May 20, 2020 / 1:30 PM / 17 days ago

Finnair to cut costs, draw down part of 600 million euro new loan

(Reuters) - Finnair said on Wednesday it planned to make sweeping cost cuts and said it had received state and bank guarantees for a 600 million euro ($657 million) loan that it planned to draw on this quarter.

FILE PHOTO: A Finnair Airbus A320-200 aircraft prepares to take off from Manchester Airport, Britain September 4, 2018. REUTERS/Phil Noble/File Photo - RC26EG932SN6/File Photo

Finland’s flag carrier said it would cut annual costs by almost 80 million euros from 2022 across its business, including in areas such as real estate and aircraft leasing.

Finnair has said it was losing about 2 million euros a day in the second quarter as 90% of flights were grounded. It said would likely take two to three years for air traffic to recover to 2019 levels.

“In the post-corona market, those who can adapt their costs to the changed market and the competitive situation are the ones who will succeed,” Chief Executive Topi Manner said in a statement.

The Finnish government said on Wednesday it had agreed to guarantee up to 540 million euros of Finnair’s planned pension premium loan of 600 million. A commercial bank would guarantee the remaining 60 million euros.

“Finnair’s operations have been significantly hit by global impacts of the coronacrisis,” the government, which owns 55.8% of the airline, said in a statement.

Finnair, which plans to raise an additional 500 million euros through a rights issue, said it planned to draw part of the pension premium loan during the April to June quarter.

Shares in Finnair were 4% lower on Wednesday, valuing the company at 412 million euros, which is less than the amount the airline aims to raise in its rights issue.

The company, which has issued two profit warnings this year, said in March it planned to layoff all staff for up to a month due to the coronavirus pandemic. Finnish law allows companies to cut staff from their payroll and then re-hire them.

($1 = 0.9127 euros)

Reporting by Tarmo Virki in Tallinn, additional reporting by Anne Kauranen in Helsinki, Editing by Mark Potter

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