Operating environment risks
Demand for passenger and cargo traffic demand is influenced by the domestic and international financial and political climate. The current trend clearly indicates that competitiveness in the air transport sector depends on how flexibly the company can react and adapt to changes in demand and to a changing competitive environment.
A critical factor for operational flexibility in future is the adjustment of fixed costs to fluctuations in demand. Moreover, the company's ability to react quickly in adjusting capacity, routes and costs to correspond to changing demand and economic conditions is also an essential factor in maintaining the company's profitability.
In Finnair a permanent adjustment in fixed costs is being implemented through a operational efficiency programme initiated in spring 2003. The objective of the programme is to implement cost cuts totalling 160 million euros and to reduce the company's unit costs by 15 per cent from the 2002 level by 2005.
The influence of domestic and international economic and political events is immediately evident as fluctuations in demand. The economic down-turn, the events of September 11, 2001, the SARS epidemic, last year's war in Iraq and the impact of terrorism have weakened the company's ability to achieve its goals in terms of volumes and revenue. |