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Wednesday, September 27, 2023

Finnair Says its Core Business of Flying to Asia is No Longer “Economically Sustainable”

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Finland’s national airline EU-wide sanctions aimed at hurting Russia have just blown Finnair’s long-haul business model out of the sky.

The Helsinki-based airline said on Monday that its flights were no longer “economically sustainable” or “competitive” and that it was preparing for a “prolonged” crisis.

Finnair’s long-haul business model is predicated on providing the quickest northern route between Europe and Asia, and it has expanded its network across Asia in recent years to accommodate rising demand.

Finnair’s ability to fly through huge swaths of Russian airspace gives the airline a significant time and distance advantage between Europe and Asia.

If Finnair is unable to fly over Russia, passengers will have to wait longer than other carriers to get between Europe and Asia.

Finnair, meantime, has been denied access to Russian airspace after Finland and the European Union banned Russian planes from flying in their area.

“The crisis in Ukraine touches all Europeans, and we understand the EU’s decision to close its airspace,” commented Finnair’s embattled chief executive Toppi Manner on Monday.

Finnair had temporarily halted flights to five Asian countries, including South Korea, Japan, and China, the day before. The airline has since realized that the problem may not be resolved in a week.

“We are implementing our contingency plan as the situation has a considerable impact on Finnair,” Manner continued.

“Bypassing the Russian airspace lengthens flight times to Asia considerably and, thus, the operation of most our passenger and cargo flights to Asia is not economically sustainable or competitive.”

The airline has retracted its financial guidance for the first half of 2022, citing a “negative financial impact.”

Flights to Bangkok, Phuket, Singapore, and Delhi can continue, but flight times will be increased by around an hour.

Finnair’s business model has already been harmed by the virus, as well as the ongoing pandemic restrictions that have put most of Asia off-limits for the past two years.

The airline’s cash position is robust, according to Manner, but the Finnish government should be prepared to assist its flag carrier because flight connections are crucial for “economy, safety, and supply security.”

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