Why have Finnair shares lost 40% in a few weeks?

It has not been reported anywhere, but the shares of Finnair have dropped from their lofty height of around €12,5 to some €7 in just a few weeks.

What is behind this dramatic fall?

Finnair is a safe and rather high cost airline. It enjoys a dominant market share of Finnish business, and has a number of very profitable routes because of Finland’s excellent geographic position for flights to Asia. They are able to maintain higher prices because competition cannot be described as being really tough.

They should be showing excellent results after several years of reorganisation. They have gone through austerity programs, where staff has been laid off and many parts of their activities sold off and outsourced. 

So nobody should be expecting big movements either way in the share price – but 40% is no small fall!

The last CEO resigned in May 2018 and a new one has just been appointed in September 2018 from the management of Nordea Bank. The departure of the former has been a shock for the markets and this has set in motion the fall. However, the appointment of the new man has taken a long time and the markets appear to be unconvinced that he is the right man. The story was that he was a popular manager who was in charge of retail banking at the bank, and that he was a listener… Although the spin doctors had their field day but the markets appear to have a different view of this man…

… and that is perhaps not surprising. Nordea has closed down many branches, sacked a lot of staff and seen many senior managers leave. They have stopped offering cash services except in a few locations, and they have made normal retail customers feel extremely unwelcome. You can only discuss financial matters by appointment and then only when the bank is open. The Chairman of the bank has also allegedly said that retail clients just bring grit to their floors! Nordea has a huge market share and along with the other large bank OP Group, they share more than 65% of the market. Their digital services are as good as any other bank, most of which are shut down once a month because of software or hardware hitches…

Nordea is no shining example of a making customers feel welcome – so when we see the head of their Retail Banking Unit joining Finnair you must wonder what is going to happen.

The fall in the share price is perhaps telling what the biggest shareholders are thinking – that is everyone else except the biggest shareholder, the government! And I suppose we can thank the relevant Minister… 

Finnair is an important company for Finnish business – we depend on exports and we need fast and inexpensive fights within Finland and to the outside world. Finnair’s prices are high compared to the only other actor in our domestic market, Norwegian. Flights with Finnair from Helsinki to Rovaniemi are around €100 higher and higher prices are the rule when compared to Norwegian for most other flights to and from foreign destinations. Finnair operates a a reasonable service but Norwegian does too. There is no difference in the quality or comfort of their services. Finnair keep on saying that Norwegian is a low cost airline – yes, they have lower costs but otherwise the service is identical…

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