Low-cost versus traditional is not so simple

Finnair made a small profit in 2007 and then produced losses for a number of years until 2012 when they managed to produce a slim profit of €11.8million. They expect to make a slightly improved return for 2013.

They have just sold a historic holding they had of 4.7% in the budget airline, Norwegian for a total of €53million. This will allow them to book a profit of about €34million.

A cynic might say they would have been better off closing down their own operation and just buying shares in Norwegian.

It is true enough that the traditional airlines from medium to small countries such as Finnair, LOT, Malev, Austrian and SAS have all struggled terribly whilst a handful of budget airlines, notably Ryanair, easyJet and Norwegian, seem to have swept the market (and profits) away with them.

But it is easy to be wise after the event and make generalisations.

Finnair could just as easily have invested in Air Berlin or flybe (shares floated at 295p and  now worth 44p). And don’t even ask Singapore Airlines about what they think about their purchase of 48% of Virgin Atlantic.

Finnair might not be able to match the recent high-speed growth of Norwegian but they should survive – and they will be better working on their own business rather than relying on other companies to produce profit for them.

 

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