Finnair said today that it expects to receive an unsecured loan facility of up to €400 million from the State of Finland. The loan, which is subject to government and EU approval, should help the airline to get through the coronavirus pandemic and continue its development as a premium airline.
Government loan should strengthen Finnair
The Finnish government is preparing to provide an unsecured hybrid loan of up to €400 million ($488 million) to Finnair to help keep the majority state-owned airline afloat. The potential funding arrangement is subject to a final decision by a Government Plenary session at which the final terms and conditions will also be determined. The EU Commission must also give its approval for the hybrid loan.
At the end of the third quarter of 2020, Finnair was reported as having equity of €940 million ($1.146 billion) and cash reserves of €725 million ($884 million). The loan facility would be set up to enable Finnair to access the funds if its equity or cash situation dropped below the limits to be defined in the loan’s terms and conditions.
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Finnair is looking to the future
The Finnish government said there had been a slower than expected recovery in air traffic because of the COVID-19 pandemic’s second wave. As a result, Finnair had suffered heavy losses as it operates at around 10% of normal capacity. The minister in charge of state ownership policies, Tytti Tuppurainen, said,
“The state is committed to acting as a responsible anchor owner for Finnair. Finland’s geographic location is challenging, and therefore we will not manage without functioning air connections.”
The airline is preparing a range of scenarios for rebuilding its network in 2021, depending on how the post-pandemic future shapes up. The company says that it started 2020 with a strong balance sheet and cash position. It now wants to ensure that it emerges from these exceptional times with the ability to continue its strategy of connecting Europe and Asia.
Finnair’s CEO Topi Manner said,
“The hybrid loan would be an important facet in ensuring our financial stability if the recovery in air traffic is slower than expected. We have during 2020 implemented several financing arrangements in order to bolster our finances and enable a cost-efficient cost structure, and we plan to continue these measures.”
Financing has kept Finnair afloat
The State of Finland has shown its support for Finnair, in which it has a 55.9% holding, right from the outset of the COVID-19 pandemic. In March 2020, as countries around the world closed their borders, the government approved a €600 million loan for the airline.
As well as securing loans, Finnair raised over €471 million ($575 million) through a rights issue. The airline also entered into a sale and leaseback agreement in August for an Airbus A350 aircraft. Last week, the carrier announced that it had been granted export credit support of over €100 million ($119.3 million) from export credit agencies in France, Germany, and the United Kingdom.
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