Finnair (FOY; NR/BB+ S) Roadshow

IPT on €500m WNG 5Y is MS+240a, books>€1b

Receives 2-notch uplift from BB- standalone rating on State of Finland (Aa1/AA+) that has a 55.7% ownership in the equity & history of financial support (as guarantor on loans, participation in equity raise & hybrid loan issuance - paid down since) during COVID. State of Finland also has 100% ownership in the airport operator & private co FINAVIA (managers 20 airports in Finland including logistics, cabin crew & ground handling). CoC with put at par for anyone who takes control (other than State of Finland) who causes a 1-notch downgrade from any rating agency. Demerger put at par as well.

• Revenues at €3.1b puts its at smaller than Wizzair & EasyJet. 81% in passenger revenues, only 6% in cargo. 78% share in its home hub of Helsinki (capital of Finland) with routes 41% in Europe, 35% in Asia, 12% in NA, 8% in Middle East & 4% Domestic.
• Ex. fuel unit costs/CASK is at 5.3c & lower than network carriers but higher than Low Cost Carriers (EasyJet 4.5, Ryanair 2.2, Wizz 2.6). Unit revenue/RASK is at 8.27c up 27% on 2019 levels. EBIT margin at 6.2% up 90bs from 2019 is at low end of all airlines; EasyJet 5.5%, Air-France 5.7%, Lufthansa 7.6%, Wizz (exp. at 8%), IAG 12%, Ryanair 13.5%. It says '25 target is 6% margin.
• FY23 EBITDA was €516m (6.2% margin vs. 5.3% in 2019), cash flow from operations €472m with gross capex a sizeable €482. Its guiding for near term capex requirements to be "limited", maintenance capex guide is for €80-100m/yr.
• Gross debt is €2b, cash & eqvs at €900m (€158m in cash & rest in financial assets) leaving net €1.1b. Net leverage at 2.2x (2019 1.3x), target is for 1-2x range. €200m revolver has covenant of leverage <3.75x. Reminder tender out on €382m outstanding 25s hence limited net supply on this €500m deal.
• Shareholder distributions have been reinstated.