Finnair's Triumph: How It Beat the Odds Despite War & Airspace Bans
How is it that Finnair, Finland's flag carrier, is not in serious financial trouble or even bankruptcy right now? When the war in Ukraine escalated in 2022, a lot of analysts predicted that the conflict would cripple the world's airlines and especially Finnair. But that didn't happen, so how? Well, as it turns out, the survival and success of this airline actually tells us some very useful things about the state of aviation right now and it also gives us a hint about what to expect from the future.
The Cyclical Nature of Aviation and Finnair's Long-Haul Strategy
Commercial aviation is a cyclical industry with constant ups and downs in both the demand and supply of travel. In that kind of environment, having a good strategy is obviously really, really important, but even if you have that, bad timing can still ruin everything. Finnair is definitely an airline who had a strategy, but they also very nearly suffered from some really bad timing, starting around a decade or so ago when the airline made a key strategic shift towards long-haul travel.
A Century of Flight: Finnair's Fleet Evolution and Modernization
I'm not going to give you a full breakdown of Finnair's history here. But basically, the airline is not too different from many other flag carriers around the world. They have the usual mix of narrow bodies and wide bodies and they're not new in the game. In 2024, they celebrated their 100th-year anniversary and with that, they claim to be the fifth oldest airline in the world. Finnair have operated a lot of aircraft types over the decades, but in recent years, they have gradually settled on to Airbuses for most of their needs apart from some ATRs and Embraer E-Jets, both of which are operated for them by Norra, their regional affiliate airline. In 2007, Finnair then became a launch customer for the Airbus A350 and they were actually the first airline to operate the type in Europe. Initially, the plan was that the Airbus A350s would replace their older four-engine Airbus A340s and maybe even some Airbus A330s as well, but that plan later evolved quite a bit. You see, Finnair only ever operated seven Airbus A340s and eight Airbus A330s. And whilst the A340s are now all gone, all of their Airbus A330s are still around, which is key to today's story. Finnair now has 18 Airbus A350s as we record this video with one more due very soon. So in total, they have a fleet of 80 aircraft of which 26 are wide bodies. That's an expansion from 15 just a few years ago and the Airbus A350s are still less than 10 years old, while the Airbus A330s are, on average, around 15 years. By comparison, the airline's narrow-body fleet is much older for the most part. Their Airbus A321s are relatively new, but their A319s and A320s are, on average, well over 20 years old and yet Finnair hasn't ordered anything new to replace them. Now that might change soon, although as I've explained in many of my other videos, Airbus in particular is quite slow in delivering new jets right now. Their backlog means that if you order an Airbus A320 or a A321neo today, you might actually receive it eight to 10 years from now. And if that would happen, that would mean that a 22 or 23-year-old Airbus A320 that Finnair has could be over 30 years old by the time that the airline takes delivery of any new Neos, assuming that's what they're going to do. Of course, there is a chance that they could look for newer lease jets instead, but these aren't that easy to come by either.
Finland's Strategic Location: A Gateway Between Europe and East Asia
So what has actually happened? How come there is such a lack of urgency to replace those smaller jets at a time when new big jets are already getting delivered? Well, that's where that change in strategy that I mentioned before comes into play. To understand what we're talking about, it's worth remembering where Finland is located on the map. You see the country is located pretty much at the northeastern corner of Europe, a position that gives them favorable access to a lot of international destinations, particularly in East Asia. Reaching places like Tokyo and other cities in Japan or South Korea, Taiwan or Mainland China could allow Finnair to turn its Helsinki base into a major hub, basically for anyone travelling between Europe and East Asia. To be clear, none of this is entirely new for Finnair. The airline has been flying to Asian destinations since the 1970s and they first flew non-stop between Helsinki and Tokyo back in 1983. But by expanding its long-haul capacity, Finnair obviously sought to turn its home base into a viable hub between Europe and Asia, as opposed to just a link between Asia and Finland itself. Finnair started taking deliveries of its new Airbus A350s in 2015 and by 2017, they had enough of them to retire the last of their Airbus A340s for good. And the deliveries then continued quickly in the next couple of years. Then the pandemic hit. Obviously, this hurt everyone in the industry and like everyone else, Finnair did things like convert passenger jets over to carry cargo and generally, just braced for the very worst.
The Impact of the Ukraine War: Turning a Strength into an Obstacle
But then, a couple of years later, some international travel to Asia slowly began to recover, which allowed Finnair to finally resume its operations there. And then came Russia's full-scale inversion of Ukraine. And with that, came the international sanctions that stopped Russian airlines from flying over Europe and other sanctioning nations, which caused reciprocal Russian sanctions blocking all European carriers from Russia's airspace. Looking back at Finland's position on the map, it's clear that part of Finnair's strategy was to spend quite a lot of time overflying Russia in order to make those links to East Asia as competitive as possible. So avoiding Russian airspace meant that flights now basically had to fly initially straight to the north, over the North Pole and then onwards towards Alaska, reaching the Pacific Ocean before turning towards Japan. In other words, the war and the sanctions turned Finland's location from a great asset into a massive obstacle, almost facing a literal wall that they just couldn't fly through. So by all accounts and logic, they were screwed.
Against the Odds: Finnair's Unexpected Profitability in 2023
So how devastating did this turn out to be for Finnair then? Well, in 2023 Finnair posted a profit, reportedly its highest full-year profit for over a decade. — What?! — And that was due to some quite risky new strategies, which I will soon get back to. But what this proved once again was that taking risks in business can sometimes pay off big.
The Wider Impact of Russian Airspace Closure on Global Airlines
Now at this point it’s worth pointing out that Finnair obviously wasn't alone in facing these problems with a blocked Russian airspace. To a greater or lesser extent, many airlines had to either give up certain promising routes to Asia or had to accept that they would pay a big price in efficiency if they wanted to keep operating them.
Alternative Hub Strategies: New Pacific, Iceland air, and the Challenges of Hub Creation
Over in the United States, a startup called New Pacific Airlines had similar plans to use Anchorage in Alaska as its hub for connections into Asia, because from there, even with Russia's airspace being unavailable, this airline would still have decent access to much of East Asia. But the uncertainties of the pandemic and those sanctions still stopped them from going ahead, so they eventually launched operations in 2023 as a charter airline instead. Now similarly, but in a slightly different way, Iceland air is using its own hub in Iceland to bridge the Atlantic. Now obviously airlines can easily fly directly between North America and Europe without a stop halfway over Iceland, but Iceland air are using their hub to enable single-aisle aircraft to do this cheaper, at least in theory. In practice though, other airlines in Iceland like WOW and PLAY have also tried the same thing and not always very successfully. There is much more to that story that I don't have time to cover here. Icelandic airlines probably deserve their own video to be fair here, but let me know in the comments if you think that I should do that, and don't forget to like and subscribe while you're down there. Anyway, at this point, I'm sure some of you are wondering what Iceland has to do with this story since obviously Russian sanctions are not involved in that, but what I'm trying to point out here is that creating a hub operation depends on much more than just a geographical location of the hub itself, and it's easy to get something wrong even when there aren't any wars or airspace closures to worry about.
Operational Challenges and Finnair's Strategic Route Adjustments
So going back to Finnair, losing access to the Russian skies didn't just make the flights less efficient, it also introduced several other operational issues. For example, before the sanctions, the flights were short enough in duration so that many of them could still be operated with only two pilots in the cockpit under EASA rules. Then after completing the flights, the crews could just go to a hotel and rest, with the plane staying at the airport overnight. And it could then be flown home the next day using the very same, now rested crew. But the much longer routes that now skirts around Russian airspace means that each aircraft also needs an augmented flight crew with three, or sometimes even four, pilots. And the required rest periods might make even more pilots and cabin crew necessary on top of that. So all of these extra crew needs and extra fuel involved would make for some very questionable economics on some of these routes, but that didn't happen to all of them. Somehow, Finnair, actually managed to continue flying to Asia. According to Fortune, before the war and the sanctions started, the airline flew to Japan 40 times per week, and as of February of this year, they are still flying there 20 times per week. Finnair did this by choosing its routes very carefully. For example, they are the only airline flying directly from Europe to Nagoya, Japan, and thereby holding up demand. But another key to their success is the efficiency and range of the Airbus A350 aircraft that they are using. They would never have been able to operate these longer routes with their Airbus A330s. And even if their old Airbus A340s had the range for some of the routes, their economics would have been even worse. But on top of that, in order to remain profitable, Finnair also had to do something with their Airbus A330s. Like I said before, they have kept them to this day, so clearly, they found other roles for them. But what? Well, the most obvious thing was to switch to other destinations, in order to fly to places which weren't affected directly by these sanctions. For example, Finnair previously didn't fly as much to the United States as other European carriers did, but that has now changed. In recent times, they have either added or increased flight frequencies to Chicago, Dallas, Miami, New York, San Francisco and Seattle for example, and by doing that, they have effectively rebalanced their network.
Wet-Leasing and Mixed-Fleet Flying: Innovative Solutions for Finnair
But that wasn't all of the tricks they had up their sleeve. Initiating flights to completely new destinations are often difficult to do and can take time to evaluate properly. So Finnair also found temporary homes for some of their Airbus A330s by wet-leasing them out. This means that the airline agreed with other airlines to send over their jets and their crews to fly and maintain them for a predetermined period. They did this with Discover Airlines in Germany and also with Qatar, flying between Doha and Copenhagen, Stockholm and Helsinki, and doing that meant that it was relatively easy for Finnair to switch crews and aircraft if needed when they flew back over to Northern Europe. But the most creative wet-leasing that Finnair did involve Airbus A330s and their crews flying off to Australia. And here is where we have to talk a little bit about an Airbus Party trick called mixed-fleet flying. You see, airline pilots typically fly on only one aircraft type, which can include different variants within the same type. For example, in the Boeing 737 family, a pilot type rated on the 737-800 like I am can also fly on the 737 MAX 8 and MAX 9 with just some minor necessary difference training. And that's basically because the same type rating also covers these different variants. For Airbus, that same idea goes for the Airbus A319, Airbus A320 and Airbus A321, but on top of that, Airbus also allows its crews to transition quickly between different types, for example, between the single-aisle Airbus A320 and the wide body Airbus A330 by only using a shortened type rating course. They can do that because these aircraft's cockpits and related systems and procedures are extremely similar. And that's what's called a cross-crew qualification or a CCQ. Mixed-fleet flying or MFF is a further step above that. This is the same as a CCQ except that here, pilots can qualify to fly a new type and then move back and forth between different types as needed. And Airbus operators have actually done this for planes as dissimilar as the Airbus A320 and the Airbus A380, which is pretty incredible if you think about it. So why is this relevant here then? Well, Finnair has, like I mentioned, wet-leased Airbus A330s to Qantas in Australia who are rostering these jets and their Finnair pilots to fly between Sydney and Bangkok and Singapore. So how do you think Finnair sends its pilots to fly these jets between Asia and Oceania? Do they just get them down on long-haul flights as passengers? No. Instead what they do is they roster these pilots to fly normal Finnair flights from Helsinki and Finland down to Bangkok in an Airbus A350 and then, after a nice rest at a hotel, they go back to the airport to fly an Airbus A330 for Qantas down to Sydney. Once they're there, they spend a few days flying between Sydney and Bangkok or Singapore before getting to Bangkok again, having another rest and then flying back to Finland in an Airbus A350 that the next flight crew brought over. This is a nine-day trip and I'm told that Finnair's pilots quite like them, which doesn't surprise me at all because it sounds awesome.
The Uneven Playing Field: Opportunities for Airlines Avoiding Sanctions
Of course, other European carriers also needed to solve that same problem regarding avoiding Russian airspace and they often did this by picking a more southern route to get to their destinations and they also had similar problems with using their fleets. But it is important to point out here that the closure of Russia's airspace wasn't all bad news for everyone. For some airlines, the closure actually became a huge opportunity and that was because the country they were from never sanctioned Russia in the first place and therefore, didn't get sanctioned back by Russia either. This meant that airlines like Turkish, Gulf carriers like Emirates or Qatar and also airlines from China can still fly to Europe or to America by overflying Russia. This is obviously great news for them because a lot of people who still want to fly, say between Europe and Russia, can now do so by flying with these airlines instead. But that also means that when an airline like Finnair flies to, let's say, Japan they now need to compete with a Chinese carrier that will stop at a Chinese airport but will fly a much more direct route through Russian airspace. So here an airline like Finnair must ensure that its prices remain competitive and maybe hope that its customers will value not having to stop and switch flights or maybe doesn't want to risk flying over Russia at all and possibly end up diverting to a Russian airport if something would go wrong with its aircraft, which has actually happened with several EU and US-bound flights.
Current Challenges: Strikes and the Uncertain Future of Russian Airspace
I'm mentioning this because I'm not trying to suggest that Finnair's last few years have been perfect. And beyond these issues that I've just mentioned and also typical problems that all airlines and crews are facing including the winter weather in the Nordics, Finnair has also been in the news over the past few weeks because of strikes. You see, over the past few years, many airlines have negotiated new contracts with their pilots who have seen the sharp rise in demand for travel recently and therefore, have wanted to undo some of the painful cuts that they accepted during the pandemic, which is something that I completely understand, by the way. In Finnair's case the drastic changes in their networks has also involved further pressures for staff reductions, which very much now form part of these negotiations. And if the pilots decide to take action soon, their move could also affect those wet-lease agreements with Qantas that I mentioned before. Those contracts could turn into dry leases from next October anyway, meaning that no crews are needed and, theoretically, they could last for another three years after that. But ultimately, Finnair wants to return all of their aircraft and crews back into its own fleet, so they have already stopped all wet leases to anyone other than Qantas as we film this. Now these contract negotiations have been going on for many months now and we will still have to wait to see how they pan out. But with other developments around the world today, Finnair's management and the management of other airlines worldwide are now also having to consider a very different question. What will happen if or when the war between Russia and Ukraine ends? Now obviously the effect of such a development on the war-torn Ukraine and its people are what's most important here. But this is clearly something that the airlines also have to try and plan for. For those airlines that have continued to fly over Russia's airspace, basically filling the gap left by European, American and also Russian airlines, this will definitely be a noticeable change and possibly a quite challenging one. And for Western Airlines, this will likely be good news, but also cause a very new dilemma. You see, without getting into politics here, it really all depends on what the end of the war will look like and how reliable it will be. For example, it really isn't clear if all sanctions will be suddenly going away or even how quickly airlines and their insurers will want to fly into or even over Russia. This will definitely be covered in a separate video when this happens. But for the likes of Finnair, returning to their original fleet-utilization strategy is therefore far from a given. Because if Finnair is actually quite happy flying its planes more frequently to the United States, Canada and Mexico, it might not be in a big hurry to force itself to rebalance its network for a dynamic return to Asia, whose future will likely be unsure for many, many years still to come, no matter what happens, and that's especially true since they never actually really left it.
Conclusion: The Strength of Demand and a Bright Future for Long-Haul Travel
Ultimately though, what Finnair's story over the past few years has shown us is just how strong the recovery of the demand for international travel has really been. There are still serious cost pressures for the airlines in the industry, but we have seen how other airlines have struggled for what seems like much less dramatic reasons, like when route expansions haven’t worked well or when aircraft issues have kept their fleets partially grounded. So it's actually incredible to see an airline whose entire long-haul strategy hinged on flying over the world's biggest country by landmass and then recorded their highest profit in a decade, less than two years after losing access to that airspace. Well done, Finnair. It's hard to say what the future will hold, but the relative success of Finnair is likely an indication that, providing that nothing new happens, the future looks quite bright for international long-haul travel, and that just makes me really happy to say.
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