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2014-03-27

Finnair: Finnair plans to take alternative measures to reach cost savings - if other solutions not found,  estimated personnel impacts 680 employees

· Cuts planned in support functions
· Wider use of outsourcing an option if insufficient results in
flight crew negotiations

Finnair Plc Stock Exchange Release 27 March 2014 at 13:00 EET

CEO Pekka Vauramo: We still hope to achieve results in negotiations,
outsourcing and redundancies are always a secondary option

Finnair is starting today employee consultations with its personnel.
The consultations concern employees working in administrative and
support functions as well as cabin attendants. The measures are part
of the savings program started in 2011, which aims at breaking
Finnair's loss-making cycle. The company still hopes that by
achieving cost reductions in ongoing negotiations the redundancies
could be avoided for the most part.

Support functions rationalised

Finnair plans to rationalise its administration and support functions,
which could lead to a reduction of approximately 140 employees at
this stage. Possible need for further reduction in these functions
will be estimated during the rest of the year. The reductions would
concern some operative, commercial and common corporate support
functions that employ altogether some 800 persons in various tasks.

"We must carefully consider our focus in the support functions," says
Pekka Vauramo. "Can we be more efficient or are there tasks that can
no longer be maintained? We believe that by focusing strictly on the
essential and by improving our productivity we can achieve
considerable savings."

No progress in the flight crew negotiations, alternative measures
planned

At the end of last year Finnair concluded new collective labour
agreements in line with the Finnish Employment and Growth Pact. At
the same time, the parties agreed on cost reduction negotiations that
would be concluded with cabin attendants by the end of April 2014 and
with pilots by mid-June. When Finnair announced its loss-making
results for 2013, the company stated that it must assess other
options for reaching its targets, in case the necessary agreements on
cost reductions are not reached through negotiations.

Although the company's priority and preference is to reach agreement
with personnel at the negotiation table, it is now obliged to draft
optional plans to increase outsourcing of flight crew. Finnair now
begins employee consultations with personnel representatives on the
topic.

"Loss-making Finnair, whose financial situation has further weakened
during the past years, can no longer wait," Vauramo emphasises. "The
situation calls for quick action to restore our profitability. We
have attempted to negotiate on cost reductions in personnel-related
costs ever since we initiated the cost reduction program in 2011. We
still hope to reach in the ongoing negotiations the kind of result
that would allow us to continue flying with our current crew. The
outsourcing of our flight crew is clearly a secondary option for us.
We would like to continue to employ our current employees and create
new jobs at Finnair."

"However, this is not possible with the current terms, since the
present-day wage level is not equivalent to the market level. We want
all Finnair employees to know the options we have at hand. Already
during the Finnish Employment and Growth Pact negotiations, we stated
that without a thorough reassessment of our CLAs Finnair has no
employment or growth prospects. Decisions on Finnair's future
direction are made during the coming weeks at the savings negotiation
tables and in the employee consultations covering the alternative
options," Vauramo adds.

Wider use of outsourcing in the cabin service

Finnair is considering wider use of outsourcing in the cabin service
of its long-haul and short-haul traffic. In the initial stage, the
company plans to outsource the cabin personnel of three long-haul
routes at maximum during this year. In the next stage, Finnair would
outsource the cabin service of more than 10 routes.

Finnair has in total 1500 cabin attendants in Finland. Due to the
planned outsourcing the reduction of approximately 540 cabin
attendants would be required.

Separate from the employee consultation process, Finnair is examining
the possibility to set up a subsidiary that would produce cabin
services and sell them to Finnair Plc.

In addition to the flight crew, Finnair concluded agreements in line
with the Finnish Employment and Growth Pact also with IAU and PRO and
is in discussions about salary and structural solutions with their
local employee groups. Slight progress has been made especially in
local negotiations in Technical Operations.

The employee consultations now beginning do not apply to pilots,
because the pilot's savings negotiations deadline is later than
others in June. Negotiations with pilots include significant changes
to CLAs and the decisions are made later in spring.

In October 2012 Finnair started a 60 million euro additional cost
savings program mainly in personnel-related costs. Finnair aims to
save 18 million euros in cabin crew costs, 17 million euros in pilot
personnel costs, and 8 million euros in IAU personnel costs. The
savings target for other employee groups is 12million euros.
Finnair's Board of Directors has also reduced the variable part of
the top management's total remuneration as well as other benefits. In
August 2013 Finnair announced that it had reached the targets of the
140 million euro cost savings program.

FINNAIR PLC
Further information:
Finnair communications, 358 9 818 4020, comms(a)finnair.com

Distribution:
NASDAQ OMX Helsinki
Principal media

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http://news.cision.com/finnair/r/finnair-plans-to-take-alternative-measu...

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