Finnair turns to Qatar amid network realignment

It's hard to watch your business model get shaken by events beyond your control. This is what has happened to Finnair over the last couple of years.

First came the COVID-19 pandemic and the long-term shutdown of the airline's core markets in Asia. Even now, as much of the rest of the world is on track to hit pre-pandemic traffic levels, China, Hong Kong and other destinations in the region haven't fully opened up yet.

Then, in February, the Russian invasion of Ukraine led the European Union and Russia to close each other's airspaces. This deprived Finnair, pretty much overnight, of a major market next door. Perhaps more crucially, Finnair also lost its main element of differentiation in the market.

Finnair's struggles

Finnair's traditional advantage was the convenient location of its Helsinki Airport (HEL) hub and the shortest route between Europe and Asia. The moment it became impossible to fly over Russia, though, this geographical location turned into a handicap.

Adding salt to the wound, Finnair's bet on the opening of a secondary long-haul hub at Stockholm Arlanda Airport (ARN) failed to meet expectations. In August, the Finnish carrier announced it was discontinuing five long-haul routes it had been operating out of the Swedish capital to John F. Kennedy International Airport (JFK), Los Angeles International Airport (LAX), Miami International Airport (MIA), Suvarnabhumi Airport (BKK) and Phuket International Airport (HKT).

So, it's no wonder the Finnish flag carrier has been busy finding new uses for its long-haul fleet. At the moment, the fleet is made of eight A330-300s and 17 A350-900s.

In addition to wet-leasing some planes to Eurowings on a short-term basis, Finnair also launched new routes to Dallas Fort Worth International Airport (DFW) and Seattle-Tacoma International Airport (SEA).

The geographical reorientation is evident when comparing the evolution of available capacity by region. In the first half of 2019, 49% of ASKs (available seat kilometers) were allocated to Asia; in the same period this year, the figure decreased to 24%. Inversely, America, which represented 10% of capacity, now accounts for 24%.

New flights to Qatar

The single major novelty, though, was unveiled last month.

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Finnair surprised pretty much everyone by announcing a close partnership with fellow Oneworld member Qatar Airways. This move will see Finnair flying daily to Hamad International Airport (DOH) in Doha, Qatar, from three different Nordic capitals: Helsinki, Copenhagen and Stockholm. It seems likely that the airline might also announce flights from at least a fourth, still undisclosed, European city soon.

The two airlines will share capacity and codeshare on those flights — which will be operated by the Finnish carrier, using its own metal.

This will come in addition to Qatar Airways already offering its own direct flights between Doha and the three northern European cities. This winter season, schedules show Qatar Airways flying at least twice daily to Copenhagen, daily to Stockholm and thrice weekly to Helsinki. Passengers are going to be able to enjoy Finnair's new cabins on the Doha run.

The A330s earmarked for deployment on the Doha routes have been fitted with the new Collins AirLounge; this is a rather innovative business-class seat. Finnair is the launch customer and the carrier has plans to progressively roll it out across the whole long-haul fleet.

These A330s also feature Finnair's recently introduced premium economy cabin and a revamped economy-class product; this is all part of a more than $200 million product refresh program announced last February.

Since both airlines are already members of the Oneworld alliance, not much is changing when it comes to loyalty programs. Finnair Plus members already have access to status points accrual and lounge access when traveling on Qatar Airways.

This is the first major tangible manifestation of the open Open Skies Treaty of 2002, which was signed between the European Union and Qatar in October 2021.

Notably, Finland, Denmark and Sweden are not among the treaty's exceptions; until 2024, this agreement will limit the number of flights allowed between the emirate and airports in Germany, France, Italy, Belgium and the Netherlands.

Finnair's fleet provides, thus, a handy and fast way to channel European traffic to Qatar Airways' extensive network through its DOH hub. (Connectivity options are more limited the other way around, though.)

At the same time, it gives Finnair a new vector for growth at a time when the Nordic airline is still reeling from simultaneous shocks.

Finnair, which last year got support from its home country's government in the form of a loan of more than $400 million, has posted an operating loss of more than $92 million in the first half of this year.

Thus, the general picture is still far from pretty. However, at a recent press conference, Finnair's top management shared some reasons for optimism. With revenue and load factors showing triple-digit increases (albeit from last year's still abnormal levels) and significant cost-cuttings proceeding apace, they expect the airline's accounts to return to the black by 2024.