Finnair's shares are collapsing as the airline warns that its Asia route network is no longer sustainable.
Finnair's biggest strength when it comes to long haul flights has been its geography. The airline has a huge route network to Asia because of how far north it is. The airline has promised passengers the fastest travel time from Europe to Asia if they combine the easy-to-use airport with the favorable geography.
Finnair struggled a lot during the Pandemic. The markets in which Finnair was the strongest have largely been closed for two years.
Asia is slowly starting to reopen. Finnair has built up its US route network. The airline has added US destinations and launched long haul flights out of Sweden.
Finnair warned of a new obstacle just as things were starting to look better.
The European Union has banned Russian aircraft from flying in its airspace, and it is expected that this will be reciprocated. Finnair warned about the implications. The financial impact of this will be significant, and as a result the airline has withdrawn its guidance related to Q1 2022.
Finnair CEO Topi Manner describes this.
“The crisis in Ukraine touches all Europeans, and we understand the EU’s decision to close its airspace. We are implementing our contingency plan as the situation has a considerable impact on Finnair. 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.”
In the event that this situation continues, the airline is planning new traffic and cost savings plans. The airline has a good cash position, with 1.7 billion euro on hand at the end of the year.
All long haul airlines in Europe will be negatively impacted by these airspace closings. Finnair will be hit the hardest by European airlines because of its huge geography advantage.
If this continues, I think Finnair will shift more flights to North America as they can't operate most Asia flights profitably while avoiding Russia.
Russia's invasion of Ukraine is having a wide-ranging impact. The loss of life is the most severe, but when it comes to aviation, the implications are endless. Finnair is one of the first airlines to warn about the financial impact of Russia closing its airspace.
Finnair has been selling points for long haul flights because of their efficient connections to Asia. That is no longer the case.
It's anyone's guess how long this will last. The global aviation industry will have to make changes if Russia is off limits for a long time.
Do you think the airspace bans will last?
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