Finnair has announced plans to cut 1,000 jobs, 15% of its workforce, with chief executive Topi Manner warning “a turn for the better is not in sight”.
The Finnish flag carrier also confirmed the long-term layoff of thousands of employees would continue. Yet it managed to raise €200 million through a bond sale, becoming the first European airline to do so since the Covid crisis began.
Almost all Finnair’s 6,200 employees in Finland have been laid off for part of the spring and summer, either for a fixed term or until further notice.
“A rapid turn for the better in the situation is unfortunately not in sight. We simply must adjust our costs to our new size.”
Finnair’s fund-raising bond offered investors no security and repayment will rank behind the rest of Finnair’s debt in the event of bankruptcy, but the bond carries annual interest of 10.25% and investors view it as backed by the Finnish government which holds a majority stake in the airline.
One banker involved in the deal told the Financial Times the government shareholding “gives people confidence Finnair won’t be allowed to fail”.
A second banker said it showed “even” aviation companies “have access to bond markets”.
However, investment manager Luke Hickmore of Aberdeen Standard Investments told the same newspaper: “The risks are not disappearing just because it’s state-owned.”
He suggested the deal was “symptomatic of the yield-chasing environment we are in”, with investors attracted by the high interest rate.
Finnair announced it would use the funds to repay an existing bond which carries a lower interest rate but which would become more expensive if not repaid by October.
The Finnair redundancy consultation will involve 2,800 workers in Finland, and others abroad. The carrier employs 6,700 in total.
Manner said: “The pandemic and the exceptionally tight travel restrictions in Finland have impacted flight demand and we will operate only a small part of our capacity compared to last year.
“As the timeline for aviation’s recovery is unclear, our plan is to implement significant temporary layoffs to adjust our resources.”
Finnair also increased its planned savings target from €80 million to €100 million.
The airline reported an operating loss of €171 for the three months to June and a net cash outflow of €597 million in the first half of the year.
Major US carriers Delta Air Lines, United and American Airlines have issued bonds in the US off the back of extensive aid from the US government.