rather unpredictable, Russia is not what it could be for them but they are persistent.

You mean they have sisu....in this case, until 1991, that was siSU. :D
 
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HELyes
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Re: The business model of Finnair?

Thu Jan 17, 2019 1:50 am

MalevTU134 wrote:
You mean they have sisu....in this case, until 1991, that was siSU. :D


Heh yeah.. There's a bear in the attic and it's not going away. Just try to make the best of the situation ;)
 
Waterbomber
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Re: The business model of Finnair?

Thu Jan 17, 2019 7:27 am

HELyes wrote:
One thing that has supported Finnair in recent years are the joint ventures, Atlantic (AA/AY/BA/IB) in US market and Siberian (AY/BA/IB/JL) in Japan. I wonder if AY had opened SFO and LAX without the Atlantic JV, geography and the smallish home market work against them in N America. The Siberian JV has strengthen Finnair in Japan which is their key market, JAL especially is an important partner, JAL opening HEL was a big step. Finnair just announced Sapporo, their 5th destination in Japan.


Correct but JAL is playing with fire too.
Pax in Japan are paying JAL fares to board a JAL flight to Europe. The only problem is that when they go to check-in at the JAL counter, they are forwarded to the Finnair counter where they are told that they will be flying Finnair.
Try booking an itinerary and only seasoned flyers will realise that the flight with JAL code on it is actually a codeshare Finnair flight.

Finnair is a long haul LCC offering despicable service, similar to Ryanair. 4 hours into a 9 hour red eye HEL-NRT flight, they are still going around selling duty free with the lights on full brightness. That's when I get up and get rude with the cabin crew. I ask if they're freaking insane?

AY was loss-making until recently.
Now it's cheap fuel helping them out but I doubt that they'd be reporting profits for 2018. I think that they'll be break even.

Their business model is questionnable, their hub is a mess, both inside and out. The only thing they're useful for is for keeping their competitors honest.
The position is good on paper alone. On a 9 hour red eye, you can't get any sleep and your feeding flight is long and on a RJ or narrowbody.

AY doesn't serve a particular niche and is very vulnerable. Now Poland wants to copy their business model with LOT and quite frankly I wonder what Norwegian is daydreaming about TATL when their only semi-viable business case would be to fly East.

My problem with AY is not their network. They are building a smart network. Their fleet is ok, but A350's are overkill, what they needed are A330's.
My problem with AY is their product and village mentality. My meal on my last AY HEL-NRT flight was not even served on a tray because they didn't have any... They just put the items on my tray table, without asking me about meal options or telling me what I was going to eat.
Their A350 is a mess, with cushionless seatbacks, armrest IFE that needs duct tape to stay upright, and they're aparently noisier than other A350's.
 
ewt340
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Re: The business model of Finnair?

Thu Jan 17, 2019 1:03 pm

Waterbomber wrote:
HELyes wrote:
One thing that has supported Finnair in recent years are the joint ventures, Atlantic (AA/AY/BA/IB) in US market and Siberian (AY/BA/IB/JL) in Japan. I wonder if AY had opened SFO and LAX without the Atlantic JV, geography and the smallish home market work against them in N America. The Siberian JV has strengthen Finnair in Japan which is their key market, JAL especially is an important partner, JAL opening HEL was a big step. Finnair just announced Sapporo, their 5th destination in Japan.


Correct but JAL is playing with fire too.
Pax in Japan are paying JAL fares to board a JAL flight to Europe. The only problem is that when they go to check-in at the JAL counter, they are forwarded to the Finnair counter where they are told that they will be flying Finnair.
Try booking an itinerary and only seasoned flyers will realise that the flight with JAL code on it is actually a codeshare Finnair flight.

Finnair is a long haul LCC offering despicable service, similar to Ryanair. 4 hours into a 9 hour red eye HEL-NRT flight, they are still going around selling duty free with the lights on full brightness. That's when I get up and get rude with the cabin crew. I ask if they're freaking insane?

AY was loss-making until recently.
Now it's cheap fuel helping them out but I doubt that they'd be reporting profits for 2018. I think that they'll be break even.

Their business model is questionnable, their hub is a mess, both inside and out. The only thing they're useful for is for keeping their competitors honest.
The position is good on paper alone. On a 9 hour red eye, you can't get any sleep and your feeding flight is long and on a RJ or narrowbody.

AY doesn't serve a particular niche and is very vulnerable. Now Poland wants to copy their business model with LOT and quite frankly I wonder what Norwegian is daydreaming about TATL when their only semi-viable business case would be to fly East.

My problem with AY is not their network. They are building a smart network. Their fleet is ok, but A350's are overkill, what they needed are A330's.
My problem with AY is their product and village mentality. My meal on my last AY HEL-NRT flight was not even served on a tray because they didn't have any... They just put the items on my tray table, without asking me about meal options or telling me what I was going to eat.
Their A350 is a mess, with cushionless seatbacks, armrest IFE that needs duct tape to stay upright, and they're aparently noisier than other A350's.


You can't really complain about services when you labeled them LCC though.
And for profit, they are between black and red for the last decade. Passengers load factor is ok, but need to improve.

Now you need to remember, almost all Asian customers doesn't really care about the thing you just listed. Low ticket prices is the number one priority. Especially for Chinese customers.
Middle class and Rich Japanese wouldn't fly Finnair, they would fly JAL or ANA (my family are married to Japanese guys), they are extremely nationalistic. So the only Japanese that fly Finnair are the poor one or the one who doesn't care about services.

Same cases with Southeast Asian or South Asian. They don't care what airlines or what kind of service they get as long as it's cheap.
 
WholaLottaLove
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Re: The business model of Finnair?

Thu Jan 17, 2019 2:17 pm

HEL is actually ideally located for Asia-bound travel. It is the only hub in Europe that can fly the A350 to and from Asia within one day. Their A350 utilization rates are insane!
 
LupineChemist
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Re: The business model of Finnair?

Thu Jan 17, 2019 2:23 pm

Yeah, the single airframe for flights to E. Asia really lowers their costs and raises utilization rates.
 
gunnerman
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Re: The business model of Finnair?

Thu Jan 17, 2019 5:42 pm

Another thing is that SK provides strictly limited competition as it's primarily a Scandinavian carrier.
 
Nami
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Re: The business model of Finnair?

Sat Jan 19, 2019 9:19 pm

ewt340 wrote:
So the only Japanese that fly Finnair are the poor one or the one who doesn't care about services.


I assume this also applies to those with connecting flights in Europe on LH, KL, AF, BA and the like? Personally I've never met a Japanese person who was willing to waste a significant amount of time and take a detour of several thousands of kilometers just for "service", so from my own anecdotal evidence you might as well add EK and QR to that list.
 
cityshuttle
Posts: 92
Joined: Mon Jan 02, 2017 3:56 pm

Re: The business model of Finnair?

Sat Jan 19, 2019 9:48 pm

Waterbomber wrote:
HELyes wrote:
Their business model is questionnable, their hub is a mess, both inside and out. The only thing they're useful for is for keeping their competitors honest.
The position is good on paper alone. On a 9 hour red eye, you can't get any sleep and your feeding flight is long and on a RJ or narrowbody.


Business model questionable ?

They found there niche for sure, offering excellent connections EU-Asia and utilizing the A 350‘s and A 330‘s at the maximum per day.

Their hub is a mess ?

I’m traveling through HEL 30-40 times each year and it is very convenient for connections, T1 and T2 literally being one building and having a walking distance of maximum 20 minutes from gate 1 to gate 55 (from one end to the othe end). Lots of shops and restaurants, nice lounges (the Schengen Lounge could be larger though).

Feeding flight is long and on RJ or narrowbody ?

Same as almost every other hub airline (maybe besides EK) ... LH is feeding e.g. Poland-FRA-US/Asia with narrowbody, AF is feeding Italy-CDG-US/Asia with narrowbody, BA is feeding Germany-LHR-US/Asia with narrowbody ... also in the US the domestic feed to TATL / TPAC is with RJ‘s or narrowbodies is most cases.

What has AY done to you that you are insisting such weird things ?
 
ewt340
Posts: 790
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Re: The business model of Finnair?

Sun Jan 20, 2019 3:29 pm

Nami wrote:
ewt340 wrote:
So the only Japanese that fly Finnair are the poor one or the one who doesn't care about services.


I assume this also applies to those with connecting flights in Europe on LH, KL, AF, BA and the like? Personally I've never met a Japanese person who was willing to waste a significant amount of time and take a detour of several thousands of kilometers just for "service", so from my own anecdotal evidence you might as well add EK and QR to that list.


Yes. We all know ANA and JAL have extremely Japanese attitude in terms of service. Their products and ticket prices reflect that. Since they are Japanese who are going to and from Japan, logically speaking, they would be using ANA or JAL for non-stop flights.

Only people who wants cheap tickets would use EK, QR, LH, BA, or Finnair. Otherwise they would choose to fly non-stop to their destinations with JAL or ANA. Of course unless there is no non-stop flights between their destinations.

This is part of Finnair business model. Instead of wasting money and time to compete with ANA and JAL, they just provide cheaper tickets which they know both ANA and JAL can't provide.
 
cityshuttle
Posts: 92
Joined: Mon Jan 02, 2017 3:56 pm

Re: The business model of Finnair?

Sun Jan 20, 2019 3:37 pm

ewt340 wrote:
This is part of Finnair business model. Instead of wasting money and time to compete with ANA and JAL, they just provide cheaper tickets which they know both ANA and JAL can't provide.


You are aware that AY is in a JV with BA and JL, right ?

Besides, fares for AY flights to any Japanese destination are always higher than fares for AY flights to other Asian destinations like SIN, ICN, etc.
 
ewt340
Posts: 790
Joined: Tue Jul 10, 2012 7:22 pm

Re: The business model of Finnair?

Sun Jan 20, 2019 5:44 pm

cityshuttle wrote:
ewt340 wrote:
This is part of Finnair business model. Instead of wasting money and time to compete with ANA and JAL, they just provide cheaper tickets which they know both ANA and JAL can't provide.


You are aware that AY is in a JV with BA and JL, right ?

Besides, fares for AY flights to any Japanese destination are always higher than fares for AY flights to other Asian destinations like SIN, ICN, etc.


Yep, and that's why JL doesn't compete with AY since their business model are different.

Fares to Japanese destinations gonna be higher because of the fact that everything is more expensive in Japan.
Flights to Helsinki from Tokyo are cheaper on Finnair, while the flights with the condeshares between JAL and Finnair are operated by Finnair (for the long-haul operations).
And then the other options are the JAL flights which is $100 - $200 more expensive.

The same goes for many flights from/to Japan to some European destinations like Dublin or Rome.
 
armchairceonr1
Posts: 271
Joined: Sun Jul 30, 2017 8:09 am

Re: The business model of Finnair?

Sun Jan 20, 2019 6:01 pm

Waterbomber wrote:
AY doesn't serve a particular niche and is very vulnerable. Now Poland wants to copy their business model with LOT and quite frankly I wonder what Norwegian is daydreaming about TATL when their only semi-viable business case would be to fly East.

My problem with AY is not their network. They are building a smart network. Their fleet is ok, but A350's are overkill, what they needed are A330's.

A lot of nonsense in your post..

Norwegian doesn't fly east because they are not permitted to do so by Russia.

Finnair bought A340s and later A350s because A330 cannot carry heavy cargo loads far east, which is very important for AY. A339 would maybe be enough, but it was not available when AY ordered A350s.

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