July 17, 2018 / 10:27 AM / 4 months ago

RPT-Finnair feels pinch from rising fuel prices, shares nosedive

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July 17 (Reuters) - Finnair said on Tuesday that a “substantial increase” in fuel prices is expected to weigh on profits in the second-half of the year, sending its shares down as much as 18 percent.

The Finnish airline, majority-owned by the state, joins a slew of other airlines that have warned about the impact of fuel costs - one of the single largest operational expenses.

The recent sharp rebound in oil prices prompted the International Air Transport Association (IATA) in June to slash the profit outlook for global airlines by 12 percent.

Finnair’s second-quarter comparable operating result rose 27.6 percent to 47.9 million euros ($56.2 million), beating analyst forecasts of 46.1 million euros.

“The effect of the FIFA World Cup in Russia was evident on our European and North American routes in June,” said CEO Pekka Vauramo in a statement.

The company, however, warned that its comparable operating result in 2018 will be broadly at the previous year’s level.

Evli Bank analysts said the outlook falls “somewhat” below their estimates.

Finnair shares were on track for their worst single-day percentage fall in 26 years, which analysts attributed to the company’s outlook.

“They are ahead of last year after the first half, which basically means that in H2 the results will decline. That was not expected in the market and there is clear downside in the consensus estimates,” Inderes analyst Antti Viljakainen said.

The company forecasts increased competition especially on routes which link Europe with Asia and North America, and earlier modernised its fleet with new aircrafts.

Last week, regional peer Icelandair slumped 25 percent after issuing a profit warning and saying an increase in capacity across the Atlantic in some of its key markets affected peak-season fare trend.

($1 = 0.8524 euros)

Reporting by Tommy Lund in Gdynia; Editing by Kirsten Donovan

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