Finnair’s revenue for the first quarter of 2021 consisted of 50% cargo operations. The airline flew 547 cargo-only flights, with March its highest cargo-revenue month of all time. Moreover, the Finnish flag carrier predicts an even greater demand for airfreight in Q2, boosted by the blockage of the Suez Canal. With prices having soared to 200% compared to pre-pandemic levels, the airline is well-positioned to profit from its CO2-efficient short northern route to Asia.
Presenting its Q1 report on Tuesday, Finnair said that while travel remains weak, cargo continues to perform well and accounts for 50% of the airline’s revenue. Topi Manner, the airline’s CEO, said that this was, not surprisingly, supported by the logistical challenges caused by the pandemic.
Port backlogs remain an issue after Suez
The airline expects another surge in airfreight demand in the coming quarter due to the events in the Suez Canal one month ago. When the Ever Given container ship was caught in a sandstorm and got wedged diagonally in the Canal in March, it held up an estimated $400 million per hour in international trade.
The Suez Canal, which links the Mediterranean and the Red Sea, offers passage to near 12% of the world’s cargo. Over 18,000 ships pass it every year, and ports are still trying desperately to deal with the backlog from the temporary obstruction to the waterway.
Finnair also believes it has a competitive advantage over other operators when transporting cargo from Europe to Asia. The short northern route is more CO2 efficient, which sits well with, for instance, Norwegian salmon exporters who are increasingly concerned with sustainability in their value-chain.
Prices have tripled over the past year
The airline’s cargo demand also enables long-haul passenger traffic. Last month, after over one year of not flying to North America, Finnair relaunched its Helsinki to New York JFK route on the back of cargo demand. March was also the carrier’s all-time best month in terms of cargo revenue.
“The cargo development price development pattern has been notable during the past months and during the course of the whole pandemic. In comparison to the previous quarter, the prices increased by 1/3. And in comparison to pre-pandemic levels, the prices have increased 200%,” Mr Manner noted in his presentation.
A summer of limited visibility
Finnair is hoping for a gradual recovery for passenger traffic, especially from Q3 onwards, although it recognizes the difficulty of making any accurate predictions. At the moment, it has scheduled 60 destinations for its summer network. These include sun destinations in Spain, Italy, and Greece.
However, more North Atlantic services will also be added in June, with Chicago and LA returning to the network and more frequencies to New York.
The overall revenue decreased in Q1 by 79.8% to 113.6 million euros compared to last year. The number of passengers also dropped by 90.2% to 0.3 million. Domestic tourism to Finnish Lapland was one of the bright spots of the quarter, the airline said while calling for concrete steps from lawmakers to ramp up international travel.
The carrier’s current liquidity of €1.2 billion is enough to see it through eight quarters at the current level of cash burn.