Finnair expects $ 488 million government loan

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Finnair said today that it expects to receive an unsecured loan facility of up to € 400 million from the Finnish state. The loan, which is subject to government and EU approval, is expected to help the airline weather the coronavirus pandemic and further develop as a premium airline.

Finnair expects a public loan of 400 million euros. Photo: Getty Images

Government loan set to strengthen Finnair

The Finnish government is set to provide an unsecured hybrid loan of up to € 400 million ($ 488 million) to Finnair to help keep the majority state-owned airline afloat. The potential funding agreement is subject to a final decision by a government plenary session at which final terms and conditions will also be determined. The European Commission must also give its approval for the hybrid loan.

At the end of the third quarter of 2020, Finnair had equity of 940 million euros ($ 1.146 billion) and cash reserves of 725 million euros ($ 884 million). The loan facility would be set up to allow Finnair to access funds if its equity or cash flow fell below the limits to be defined in the loan conditions.

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Finnair, September Calendar, COVID-19 Recovery
Finnair is preparing for post-pandemic scenarios. Photo: Getty Images

Finnair looks to the future

The Finnish government has said there has been a slower-than-expected recovery in air traffic due to the second wave of the COVID-19 pandemic. As a result, Finnair suffered heavy losses as it is operating at around 10% of its normal capacity. State Property Policy Minister Tytti Tuppurainen said:

“The state is committed to acting as a responsible anchor owner for Finnair. Finland’s geographic location is difficult, and therefore we will not be successful without functioning air links. “

The airline is preparing a series of scenarios to rebuild its network in 2021, depending on how the post-pandemic future evolves. The company says it started 2020 with a strong balance sheet and cash flow. It now wants to ensure that it comes out of this exceptional period with the ability to pursue its strategy of connection between Europe and Asia.

Finnair CEO Topi Manner said:

“The hybrid loan would be an important facet in ensuring our financial stability if the recovery in air traffic is slower than expected. We have put in place several financing agreements in 2020 to strengthen our finances and enable a profitable cost structure, and we plan to continue these measures. “

Finnair
The funding enabled Finnair to survive during the pandemic. Photo: Getty

Funding kept Finnair afloat

The Finnish state has shown its support for Finnair, of which it holds 55.9%, from the start of the COVID-19 pandemic. In March 2020, as countries around the world closed their borders, the government approved a € 600 million loan for the airline.

In addition to guaranteeing loans, Finnair has raised more than 471 million euros ($ 575 million) through a rights issue. The airline also entered into a sale-leaseback agreement in August for an Airbus A350 aircraft. Last week, the carrier announced that it had secured more than 100 million euros ($ 119.3 million) in export credit support from export credit agencies in France, Germany and the United Kingdom.

What do you think of the government’s support for Finnair? Let us know in the comments.

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