The European Union has backed an agreement between Finnair and the Finnish government that will see the flag carrier of Finland receive a hybrid loan of up to €400 million (~$448 million). The deal was signed between the state and the airline on March 17th.
According to a statement shared this week, the EU Commission’s competition authority approved the arrangement in line with the European Union’s state aid customs. The financial support comes on the back of the unprecedented impact that the pandemic has caused on the aviation industry. As a result of the dire conditions, Finnair has been reporting notable losses amid ongoing travel restrictions and related flight suspensions.
Of the credit limit, around €350m (~$418m) can be used by Finnair based on the state aid decision made by the EC earlier this month. The airline can access the funds if its cash or equity position falls below the limits “to be defined in the facility’s terms and conditions.” Moreover, the remaining approximately €50m (~$60m) share will be brought to approval by the Commission in the future.
Finnair CEO Topi Manner shared his thoughts about the financing. The executive is thankful for the support affirms that his airline will remain focused to rise above the challenges.
“Through comprehensive and timely financing actions we have sought to secure a clear path for Finnair out of the pandemic. We are grateful for this important support by the State owner. The now approved hybrid loan is an important step in ensuring financial stability of Finnair even in a situation where the traffic recovery would start later than expected,” shares Manner in the statement.
“We continue to work to enhance our cost structure and secure our competitiveness, in order to be able to implement our strategy in the post pandemic, highly competitive market.”
Following the catalyzing of the virus last spring, Finnair shared that it was losing approximately €2m (~$2.39m) per day. Subsequently, by fall, its revenues were falling by 89%. In a bid to help solidify the firm’s financial position, it announced last month that it plans to buy back $2.2m (~$2.63m) of its shares.
Altogether, at the end of 2020, Finnair’s equity was €896.6m (~$1bn). Meanwhile, its cash reserves were at €823.7m (~$984.20m). The company will nonetheless be hoping for a better climate this summer as the global health crisis continue to take its toll on the industry. The carrier told Simple Flying that it is confident that its core markets will bounce back.
What are your thoughts about Finnair signing an agreement with the government of Finland to secure a hybrid loan? Do you feel that this is a good move for the carrier? Let us know what you think of the situation in the comment section.