Finnair is losing around two million euros per day as the coronavirus pandemic continues to decimate airline profits. To help combat the decline in revenue, Finnair announced today in its first-quarter report that it plans to raise 500 million euros ($543 million) through a rights offering.

With the COVID-19 emergency forcing airlines to ground fleets and cut costs, Finnair will, with the rights offering, look to raise cash to add to its war chest.

Shares in Finnair dropped 10.7%

Reacting to the news that Finnair was looking to raise more cash than its equity, the business news website, Market Screener, is reporting that shares in the oneworld Alliance member dropped by 10.7%. Now trading at 3.81 euros per share, Finnair would have a market capitalization value of 488 million euros, 12 million euros less than the amount it is looking to raise.

The national airline of Finland said that preparations were taking place for the rights issue and that it will be managed by Citygroup and Finnish financial services group Nordea.

When talking about the current situation, Chief Executive Topi Manner said in a statement:

"The coronavirus is a major blow to global aviation and to Finnair. In the current quarter, the majority of our fleet is grounded, and the loss for the second quarter will be considerable, approximately 2 million euros per day, even after the cost adjustments."

Adding: "We want to ensure with this share issue that Finnair is a competitive airline in the future."

The Finnair boss went on to say that as of the end of March, the airline had liquid cash funds of 833 million euros.

The Finnish government owns 55.8% of Finnair

"Finnair's liquidity is safeguarded until the end of H1'21, but the large share issue of 500 million euros may not have been expected in the markets at this stage," said Inderes analyst Antti Viljakainen when speaking to Market Screener.

Finnair has announced that its largest shareholder, the Finnish government (55.8%), has agreed to support by adding money to help cover the rights offering, which will go before the Finnish parliament for approval.

Finnair

Before the first-quarter results were announced, analysts were predicting a loss of 0.60 euros a share down a further 0.27 euros from the loss posted for the same period a year earlier. What investors got instead was a more extensive loss of 1.14 euros, some 0.81 euros more than the first quarter of 2019.

Finnair gave investors a heads up on March 16 when it issued its second profit warning in three weeks, saying that 2020 was going to be a challenging year and that the airline was cutting 90% of its average capacity starting the beginning of April.

Now in the second-quarter, Finnair is telling investors that the next three months will see the airlines lose around 2 million euros a day even after cost adjustments directly related to the coronavirus.

SAS and Norwegian are taking drastic measures

Earlier in the week, Scandinavian airline and rival SAS said that it was cutting roughly 5,000 full-time staff from its workforce and that it did not expect to see 2019 levels until at least 2022.

SAS airbus getty images

While things do not sound so rosy for Finnair and SAS, Norwegian Air Shuttle is in a world of hurt, saying it could very well run out of cash by the middle of May.

While Finnair and SAS will ultimately survive, Norwegian is busy scrambling to convert debt into equity to qualify for state aid.