Translation: Original published in Finnish on 07/23/2026 at 07:30 am EEST

Source: Inderes & Modular Finance, 5 estimates (consensus)

Finnair achieved its best Q2 earnings in history in the second quarter, driven by strong unit revenues. The company raised its revenue guidance but kept its earnings guidance unchanged. Estimate changes were minor following the report, but we believe an upgrade to the earnings guidance is possible during the remainder of the year. However, we believe the share price already reflects very good earnings development, and the stock's valuation is significantly higher than its peers. Thus, Finnair's 12-month expected return remains below our high required return. Therefore, we reiterate our Sell recommendation for Finnair, but raise our target price to EUR 4.0 (was EUR 3.8), reflecting minor estimate changes.

Strong unit revenues drove record earnings

Finnair's Q2 revenue grew by some 16% to 917 MEUR, in line with our estimate based on the company's monthly traffic data. Average returns in passenger traffic rose by just under 8%, a development supported particularly by strong demand in Asian traffic. Average returns also increased in other regions from the comparison period, but the development was slightly below our expectations. Of the other revenue lines, Ancillary revenue grew strongly by around 24%, Freight by over 40%, and Travel Services by around 8%, exceeding our estimates.

In Q2, Finnair posted a record-high adjusted EBIT of 78 MEUR, corresponding to a strong 8.6% margin. However, the result was slightly below the consensus estimate of 85 MEUR and also slightly below our estimate of 81 MEUR. The slight forecast undershoot was mainly explained by lower-than-expected other operating income and higher personnel expenses, which were partly offset by lower fuel costs than we estimated. On the lower lines, the company had non-recurring income, and financing costs were slightly below our estimates, which led to reported EPS rising to EUR 0.28 and exceeding our estimate.

Only marginal changes to our estimates

Finnair decreased its capacity growth estimate for the current year to around 1% (previously 3%) due to the cancellation of Middle East flights and estimates that its own passenger traffic volume will grow by around 7%. The company raised its revenue guidance to 3.4-3.5 BEUR (was 3.3–3.4 BEUR), but maintained its adjusted EBIT guidance at 120–190 MEUR. The upward revision of the revenue guidance met our expectations, but the earnings guidance, on the other hand, appears cautious. We consider an upgrade possible if the market normalizes in a controlled manner and no unfavorable moves occur in fuel prices or currencies.

We slightly raised our revenue estimate for the current year, reflecting the updated passenger volume guidance and continued strong demand. At the same time, we lowered our capacity estimate but raised our unit revenue assumptions. Our 2026 adjusted EBIT estimate increased by about one per cent, settling slightly above the current guidance range. Next year, we expect earnings to fall slightly from the exceptionally strong level in 2026. In the coming years, however, earnings will be supported by volume growth, the normalization of oil prices, and the strengthening of the EUR/USD exchange rate, while the gradual normalization of unit margins and an inflationary cost environment will limit the upside potential for profitability.

A fairly good scenario is already baked into the price

Based on our estimates, Finnair's P/E ratios for 2026 and 2027 are approximately 9x and 11x, and adjusted EV/EBIT multiples are around 9x. Thus, the stock trades above or at the upper end of our acceptable ranges (adj. P/E: 6x-9x adj. EV/EBIT: 6x-9x) . In addition, the stock is valued at a clear premium compared to its European core peers. The stock’s DCF value is also lower than the current price level. Thus, the expected return on Finnair for the year remains unsatisfactory in our view after the share price increase of over 50% this year, even though the company is currently flying with a strong tailwind.