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Finnair looks to Asia as catalyst for growth

7 Nov 2010

Asia is proving to be the main driver for the recovery of Finnair, which, along with other airlines, struggled during the recession. It recently posted its first quarterly profit in almost two years.

Mika Vehviläinen, its new chief executive officer, cited the rise in Asian traffic as a catalyst for improvement, a factor that has also boosted the airline’s decade-long decision to focus on the region.

“Things are looking up, I would say, it’s going pretty well and we’re seeing business travel returning” said Vehviläinen. “Asian travel is especially growing, really strongly. The Asian revenues are now, if you include European feeder traffic, about 55 percent of our total income.”

Finnair's has always had an ace up its wing – its Helsinki Vantaa hub provides some of the shortest direct flight times between Europe and Asia by crossing the Arctic Circle and going “over the top”, something airlines like Air France at Paris CDG and Lufthansa at Frankfurt are unable to do.

Vehvilainen, former head of German engineering giant Siemens, is no stranger to Asia's potential, particularly those shown by a booming India and China. He said: “In my previous role, I had a large R&D section in China so I’m pretty familiar with the location and opportunities. Of course, it helps to understand the local conditions in a market.”

“If you look at somewhere like Shenzhen in China, there are dozens of new technology companies going there. And they are actually globalising their operations, they are buying other companies, they are expanding. Increasingly, I think the future customers of ours are going to be Asian business travellers coming over to Europe.”

Japan too, second in the world economic rankings and a nation famously obsessed with technology, is also proving a very lucrative market for Finnair. Finnair's top man observed:"If you look at leisure travel out of Japan, the point of sale of some of those routes is 90 percent from Asia entering Europe. I think there are tremendous opportunities for further growth in the Asia market, and that’s what we’re counting on.”

But despite attempts to grow in India and China, during the economic crisis, neither country was without its casualties for Finnair with regards to route closures. Guangzhou and Mumbai have ceased operating, with neither set to reopen any time soon. Vehviläinen said: "If we are going to expand further in China, the chance that it will be somewhere other than Guangzhou is quite high. There are a number of what we might call secondary cities in China, but as you know they represent millions of people. These offer opportunities further down the road as new destinations.”

Regarding India, Vehviläinen said the market's price-consciousness and low yields, had proved “very challenging” despite high traffic flows in and out of the country. Instead, fresh opportunities, he believed, would come in the guise of soon-to-be fellow oneworld member, Kingfisher Airlines. “What I’m looking for there is the expansion of cooperation now that Kingfisher is joining Oneworld, and that allows us to connect to destinations within India."

Finnair is not the only oneworld member to single out Kingfisher – British Airways just last month announced new codeshares across India, Sri Lanka, the UK and continental Europe.

Whatever advantage Helsinki gives Finnair is not likely to be threatened any time soon, with few airports in Scandinavia offering direct services to Asia. Rivals such as Air France, Lufthansa and British Airways, which Finnair is loathe to compete with directly, can only tempt away those travellers favouring Helsinki’s shorter flight times with significantly lower fares.

Finnair has also worked hard to protect feeder traffic to Helsinki transiting on to its Asian network. In September, it performed the rather canny move of purchasing an important stake in Finnish domestic carrier Finncomm, which after years of providing feeder traffic to Finnair, decided to seek out a buyer.

For more on Finnair's plans for Asia, click here. For more information on the carrier, visit www.finnair.com

Andrew Gough

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