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Finnair plans $632 million rights issue as state sticks with stake

Published 06/10/2023, 06:14
Updated 06/10/2023, 11:03
© Reuters. A Finnair ATR 72-500 plane takes off from Vilnius international airport, Lithuania September 6, 2022. REUTERS/Ints Kalnins/File photo
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By Anne Kauranen and Anna Ringstrom

HELSINKI (Reuters) -Finnair said on Friday it was planning a rights issue to raise up to 600 million euros ($632 million) to shore up its finances and pay back a loan from the state, which is keeping its controlling stake.

Finland's national carrier has been hit hard by the pandemic and then by the closure of Russian airspace following Moscow's invasion of Ukraine which challenged its Asia-focussed strategy.

Its shares fell as much as 25% in morning trade.

Despite the financial struggles, Finland intends to keep its 55.8% holding and is not considering options similar to consolidation happening around Scandinavian rival SAS, Prime Minister's senior adviser Maija Strandberg said.

"Finnair is a company of strategic interest... (because) sufficient international flight connections are indispensable for Finland," she told Reuters, adding Finnair also plays a role in national security of supply due to its northern location.

Long-struggling rival SAS, which is under bankruptcy protection, on Tuesday announced U.S. investment firm Castlelake and Air France-KLM (LON:0LN7) would become new major shareholders alongside the Danish state as part of a rescue plan.

Strandberg said the share issue would allow Finnair to fully pay back the 400-million-euro emergency loan the Finnish state granted to it in April 2022, after the Russian airspace closure slashed most of its Asian flights.

"Part of the capital loan granted to the company by the state will be converted into equity," Strandberg said.

As it attempts to recover, Finnair has sought new business through its partnership with Qatar Airways. Its total passenger traffic increased 3.5% year-on-year in September.

It its second quarter, Finnair swung back to profit helped by recovering demand, but it has said markets remain uncertain because of inflation and high interest rates.

"The rights issue is aimed at reducing Finnair's financing costs, support strategy execution to drive sustainable profitable growth, and ensure ability for future investments," the company said in a statement.

© Reuters. A Finnair ATR 72-500 plane takes off from Vilnius international airport, Lithuania September 6, 2022. REUTERS/Ints Kalnins/File photo

It aims to complete the rights issue in the fourth quarter, and also intends to restart dividend payments from 2025, it added.

($1 = 0.9489 euros)

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