In a move designed to solidify the company's financial position, Finish national flag carrier Finnair has announced that it plans to buy back $2.2 million of its shares. The Helsinki-based airlines' board of directors decided to acquire its shares based on an approved authorization during the Finnair Annual General Meeting held on 29 May 2020.
A statement released Friday that Simple Flying Finnair saw, Finnair says that the maximum number of shares to be acquired is 1,800,000. This figure corresponds to 0.13% of the total number of shares. Finnair currently holds 170,660 of its shares, which correspond to around 0.01% of its total shares. The maximum allocation of money to purchase shares is €1.8 million.
The shares are for FlyShare
The shares buy-back scheme is scheduled to begin when the statement was released, February 19, 2021, and must be completed by March 31, 2020. The Nordic airline plans to buy the shares through public trading on the Nasdaq Helsinki stock exchange for the prevailing market price at the time of purchase.
Finnair says that its newly acquired shares will be primarily used to implement its Share Savings Plan (FlyShare) and long-term share-based incentive scheme for key personnel. During the Annual General Meeting held last May, the board approved the acquisition of a maximum of 5,000,000 shares and use them to finance Finnair's incentive and remuneration schemes. The authorization to purchase its shares remains in effect until November 29, 2021, so the current buy-back scheme might not be the last one we see from the airline.
Why do airlines buy back their shares?
Airlines, just like other publically traded companies, buy back their shares for several reasons. Some may have large amounts of cash that they do not want to sit on, so spend it buying back previously issued shares. This then helps airlines to reduce their costs as they have fewer dividends to payout to shareholders. Buying back shares is also a way of pushing up the airline's share price, which many people use as a litmus test to measure an airline's performance.
Since the COVID-19 pandemic first appeared in Europe, the Finnish government, which owns a 55.9% stake in the airline, has helped keep the oneworld alliance member in business with a €600 million loan. On top of the government loan, Finnair also secured over €471 million through a rights issue of its shares. Despite the government aid and the rights issue, Finnair still made hundreds of staff redundant while putting others on long-term leave.
Finnair executives are the winners
This new buyback of shares would appear to give senior managers and board members a financial perk. Of course, the airline can justify this by saying that because of the medical emergency, Finnair's share price warrants the airline purchasing as much of its shares as it can.
According to newswire service Reuters, Finnair reported its third consecutive quarterly loss of €162.9 million for the final quarter of 2020. With a recovery in air travel still not guaranteed, many people may be questioning why Finnair is buying back its shares now.
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