Finnair teeters on edge of bankruptcy due to compulsory flights through Russian airspace.
Finnish national pride, Finnair, is grappling with mounting financial difficulties despite being partially owned by the Finnish government. Despite no immediate talks of a sale, ongoing pilot strikes have led to the cancellation of hundreds of flights, posing a significant threat to the carrier's profitability.
The COVID-19 pandemic severely impacted Finnair's revenue in 2020, causing it to drop from €3 billion to less than €1 billion. Consequently, the airline has had to make drastic cuts, with its debt nearly quadrupling to almost €2 billion over the past five years — nearly four times its market capitalization.
Estonian aviation expert Sven Kookemelk, former head of airline Nordica, believes Finnair's business model is severely affected by the closure of Russian airspace. He contends that Finnair can no longer deliver passengers to Asia as quickly as its competitors. Kookemelk suggests the airline will need to significantly reduce its fleet due to the airspace closure, with several long-haul aircraft currently grounded and an aging short-haul fleet in need of replacement.
However, Kookemelk doubts the Finnish government has the resources to bail out Finnair, given the growing defense spending. Despite Finnair's struggles, Helsingin Sanomat predicts the airline's operating profit could reach between €100-200 million by 2025.
Nonetheless, Finnair faces operational disruptions due to recurring strikes by the Finnish Aviation Union, which have led to over 100 flight cancellations per strike and affected thousands of passengers, adding uncertainty and potential reputational damage.
To address Finnair's financial challenges, the airline must focus on cost management and efficiency, restructuring debt or seeking additional capital, improving labor relations, and diversifying markets or routes. Enhancing customer communication and flexibility amid disruptions could also help sustain customer confidence and loyalty.
The financial struggles of Finnair, partially owned by the Finnish government, have been exacerbated by the closure of Russian airspace, causing concerns about its business model in the technology-driven general-news landscape. In an effort to address these challenges, Finnair must focus on cost management, restructuring debt, and diversifying markets, while also improving labor relations and enhancing customer communication.
