Finland’s airports will require more public funds to ensure national connectivity. Finnish airport operator Finavia has published its H1 2023 report. In all, it is a mixed result, with some positive news despite the challenges posed by the closure of Russian airspace.
Finavia: Improved Operating Margin Through Cost-Cutting
In the first half of 2023, air traffic demonstrated promising growth. Increased passenger volumes bolstered Finavia’s revenue, which derives mainly from air traffic. This positively impacted the company’s profitability and led to a remarkable 131% improvement in the operating margin before extraordinary items, totaling EUR 43.2 million. Despite the adversity posed by the COVID-19 pandemic, Finavia successfully achieved the targets set by its cost-cutting program. As a result, Finavia substantially reduced EUR 300 million in operational costs and investments.
Reduced Passenger Flow at Helsinki Airport Results in 14.5m EUR Deficit
However, the panorama isn’t entirely rosy. The company posted an operating result in the red, standing at EUR -14.5 million. A considerable chunk of this deficit is attributed to the reduced passenger flow at Helsinki Airport, a direct consequence of the Russian airspace closure. Presently, the passenger count at Helsinki Airport is about 70% of what it was pre-pandemic in the first half of 2019. This low passenger volume has a critical ripple effect that impacts connectivity in Finland. Helsinki’s air traffic revenues primarily subsidize the operational costs of regional airports.
Financing of the Airport Network is “Dire”
Finavia’s CEO, Kimmo Mäki, offers a sobering perspective on the situation, “We estimate that passenger volumes and, consequently, Finavia’s air traffic revenues will remain low for a long time due to the closure of Russian airspace. Due to moderate passenger volumes, Helsinki Airport’s revenues are not adequate to cover the operation of all regional network airports or future investment needs. Despite the fact that we are actively continuing our work to launch new flight connections, as well as implementing cost-cutting measures and taking other actions to ensure financially sustainable operations, the financing of the airport network is facing a dire situation.”
A Sluggish Recovery for Finland’s Smaller Network Airports
The first half of 2023 underscores a sluggish recovery of passenger traffic, more so at Finavia’s smaller network airports. There’s been a persisting decline in the passenger numbers at these smaller hubs for several years, and the horizon shows no significant signs of reversal.
Public Financing for Regional Connectivity in Finland
The Finnish government’s temporary financial support for flight connections, including Joensuu, Jyväskylä, Kajaani, among others, is set to expire in April 2024. The potential continuation of these services without support might inflict annual losses estimated at EUR 20 million on Finavia.
As Mäki points out, discussions about regional air traffic subsidies must be holistic, factoring in the repercussions on Finavia’s financial health. He emphasized, “No aircraft can safely land or take off without a well-operated airport.“
Some Regional Airports Have Improved
However, it’s not all gloom and doom. Certain regional airports, such as Tampere-Pirkkala, Rovaniemi, and Turku Airports, have reported positive trends in passenger volumes, thanks to the inauguration of new direct international routes. The Lapland region, globally recognized as an enchanting tourist spot, further elevates these numbers. Rovaniemi’s passenger flow has surpassed its 2019 count, while airports in Kittilä, Ivalo, and Kuusamo are not far behind.
While challenges persist, the airport group looks for opportunities. The overarching need is to devise a robust long-term financing strategy to ensure Finland’s airport network’s continued success and sustainability.