Financial Information 2023

Report

Increasing value for society

Enabling safe and free movement of people, goods and services
Improving cultural, societal and commercial interaction
Participating and inspiring cross-industry collaboration
Economic multiplier effects for the Finnish society

Sustainable growth

Producing direct and indirect employment (e.g. tourism, international trade and foreign investments )
Venturing out of our traditional business to find solutions for our core
Producing value for shareholders' investments
Increased brand value

Satisfied & competent personnel

Equal opportunities for personnel
Good governance
Safe and healthy work
Support and respect of labour and human rights

Environmental impact

Air emissions (CO2 and non-CO2 )
Noise emissions
Liquid waste (de-icing fluids )
Material waste

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

Financial performance in 2023

Passenger traffic

Revenue in 2023

Finnair's total revenue increased year-on-year as the COVID-19 impact was visible in 2022 and, on the other hand, as passenger yields were exceptionally high during the period on the back of robust demand and restricted market capacity.

The negative impact of the COVID-19 pandemic was still visible in the Asian traffic, as travel especially to China was limited during 2023. On the other hand, the comparison period was burdened by the Omicron variant that softened demand, combined with the closure of Russian airspace at the end of February 2022. Although the figures improved during the period due to strong demand, the Russian airspace closure had a negative impact on the 2023 figures as well, and this was visible mainly in the Asian figures. Passenger revenue increased by 41.0 per cent and traffic capacity, measured in Available Seat Kilometres (ASK), increased by 15.5 per cent overall against the comparison period. The number of passengers increased by 20.8 per cent to 10,983,300. Traffic,

Unit revenue (RASK) increased by 9.8 per cent and amounted to 8.27 cents (7.53). The RASK increase was caused by elevated passenger yields and higher passenger load factor despite the lower cargo yields during the period and the higher number of cargo-only flights in the comparison period, as these flights do not generate any ASKs and, thus, have a positive RASK impact.

Revenue by product

EUR million	2023	2022	Change %
Passenger revenue	2,411.6	1,710.7	41.0
Ancillary revenue	147.8	123.2	20.0
Cargo	192.0	352.3	-45.5
Travel services	237.1	170.3	39.2
Total	2,988.5	2,356.6	26.8

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

measured in Revenue Passenger Kilometres (RPK), increased by 30.6 per cent and the passenger load factor (PLF) increased by 8.8 percentage points to 76.4 per cent.

The distance-based reported traffic figures are based on the great circle distance and, thus, do not reflect the longer Asian routings caused by the closure of Russian airspace. As a result, they are not fully comparable with the figures prior to the airspace closure. During the period, the adjusted ASKs, taking into account the longer sector lengths, would be c. 15 per cent higher than the reported ASKs.

In Asian traffic, the number of scheduled passenger flights was 55 per cent compared to 2019 because of the remaining pandemic impacts, but especially due to the Russian airspace closure. The number of scheduled passenger flights was nonetheless more than in the comparison period, as travel to Asia opened. Therefore, ASKs grew by 42.4 per cent and RPKs by 74.6 per cent. PLF increased by 14.1 percentage points to 76.5 per cent.

Due to the closed Russian airspace, Finnair has increased its North Atlantic capacity. As a result, North Atlantic ASKs in 2023 increased slightly compared to 2019. Compared to 2022, ASKs, however, decreased by 38.3 per cent as the Stockholm operations were discontinued at the end of October 2022. RPKs decreased only by 23.5 per cent year-on-year. Thus, PLF increased by 14.0 percentage points to 72.5 per cent.

ASKs grew by 8.2 per cent in European traffic year-on-year. RPKs grew by 13.4 per cent on the back of robust demand and the PLF increased by 3.6 percentage points to 78.7 per cent. Since the beginning of 2023, Finnair has reported Middle East as a separate traffic area whereas in 2022, these figures were still included in the European traffic. Comparison period figures have now been adjusted accordingly.

Finnair started its cooperation with Qatar Airways at the end of 2022. Flights operated by Finnair between Copenhagen, Stockholm and Doha commenced at the beginning of November, and flights between Helsinki and Doha from

Passenger revenue and traffic data by area

		Passenger revenue		ASK		RPK		PLF
Traffic area	2023 EUR mill.	2022 EUR mill.	2023 Mill. km	2022 Mill. km	2023 Mill. km	2022 Mill. km	%	Change %-p
Asia	763.2	425.0	12,752.0	8,953.1	9,755.9	5,586.0	76.5	14.1
North Atlantic	214.9	244.3	4,162.9	6,743.3	3,019.7	3,946.2	72.5	14.0
Europe	1,045.3	855.0	14,760.0	13,639.5	11,618.9	10,243.3	78.7	3.6
Middle East	206.3	42.9	3,054.4	690.7	2,211.9	486.9	72.4	1.9
Domestic	172.7	128.2	1,425.3	1,271.8	1,019.8	894.4	71.5	1.2
Unallocated	9.3	15.3
Total	2,411.6	1,710.7	36,154.5	31,298.4	27,626.4	21,156.8	76.4	8.8

mid-December. As mentioned, the figures for these
three daily routes are reported as a part of the
new traffic area Middle East starting from 2023.
This traffic area includes flights to Dubai and Israel,
which were operated already before the Qatar
Airways cooperation. ASKs grew by 342.2 per cent
in Middle Eastern traffic year-on-year. RPKs grew
by 354.3 per cent and, thus, also the PLF increased
by 1.9 percentage points to 72.4 per cent.

Domestic traffic capacity increased by 12.1 per
cent, RPKs by 14.0 per cent and the PLF by 1.2

percentage points to 71.5 per cent year-on-year.

Ancillary

Ancillary revenue, consisting of e.g., various service fees and inflight sales, increased to 147.8 million

Revenue bridge by traffic area

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

euros (123.2). Advance seat reservations, excess baggage and frequent flyer programme-related revenue were the largest ancillary categories.

Cargo

As Finnair operated fewer scheduled passenger flights to Asia compared to the pre-pandemic era, mainly due to the closure of Russian airspace, Finnair's 2023 cargo volumes were lower than the pre-pandemic figures of 2019. Available cargo tonne kilometres, however, increased by 12.6 per cent and revenue scheduled cargo tonne kilometres by 3.5 per cent year-on-year. The increase is mainly explained by the fact that Finnair reports the cargo traffic figures related to the Qatar Airways cooperation as Finnair operates the flights. However, revenue related to these flights is included in passenger revenue. Even though total cargo tonnes increased by 10.3 per cent, cargo revenue decreased by 45.5 per cent year-on-year, due to lower cargo yields and the allocation of Qatar Airways related revenue.

Travel services

Travel services' financial development has been positively affected by the robust demand after the COVID-19 pandemic. During 2023, only international package holidays were produced, as the production of domestic package holidays was discontinued earlier. The total number of travel services passengers increased by 18.9 per cent year-on-year and the load factor in allotmentbased capacity was 95.9 per cent. Travel Services revenue increased by 39.2 per cent to 237.1 million euros (170.3).

Other operating income

Other operating income decreased by 20.2 per cent to 117.0 million euros (146.7), as the wet lease arrangement with Eurowings Discover, that commenced in Q2 2022, ended in Q1 2023.

Operating expenses included in comparable operating result

Finnair's operating expenses, included in the comparable operating result, increased by 9.5 per cent mainly due to increased capacity and longer Asian routings. Finnair continued its cost efficiency initiatives during 2023.

Unit cost (CASK) decreased by 3.7 per cent and totalled 7.76 cents (8.05). CASK excluding fuel decreased by 2.1 per cent. Year-on-year, the decrease was caused by the increased capacity, the higher share of cargo-only flights in the comparison period, as well as the achieved cost savings.

2022 2023

Fuel costs, change 8%

Capacity rents, change 5%

Aircraft materials and overhaul, change 13%

Traffic charges, change 13%

Sales, marketing and distribution costs, change 14%
Passenger and handling services, change 19%
Depreciation, change 5%
Property, IT and other expenses, change -9%

Key Figures – Revenue and profitability

		2023	2022	2021	2020	2019
Revenue	EUR mill.	2,988.5	2,356.6	838.4	829.2	3,097.7
change from previous year	%	26.8	181.1	1.1	-73.2	9.2
Comparable operating result	EUR mill.	184.0	-163.9	-468.9	-595.3	162.8
Comparable operating result of revenue	%	6.2	-7.0	-55.9	-71.8	5.3
Operating result	EUR mill.	191.4	-200.6	-454.4	-464.5	160.0
Comparable EBITDA of revenue	%	17.3	6.5	-17.8	-30.3	15.8
Basic and diluted earnings per share (EPS)*	EUR	0.022	-0.060	-0.057	-0.086	0.015
Unit revenue per available seat kilometre (RASK)	cents/ASK	8.27	7.53	6.93	6.41	6.56
Unit revenue per revenue passenger kilometre (yield)	cents/RPK	8.73	8.09	8.13	6.48	6.44
Unit cost per available seat kilometre (CASK)	cents/ASK	7.76	8.05	10.81	11.01	6.22
CASK excluding fuel	cents/ASK	5.27	5.38	9.06	9.21	4.76

* A rights offering was implemented in November 2023 and, therefore, 2019-2022 EPS figures have been restated accordingly.

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Operating expenses included in the comparable operating result, excluding fuel, increased by 10.4 per cent.

Fuel costs, including hedging results and emissions trading costs, grew mainly due to the increased capacity (measured in ASK) and longer Asian routings. Fuel efficiency (as measured in fuel consumption per ASK) weakened by 5.5 per cent due to e.g., longer Asian routings despite a limited number of cargo-only flights, that do not generate ASKs, in 2023. Fuel consumption per RTK, which also accounts for developments in both passenger and cargo load factors, however, decreased by 0.7 per cent year-on-year as passenger load factor improved.

Staff and other crew-related costs increased mainly due to the added capacity and longer Asian routings as well as paid incentives.

Passenger and handling costs (including tour operation expenses related to e.g., hotels) were driven up by the increased volumes, especially in passenger traffic. Sales, marketing and distribution costs increased due to marketing activities and improved sales intake.

Aircraft materials and overhaul costs went up due to the added capacity and longer Asian routings. Traffic charges increased as a result of the longer routings between Europe and Asia and increased capacity even though e.g., the Russian overflight royalties did not accrue during the period.

Capacity rents, covering purchased traffic from Norra and any wet leases or potential cargo rents, increased versus the comparison period as capacity increased. Property, IT and other expenses, on the other hand, decreased mainly due to exchange gains and cost savings. Depreciation increased year-on-year e.g. due to depreciation of the wide-body fleet cabin refurbishment.

Result

As travelling was unrestricted within Europe, to the United States and to almost all countries in Asia during 2023, impacts of the COVID-19 pandemic were fairly mild. However, as the Russian airspace was closed back in February 2022, the rerouted flights were longer, increasing e.g., staff, fuel and navigation costs.

As revenue increased more than operating expenses, Finnair's comparable EBITDA and comparable operating result both improved yearon-year and comparable operating result turned positive. Comparable EBIT margin was 6.2 per cent (-7.0). In its strategy update in Q2, Finnair set a new financial target, which is a comparable operating profit margin of 6 per cent by the end of 2025.

Result

EUR million	2023	2022	Change %
Comparable EBITDA	516.5	153.2	>200
Depreciation and impairment	-332.6	-317.1	-4.9
Comparable operating result	184.0	-163.9	>200
Items affecting comparability	7.5	-36.6	-120.3
Operating result	191.4	-200.6	195.4
Financial income	56.2	6.5	>200
Financial expenses	-142.2	-137.9	-3.1
Exchange gains and losses	13.7	-38.8	135.3
Result before taxes	119.1	-370.7	132.1
Income taxes	135.2	-105.4	>200
Result for the period	254.3	-476.2	153.4

Operating expenses included in comparable operating result

EUR million	2023	2022	Change %
Staff and other crew related costs	498.1	447.1	11.4
Fuel costs	899.6	836.0	7.6
Capacity rents	107.2	102.5	4.6
Aircraft materials and overhaul	207.2	183.6	12.8
Traffic charges	233.8	206.5	13.2
Sales, marketing and distribution costs	117.1	103.1	13.6
Passenger and handling costs	414.1	348.0	19.0
Property, IT and other expenses	111.9	123.3	-9.2
Depreciation	332.6	317.1	4.9
Total	2,921.5	2,667.1	9.5

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

Unrealised changes in foreign currencies relating to fleet overhaul provisions were 7.1 million euros (-8.8) due to the weakened US dollar during the period. During the period, Finnair recognised an impairment of 13.7 million euros related to lease agreements for a maintenance hangar and its land area situated in the Helsinki airport area, whereas in 2022, impairment on A330 aircraft was the biggest item affecting comparability (-32.7). Other items affecting comparability consist of fair value changes of derivatives for which hedge accounting is not applied, sales gains or losses and restructuring costs. These items totalled 14.0 million euros (4.9) during 2023 and related mostly to sales gains of 13.3 million euros (6.6) mainly consisting of gains of lease buyouts regarding six A321 aircraft.

The net financial expenses were negative mainly because of the interest expenses surpassing interest income and exchange gains. The company did not book any deferred tax assets based on the losses in Q1 2023 due to the uncertainty relating to utilisation of these losses in taxation. However, the recognised income taxes mainly related to changes in deferred tax assets that are based on certain temporary differences that had not been recognised during the financial year 2022. The company decided to recognise them in Q1 as these items have no statute of limitations, and as the company outlook had improved. In Q2, Finnair re-recognised 99 million euros of the deferred tax assets related to 2020 and 2021 tax losses that

were written down in 2022 as its financial outlook had further improved. In Q4, it re-recognised the remaining 18 million euros of the written down deferred tax assets related to 2020 and 2021 tax losses and recognised also 28 million euros of the deferred tax assets related to 2022 tax losses. Other recognised income taxes between during 2023 consisted of utilised tax losses and other temporary differences.

The result for the period was positive due to improved financial performance and the abovementioned recognised deferred tax assets.

Financial Statements Board of Directors' Proposal on the Dividend

Auditor's Report

Financial position and capital expenditure

Balance sheet

The Group's balance sheet totalled 3,698.0 million euros at the end of December (4,133.0). Due to investments mainly related to acquisitions of nine previously leased narrow-body aircraft, the fleet book value increased by 158.2 million euros despite depreciation. The right-of-use fleet decreased by 157.9 million euros due to depreciation and the aircraft acquisition.

Receivables related to revenue increased to 154.4 million euros mainly due to improved ticket sales (134.9). Net deferred tax assets increased to 234.0 million euros (80.6) mainly due to the re-recognition of deferred tax assets totalling to 117 million euros in Q2 and Q4 related to 2020 and 2021 tax losses

as well as recognition of deferred tax assets of 28 million euros in Q4 related to 2022 tax losses. The pension assets rose to 128.0 million euros (120.0) mostly due to actuarial gains whereas pension obligations increased to 0.8 million euros (0.7).

Deferred income and advances received
increased to 506.7 million euros (452.0). This was
mainly caused by an increase in the unflown ticket
liability, amounting to 394.8 million euros (356.4)
due to capacity growth and stronger passenger
yields.

Key Figures – Capital structure

		2023	2022	2021	2020	2019
Equity ratio	%	15.6	9.9	11.8	24.6	24.9
Gearing	%	192.8	266.4	321.8	153.2	64.3
Interest-bearing net debt	EUR mill.	1,112.5	1,094.0	1,530.9	1,373.8	621.0
Interest-bearing net debt / Comparable EBITDA		2.2	7.1	-10.3	-5.5	1.3
Gross capital expenditure	EUR mill.	484.2	199.6	434.5	515.9	443.8
Return on capital employed (ROCE)	%	8.8	-6.1	-13.9	-15.2	6.3
Cash to sales	%	30.9	64.7	151.0	99.3	30.8

Cash funds

Adjusted Interest-bearing liabilities
Equity
Gearing
Equity ratio

Gearing

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

The profit for the period augmented shareholders' equity, which totalled 577.0 million euros (410.7), or 0.03 euros per share (0.051 ). During the period, Finnair redeemed the hybrid bond of 200 million euros and paid the related interests which had a declining impact on equity. Further, Finnair carried out a rights issue of 570 million euros in November to strengthen its financial position. It had an impact on the structure of equity as the company converted the 400-million-euro capital loan granted by the State of Finland into equity pro rata to the State's ownership and repaid the remainder of it together with the accrued interests to the State after the rights issue. Shareholders' equity includes

Cash flow and financial position

During 2023, net cash flow from operating activities was strong due to materially improved comparable EBITDA. Net cash flow from investments was negative, due to fleet-related investments and changes in other current financial assets (maturity over three months). Net cash flow from financing was negative due to both loan and

Cash flow

EUR million	2023	2022
Net cash flow from operating activities	472.3	259.0
Net cash flow from investing activities	-464.0	-75.5
Net cash flow from financing activities	-676.4	42.1

Capital structure

%	31 Dec 2023	31 Dec 2022
Equity ratio	15.6	9.9
Gearing	192.8	266.4

Liquidity and net debt

EUR million	31 Dec 2023	31 Dec 2022
Cash funds	922.0	1,524.4
Adjusted interest-bearing liabilities	2,034.5	2,618.4
Interest-bearing net debt	1,112.5	1,094.0

Balance sheet

lease liability repayments. The loan repayments include the senior bond buyback of 18 million euros executed in Q1, the first 100-million-euro tranche of the pension premium loan amortisation in June and another tranche of 220 million euros in December, the 200-million-euro hybrid bond redemption with 20-million-euro interests in September as well as the remaining 81 million euros of the capital loan granted by the State of Finland together with total interests and other fees of 49 million. The equity ratio on 31 December 2023 improved from the year-end 2022 mostly thanks to the positive result for the period and lower interest-

a fair value reserve that is affected by changes in the fair values of jet fuel and currency derivatives used for hedging as well as actuarial gains and losses related to defined benefit plans. The value of the item at the end of December was 48.6 million euros after deferred taxes (42.8) as actuarial gains from defined benefit pension plans had an improving impact on equity.

1 A rights offering was implemented in November 2023. The shareholders' equity per share for the comparison period has been restated accordingly.

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend

Report

and acquired previously leased narrowbody aircraft with more than 200 million euros. Finnair has a 200-million-euro short-term, unsecured commercial paper programme, which was unused at the end of December.

Adjusted interest-bearing liabilities decreased from year-end 2022 due to repayments of lease liabilities, weakened US dollar and loan repayments. The share of lease liabilities totalled 1,115.0 million euros (1,330.7).

Capital expenditure

Gross capital expenditure, excluding advance payments, totalled 484.2 million euros during 2023 (199.6) and was primarily related to fleet investments.

Cash flow from investments (including fixed asset investments and divestments, sublease payments received, advance payments and change in other non-current assets) totalled -403.3 million euros (-62.7).

Change in other current financial assets (maturity over three months) totalled -60.7 million euros (-12.8) also forming a part of the total net cash flow from investments, which amounted to -464.0 million euros (-75.5).

Cash flow from investments (including only fixed asset investments and advance payments) for the financial year 2024 relates mainly to the fleet and is expected to total -235 million euros. Investment cash flow includes both committed investments as well as estimates for planned, but not yet committed, investments.

The company has 42 unencumbered aircraft, which account for approximately 38.0 per cent of the balance sheet value of the entire fleet of 1,828.0 million euros.2

bearing liabilities. Gearing declined year-on-year on the back of improved equity.

The company's liquidity remained strong on the back of the robust net cash flow from operating activities and the rights issue even though the company repaid 130 million euros of the capital loan granted by the State of Finland including the total interests and other fees, repaid 320 million euros of the pension premium loan, redeemed the 200-million-euro hybrid bond with interest

2 Fleet value includes right of use assets as well as prepayments of future aircraft deliveries.

Shareholder return policy and the Board's proposal for the distribution of profit

The aim of Finnair's shareholder return policy is to pay, on average, one-third of the earnings per share as dividend or capital distribution during an economic cycle. When deciding on such distribution, Finnair intends to take into account its earnings trend and outlook, financial situation as well as capital and investment need for any given period. Any future distributions may be made in two annual investments.

In connection with the 570-million-euro rights issue implemented in November, Finnair announced that it is targeting to reinstate its ability for shareholder distributions from 2025 onwards based on 2024 financial statements.

In 2023, earnings per share were 0.022 euros (-0.060). Finnair Plc's distributable equity amounted to 473,123,719.36 euros on 31 December 2023. The Board of Directors proposes to the Annual General Meeting that no dividend be distributed based on the financial statements adopted for 2023.

Cash Flow change 2023

* Finnair's cash funds differ from liquid funds as liquid funds do not include other financial assets (maturity over 3 months).

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Finnair's operating fleet

Finnair's fleet is managed by Finnair Aircraft Finance Oy, a wholly-owned subsidiary of Finnair Plc. At the end of year, Finnair itself operated 55 aircraft, of which 25 were wide-body and 30 narrow-body aircraft. The average age of the fleet operated by Finnair was 12.5 years.

During the year, Finnair Aircraft Finance Oy purchased in total nine narrowbody aircraft previously leased to the company: in February one A320 aircraft, and in March one A320 and one A321 aircraft, and during December six previously leased A321 aircraft. In March, the company also re-delivered one leased A319 to the lessor.

Fleet renewal

At the end of year, Finnair had seventeen A350 aircraft, which have been delivered between

2015–2021, and two A350 aircraft on order from Airbus. In April, the company concluded an agreement with the manufacturer to defer the second aircraft on order. The first of the two remaining aircraft on order is scheduled to be delivered to Finnair in Q4 2024 and the second deferred aircraft in Q2 2026.

Finnair's investment commitments for property, plant and equipment, totalling 313.7 million euros, include the upcoming investments in the widebody fleet.

Fleet operated by Norra (purchased traffic)

Nordic Regional Airlines (Norra) operates a fleet of 24 aircraft for Finnair on a contract flying basis. All the aircraft operated by Norra are leased from Finnair Aircraft Finance Oy.

Fleet

Fleet operated by Finnair*

		Change			Average
Seats	#	31 Dec 2022	Own**	Leased	31 Dec 2023	Ordered

144	5	-1	5		22.6
174	10		10		21.4
209	15		7	8	9.4

279/263	8		4	4	14.2
278/297/321/336	17		5	12	6.1	2
	55	-1	31	24	12.5	2
			from			age

* Finnair's Air Operator Certificate (AOC).

** Includes JOLCO-financed (Japanese Operating Lease with Call Option) and ECA (Export Credit Agency) financed aircraft.

Fleet operated by Norra*

			Change			Average
			from			age
31 Dec 2023	Seats	#	31 Dec 2022	Own	Leased	31 Dec 2023	Ordered
ATR	68–70	12		6	6	14.4
Embraer E190	100	12		9	3	15.5
Total		24	0	15	9	15.0	0

* Nordic Regional Airlines Oy's Air Operator Certificate (AOC).

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

During Q2 2023, Finnair updated its strategy extending to 2025, as the company had already executed many of the actions planned for the strategy period. The strategy, published in September 2022, was focused on restoring profitability and maintaining Finnair's competitiveness regardless of the closed Russian airspace. It targeted a comparable operating profit level of at least 5% from mid-2024 onwards.

In its strategy update in Q2, Finnair set a new financial target, which is a comparable operating profit margin of 6% by the end of 2025. The strategy themes to achieve this target are:

• Customer-centric commercial and operational excellence

Balanced growth supported by optimised fleet
Continuous cost efficiency to ensure competitiveness
Among industry sustainability leaders
Building a sustainable balance sheet
Adaptable Finnair culture driven by engaged people

Strategy implementation

In November, Finnair carried out a rights issue of 570 million euros. The gross proceeds from the rights issue were used to strengthen Finnair's balance sheet and financial position to better manage its outstanding financial liabilities, support the implementation of its strategy to drive sustainable profitable growth and ensure its ability for future investments. Finnair's long-term financial targets are based on the following key assumptions: the company's overall capacity, measured in Available Seat Kilometres (ASK), would increase by more than 15 per cent from 2023 to 2025; the company's maintenance capex would be 80–100 million euros annually; the company would be able to utilise 190 million euros of the recognised deferred

At the same time, the company set additional
key long-term financial targets. In addition to the
previously announced comparable EBIT margin
target of 6%, Finnair aims to achieve a net debt
of 1–2 times the comparable EBITDA by the end
of 2025 and to restore the company's ability for
shareholder distributions from 2025 onwards.
Further, Finnair maintained its goal to be carbon
neutral by 2045.

tax assets, which would limit the corporate tax payable over the medium term; and the company would maintain a cash to sales ratio of 30 per cent over time.

Customer-centric commercial and operational excellence

Finnair aims to be a modern Nordic airline, providing customers with the ability to tailor their journey at each step of the process as well as to remain relevant outside of the air travel experience. The first step has been to significantly increase the share of direct distribution, improve digital sales capability, and develop revenue optimisation and partner utilisation. The next step is to smooth

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend

the process from the customer's perspective by shifting to customer-centric and data-driven sales, strengthening customer relationships by providing the right product at the right time and increasing customer engagement with more targeted sales communications. Safety as well as excellent on-time performance and regularity remain at the core of Finnair's operational quality, and the company invests in the use of analytics and data to provide a smooth and timely travel experience.

The role of digital services is a key part of Finnair's strategy, and its importance will continue to grow. The average monthly number of unique and verified Finnair website visitors in 2023 (2.1 million) decreased from the comparison period level (2.3). This was mainly caused by the revised cookie consent policy. The number of active users of the Finnair mobile application increased by 21.0 per cent to 860,000 year-on-year, as customers

The updated strategy still emphasises the utilisation of joint businesses with airline partnerships (Atlantic Joint Business or AJB, Siberian Joint Business or SJB and joint business with Juneyao Air). This highlights the role of oneworld partners such as American Airlines and Alaska Airlines in North America, Qatar Airways

were able to effect more changes and purchase more ancillaries directly from the app. Share of passengers in Finnair's modern channels3 grew to 67.8 per cent (66.5) driven by the increasing NDC (New Distribution Capability) share in all customer segments. in the Middle East, Japan Airlines on routes to Japan and Qantas on the new routes connecting Australia and Asia, which Finnair started to operate in late 2023. Finnair's partnerships provide Finnair customers with an extensive global network and, on the other hand, significantly strengthen Finnair's distribution power.

Product and service quality are still differentiating factors for Finnair, in which operative quality plays an important role. Finnair's long-haul traffic emphasises a high-quality, differentiating travel experience, while smoothness, simplicity and efficiency are key to intra-European traffic. Finnair's Net Promoter Score (NPS) measuring customer satisfaction was still at a good level of 35 (40). In addition to the refurbished wide-body aircraft cabin, which has received very positive feedback from Finnair customers, NPS has been positively impacted by Finnair's good on-time performance of 80.9 per cent (79.0) despite the capacity challenges that have impacted the European aviation system. As an indication of Finnair's strong customer satisfaction, the company was selected as the best airline in Northern Europe for the 13th consecutive time in the Skytrax customer survey. Further, customers voted to select Finnair as a five-star airline in the Airline Passenger Experience Association (APEX) airline evaluation in 2023.

In 2023, the company announced changes to the Finnair Plus programme, which will bring new benefits to its members and new opportunities to collect and use frequent flyer currency. Starting from the spring of 2024, the programme will also move to a new spend-based platform. In the future, programme members will collect Avios loyalty currency. Avios is a frequent flyer currency used by Finnair's oneworld partner frequent flyer programmes British Airways Executive Club, Qatar Airways Privilege Club and Iberia Plus.

The company also announced during 2023 that it is investing in new, larger lounges on the Schengen side of Helsinki Airport. The expanded lounges will be available in the second half of 2024 to serve the needs of a growing number of customers. Further, the company announced that it will renew the cabins of all Embraer E190 fleet consisting of 12 aircraft. The renewal will be implemented during 2024–2025.

Balanced growth supported by optimised fleet

Due to the closure of Russian airspace, Finnair's hub lost its unique geographic advantage, as flying around Russia lengthens the routings between Helsinki and the mega cities in Japan, South Korea and China by up to 40 per cent, depending on the

Key Figures – Customer centric commercial and operational excellence

2023	2022	2021	2020	2019
35	40	38	48	38
80.9	79.0	82.3	90.2	79.3
67.8	66.5	71.5	51.2	40.8
2.1	2.3	1.1	1.1	2.0
860.0	711.0	326.0	187.3	332.6
147.8	123.2	44.1	62.3	176.2

3 In 2023, Finnair started to report its share of passengers in modern channels instead of share of sales in direct digital channels as the company is focusing on digitalisation. The modern sales channels include direct as well as modern, digital indirect channels.

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Auditor's Report

destination. Finnair has re-balanced its network with an emphasis on the West and the Middle East and optimised its European network and traffic structure to increase efficiency.

Through the Qantas wet and dry lease agreements published in Q2 2023 and the cooperation with Qatar Airways commenced in Q4 2022, Finnair will be able to productively deploy its A330 fleet despite the closure of Russian airspace, while maintaining flexibility in the near term to restore connectivity between Asia and Europe.

Faster, standardised turnarounds at airports, improved aircraft utilisation and aircraft returning from wet lease outs in Q1 2024, as well as the next A350 delivery in Q4 2024, will enable Finnair to grow in line with the market and increase capacity at a competitive cost level despite the capacity constraints prevailing in the aircraft market.

Continuous cost efficiency to ensure competitiveness

Maintaining profitable and competitive operations require Finnair to continuously review its cost levels with a view to containing cost increases. However, the company has moved from programme-based cost reductions towards continuous cost efficiency improvement to ensure its competitiveness and to

Key Figures – Among industry sustainability leaders

		2023	2022	2021	2020	2019
Fuel consumption	tonnes	960,357	788,104	364,478	365,492	1,132,219
Flight CO2 emissions	tonnes	3,025,124	2,482,528	1,148,107	1,151,299	3,566,491
	g/ASK	83.7	79.3	94.9	89.0	75.6
	g/RTK	920.5	926.9	931.7	948.6	785.3
Flight CO2 emissions Flight CO2 emissions

Key Figures – Adaptable Finnair culture driven by engaged people

					2019
	5,195	5,336	5,614	6,573	6,771
%	4.6	5.4	2.3	3.8	4.6
%	3.8	7.3	6.8	7.4	3.8
	5.5	6.8	5.6	4.4	9.6
		2023	2022	2021	2020

protect the opportunity to maintain investments in the customer experience in the future.

In 2023, Finnair continued to advance existing savings projects and developed new projects that, among other things, utilise the opportunities offered by artificial intelligence. Further, the purchase of six previously leased A321 aircraft in late 2023 will have an annual positive impact of more than 20 million euros on both profit before taxes and cash flow over the next few years. Also the additional pension premium loan repayment of 120 million euros during Q4 will have a positive impact on profit before taxes amounting to approximately 3 million euros in 2024 in the form of lower net interest costs.

Among industry sustainability leaders

Finnair is committed to continuously and systematically developing its operations in every relevant aspect of sustainability. The company aims to be among the most sustainable airlines in the world. To achieve this, the company must perform visible and effective acts of social and environmental sustainability, as well as cooperate closely with its partners and its supply chain. In order to invest more sustainably, the company must also ensure that the economic development of its business supports such investments..

The company's long-term sustainability target is to be carbon neutral by 2045. In April 2022, Finnair committed to cooperating with the Science Based Targets initiative (SBTi) to bring its emissions targets in line with the Paris Agreement. SBTi requires airlines to decarbonise through their own operations, so it does not take into account off-industry carbon credits or other marketbased mechanisms such as the ETS. In line with SBTi's requirements, Finnair focuses on reducing the direct emissions of its aircraft. This requires significant measures to modernise Finnair's aircraft, improve operational efficiency and

increase the use of sustainable aviation fuels. The exact schedule and scope of the measures will be specified during the year 2024, as Finnair prepares to submit short-term CO2 intensity reduction targets to SBTi for validation in the first quarter of 2024. Social responsibility is also a key component of the

company's sustainability work. This means taking care of the safety and health of its employees and customers, promoting human rights, equality, non-discrimination, and diversity in the workplace and in its value chain, and offering accessible services.

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Building a sustainable balance sheet

In building a sustainable balance sheet, it is essential to maintain the achieved business profitability. This strengthens equity and improves cash flows, which enables debt repayment and – together with continuous cost efficiency – builds a sustainable balance sheet. This strategy theme is also incoporated into other strategy themes.

During 2023, Finnair took many steps towards building a more sustainable and efficient balance sheet. In November, it carried out a rights issue of 570 million euros to strengthen its balance sheet and financial position. With the proceeds, Finnair repaid the remaining amount of the capital loan granted by the State of Finland together with total interests and other fees, totalling 130 million euros, and repaid an additional tranche of 120 million euros of its pension premium loan in addition to the scheduled tranches totalling 200 million euros. It also purchased six narrowbody aircraft previously on lease to the company for more than 200 million euros. Further, Finnair redeemed the 200-millioneuro hybrid bond at the beginning of September, driven by clearly improved profitability. For the same reason, it also recognised a total of 145 million euros of deferred tax assets related to 2020–2022 tax losses.

Adaptable Finnair culture driven by engaged people

Throughout Finnair's 100-year history, the company and its employees have demonstrated a remarkable ability to adapt to changing circumstances and find new, previously untapped opportunities. This has been particularly highlighted during and after the twin crises caused by the pandemic and Russia's attack on Ukraine followed by the closure of Russian airspace. Going forward, the company will focus even more on nurturing and developing this cultural strength and will invest in its people to further improve employee competence, employee and customer experience, and business results.

d

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Financial performance 2019–2023

Revenue

Number of passengers

Available seat kilometres (ASK) and revenue passenger kilometres (RPK)

Available seat kilometres (ASK) Revenue passenger kilometres (RPK) Available seat kilometres (ASK), % change
Revenue passenger kilometres (RPK), % change

Return on capital employed (ROCE)

Cash funds

Interest-bearing liabilities and cash funds

Investments cash flow and net cash flow from operations

Investment cash flow*

Net cash flow from operations

* Including investments and divestments of fixed assets and group shares.

Comparable operating result*

Operating result

Comparable operating result*, % of revenue

Financial target: The target level of comparable operating result percentage of revenue for the strategy period is 6% by the end of 2025.

* Comparable operating result excluding unrealised changes in foreign currencies of fleet overhaul provision, fair value changes of derivatives where hedge accounting is not applied, sales gains and losses on aircraft and other transactions, impairment, exceptional changes in defined benefit pension plans and restructuring costs.

Comparable operating result and operating result

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The year 2023 stands out as a significant year in Finnair's history, as the company celebrated its 100th anniversary. The year was also notable in the sense that, following a challenging double crisis, the company successfully restored its profitability. The role of aviation as a fast and global enabler of connections and as an economic driver lays the basic need also for the next 100 years. Finnair is attentive to the sustainable development of the society around it and the obvious challenge it must tackle now is how to make sustainable aviation a reality within the next few decades.

Finnair has begun its long journey as part of the energy transition to minimise the amount of fossil energy, but the transition to use cleaner energy sources will take several decades in aviation. Nonetheless, Finnair is already setting milestones for it. Finnair is gradually increasing the volume of Sustainable Aviation Fuel (SAF) refuelling, continuously improving energy-efficiency of flying, and closely monitoring the development of new hydrogen and hybrid-electric aircraft. Worldwide, new technologies are advancing at an accelerating pace, making it crucial to identify and select the optimal path to achieve Finnair's target to fly carbon neutral in 2045.

During 2023, Finnair conducted a double materiality analysis (DMA) in accordance with the European Sustainability Reporting Standards (ESRS), with careful consideration of the disclosure requirements specified in ESRS 2, as well as the EFRAG Value chain implementation guidance. The assessment process consisted of a contextual analysis (based on Finnair's previous materiality

assessments), public and certain internal sources, engagement with stakeholders through interviews and surveys, internal impact, and financial materiality assessments, as well as working group meetings. The results were reviewed and validated by Finnair's Executive Board and the process followed the principles of internal control and risk management confirmed by Finnair's Board of Directors. The DMA was conducted in close collaboration with a third-party service provider. As a result of the work, it can be stated that the material sustainability topics of Finnair include (not in priority order):

• Energy Consumption and Greenhouse Gas (GHG) Emissions: Finnair is targeting to fly carbon neutral in 2045, is actively improving the energy efficiency of its operations and will set a science-

Non-financial performance in 2023

based target for the next ten years period during the first quarter of 2024.

Biodiversity Aspects: Finnair's climate commitments extend to ensuring sustainable aviation fuels are produced with a focus on minimising harm to ecosystem services.
Community Impact: The company is actively increasing the positive effects on people and communities around it.
Employee Experience: Motivated, diverse, and competent employees is the core of Finnair's success.
Consumer Experience: Enhancing the travel experiences of our consumers and listening their views are pivotal aspects of the company's sustainability strategy.

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Supply Chain Management: Finnair is implementing systematic measures throughout its supply chain to ensure responsible sourcing and operations, considering human rights of workers in its value chain.
Business Conduct: Ethical, transparent, and robust business practices are integral to Finnair's operations, aligning with global standards.
Aircraft Noise: The company recognises the importance of addressing aircraft noise pollution and is actively working on mitigating solutions.
Circular Economics: Finnair is embracing circular economic principles to minimize waste and maximize resource efficiency.
Climate Change Adaptation: Understanding and adapting to climate change risks are integral to Finnair's long-term strategy.

The impacts of the pandemic on Finnair's operations were very mild in the second half (H2) of 2023, although the increase in travel to China remained slow. On the other hand, the Russian airspace closure to EU carriers clearly affected Finnair's traffic to Asia. During 2023, the risks related to the double crisis have, however, normalised and the year can be considered the first reasonable reference year for the coming years.

The Audit Committee, nominated by Finnair's Board of Directors, ensures that sustainability is seamlessly integrated into its core business strategy. The company is committed to the continuous development of all identified material topics, supported by comprehensive policies, robust management processes, stakeholder engagement, and transparent communication practices. The company is preparing to publish its first CSRD-compliant sustainability report in 2025 on the development and status of 2024. The Code of Conduct applies to all Finnair personnel and all locations. Further, Finnair's Supplier Code of Conduct address, among other things, the company's principles for ethical procurement, human rights, antibribery and corruption policies, as well as environmental responsibility. The company requires that its suppliers comply with ethical standards that are essentially similar to those with which Finnair complies within its own operations. Finnair is working to further integrate sustainability and ethical business conduct into all business processes.

Business Conduct

Finnair is committed to complying with international and national legislation in its operations and the ethical business principles laid out in its Code of Conduct and supports the Sustainable Development Goals (SDG) set by The United Nations General Assembly.

Finnair has identified the developments in its value chain and legislation and has begun to establish a framework for human rights-related due diligence. The company is committed to integrating this due diligence into its business as an ongoing and iterative programme. Stakeholder engagement, especially with vulnerable groups, is a crucial part of this assessment to gain accurate insights from those who may be affected by the company's operations. The company sees human rights due diligence as a continuous learning journey, not merely as a checklist. Managing the company's business goes beyond mere compliance; it should reflect a genuine commitment to building sustainable business that respects and supports human rights in all its operations.

Human Rights, Bribery and Anti-Corruption

Finnair respects the UN Universal Declaration on Human Rights and the core conventions of the International Labour Organisation (ILO). The company has signed the United Nation's Global Compact initiative and as required by the Global Compact's ten principles, the company aims to prevent any violations of human rights, including the use of forced or child labour, both within its own operations and its supply chain. The company reports annually on the progress of its operations in accordance with the UN Communications on Progress requirements. Finnair's Code of Conduct includes an anti-

Finnair's own non-flight operations (Scope 1 & 2) at Helsinki-Vantaa are carbon neutral from the beginning of 2023.

Taxes and other environmental costs

Other environmentally related costs

Other environmentally related costs include Noise and emissions charges.

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corruption section; the receiving and giving of bribes is strictly prohibited. Preventing corruption is everyone's responsibility at Finnair, including the heads of business operations, compliance function and the internal audit.

The direct human rights risks related to the company's own operations have not been assessed to be at a significant level. However, there may be indirect risks and consequences associated with the supply chain and outsourced operations and services. The company's versatile supply chain is built around its route network. It includes suppliers and service providers who are specializing in airlines and subject to international aviation regulations, as well as operators who ensure and enable the safety of Finnair's core business.

Suspected human trafficking is a real concern in aviation, and Finnair has procedures in place to prohibit it. Finnair has signed IATA's resolution against modern slavery and human trafficking. The company works closely with governments and the airports it operates from to ensure that all possible trafficking incidents on its flights are reported and dealt with appropriately. The crew has been given specific instructions on the procedures to be followed in cases where human trafficking is suspected. Finnair has made IATA's human trafficking online training package mandatory for all crew members and ground agents. Finnair is

committed to increasing its personnel's awareness of this issue.

Enterprise Risk Management (ERM) framework and process, which is based on the COSO ERM framework. The process considers all potential business risks, including sustainability-related risks and evaluates their potential substantive financial impacts. When evaluating the risk impact, the primary criteria used has been strategic impact. Financial and reputation impacts are used as assisting criteria for the impact evaluation.

Finnair has a Whistleblowing line called Finnair Ethics Helpline in use, through which both our employees and partners can report on concerns related to ethical business principles. During 2023, no material incident of material misconduct was reported through the Finnair Ethics Helpline nor were there any such investigations ongoing in the company. Sustainability Risk Management The company has implemented a systematic As part of the double materiality assessment conducted during the year 2023, the company updated the impacts, risks, and opportunities related to environmental, social, and governance responsibility. As a result of the process, the company now has a so-called long and short list of various sustainability topics, associated with both opportunities and risks. These are managed in accordance with the company's risk management framework and process. External reporting related to these risks will be further developed in the year 2024.

The primary governance principle is adherence to the Three Lines of Defense model, with a clear division of roles and responsibilities with respect to internal control and risk management. The Three Lines of Defense governance ensures that the segregation of duties is defined and established between risk management and risk control. For more detailed description of the risk management,

please refer to the Risk Management chapter in the Report of the Boad of Directors.

Customers, employees, and other stakeholders

The year 2023 has been characterised by strong growth and diligent work. Progress has been made in internal ways of working and in refining the content and accessibility of services for customers. The company's primary goals continue to be ensuring operational safety and maintaining clear priorities.

Finnair's commitment to continuously enhance the customer experience remains unwavering, with a consistent application of relevant accessibility standards. Despite the challenges presented by the operating environment, there

Number of persons employed by Finnair at year-end

The diversity of the Personnel: Gender

Executive Board 67%

Executive Board 33%

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has been an increase in the number of customers, accompanied by a modest decline in Net Promoter Score (NPS) (35) from the preceding year (40). While NPS showed a decrease, it is noteworthy that Finnair's customers express satisfaction with the services provided and good arrival punctuality of flights. During the year, changes were made in airport services, ticket types, and baggage policies. These strategic initiatives not only improved operational efficiency and punctuality but also played a pivotal role in enhancing our financial performance, aligning seamlessly with our overarching strategic direction.

The well-being of Finnair's employees is a central focus area of the company. The company is committed to maintaining the health and safety of its staff, providing them with learning and training opportunities, and promoting a workplace culture that values equality, inclusivity, and diversity. The company recognises diversity as a key driver of its performance.

Finnair employed an average of 5,195 (5,336) people in 2023, which is 2.7 per cent less than in the comparison period. The number of employees decreased during 2023 by 7 or 0.1 per cent, totalling 5,223 at the end of December (5,230). In total, 571 new persons were hired at Finnair in 2023. The increase was mostly due to growth in the number of Finnair Kitchen employees, pilots and cabin crew members. The attrition rate for the last 12 months

was 3.8 per cent (7.3). During 2023, the average number of people at work was 4,818 (4,492).

Full-time staff accounted for 85 per cent (87) of Finnair employees in 2023, and 92 per cent (97) of staff were employed on a permanent basis. The average age of employees was 44 years (43). Of the personnel, 35 per cent (33) were over 50 years of age, while 12 per cent (13) were under 30 years of age. At the end of 2023, 55 per cent (56) of Finnair's employees were women and 45 per cent (44) were men. Four (three) out of the eight members of Finnair's Board of Directors are women. Finnair does not maintain statistics based on ethnicity.

LTIF (Lost Time Incident Frequency), which measures the frequency of accidents at the company level, decreased year-on-year and was 5.5 (6.8). Also, the number of absences due to illness was lower than in the comparison period and was 4.6 per cent (5.4).

In Finland, employees have a legal right to freedom of association, and Finnair values good co-operation with labour unions representing its various employee groups. In 2023, the following collective agreements were negotiated:

• An agreement between Palta and Finnish Aviation Union IAU concerning blue collar employees in Finnair's Helsinki Airport customer and ground service, cargo and technical services. The agreement is valid until 15 March 2025.

An agreement between Palta and Workers' Union AKT concerning travel agencies (Suntours). The agreement is valid until 30 April 2025.
An agreement between Finnair Plc and Finnairin Insinöörit ja ylemmät FINTO ry concerning Finnair Plc:s upper white-collar employees. The agreement is valid until the end of February 2026.
In addition, the following previously negotiated collective agreements are valid:
An agreement between Palta and Finnish Air Line Pilots' Association concerning Finnair Plc's Finnish pilots was negotiated in 2021 and it is valid until the end of September 2024.
An agreement between Palta and Transport Workers' Union AKT representing Finnair's cabin crew was negotiated in 2022. The agreement is valid until the end of January 2025.
An agreement between Service Sector Employers Palta Trade Union Pro concerning Finnair's technical aviation employees was negotiated in 2022. The agreement is valid until the end of January 2025.
An agreement between Service Sector Employers Palta Trade Union Pro concerning Finnair's aviation employees was negotiated in 2021. The agreement is valid until the end of January 2025.

Lost Time Incident Frequency

No/M h

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Report

-

Supply chain

The sustainability of the supply chain is very important in Finnair's operations, as Finnair increasingly uses partners and service providers to maintain and expand its international route network.

In 2023, the company conducted a comprehensive screening of indirect emissions, Scope 3, resulting in the identification of five out of the 15 categories as significant. The company continues its ongoing development work related to Scope 3 emissions accounting and will provide more detailed reports on these emissions in the coming year's activities.

The company is in the process of developing a programme related to the management of environmental impacts in the supply chain, aiming to understand and control emissions in its supply chain. The programme also establishes a framework for actively sharing and increasing awareness of Finnair's Nordic values. It also guides the selection of key partners from the approximately 4,500 active suppliers, with whom efforts are made to systematically improve the environmental impacts of products and services. Additionally, the goal is to seamlessly integrate sustainability into the company's existing procurement processes, such as supplier selection and building customer relationships.

Currently, the company has not set specific target levels for supplier climate action or other environmental goals. Social and administrative aspects are primarily addressed through the Supplier Code of Conduct (SCoC) and selfassessment questionnaire forms.

The supply chain directly related to flight operations must operate according to international aviation regulations, and these suppliers are strictly monitored. For example, international aviation safety regulations require that all airport employees must be registered and must always carry an official ID card with them. This creates a secure basis for activities directly related to flight operations not being subject to a

Performance

climate targets in line with the Paris Agreement. SBTi requires airlines to decarbonise through their own operations, so it does not take into account off-industry carbon credits or other market-based mechanisms such as the EU ETS. In line with SBTi's requirements, Finnair now focuses on reducing the direct emissions of its aircraft. This requires significant measures to modernise Finnair's aircraft, improve operational efficiency and increase the use of sustainable aviation fuels (SAF). More exact schedule and the scope of the measures will be presented during the year 2024 as Finnair prepares to submit a short-term CO2 intensity reduction target for SBTi for validation in the first quarter of 2024.

significant risk of forced labor or children's rights. Environmental Finnair has recognised the interconnected challenges of climate change, biodiversity loss, and the transition to a circular economy. To address these challenges, the company has set ambitious goals across these fronts and encourages collaborative efforts from all its stakeholders. Climate Action Finnair aims to fly carbon-neutral in 2045. In April 2022, Finnair committed to cooperating with the For more immediate actions, the company is committed to achieving carbon neutrality for its own on-site ground operations in the Helsinki-Vantaa area (Scope 1 and 2) starting from 2023. Initiatives include utilising renewable diesel, improving energy efficiency, introducing renewable fuel oil, green electricity, green district heat, and offsetting residual emissions. In 2023, 8,973 tons of residual CO2 emissions will be offset using projects consistent with those offered to customers. During the year 2023, one concrete action taken was an investment in 2,435 solar panels, which more than doubled the amount of solar energy produced by the company. Thanks to the investment, on a sunny summer day,

Science Based Targets initiative (SBTi) to bring its Finnair may generate over 1.1 MW peaks (MWp)

Development in Finnair's flight emissions and emission efficiency

Total CO2

Emissions Efficiency

RTK = revenue tonne kilometres, i.e. capacity use according to payload weight.

Finnair reduced 10% of its own business travel emissions through SAF.

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Energy efficiency and Emissions

More than 85 per cent of Finnair's greenhouse gas emissions relate to flight operations, burning jet fuel (Scope 1) plus its production and transportation (Scope 3). For this reason, the company's measures and reporting related to climate change are focused on this function. In line with the SBTi, the company's emission reduction measures will include investments in new technology aircraft, use of SAF and operational efficiency improvements.

In 2023, Finnair's traffic measured in revenue tonne kilometres (RTK) increased by 23 per cent (117) compared to 2022, and the company continued operating to most of its Asian destinations despite routings that are up to 40 per cent longer. Thus, direct carbon dioxide emissions from flying (CO2) increased by 21.8 per cent (116) to 3,027,569 tons (2,486,543). This is still 15.4 per cent less than in year 2019.

profitability strategy. In the European Union, there will be legislative reforms in the near future (namely the Fit for 55 package) which will increase EU airlines' costs and may result in a competitive advantage for non-EU operators. Finnair has had continuous and open discussions with both legislators and other stakeholders about the appropriate implementation of the changes in the legislation. during a day. This is sufficient to cover the energy consumption of the property used by the Finnair Cargo, on whose roof most of the company's solar panels are installed. SAF shall be any airline's most important measure in achieving reasonable emission reductions during this decade. This is the reason why Finnair together with the oneworld Alliance has set a

During 2023, effective and successful work to improve fuel efficiency continued. The fuel efficiency of flying was 292 g/RTK (294) (without allocation between passengers and cargo), i.e. fuel efficiency improved by 0.7 per cent (0.5). When allocating carbon dioxide emissions between passengers and cargo (see more details on the allocation principles from the sustainability appendix) emission efficiencies improved by 1.2 per cent (4.1) passenger related figure being 84.6 g CO2/RPK (85.6) and for cargo 846 g CO2/RTK (856). The improvement in the fuel efficiency was mainly due to the increase of aircraft load factors from 67,6 per cent to 76.4 per cent. On the other hand, flying efficiency was weakened by the increased amount of flights at longer Asia routes.

The company has a cross-organisational working group focused on fuel efficiency, which with its actions implemented during 2023 saved approximately 1,760 tons of fuel (5,000) and thus reduced carbon dioxide emissions by approximately 5,560 tons (15,750). The actions included implementing of new in-flight service concepts as well as optimising of flight operations (weight savings) and ground operations supporting reduced speed of flying. The working group has been active at Finnair for several years already, and the abovementioned figures do not take into account the group's achievements from previous years.

Total of 2,435 solar panels were installed on the roofs of Cargo and Hangar buildings.

common goal of achieving a 10 per cent level in SAF uptake by 2030, well above the designed six per cent EU mandate target. The company is currently working on a detailed SAF strategy which will be implemented during 2024. Finnair used its own SAF programme and decreased its own business travel emissions by 10 per cent by purchasing SAF for these journeys.

In 2023, the company used approximately 2,266 tons of SAF, which constituted about 0.2 per cent of the total kerosene consumption. Of this SAF, Finnair's customers partly funded 1,101 tons, the company voluntarily funded 681 tons, and 483 tons were obtained through national mandates. Overall, the utilisation of SAF resulted in a reduction of CO2 emissions by 6,359 tons, with our customers contributing 3,106 tons to this reduction. This figure contains so called life-cycle emissions (LCA).

The biggest risks facing Finnair in this area are related to the ongoing transition to a green economy and the effects of the company's

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The energy consumption of the Finnair facilities increased by 3.1 per cent in 2023 (0.5). The total electricity consumption of the facilities was 22,268 MWh (22,266) and heat consumption 24,755 MWh (23,316). Total energy efficiency was 21.7 kWh/ m3 (21.1), including both electricity and district heat consumptions.

The decrease in electricity consumption was due to increased operational efficiencies, and the increase in heating energy may be explained by a colder winter. CO2 emissions from energy consumption in buildings increased by 3.3 per cent (25,0) to a total of 7,558 (7,339). The growth was attributed to both the increase in total energy consumption and the energy companies' updated practice of reporting more detailed product-specific emission factors. Finnair has not utilised renewable energy origin certificates in its energy procurements.

Circular Economy

Finnair develops its products and services constantly to be more sustainable. Finnair's objective is to introduce circular economy principles in all its operations by the end of year 2025. This will help the company to make more efficient use of materials and reduce consumption. The plan covers the following measures: reducing material need, reuse of materials when possible, recycling waste materials, utilisation of waste

in other ways (e.g. as energy) and, finally, safe disposal of the remaining waste.

The total amount of waste produced by Finnair in Helsinki hub increased by 20.7 per cent (101.2), or about 481 tons (925), with the total mass for the year being 2,320 tons (1,839). The increase in the amount of waste is directly related to the growth in number of customers. The largest waste stream has been mixed waste from the in-flight service, containing food waste, i.e. international food waste. Food and beverage waste from international flights has to be incinerated, due to authority requirements, while other ordinary food waste is composted. In 2023, approximately 73 per cent (74) of the waste was utilised as energy and approximately 27 per cent (26) of the waste material was either reused, recycled or composted. No waste ended up in a landfill.

Finnair has set two goals related to efficient material use. Firstly, the company works on reducing the total waste generated per passenger for example by optimising purchases in its catering operations and by preventive maintenance of aircraft and aircraft parts in its own maintenance operations. Secondly, the company works on recycling the waste that cannot be avoided. The amount of waste per passenger measured in our Helsinki hub increased by 11.5 per cent to 0.23 kg per passenger (0.20) still reaching the company's target of 0.29 kg per passenger for

Recycling rate at Helsinki hub was 26.7 per cent (26.1) improving by 2.3 per cent and meeting the company's annual target of 25 per cent.

In 2023, the company implemented a process to reuse cabin and ground crew uniforms. This ensures that high-quality workwear is not discarded but rather finds a new user. Since July 2023, thanks to this process, the material required for staff uniforms was reduced by 10 per cent during the first six months.

Another initiative to reduce the materials needed and waste generated is optimising the number of meals loaded per flight. Finnair encourage passengers to prebook their onboard meals to avoid unnecessary over catering. The company also continuously analyse the meal data to reach an optimal amount of meals per flight. This work has already prevented the production, loading, and disposal of 9,000 unused meals in 2023. These measures have a positive effect on flight CO2 emissions also.

Biodiversity

Finnair takes environmental aspects into consideration on the ground and in the air operations. Besides the climate actions that reduce the environmental load, Finnair's environmental policy also includes the preservation and promotion of natural diversity, known as biodiversity thinking.

In celebration of Finnair's centenary, it has, together with Airbus, collaborated with Snowchange on the Haarasuo peatland-forest ecosystem restoration in Suomussalmi, Finland. This 30-hectare site, integral to local communities and ecological diversity, has undergone rejuvenation to counteract the impacts of historical forestry practices. The Haarasuo restoration is centred around three key objectives: revitalising peatlands, managing invasive species, and rehabilitating forest ecosystems. The ambition is to cultivate a biodiverse habitat, expecting a revival of indigenous plant and animal life by 2034, thereby aiding in carbon capture and contributing to climate change mitigation. Furthermore, the Haarasuo project has considerable socio-ecological significance. It bolsters traditional local practices such as berry picking and hunting, and rejuvenate aquatic life, including trout populations.

Finnair has zero tolerance for illegal wildlife trading and is a United for Wildlife-certified airline. As such, the company has undertaken to promote the awareness of different stakeholders about this topic. Furthermore, Finnair has prohibited the transportation of hunting trophies or memorabilia originating from endangered species or their parts in its cargo network. Also, primates and canines intended for laboratory, experimental or other exploitation use will never be accepted for transport.

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Regulating services have a significant impact on both the airline business and travel services. The local decline of biodiversity erodes the operating conditions of the tourism industry and increases the risk of infectious diseases.

Aircraft Noise

While the biggest environmental impact of an airline is its aircraft engine emissions another easily observed impact is aircraft noise at the areas surrounding airports. The noise produced by aircraft is mainly engine noise and aerodynamic noise. The level of engine noise is greater in takeoffs, while the level of aerodynamic noise grows during approaches.

Finnair has continuously, in cooperation with air traffic control, improved continuous descent approaches (CDA) at Helsinki-Vantaa airport reaching 85.8 percent level in 2023. The set target of maintaining the 85 percent level was then well achieved.

EU Taxonomy

Background

As a part of its Action Plan for Sustainable Finance, the European Union is working on a classification system for determining environmentally sustainable economic activities, also known as the EU Taxonomy. The EU Taxonomy Regulation establishes six environmental objectives: 1) climate change mitigation, 2) climate change adaptation, 3) the sustainable use and protection of water and marine resources, 4) the transition to a circular economy, 5) pollution prevention and control, and the protection and 6) restoration of biodiversity and ecosystems.

The EU Taxonomy is constantly evolving, as new economic activities and environmental objectives have been gradually added. The first delegated act of the Taxonomy Regulation concerning climate change mitigation and adaptation entered into force on 1 January 2022. Article 8 of the Regulation brought an obligation for Public-Interest Entities under the Non-financial Reporting Directive (NFRD), such as Finnair, to report on their Taxonomy-eligibility for the first two environmental objectives, climate change mitigation and adaptation, for the reporting year 2021. In the reporting year 2022, entities were also obliged to assess the Taxonomyalignment of their economic activities for the first two objectives. For the reporting year 2023, the list of economic activities was expanded for the first two environmental objectives. In addition, the remaining four environmental objectives were introduced for certain economic activities. For 2023, all in-scope Entities are required to report the proportion of their revenue, capital expenditure (CapEx) and operating expenditure (OpEx) that is both Taxonomy-eligible and aligned with the first two environmental objectives.

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

Auditor's Report

These indicators are defined in the EU Taxonomy and their definitions differ from those of IFRS for capital expenditure and operating expenditure. For the latter four environmental objectives and the economic activities covered by them, on the one hand, and for the new economic activities under the first two environmental objectives, only Taxonomy eligibility shall be reported.

Finnair's approach on EU Taxonomy

Finnair has assessed the Taxonomy-eligibility of its economic activities by comparing their NACE coding against the economic activities included in the EU Taxonomy and related criteria. Finnair's core business areas consist of passenger traffic, ancillary sales, cargo and travel services. Of these, passenger air transport (NACE H51.1, activity number 6.19) and freight air transport (NACE H51.21, activity number 6.19) are included in the list of economic activities contributing to climate change mitigation from the reporting year 2023 and, thus, Finnair must report a Taxonomy-eligible share of its revenue, CapEx and OpEx related to these economic activities. The alignment of these activities will not be reported until 2024. Of Finnair's other core business areas, ancillary sales and travel services are not, however, yet included in the Taxonomy's list of economic activities. The same applies to freight transport services by road supplied by Finnair Cargo (activity number 6.6), as these services are outsourced to a third party and are, therefore, not considered Taxonomy-eligible.

Revenue

The EU taxonomy definition of revenue is identical with Finnair Group's revenue in financial reporting and, thus, other operating income is not included in it. As a result of the new economic activities covering passenger traffic and air cargo operations, Finnair's taxonomy-eligible revenue accounts for 87 per cent (0) of its total revenue. The share of Taxonomy-aligned revenue of total revenue is 0 per cent (0), but due to reporting requirements, the possible Taxonomy-aligned share of passenger and cargo revenue has not been defined yet.

Capital expenditure (CapEx)

Capital expenditure definition according to the EU Taxonomy is the same as gross capital expenditure reported by Finnair. The share of Taxonomy-eligible CapEx of total CapEx increased to 83 per cent (1), and almost all of it was related to the fleet operated by the company in both passenger and air cargo operations. Other Taxonomy-eligible CapEx was related to real estate and related energy solutions. Despite the installation of more than 2,400 solar panels (function number 4.1), 0 per cent of Finnair's total CapEx was Taxonomy-aligned (0), as alignment of passenger and air cargo operations is not yet reported. The solar panel investment of approximately 1 million euros was deemed as Taxonomy-aligned CapEx that fulfils the climate change mitigation criteria, does not cause significant harm to other environmental objectives

and would also meet minimum safeguards even though Finnair has not in this case verified the manufacturing conditions of the solar panels in accordance with the related recommendations.

Operating expenditure (OpEx)

Operating expenditure, as defined in the EU Taxonomy, consists of direct research, development and maintenance costs as well as short-term leases. The Taxonomy-eligible share of Finnair's total Taxonomy-based OpEx increased to 100 per cent (5), as almost all OpEx were related to fleet maintenance. Other Taxonomy-eligible OpEx related to the maintenance of acquired and owned buildings (activity number 7.7) as well as short-term leases. During the reporting year 2023, 0 per cent of the total Taxonomy-based OpEx were Taxonomy-aligned (0), as alignment of passenger and cargo operations is not yet reported.

In accordance with the Taxonomy reporting requirements, Finnair has avoided double counting by ensuring that revenue, CapEx and OpEx have been allocated only once to an economic activity and from environmental objectives only to climate change mitigation. More detailed Taxonomy figures are presented in the Taxonomy tables on the following pages.

Finnair has heavily modernised its wide-body fleet in recent years. In 2015–2017, seven A340 aircraft were retired from revenue service at Finnair and

since 2015, Finnair has introduced 17 modern, lower emission A350 wide-body aircraft to its fleet. Of the disposed A340 aircraft, one was sold for recycling, two were returned to lessors at the end of their leases, and four were sold to Airbus in conjunction with the confirmation of the exercise of Finnair's option to purchase eight additional A350 aircraft. Finnair still has two A350 aircraft on order. The first is scheduled to be delivered in Q4 2024 and the second in Q2 2026. This renewal of the widebody fleet is the largest single investment in the company's history. However, it is not yet defined whether this forward-thinking investment, partly made before the Taxonomy implementation, can be reported within the Taxonomy.

Finnair aims to increase the use of renewable aviation fuels (SAF) together with the oneworld alliance and other stakeholders. The oneworld Alliance has set a common goal of achieving a 10 per cent level SAF uptake by 2030, well above the 5 per cent mandate proposed by the EU. Achieving this goal will require a joint effort with both legislators and various industrial sectors. The introduction of SAF is also strongly linked to the protection of biodiversity, i.e. sixth environmental objective), so that the rapidly growing demand does not lead, e.g., to increased land use that could cause harm to biodiversity. Finnair's SAF usage of 0.24 per cent in 2023 would not meet the future Taxonomy minimum of 5 per cent.

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Regarding travel services, the Taxonomy would focus on the conservation and protection of nature's biodiversity if this economic function were to be included in the Taxonomy. The technical criteria have been created for accommodation services, and the need to develop criteria for the leisure activities management is still pending. Nature and its diversity are a significant attraction in the business of Aurinkomatkat. When planning destination programmes, Aurinkomatkat carefully assesses their potential impacts on environment and biodiversity. The aim is to avoid, for example, organising visits in places where this might pose a threat or harm to biodiversity

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

Proportion of revenue from products or services associated with Taxonomy-aligned economic activities – disclosure covering year 2023

Financial year 2023		2023		Substantial contribution criteria						DNSH criteria ("Does Not Significantly Harm")
Economic Activities (1)	Code (2)	Revenue (3)	Proportion of turnover, year 2023 (4)	Change Mitigation (5) mate Cli	Change ptation (6) mate Ada Cli	Water (7)	Pollution (8)	my (9) Circular Econo	0) Biodiversity (1	Change Mitigation (11) mate Cli	Change ptation (12) mate Ada Cli	Water (13)	4) Pollution (1	my (15) Circular Econo	Biodiversity (16)	m Safeguards mu Mini (17)	revenue, year 2022 (18) A.2.) my-aligned A.1.) or -eligible ( Proportion of Taxono (	bling Category ena activity (19)	Category transitional activity (20)
		MEUR	%	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y/N	Y/N	Y/N	Y/N	Y/N	Y/N	Y/N	%	E	T
TAXONOMY-ELIGIBLE ACTIVITIES
Environmentally sustainable activities (Taxonomy-aligned)
Revenue of environmentally sustainable activities (Taxonomy-aligned) (A.1)		0	0														0
Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)																	0
				EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL
Passenger and freight air transport	6.19	2,589	87	EL	N/EL	N/EL	N/EL	N/EL	N/EL
Revenue of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)		2,589	87														0
Revenue of Taxonomy-eligible activities (A.1+A.2)		2,589	87														0
TAXONOMY-NON-ELIGIBLE ACTIVITIES
Revenue of Taxonomy-non-eligible activities		400	13
TOTAL		2,988	100%

Y – Yes, Taxonomy-eligible and Taxonomy-aligned activity with the relevant environmental objective N – No, Taxonomy-eligible but not Taxonomy-aligned activity with the relevant environmental objective N/EL – Not eligible, Taxonomy-non-eligible activity for the relevant environmental objective.

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities – disclosure covering year 2023

Financial year 2023	2023					Substantial contribution criteria							DNSH criteria ("Does Not Significantly Harm")
Economic Activities (1)	Code (2)	pEx (3) Ca	pEx, Ca Proportion of year 2023 (4)	Change Mitigation (5) mate Cli	Change ptation (6) mate Ada Cli	Water (7)	Pollution (8)	my (9) Circular Econo	0) Biodiversity (1	Change Mitigation (11) mate Cli	Change ptation (12) mate Ada Cli	Water (13)	4) Pollution (1	my (15) Circular Econo	Biodiversity (16)	m Safeguards mu Mini (17)	A.2.) pEx, year 2022 (18) my-aligned A.1.) or -eligible ( Proportion of Taxono Ca (	bling Category ena activity (19)	Category transitional activity (20)
		MEUR	%	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y/N	Y/N	Y/N	Y/N	Y/N	Y/N	Y/N	%	E	T
TAXONOMY-ELIGIBLE ACTIVITIES
Environmentally sustainable activities (Taxonomy-aligned)
Electricity generation using solar photovoltaic technology	CCM 4.1	1	0	Y	N	N	N	N	N		Y	N/A	N/A	Y	Y	Y	0	E
CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1)		1	0	Y	N	N	N	N	N		Y	N/A	N/A	Y	Y	Y	0
Of which enabling		1	0	Y	N	N	N	N	N		Y	N/A	N/A	Y	Y	Y	0	E
Of which transitional		0	0														0
Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
				EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL
Passenger and freight air transport	CCM 6.19	401	83	EL	N/EL	N/EL	N/EL	N/EL	N/EL
Acquisition and ownership of buildings	CCM 7.7	0	0	EL	N/EL	N/EL	N/EL	N/EL	N/EL								0
Installation of energy efficient equipment	CCM 7.3	0	0	EL	N/EL	N/EL	N/EL	N/EL	N/EL								0
CapEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)		401	83														0
CapEx of Taxonomy-eligible activities (A.1+A.2)		402	83														0
TAXONOMY-NON-ELIGIBLE ACTIVITIES
CapEx of Taxonomy-non-eligible activities		82	17
TOTAL		484	100%

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities – disclosure covering year 2022

Financial year 2023				Substantial contribution criteria				DNSH criteria ("Does Not Significantly Harm")
Economic Activities (1)	Code (2)	OpEx (3)	OpEx, Proportion of year 2023 (4)	Change Mitigation (5) mate Cli	Change ptation (6) mate Ada Cli	Water (7)	Pollution (8)	my (9) Circular Econo	0) Biodiversity (1	Change Mitigation (11) mate Cli	Change ptation (12) mate Ada Cli	Water (13)	4) Pollution (1	my (15) Circular Econo	Biodiversity (16)	m Safeguards mu Mini (17)	A.2.) OpEx, year 2022 (18) my-aligned A.1.) or -eligible ( Proportion of Taxono (	bling Category ena activity (19)	Category transitional activity (20)
		MEUR	%	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y/N	Y/N	Y/N	Y/N	Y/N	Y/N	Y/N	%	E	T
TAXONOMY-ELIGIBLE ACTIVITIES
Environmentally sustainable activities (Taxonomy-aligned)
OpEx of environmentally sustainable activities (Taxonomy-aligned) (A.1)		0	0														0
Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
				EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL	EL; N/EL
Passenger and freight air transport	CCM 6.19	310	97	EL	N/EL	N/EL	N/EL	N/EL	N/EL
Acquisition and ownership of buildings	CCM 7.7	9	3	EL	N/EL	N/EL	N/EL	N/EL	N/EL								5
OpEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)		319	100														5
OpEx of Taxonomy-eligible activities (A.1+A.2)		319	100														5
TAXONOMY-NON-ELIGIBLE ACTIVITIES
OpEx of Taxonomy-non-eligible activities		1	0
TOTAL		319	100%

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Nuclear and fossil gas related activities

Row	Nuclear energy related activities
1	The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle.	NO
2	The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies.	NO
3	The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades.	NO
	Fossil gas related activities
4	The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels.	NO
5	The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels.	NO
6	The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels.	NO

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Review of the year 2023	The Report of the Board of Directors	Financial Statements		Auditor's Report
				Performance
Topic	Targets and KPIs		2023	2022	Key actions during the reporting period
Environmental responsibility		Carbon neutral flying by the end of 2045 (gCO2/RTK)	921	928	In the reporting year, Finnair continued its cross-organisational efforts to improve fuel efficiency, resulting in a reduction of approximately 5,560 tonnes of CO2 emissions. The company strives to consistently increase the use of Sustainable Aviation Fuel (SAF), and in 2023, over 0.2% of the fuel consumption consisted of SAF, reducing emissions by about 6,360 tonnes.
		Improving the fuel efficiency of flying by 1% annually. Company's internal Fuel Efficiency Index (nFEI) is used here as a basis for the KPI where e.g. route distance, wind and payload impacts are normalised.	-0.7	0.0	The most effective actions included implementation of new in-flight service concepts and optimisation of flight (weight savings) and ground operations (reduced speed of flying). On the other hand, growth in number of longer Asian flights had a negative impact on efficiency.
		Reducing food waste per pax, target <0.25kg/pax	0.21	0.20	To reduce waste, the company implemented several enhancements to existing processes, such as optimising the quantity of meals loaded onboard and further reducing food waste during the service preparation.
	target >27% in 2025.	Improving waste recycling at Helsinki-Vantaa site,	27.0	26.1	Finnair continued the structured work to promote recycling in different units and for example changed non- recyclable plastic cups with recyclables and updated the recycling instructions in cabin.
Social responsibility	On-time performance %		80.9	79.0	During 2023, changes were made to airport services, ticket types and baggage
		Customer satisfaction, NPS increase on the previous year	35	40	policies, among other things. These projects improved operational efficiency and punctuality, as well as contributed to improved financial performance.
		Employee satisfaction, eNPS increase on the previous year	-2	-17	The results continue to reflect the burden of the crisis years. Dialogue
		Absences due to illness, decrease on the previous year	4.6	5.4	between personnel groups has been improved and employee consultation
		LTIF (Lost-time injury frequency) of less than 6.5	5.5	6.8	and involvement have been improved through pulse surveys. In parts of the organisation, training aimed at understanding diversity and reducing polarisation was launched.
Ethical Business conduct	Code of Conduct awareness grade in WeTogether@Finnair survey at least 4 on scale 1–5			3.9	Continuous training of employees in ethical practices.

Performance

During the first quarter, there were no changes in the company's management.

On 23 May 2023, Finnair announced that it has appointed Kaisa Aalto-Luoto as Finnair's Chief People Officer and a member of the Executive Board. Aalto-Luoto started in her new role in October 2023. Previously, she has worked as Chief Human Resources Officer at Sanoma Media as well as Senior Vice President, Human Resources and Communications in Outotec, and has a long career in demanding HR management positions at Outotec and Mandatum Life. Johanna Karppi, Finnair's prior Senior Vice President, Human Resources, continued in her role until October 2023.

On 18 August 2023, Finnair announced that its CEO, Topi Manner, has given notice of his resignation

Changes in company management

from the company to join Elisa Corporation as their new CEO, starting at the latest on 1 March 2024.

After the period on 11 January 2024, Finnair announced that it has appointed Turkka Kuusisto as CEO of Finnair and he will start in this role on 11 July 2024 at the latest. Kuusisto joins Finnair from Posti Group Corporation, where he has served as the CEO since 2020. Prior to his CEO role in Posti Group Corporation, Kuusisto served in senior leadership positions in Posti Group Corporation and in Lindorff Group. Finnair's previous CEO Topi Manner left the company on 15 January 2024 to later take on the role of CEO at Elisa Corporation. Jaakko Schildt, Chief Operating Officer of Finnair, acts as an interim CEO between 15 January and the start of the new CEO.

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Shares and share capital

On 31 December 2023, the number of Finnair Plc's shares entered in the Trade Register was 20,481,139,267 (1,407,401,265) and the increase was explained by the rights issue carried out in November. The registered share capital was 75,442,904.30 euros. The company's shares are quoted on Nasdaq Helsinki. Each share has one vote at the General Meeting.

Share price development and trading

Finnair Plc's market capitalisation was 815.1 million euros at the end of December (546.4) and the closing price of the share was 0.04 euros (0.07). During 2023, the highest price for the Finnair Plc share on the Nasdaq Helsinki was 0.10 euros, the

Shares and shareholders

lowest price 0.03 euros and the average price 0.06 euros. Some 1,831.4 million company shares, with a total value of 218.5 million euros, were traded on the Nasdaq Helsinki exchange.

Shareholders

The number of Finnair Plc's shareholders increased by 3.7 per cent in 2023 to 123,036 shareholders (excluding nominee registered shareholders). The number of domestic retail shareholders increased from 116,549 to 120,727, whereas their combined share of ownership decreased by 19.6 per cent. Nominee registered or foreign investors held 9.5 per cent (7.6) of all shares.

Flagging notifications

No flagging notices were issued in 2023.

	Finnair plc largest shareholders as at 31 December 2023	Number of shares	%	Changes 2023
1	State of Finland, Prime Minister's Office	11,406,710,447	55.7%	10,620,040,761
2	Varma Mutual Pension Insurance Company	582,778,300	2.8%	551,897,037
3	Ilmarinen Mutual Pension Insurance Company	278,850,000	1.4%	264,000,000
4	Elo Mutual Pension Insurance Company	197,450,500	1.0%	189,095,500
5	The State Pension Fund	179,500,000	0.9%	168,500,000
6	Danske Invest Finnish Equity Fund	149,732,799	0.7%	149,732,799
7	Säästöpankki Pienyhtiöt	72,900,000	0.4%	72,900,000
8	Nordea Pro Finland Fund	58,520,178	0.3%	58,520,178
9	Nordea Bank ABP	50,379,683	0.2%	50,379,683
10	Finnair Plc	49,565,650	0.2%	49,166,347

	Nominee registered	1,929,299,110	9.4%	1,823,622,849
	Others	5,525,452,600	27.0%	5,075,882,848
	Total	20,481,139,267	100%	19,073,738,002

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

Auditor's Report

Government ownership

At the end of 2023, the Finnish Government owned 55.7 per cent of Finnair Plc's shares and votes. According to the decision made by the Finnish Parliament on 20 June 1994, the Government must own more than half of Finnair Plc's shares. Decreasing the ownership below this level would require revision of the Parliament's decision.

Share ownership by management

On 31 December 2023, members of the company's Board of Directors owned a total of 3,045,000

Finnair Plc's shares. The CEO Topi Manner owned 10,704,916 shares and the members of the Executive Board, including the CEO, owned a total of 24,368,486 shares, representing 0.12 per cent of all shares and votes.

Own shares

On 31 December 2022, Finnair held a total of 399,303 own shares, representing 0.03 per cent of the total number of shares and votes.

On 3 April 2023, Finnair transferred a total of 1,324,933 own shares as incentives to the participants of the FlyShare employee share savings plan. After that, the company held a total of 399,303 own shares.

* A rights offering war implemented in November 2023 and, therefore, Finnair's share prices have been restated accordingly.

Finnair share 2019–2023*

Comparison Nasdaq Helsinki

Comparison European Airlines

Based on the share issue authorisation granted by the Extraordinary General Meeting held on 27 October 2023, Finnair Plc's issued 60,000,000 new shares to itself without consideration on 24 November 2023. Thus, the company held a total of 60,399,303 own shares.

On 4 December, Finnair transferred a total of 10,833,653 own shares as a reward for the rebuild incentive plan's performance period 1 July 2020–30 June 2023 and for the savings periods 2019–2020 and 2020–2021 of the FlyShare share savings plan.

Key Figures – Share

		2023	2022	2021	2020	2019
Equity/share*	EUR	0.03	0.05	0.06	0.11	0.23
Dividend for the financial year**	EUR mill.	0	0	0	0	0
Dividend/share* **	EUR	0.00	0.00	0.00	0.00	0.00
Dividend/earnings**	%	0.0	0.0	0.0	0.0	0.0
Dividend yield**	%	0.0	0.0	0.0	0.0	0.0
Cash flow from operating activities/ share*	EUR	0.05	0.03	-0.00	-0.17	0.14
P/E ratio		1.77	-1.08	-1.74	-1.47	12.12

* A rights offering was implemented in November 2023 and, therefore, 2019–2022 key figures based on the number of shares have been restated accordingly.

** The dividend for year 2023 is a proposal of the Board of Directors to the Annual General Meeting.

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend

Auditor's
Report

Acquisition and delivery of own shares and returns of shares	Number of shares	Acquisition value, EUR	Average price, EUR
1 January 2019	649,008	4,254,968.65	6.556
2019	164,651	1,042,355.90	6.331
2019	-261,346	-1,501,496.17	5.745
2020	-381,653	-2,701,783.40	7.079
2021	1,800,000	1,144,440.00	0.636
2021	-549,527	-1,350,674.25	2.458
2022	-1,021,830	-649,074.54	0.635
2023	61,324,933	0.00	0.000
2023	-12,158,586	0.00	0.000
31 December 2023	49,565,650	238,736.19	0.005

Shareholders by type at 31 December 2023	Number of shares	%	Number of shareholders	%	Breakdown of shares at 31 December 2023	Number of shares	%	Number of shareholders	%
Public bodies	12,661,801,568	61.8	10	0.0	1–500	4,158,330	0.0	27,043	22.0
Households	4,678,148,707	22.8	120,727	98.1	501–1,000	6,332,547	0.0	8,176	6.6
Private companies	673,419,371	3.3	1,910	1.6	1,001–10,000	157,142,501	0.8	37,813	30.7
Financial institutions	497,287,511	2.4	54	0.0	10,001–100,000	1,357,908,313	6.6	39,684	32.3
Associations	24,012,137	0.1	65	0.1	100,001–1,000,000	2,417,933,237	11.8	9,726	7.9
Finnish shareholders, total	18,534,669,294	90.5	122,766	99.8	1,000,001–10,000,000	1,186,410,766	5.8	561	0.5
Registered in the name of a nominee	1,929,299,110	9.4	10	0.0	10,000,001–100,000,000	626,932,417	3.1	27	0.0
Outside Finland	17,170,863	0.1	270	0.2	100,000,001–1,000,00,000	1,388,311,599	6.8	5	0.0
Nominee registered and foreign	1,946,469,973	9.5	280	0.2	1,000,000,001–	11,406,710,447	55.7	1	0.0
shareholders, total					Registered in the name of nominee	1,929,299,110	9.4	10	0.0
Total	20,481,139,267	100.0	123,046	100.0	Total	20,481,139,267	100.0	123,046	100.0

The shares were transferred to the members of the executive board who were participants in these plans. The transfer of the shares was based on the authorisation given by the Extraordinary General Meeting held on 27 October 2023.

Finnair retained 49,565,650 own shares at the end of the period, representing 0.24 per cent of the total number of shares and votes.

Shareholder agreements

Finnair is not aware of any shareholder agreements pertaining to share ownership or the use of voting rights.

Change of control provisions in material agreements

Some of Finnair's financing agreements include a change of control clause under which the financier shall be entitled to request prepayment of the existing loan or to cancel the availability of a loan facility in the event that a person other than the Finnish state acquires control of Finnair either through a majority of the voting rights or otherwise.

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend

Share-based incentive schemes

After the period in February 2024, the Board of Directors of Finnair approved a new individual performance share plan period covering the years 2024–2026. Within the plan, the participants have the opportunity to earn Finnair shares as a longterm incentive reward, if the performance targets set by the Board of Directors for the plan are achieved. The potential share rewards will be delivered to the participants in the spring of 2027. The plan applies to some 75 persons. It is described in more detail in a stock exchange release published by the company and on the company's website.

Effective authorisations granted by the Annual General Meeting 2023

Finnair's Annual General Meeting was held in Helsinki on 23 March 2023.

The AGM authorised the Board of Directors to decide on the repurchase of the company's own shares and/or on the acceptance as pledge. The authorisation shall not exceed 50,000,000 shares, which corresponds to approximately 3.6 per cent of all the shares in the company. The authorisation is effective for a period of 18 months from the resolution of the AGM.

The AGM also authorised the Board of Directors to decide on donations up to an aggregate maximum of EUR 250,000 for charitable or corresponding purposes. The authorisation is effective until the next Annual General Meeting.

The resolutions of the AGM are available in full on the company's website.

Decisions made by and authorisations granted by the Extraordinary General Meeting 2023

The Extraordinary General Meeting (EGM) of Finnair Plc was held on 27 October 2023 without a meeting venue as a virtual meeting in accordance with Section 11 of the Articles of Association of the Company and Chapter 5, Section 16 Subsection 3 of the Finnish Companies Act. A total of 222 shareholders representing approximately 61 per cent of the company's shares and votes, were represented in the EGM, either by advance vote or via remote connection. The EGM adopted all the proposals of the Board of Directors to the EGM.

Authorising the board of directors to resolve on a rights offering

In accordance with the proposal of the Board of Directors, the EGM resolved that the Board of Directors is authorised to decide on the issuance

Financial Statements Board of Directors' Proposal on the Dividend

Report

of a maximum of 22,000,000,000 new shares. The new shares to be issued based on the authorisation will be offered to the Company's shareholders for subscription under pre-emptive subscription rights in the same proportion as they already hold shares in the Company. Shares that remain unsubscribed on the basis of pre-emptive subscription rights may be offered on a secondary basis for subscription to other shareholders or third parties. The Board of Directors is authorised to decide to whom shares that remain unsubscribed are offered to. The authorisation can only be used once, and it does not permit the Board of Directors to conduct multiple share issues. The Board of Directors decides on all other terms and conditions of the share issue. As the rights offering under the authorisation was carried out in November 2023, the authorisation is no longer valid.

Authorising the board of directors to resolve on the issuance of shares

In accordance with the proposal of the Board of Directors, the EGM resolved that the Board of Directors is authorised to decide on the issuance of shares. The maximum number of shares that may be issued based on the authorisation shall not exceed 132,935,562 shares, which corresponds to approximately 0.6 per cent of all the shares in the Company if the authorisation to issue shares decided by the EGM for the rights offering above is used in full. The authorisation is, however, at all times, limited to 0.6 per cent of the Company's actual total

number of shares after the rights offering, so that upon completion of the rights offering the maximum number of shares that may be issued based on the authorisation shall be reduced to the nearest whole number corresponding to 0.6 per cent of the Company's total number of shares following the registration of the new shares to be issued in the rights offering. The Board of Directors decides on all conditions of the issuance of shares, including to whom, at what price and in which manner the shares are issued on the basis of the authorisation. The authorisation concerns both the issuance of new shares as well as the transfer of treasury shares. Shares may also be issued in deviation from the shareholders' pre-emptive rights (directed issue), e.g., for using the shares to develop the Company's capital structure, to finance or carry out acquisitions, investments or other business transactions, or in order to use the shares as part of the Company's incentive and remuneration schemes. The authorisation is effective until 23 September 2024, corresponding to a period of 18 months from the Annual General Meeting held on 23 March 2023, and, as it entered into force, revoked the share issue authorisation granted by the Annual General Meeting on 23 March 2023. The authorisation was conditional to the completion of the rights offering and entered into force as of the registration of the new shares issued in the rights offering.

The resolutions of the EGM are available in full on the company's website .

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Financial Statements Board of Directors' Proposal on the Dividend

Auditor's
Report

Risk management

Risk management framework and principles

Finnair operates in a global and highly competitive environment that is sensitive to economic fluctuations. In executing its strategy, Finnair and its operations are exposed to a broad range of risks and opportunities.

Risk management is an integral part of effective management practice to ensure that Finnair is successful in achieving its business objectives. Uncertainty (opportunity or threat) is an inevitable element in all decision-making, and thus an integral component of running the business.

Finnair's Risk Management Framework has been defined and established to ensure the identification, evaluation and management of risks and uncertainties associated with the set objectives. The framework is designed to take a corporatewide portfolio view of risks. The risk management principles are summarised as follows:

Risk management extends beyond internal control to strategy-setting, governance, and measuring performance;
Risks are managed as an integrated part of strategic and operational planning, day-to-day decision making, and operational processes;
Three Lines of Defence model is applied as the primary governance principle to ensure that the segregation of duties is defined and established between risk management and risk control;

• The performance and efficiency of Finnair's risk management and internal control systems are subject to systematic monitoring.

Risk management policy and process

The framework and principles for risk management have been defined in the Finnair Internal Control and Risk Management Policy, which has been approved by the Board of Directors. The policy is supplemented by other policies for managing risks in specific areas. Examples of other risk policies are Treasury Policy, Procurement Policy, Information Security Policy, Data Privacy Policy, Competition Policy, and Trade Sanction Policy.

The Finnair Risk Management Framework and principles are based on the internationally recognised best practices for risk management (COSO Enterprise Risk Management – Integrating with Strategy and Performance, and ISO 31000:2009 standard).

Risk identification and evaluation include the following phases:

Identification of external and internal events affecting the achievement of objectives;
Distinction between risks and opportunities;
Analysis of identified risks;
Integration (aggregation) of risks;
Evaluation and prioritisation of risks based on their impact and likelihood.

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Financial Statements Board of Directors' Proposal on the Dividend

Risk governance

1st Line of Defence

Business units and shared functions are responsible for setting the objectives and managing day-to-day performance. As risk owners, the business units and shared functions identify and evaluate risks and make risk-informed decisions. They manage risks by defining and implementing controls. Thus, they are responsible for conducting day-to-day control and risk management activities in accordance with Finnair's Risk Management and Internal Control Frameworks.

As a part of the first line of defence, Finnair's CEO and the Finnair Executive Board have the overall accountability for appropriate risk management practices.

2nd Line of Defence

Risk & Compliance provides expertise in risk assessment and risk management, and acts as a control function that is responsible for developing and maintaining the Risk Management Framework and Internal Control Framework as well as for continuously monitoring the implementation of the policies, rules, procedures and key controls within the frameworks. Risk & Compliance has a reporting line to the Audit Committee of the Board of Directors.

Outside the scope of the Risk & Compliance function is Finnair's statutory Safety Management System, which is required by Finnair's Air Operator's Certificate and applicable Aviation Regulation and is subject to specific responsibility matrix and supervision prescribed by the supervisory authorities. Safety & Compliance acts as a control function with respect to the Safety Management System.

3rd Line of Defence

Internal Audit performs audits and provides the Audit Committee with an independent assessment of the overall effectiveness and maturity of the internal control and risk management systems.

Risk management process

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Significant risks and uncertainties

economic environment, and on Finnair's network and profitability. The war in Ukraine has already significantly impacted the global trade in the form of sanctions and countersanctions, and as regards to civil aviation, closures of the airspace. A possible escalation of the war and unrest in conflict areas in the Middle East may have adverse effects on, e.g., the demand for air travel, fuel prices, the flight network and the use of airspace. Their negative impact on Finnair's operating result and financial position depends on the company's ability to adjust its route network, costs, revenue generating sources and financing in the new operating environment.

Macroeconomic factors continue to be a key driver of air transportation demand, as there has historically been a strong correlation

between air travel and the development of macroeconomic factors such as GDP. Due to this correlation, aviation is an industry that is highly sensitive to global economic cycles and reacts quickly to external disruptions, seasonal variations and economic trends, as the global COVID-19 pandemic and the war in Ukraine have demonstrated.

The effect of the COVID-19 pandemic in the markets in which Finnair operates has adversely affected the demand for Finnair's services. Even though the existing travel restrictions are very limited since China opened for travel, the uncertainty concerning the travel restrictions, especially in Asia, poses a risk to demand for air travel, and consequently to Finnair's revenue development. The COVID-19 pandemic may also have long-term negative effects on air travel demand due to potential changes in travellers' perception of the air travel experience and the perceived uncertainty relating to the current pandemic or other similar health threats in the future. The recovery of business travel to pre-COVID-19 levels is likely to be affected by the adoption of virtual and teleconferencing tools.

Factors beyond Finnair's control are related to the duration of the Russian airspace closure, COVID-19 pandemic and retightening of related travel restrictions, resource challenges in the European aviation system caused by the pandemic as well as the recovery of demand for air travel. In addition, other general risk factors in the industry and business, such as the fluctuation of jet fuel prices and its weakened supply, fluctuation in

In the implementation of its strategy and business, Finnair is faced with various risks and opportunities. Finnair has a comprehensive risk management process to ensure that risks are identified and mitigated as much as possible, although many risks are not within the company's full control. The risks and uncertainties described below are considered as potentially having a significant impact on Finnair's business, financial result and future outlook at least for the next 12 months. This list is not intended to be exhaustive.

Factors such as geopolitical uncertainty, the threat of trade wars, the threat of terrorism and cyber-attacks as well as other potential external disruptions may, if they materialise, significantly affect Finnair's operations. Geopolitical tensions may have an adverse effect on the global

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

demand for air travel in general, and fluctuations in currency exchange rates, as well as regulatory and tax changes are also beyond Finnair's control. Other general macroeconomic conditions, such as deterioration in business or consumer confidence, changing customer preferences or employment levels, lower availability of credit, rising interest rates, rise in prevailing high inflation, recession, or changes in taxation may have an adverse impact on private consumption, and consequently on the demand for air travel.

The key factors affecting revenue and operating result, which Finnair can partially affect, are operating costs and the volume of production. Due to the considerable effect of the COVID-19 pandemic, Finnair has carried out an extensive 200-million-euro cost savings programme. The current inflationary pressure poses a risk to retaining the cost level achieved.

As jet fuel costs are the largest variable expense item, the jet fuel price development has a material effect on profitability. Fuel price fluctuations may result in increased uncertainty around Finnair's financial performance and cash flow. Jet fuel prices have historically fluctuated significantly, and fluctuations are expected to continue in the future e.g., due to the impacts of the war in Ukraine. Finnair's ability to pass on the increased costs of jet fuel to its customers by increasing fares is limited by the fierce competition in the airline

Review of the year 2023 Financial Statements Board of Directors'

Capacity increases and product improvements among Finnair's existing or new competitors may have an effect on the demand for, and yield of, Finnair's services. Competition in the airline industry is intense, and the market situation is continuously changing as new entrants and/or alliances expand, industry participants consolidate and airlines form marketing or operational alliances, which might gain competitive advantage over Finnair's oneworld alliance or its joint to the COVID-19 pandemic and the closure of competition through, among others, more aggressive pricing.

industry. Finnair's jet fuel costs are also subject to foreign exchange rate risk as international prices for jet fuel are denominated in U.S. dollars. The residual effect of jet fuel price fluctuations is determined by the hedges in use at a given point in time. Increasing jet fuel costs, disruptions in fuel supplies and ineffective hedging in relation to changes in market prices may result in increased expenses, which may have a material adverse effect on Finnair's business, financial result and future outlook. Derivatives used to hedge against adverse price movements in jet fuel may prove to be inefficient, resulting in an increased jet fuel price in relation to market prices. The volatile market impacts the pricing and availability of hedging instruments. Finnair manages risks related to fuel costs in accordance with the current risk management policy.

businesses. In addition, the cost base restructurings of Finnair's competitors, undertaken in response Russian airspace, may result in further intensified Finnair, like other airlines, strives to distribute its services in increasingly versatile and flexible ways and at a lower cost by adopting and utilising new distribution technologies and channels, including the transition towards the differentiation of fare content and availability between channels. The ability to capitalise on the commercial possibilities provided by these technologies is dependent on, among others, Finnair's partners to develop and implement such applications as well as Finnair's ability to generate products and services that best correspond to customer needs. Hence, the introduction of new digital distribution technologies and channels involves implementation, as well as commercial, risks. Finnair is exposed to the risk of operating losses from natural events, pandemics or health epidemics and weather-related events, influencing operating costs and revenue. Outbreaks of epidemics or pandemics, as COVID-19 has demonstrated, can adversely affect the demand for air travel and have a significant effect on Finnair's operations. Further, natural hazards arising from climate change, such as increased extreme weather conditions, including substantial snowfall, atmospheric turbulence, earthquakes, hurricanes, typhoons, or severe thunderstorms, may result in substantial additional costs to Finnair. Such weather conditions may, for example, lead to flight cancellations, increased waiting times, increased fuel consumption as well as costs associated with aircraft de-icing, which could lead to additional costs to Finnair and thus, have an adverse effect on Finnair's results of operations and financial condition. In a changing aviation business environment, it is difficult to predict the impact that the

Retightening of the COVID-19 pandemic related restrictions, especially in Asia, as well as the prolongation of the Russian airspace closure would have an adverse impact on the company's profitability, cash funds and equity. Weakened profitability would also increase the risk of fleet and other asset impairment.

If the business would become unprofitable again, it could result in depletion of equity, which may have an adverse effect on the availability and terms of new funding.

The aviation industry is affected by a number
of regulatory trends. Estimating the exact
impacts of the regulatory changes on airlines'
operational activities and/or costs in advance
is difficult. Examples of such regulatory trends
include regulation related to emissions trading,
noise regulation and other environmental
regulation, as well as regulations on privacy and
consumer protection.

COVID-19 and the potential further changes in the geopolitical situation may have on airline market access and traffic right opportunities in general. Potentially increasing protectionism in the political environment may have an adverse impact on the market access required for the implementation of Finnair's strategy. At the same time, it is also possible that connectivity needs may increase in some countries, leading to increasing market access opportunities and new traffic rights.

General labour market tensions in Finland are higher than normal, which increases the risk of indirect strikes and other industrial action. Depending on their timing, duration and scope, strikes and other industrial action in Finland and elsewhere may have a significant adverse impact on Finnair's operations and result.

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Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Due to the seasonality of the airline business, the Group's revenue and result are generally at their lowest in the first quarter and at their highest in the third quarter of the year.

In addition to operational activities and market conditions, the fuel price development has a key impact on Finnair's result, as fuel costs are the company's most significant variable expense item. Finnair's foreign exchange risk arises primarily from fuel and aircraft purchases, aircraft divestments, aircraft lease payments, aircraft maintenance and foreign currency revenue. Significant dollardenominated expense items are e.g. fuel costs and aircraft lease payments. The largest investments, namely the acquisition of aircraft and related spare parts, are also mainly denominated in US dollars. The most significant income currencies after the

Seasonal variation and sensitivities in business operations

euro are the US dollar, the Japanese yen, the South Korean won, the Swedish krona, the UK pound, and the Norwegian krona.

The company hedges its currency, interest rate and jet fuel exposure using a variety of derivative instruments, such as forward contracts, swaps and options, in compliance with the risk management policy approved annually by the Board of Directors. Finnair's risk management policy was updated during Q4 2023. Before the update Finnair hedged its fuel purchases 12 months forward on a rolling basis. The update extends the time horizon to 18 months on a rolling basis. Also, the hedging ratios were increased slightly throughout the hedging horizon. After the update, the maximum hedging ratio for the first 3-month period is 93 per cent and the lower limit is 68 per cent, while

profit (rolling 12 months from date of financial statements) Passenger load factor (PLF, %)		1 percentage point change EUR 34 million
Average yield of passenger traffic		EUR 24 million
Unit cost (CASK excl. fuel)		EUR 21 million
		10% change,
Fuel sensitivities	10% change,	taking hedging
(rolling 12 months from date of financial statements)	without hedging	into account
Fuel	EUR 77 million	EUR 49 million
Fuel hedging and average hedged price	Hedged fuel,	Average hedge
(rolling 12 months from date of financial statements)	tonnes*	price, USD/ton* **
Q1 2024	198,000
Q2 2024	183,000
Q3 2024	144,000
Q4 2024	87,000
Q1 2025	-
Q2 2025	-
Total	612,000

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend

average hedging ratio is approximately 80 per cent. The hedging ratio decreases towards the end of the 18-month hedging period.

Hedging of foreign currency exposure in balance sheet

Finnair's balance sheet includes asset-related foreign currency exposure due to the recognition of the present value of qualifying operating lease

Hedging ratio for

Currency distribution, %	2023	2022	Currency sensitivities USD and JPY (rolling 12 months from date of financial statements for operational cash flows)	operational cash flows (rolling next 12 months)
Sales currencies			10% change without hedging	10% change taking hedging into account
EUR	59	58	-	-	-
USD*	9	8	see below	see below	see below
JPY	4	4	EUR 12 million	EUR 5 million	51%
KRW	3	2	-	-	-
SEK	3	4	-	-	-
GBP	4	4	-	-	-
NOK	3	4	-	-	-
Other	14	15	-	-	-
Purchase currencies
EUR	60	55	-	-	-
USD*	34	41	EUR 62 million	EUR 28 million	57%
Other	6	5	-	-	-

* Hedging ratio and sensitivity analysis for USD basket, which consists of net cash flows in USD and HKD. The sensitivity analysis assumes that the correlation of the Hong Kong dollar with the US dollar is strong.

liabilities in the balance sheet as right-of-use assets. Unrealised foreign exchange losses/gains caused by the translation of the USD denominated liability will have an impact on Finnair's net result. In the future, the effect and amount of the foreign currency exchange could be positive or negative, depending on the USD-rate at the closing date. Finnair has mitigated the foreign exchange volatility introduced by this difference by using derivatives as well as by partly investing liquidity in foreign currency money market funds or other financial assets where possible. The annual effect

in net result going forward is dependent on the size of the qualifying operating lease portfolio, the duration of the leases and hedging ratio. At the end of December, the hedging ratio of USD denominated interest-bearing liabilities (including IFRS 16) was approximately 90 per cent.

Review of the year 2023 Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Outlook

Guidance issued on 24 October 2023:

Finnair reiterates its capacity guidance estimating that in 2023, it will operate an average capacity of 80–85 per cent, as measured in ASKs, compared to 2019. The capacity estimate also includes the agreed wet leases.

Finnair specifies its previous guidance for full-year 2023 revenue and now estimates it to be in the range of 2.9–3.1 billion euros.

The company also specifies its previous guidance for full-year 2023 comparable operating result and now estimates it to be in the range of 160–200 million euros. The company's comparable

operating result estimate is based on the current fuel price and exchange rates.

Specific risks related to Finnair's operating environment have normalised as the impacts of the pandemic have faded and the markets have adapted to the closure of Russian airspace. However, risks related to the impacts of inflation and rising interest rates on demand and costs remain elevated, thus, causing uncertainty in the operating environment. Also the prevailing situation in the Middle East causes uncertainty in the operating environment.

Finnair will update its outlook and guidance in connection with the financial statements bulletin for 2023.

New guidance on 14 February 2024:

Global air traffic is expected to continue growing in 2024. However, risks related to the impact of inflation and higher interest rates on demand and costs remain elevated, causing uncertainty in the operating environment. International conflicts and global political instability also cause uncertainty in the operating environment. These factors may affect the demand for air travel and cargo.

Finnair plans to increase its total capacity by more than 10 per cent in 2024. The capacity estimate includes the agreed wet leases. This growth will mainly focus on Asia and Europe. Finnair's revenue is expected to grow at a somewhat slower pace than capacity in 2024.

In accordance with its disclosure policy, Finnair provides full-year comparable EBIT estimate in connection with the half-year report in July.

Finnair will update its outlook and guidance in connection with the Q1 2024 interim report.

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Financial Statements Board of Directors' Proposal on the Dividend

Auditor's Report

Performance indicators classified as alternative performance measures

Alternative performance measures	Calculation	Reason to use the measure
Items affecting comparability	Unrealized changes in foreign currencies of fleet overhaul provisions + Fair value changes of derivatives where hedge accounting is not applied + Sales gains and losses on aircraft and other transactions + Impairment + Restructuring costs	Component used in calculating comparable operating result.
Comparable operating result	Operating result - Items affecting comparability	Comparable operating result is presented to better reflect the Group's business performance when comparing results to previous periods.
Comparable operating result, % of revenue	Comparable operating result / Revenue x 100	Comparable operating result is presented to better reflect the Group's business performance when comparing results to previous periods.
Comparable EBITDA	Comparable operating result + Depreciation	Comparable EBITDA is presented to better reflect the Group's business performance when comparing results to previous periods. Comparable EBITDA is a common measure in airline business which aims to reflect comparable operating result excluding capital cost.
Comparable EBITDA, % of revenue	Comparable EBITDA / Revenue x 100	Comparable EBITDA is presented to better reflect the Group's business performance when comparing results to previous periods. Comparable EBITDA is a common measure in airline business which aims to reflect comparable operating result excluding capital cost.
Equity ratio, %	Equity total / Equity and liabilities total x 100	Equity ratio provides information on the financial leverage used by the Group to fund its assets.
Adjusted interest-bearing liabilities	Lease liabilities + Other interest-bearing liabilities + Cross currency interest rate swaps in derivative financial instruments	Component used in calculating gearing.
Cash funds	Cash and cash equivalents + Other financial assets	Component used in calculating gearing. Cash funds represent the total amount of financial assets that are available for use within short notice. Therefore, cash funds provide the true and fair view of the Group's financial position.
Interest-bearing net debt	Adjusted interest-bearing liabilities - Cash funds	Interest-bearing net debt provides view of the Group's total external debt financing.
Gearing, %	Interest-bearing net debt / Equity total x 100	Gearing provides view of the level of the Group's indebtedness.

Finnair uses alternative performance measures referred to in the European Securities Markets Authority (ESMA) Guidelines on Alternative Performance Measures to describe its operational and financial performance, to provide a comparable view of its business and to enable better comparability relative to its industry peers. The alternative performance measures do not replace IFRS indicators.

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Financial Statements Board of Directors' Proposal on the Dividend

Alternative performance measures	Calculation	Reason to use the measure
Interest-bearing net debt / Comparable EBITDA, LTM	Interest-bearing net debt / Comparable EBITDA, for the last twelve months	The ratio provides information on the Group's leverage by comparing the Group's net debt to the amount of income generated before covering interest, taxes and depreciation.
Gross capital expenditure	Additions in fixed assets + New contracts in right-of-use assets + Reassessments and modifications in right-of-use assets	Gross capital expenditure provides information on the Group's capitalized investments and lease modifications.
Return on capital employed (ROCE), LTM, %	(Result before taxes + Financial expenses + Exchange rate gains and losses, for the last twelve months) / (Equity total + Lease liabilities + Other interest-bearing liabilities, average of reporting period and comparison period)	The ratio provides a view to monitor the return of capital employed.
Cash to sales, LTM, %	Cash funds / Revenue for the last twelve months x 100	The ratio provides information about the Group's liquidity in terms of available cash as a percentage of its sales.

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the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

Auditor's
Report

Reconciliation of performance indicators classified as alternative performance measures

Equity ratio

EUR in millions, unless otherwise indicated	31 Dec 2023	31 Dec 2022
Equity total	577.0	410.7
Equity and liabilities total	3,698.0	4,133.0
Equity ratio, %	15.6	9.9

Items affecting comparability

Gross capital expenditure

EUR in millions	2023	2022
Additions in fixed assets	409.4	125.8
New contracts in right-of-use assets	24.3	9.5
Reassessments and modifications in right-of-use assets	50.5	64.3
Gross capital expenditure	484.2	199.6

			EUR in millions, unless otherwise indicated	31 Dec 2023	31 Dec 2022
Items affecting comparability is reconciled in the note 1.3.7 Items excluded from comparable operating			Lease liabilities	1,115.0	1,330.7
result.			Other interest-bearing liabilities	910.6	1,298.5
			Cross currency interest rate swaps*	8.9	-10.7
EUR in millions	2023	2022	Adjusted interest-bearing liabilities	2,034.5	2,618.4
Operating result	191.4	-200.6	Other financial assets	-776.8	-738.6
Unrealized changes in foreign currencies of fleet overhaul provisions	-7.1	8.8	Cash and cash equivalents	-145.1	-785.8
Fair value changes of derivatives where hedge accounting is not applied	-0.7	-0.9
Sales gains and losses on aircraft and other transactions	-13.3	-6.6	Cash funds	-922.0	-1,524.4
Impairment	13.7	32.7	Interest-bearing net debt	1,112.5	1,094.0
			Equity total	577.0	410.7
Restructuring costs	-0.1	2.6	Gearing, %	192.8	266.4
Comparable operating result	184.0	-163.9	Comparable EBITDA, LTM	516.5	153.2
Depreciation	332.6	317.1
Comparable EBITDA	516.5	153.2	Interest-bearing net debt / Comparable EBITDA, LTM	2.2	7.1

Gearing, interest-bearing net debt and interest-bearing net debt / Comparable EBITDA, LTM

* Cross-currency interest rate swaps are used for hedging the currency and interest rate risk of interestbearing loans, but hedge accounting is not applied. Changes in fair net value correlate with changes in the fair value of interest-bearing liabilities. Therefore, the fair net value of cross-currency interest rate swaps recognised in derivative assets/liabilities and reported in the note 3.8 Derivatives, is considered an interest-bearing liability in the net debt calculation.

Financial Statements Board of Directors' Proposal on the Dividend

Return on capital employed (ROCE), LTM

EUR in millions, unless otherwise indicated	31 Dec 2023	31 Dec 2022
Result before taxes, LTM	119.1	-370.7
Financial expenses, LTM	142.2	137.9
Exchange rate gains and losses, LTM	-13.7	38.8
Return, LTM	247.6	-194.0
Equity total	577.0	410.7
Lease liabilities	1,115.0	1,330.7
Other interest-bearing liabilities	910.6	1,298.5
Capital employed	2,602.5	3,039.8
Capital employed, average of reporting period and comparison period	2,821.2	3,162.2*
Return on capital employed (ROCE), LTM, %	8.8	-6.1

* Capital employed accounted was EUR 3,284.6 million as at 31 December 2021.

Cash to sales, LTM

EUR million, unless otherwise indicated	31 Dec 2023	31 Dec 2022
Other financial assets	776.8	738.6
Cash and cash equivalents	145.1	785.8
Cash funds	922.0	1,524.4
Revenue, LTM	2,988.5	2,356.6
Cash to sales, LTM %	30.9	64.7

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Financial Statements Board of Directors' Proposal on the Dividend Auditor's Report

Other performance indicators

Revenue and profitability		Among industry sustainability leaders
Earnings per share (EPS), basic	(Result for the period - Hybrid bond and capital loan expenses net of tax) / Average number of outstanding shares during the period	Flight CO₂ emissions	CO₂ emissions from jet fuel consumption
Earnings per share (EPS), diluted	(Result for the period - Hybrid bond and capital loan expenses net of tax) / Average number of outstanding shares during the period taking into account the diluting effect resulting from changing into shares all potentionally diluting shares	Adaptable Finnair culture driven by engaged people
		Absences due to illness	Share of sickness absence hours relating to planned work hours
		Lost-time injury frequency	The number of workplace accidents per million working hours
Unit revenue per available seat kilometre (RASK)	Unit revenue (RASK) represents the Group's revenue divided by available seat kilometres (ASK).	Attrition rate, LTM	Number of leavers on own request during the last twelve months compared to active employments on reporting date and leavers
Unit revenue per revenue passenger kilometre (yield)	Passenger revenue by product divided by Revenue passenger kilometres (RPK).		on own request during the last twelve months
Unit cost per available seat Unit cost (CASK) represents the Group's operational costs divided	Share
kilometre (CASK)	by available seat kilometres. Other operating income is deducted from operational costs.	Equity/share	Equity / Number of outstanding shares at the end of period
CASK excluding fuel	(Comparable operating result - Revenue - Fuel costs) / ASK x 100	Dividend/earnings	Dividend per share / Earnings per share (EPS) x 100
		Dividend yield, %	Dividend per share / Share price at the end of period x 100
Traffic		Cash flow from operating activities/share	Net cash flow from operating activities / Average number of outstanding shares during the period
Available seat kilometres (ASK)	Total number of seats available × great circle distance in kilometres
Revenue passenger kilometres	Number of revenue passengers × great circle distance in kilometres	P/E ratio	Share price at the end of period / Earnings per share (EPS) x 100

Revenue and profitability		Among industry sustainability leaders
Earnings per share (EPS), basic	(Result for the period - Hybrid bond and capital loan expenses net of tax) / Average number of outstanding shares during the period	Flight CO₂ emissions	CO₂ emissions from jet fuel consumption
Earnings per share (EPS), diluted	(Result for the period - Hybrid bond and capital loan expenses net of tax) / Average number of outstanding shares during the period taking into account the diluting effect resulting from changing into shares all potentionally diluting shares	Adaptable Finnair culture driven by engaged people
		Absences due to illness	Share of sickness absence hours relating to planned work hours
		Lost-time injury frequency	The number of workplace accidents per million working hours
Unit revenue per available seat kilometre (RASK)	Unit revenue (RASK) represents the Group's revenue divided by available seat kilometres (ASK).	Attrition rate, LTM	Number of leavers on own request during the last twelve months compared to active employments on reporting date and leavers
Unit revenue per revenue passenger kilometre (yield)	Passenger revenue by product divided by Revenue passenger kilometres (RPK).		on own request during the last twelve months
Unit cost per available seat	Unit cost (CASK) represents the Group's operational costs divided	Share
kilometre (CASK) by available seat kilometres. Other operating income is deducted	from operational costs.	Equity/share	Equity / Number of outstanding shares at the end of period
CASK excluding fuel	(Comparable operating result - Revenue - Fuel costs) / ASK x 100	Dividend/earnings	Dividend per share / Earnings per share (EPS) x 100
		Dividend yield, %	Dividend per share / Share price at the end of period x 100
Traffic		Cash flow from operating	Net cash flow from operating activities / Average number of
Available seat kilometres (ASK)	Total number of seats available × great circle distance in kilometres	activities/share	outstanding shares during the period
Revenue passenger kilometres (RPK)	Number of revenue passengers × great circle distance in kilometres	P/E ratio	Share price at the end of period / Earnings per share (EPS) x 100
Passenger load factor (PLF)	Share of revenue passenger kilometres of available seat kilometres

Customer-centric commercial and operational excellence

Net Promoter Score (NPS)	Net Promoter Score is based on a question: "Thinking about all aspects of this journey, how likely would you be to recommend Finnair to a relative, friend or colleague?" Scale is 0-10: The share of detractors (ratings 0-6) is deducted from the share of promoters (ratings 9-10). Result is between +100 and -100.
On-time performance	The share of flights arrived less than 15 minutes late
Share of passengers in modern channels	Share of passengers in Finnair's direct and modern, digital indirect channels in relation to total passengers for the period based on departure date. These channels include Finnair.com, Finnair mobile app, New Distribution Capability (NDC) solutions, Finnair call centers, Aurinkomatkat sales and group tool sales.

Property of each and

Review of the year 2023

Financial Statements Board of Directors' Proposal on the Dividend

	ﺎ

Financial Statements

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend Auditor's Report

Financial Statements

How to read Finnair Financial Statements?

Finnair's financial statements are structured to facilitate reading and understanding of the financial statements and to clarify the overall picture derived from it. The notes to the financial statements have been combined to business related sections, separately listing the accounting principles, critical accounting estimates and sources of uncertainty in each section. In addition, comments on interesting figures and other highlights are provided in text areas marked with a star. The financial statements also include illustrative charts to support the understanding of the figures.

Notes to the financial statement have been combined into sections based on their context. The aim is to give a more relevant picture of the Finnair Group and its business. The content of each section is described and explained in the beginning of that section and marked with .

Specific accounting principles are attached to the relevant note. The accounting principles can be recognised from character .

Critical accounting estimates and sources of uncertainty have been presented together with the relevant note and specified with character .

Highlights related to the section are explained in a separate text box to underline significant matters.

Financial Statements

This Financial Information 2023 is not the official version of xHTML document compliant with the ESEF (European Single Electronic Format) regulation. The official version of Financial Information 2023 in accordance with ESEF regulations is available at https://investors.finnair.com/fi.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

-

Financial Statements

Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity

Consolidated income statement

EUR mill.	Note	2023	2022
Revenue	1.1, 1.2	2,988.5	2,356.6
Other operating income		130.5	153.5
Operating expenses
Staff and other crew related costs	1.3.8	-498.1	-449.6
Fuel costs		-898.9	-835.1
Capacity rents		-107.2	-102.5
Aircraft materials and overhaul		-200.1	-192.4
Traffic charges		-233.8	-206.5
Sales, marketing and distribution costs		-117.1	-103.1
Passenger and handling services	1.3.2	-414.1	-348.0
Depreciation and impairment	2.3	-346.2	-349.8
Property, IT and other expenses	1.3.3	-112.1	-123.7
Operating result		191.4	-200.6
Financial income	3.1	56.2	6.5
Financial expenses	3.1	-142.2	-137.9
Exchange rate gains and losses	3.1	13.7	-38.8
Result before taxes		119.1	-370.7
Income taxes	5.1	135.2	-105.4
Result for the period		254.3	-476.2
Attributable to
Owners of the parent company		254.3	-476.2
Earnings per share attributable to shareholders of the parent company, EUR

EUR mill.	Note	2023	2022
Revenue	1.1, 1.2	2,988.5	2,356.6
Other operating income		130.5	153.5
Operating expenses
Staff and other crew related costs	1.3.8	-498.1	-449.6
Fuel costs		-898.9	-835.1
Capacity rents		-107.2	-102.5
Aircraft materials and overhaul		-200.1	-192.4
Traffic charges		-233.8	-206.5
Sales, marketing and distribution costs		-117.1	-103.1
Passenger and handling services	1.3.2	-414.1	-348.0
Depreciation and impairment	2.3	-346.2	-349.8
Property, IT and other expenses	1.3.3	-112.1	-123.7
Operating result		191.4	-200.6
Financial income	3.1	56.2	6.5
Financial expenses	3.1	-142.2	-137.9
Exchange rate gains and losses	3.1	13.7	-38.8
Result before taxes		119.1	-370.7
Income taxes	5.1	135.2	-105.4
Result for the period		254.3	-476.2
Attributable to
Owners of the parent company		254.3	-476.2
Earnings per share attributable to shareholders of the parent company, EUR
Basic earnings per share	3.9	0.022	-0.060
Diluted earnings per share	3.9	0.022	-0.060

Consolidated statement of comprehensive income

EUR mill.	Note	2023	2022
Result for the period		254.3	-476.2
Other comprehensive income items
Items that may be reclassified to profit or loss in subsequent periods
Change in fair value of hedging instruments		-7.7	-13.8
Tax effect		4.2	0.1
Items that will not be reclassified to profit or loss in subsequent periods
Actuarial gains and losses from defined benefit plans	1.3.8.2	11.6	49.9
Tax effect		-2.3	-10.0
Other comprehensive income items total		5.8	26.2
Comprehensive income for the period		260.0	-450.0

Attributable to
Owners of the parent company		260.0	-450.0

The business returned to profit during 2023

Operating result turned to profit in the financial year 2023 after the loss making years, which was a result of the easing of the negative impact of the COVID-19 pandemic and closure of Russian airspace as well as a successful implementation of the company strategy. Profitability improved especially due to strong passenger demand and exceptionally high ticket prices. Income taxes had a positive impact on the result for the period due to recognition of deferred tax assets on balance sheet. Accounting for income taxes is presented in more detail in note 5.1 Income taxes.

= Highlights

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated income statement
Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Consolidated balance sheet

EUR mill.	Note	2023	2022	EUR mill.	Note	2023	2022
ASSETS				EQUITY AND LIABILITIES
Non-current assets				Equity attributable to owners of the parent
Fleet	2.1	1,053.0	894.8	Share capital		75.4	75.4
Right-of-use fleet	2.2	775.0	932.9	Other equity		501.5	335.2
Fleet total		1,828.0	1,827.6	Equity total		577.0	410.7
Other fixed assets	2.1	141.8	150.1	Non-current liabilities
Right-of-use other fixed assets	2.2	140.4	145.4	Lease liabilities	2.2, 3.3	951.0	1,128.0
Other fixed assets total		282.2	295.5	Other interest-bearing liabilities	3.3	790.2	1,058.4
Pension assets	1.3.8.2	128.0	120.0	Pension obligations	1.3.8.2	0.8	0.7
Other non-current assets		3.1	4.5	Provisions and other liabilities	1.3.6	125.9	186.4
Deferred tax assets	5.1	234.0	80.6	Non-current liabilities total		1,868.0	2,373.5
Non-current assets total		2,475.2	2,328.3	Current liabilities
Current assets				Lease liabilities	2.2, 3.3	164.0	202.7
Receivables related to revenue	1.2.3	154.4	134.9	Other interest-bearing liabilities	3.3	120.3	240.1
Inventories and other current assets	1.3.4	134.6	122.0	Provisions	1.3.6	28.1	71.7
Derivative financial instruments	3.8	11.8	23.5	Trade payables		107.0	90.3
Other financial assets	3.2.1	776.8	738.6	Derivative financial instruments	3.8	43.4	36.7
Cash and cash equivalents	3.2.2	145.1	785.8	Deferred income and advances received	1.2.4	506.7	452.0
Current assets total		1,222.8	1,804.8	Liabilities related to employee benefits	1.3.8.1	116.5	111.2
Assets total		3,698.0	4,133.0	Other liabilities	1.3.5	167.1	144.4
				Current liabilities total		1,253.1	1,348.9
				Liabilities total		3,121.0	3,722.4
				Equity and liabilities total		3,698.0	4,133.0

Finnair invested in fleet and repaid interest-bearing liabilities

During 2023, Finnair purchased nine leased narrow body aircraft which is reflected in the increase of its own fleet and in the decrease of the right-of-use fleet. The early termination of lease contracts was reflected also in the reduction of lease liabilities. Decrease in other interest bearing liabilities was mainly due to amortisation of the pension premium loan. Changes in the capital structure are described in more detail in note 3. Capital structure and financing costs.

= Highlights

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated balance sheet

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Consolidated cash flow statement

EUR mill.	2023	2022
Cash flow from operating activities
Result before taxes	119.1	-370.7
Depreciation and impairment	346.2	349.8
Financial income and expenses	72.3	170.2
Sales gains and losses on aircraft and other transactions	-13.3	-6.6
Change in provisions	-21.4	45.2
Employee benefits	8.9	12.7
Other adjustments	1.0	2.1
Non-cash transactions	-11.5	60.0
Changes in trade and other receivables	-30.2	-86.9
Changes in inventories	-1.1	-10.1
Changes in trade and other payables	89.4	249.5
Changes in working capital	58.1	152.5
Financial expenses paid, net	-98.7	-96.1
Net cash flow from operating activities	472.3	259.0
Cash flow from investing activities
Investments in fleet	-400.6	-83.1
Investments in other fixed assets	-3.6	-4.9
Divestments of fleet, other fixed assets and shares	0.4	25.5
Lease and lease interest payments received	0.4	0.4
Change in other current financial assets (maturity over 3 months)	-60.7	-12.8
Change in other non-current assets	0.0	-0.7
Net cash flow from investing activities	-464.0	-75.5

Cash flow from financing activities

Loan repayments	-377.4	-144.0
Repayments of lease liabilities	-198.1	-193.4
Share issue**	570.4	-
Share issue costs	-2.1	-
Hybrid bond repayments	-200.0	-
Hybrid bond interests and expenses	-20.4	-20.5
Proceeds from capital loan	-	400.0
Capital loan repayments**	-400.0	-
Capital loan interests and expenses	-48.9	-
Net cash flow from financing activities	-676.4	42.1

Change in cash flows	-668.1	225.6

EUR mill.	2023	2022
Cash flow from operating activities
Result before taxes	119.1	-370.7
Depreciation and impairment	346.2	349.8
Financial income and expenses	72.3	170.2
Sales gains and losses on aircraft and other transactions	-13.3	-6.6
Change in provisions	-21.4	45.2
Employee benefits	8.9	12.7
Other adjustments	1.0	2.1
Non-cash transactions	-11.5	60.0
Changes in trade and other receivables	-30.2	-86.9
Changes in inventories	-1.1	-10.1
Changes in trade and other payables	89.4	249.5
Changes in working capital	58.1	152.5
Financial expenses paid, net	-98.7	-96.1
Net cash flow from operating activities	472.3	259.0
Cash flow from investing activities
Investments in fleet	-400.6	-83.1
Investments in other fixed assets	-3.6	-4.9
Divestments of fleet, other fixed assets and shares	0.4	25.5
Lease and lease interest payments received	0.4	0.4
Change in other current financial assets (maturity over 3 months)	-60.7	-12.8
Change in other non-current assets	0.0	-0.7
Net cash flow from investing activities	-464.0	-75.5
Cash flow from financing activities
Loan repayments	-377.4	-144.0
Repayments of lease liabilities	-198.1	-193.4
Share issue**	570.4	-
Share issue costs	-2.1	-
Hybrid bond repayments	-200.0	-
Hybrid bond interests and expenses	-20.4	-20.5
Proceeds from capital loan	-	400.0
Capital loan repayments**	-400.0	-
Capital loan interests and expenses	-48.9	-
Net cash flow from financing activities	-676.4	42.1

Change in cash flows	-668.1	225.6
Liquid funds, at beginning	1,375.6	1,150.0
Change in cash flows	-668.1	225.6
Liquid funds, at end*	707.5	1,375.6

* Liquid funds

EUR mill.	2023	2022
Other financial assets	776.8	738.6
Cash and cash equivalents	145.1	785.8
Cash funds	922.0	1,524.4
Other current financial assets (maturity over 3 months)	-214.4	-148.8
Liquid funds	707.5	1,375.6

** The participation of the State of Finland to the rights issue was paid by offsetting the aggregate subscription price against a corresponding amount of the principal of the capital loan. After the completion of the rights issue Finnair repaid the remainder of the capital loan to the State of Finland. The offsetting is disclosed in more detail in the notes 3.3 Financial liabilities and 3.9 Equity-related information.

Changes in equity and liabilities arising from financing activities are disclosed in the notes 3.3 Financial liabilities and 3.9 Equity-related information.

Fleet investments and loan repayments reduced cash funds

The net cash flow from operating activities increased during the finanical year as a result of the improved profitability. Investments in fleet relate mostly to the acquisition of nine aircraft previously leased by Finnair as well as cabin refurbishment of the wide-body aircraft. Net cash flow from financing activities decreased due lease and loan repayments, including repayment of the capital loan and hybrid bond. Changes in the capital structure are described in more detail in note 3. Capital structure and financing costs.

= Highlights

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated cash flow statement

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Consolidated statement of changes in equity

		Other	Hedging reserve and other OCI	Unrestricted	Retained
EUR mill.	Share capital	restricted funds	items	equity funds	earnings	Hybrid bond	Capital loan	Equity total
Equity 1 Jan 2023	75.4	168.1	42.8	763.3	-1,237.0	198.0	400.0	410.7
Result for the period	-	-	-	-	254.3	-	-	254.3
Change in fair value of hedging instruments	-	-	-3.5	-	-	-	-	-3.5
Actuarial gains and losses from defined benefit plans	-	-	9.3	-	-	-	-	9.3
Other comprehensive income items total	-	-	5.8	-	-	-	-	5.8
Comprehensive income for the period	-	-	5.8	-	254.3	-	-	260.0
Share issue	-	-	-	570.4	-	-	-	570.4
Share issue costs	-	-	-	-9.5	-	-	-	-9.5
Capital loan repayments	-	-	-	-	-	-	-400.0	-400.0
Capital loan interests and expenses	-	-	-	-	-39.1	-	-	-39.1
Hybrid bond repayments	-	-	-	-	-	-200.0	-	-200.0
Hybrid bond interests and expenses	-	-	-	-	-18.3	2.0	-	-16.3
Share-based payments	-	-	-	0.7	-	-	-	0.7
Equity 31 Dec 2023	75.4	168.1	48.6	1,325.0	-1,040.2	-	-	577.0

			Hedging reserve
EUR mill.	Share capital	Other restricted funds	and other OCI items	Unrestricted equity funds	Retained earnings	Hybrid bond	Capital loan	Equity total
Equity 1 Jan 2022	75.4	168.1	16.6	762.0	-744.5	198.0	-	475.7
Result for the period	-	-	-	-	-476.2	-	-	-476.2
Change in fair value of hedging instruments	-	-	-13.7	-	-	-	-	-13.7
Actuarial gains and losses from defined benefit plans	-	-	40.0	-	-	-	-	40.0
Other comprehensive income items total	-	-	26.2	-	-	-	-	26.2
Comprehensive income for the period	-	-	26.2	-	-476.2	-	-	-450.0
Proceeds from hybrid bond	-	-	-	-	-	290.0	-	290.0
Conversion of hybrid bond into capital loan	-	-	-	-	-	-290.0	290.0	-
Proceeds from capital loan	-	-	-	-	-	-	110.0	110.0
Hybrid bond interests and expenses	-	-	-	-	-16.4	-	-	-16.4
Share-based payments	-	-	-	1.4	-	-	-	1.4
Equity 31 Dec 2022	75.4	168.1	42.8	763.3	-1,237.0	198.0	400.0	410.7

The group's equity increased despite repayment of capital and hybrid loans Equity increased from prior year as a result of funds received from a share issue and the positive result for the period. Increase in equity was partly offset by repayments of the capital loan and hybrid bond.

= Highlights

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Basis of preparation

Finnair Plc's consolidated financial statements for 2023 have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, and they comply with the IAS and IFRS standards and respective SIC and IFRIC Interpretations effective on 31 December 2023. The notes to the consolidated financial statements also comply with Finnish accounting and corporate law. Changes applied in accounting principles in 2023 and future periods are described in the below section Changes in accounting principles.

The consolidated financial statements have been prepared on a going concern basis. The Board of Directors has assessed Finnair Group's ability to continue as a going concern based on the Group's ability to meet its obligations as they fall due at least 12 months after the consolidated financial statements are issued.

The consolidated financial statements are presented in euros, which is the parent company's functional currency. Transactions denominated in foreign currencies are translated into functional currency by using the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies and outstanding at the end of the reporting period are translated using the exchange rates of the closing date. Foreign exchange gains and losses arising from monetary assets and liabilities as well as fair value changes of related hedging instruments are recognized in the income statement.

The 2023 consolidated financial statements have been prepared based on original acquisition costs, except for financial assets recognised through profit and loss at fair value and derivative contracts measured at fair value. Financial statement data is presented in millions of euros and rounded to the nearest hundred thousand euro, which is why the sum of the individual figures may differ from the total shown.

Presentation of consolidated income statement and balance sheet

Finnair's consolidated income statement includes a subtotal 'operating result' which is not defined in the IAS 1 Presentation of Financial Statements standard. The Group has defined it as the net amount of operating income and expenses, including revenue and other operating income, less operating expenses, such as employee benefits, fuel costs, maintenance expenses and depreciations. Exchange rate differences and realised changes in fair values of derivatives are included in the operating result if they arise from items related to business operations; otherwise, they are recognised in financial items. The operating result excludes financial items, share of results from associates and joint ventures and income taxes.

In the consolidated balance sheet, assets and liabilities are classified as current when they are expected to realise within 12 months or when they are classified as liquid funds or as financial assets or liabilities classified at fair value through profit or loss. Other assets and liabilities are classified as non-current assets or liabilities. Interest-bearing liabilities include loans from financial institutions, bonds, loans taken for aircraft financing (JOLCO-loans & export credit support), lease liabilities and commercial papers. Interest-bearing assets include interest-bearing deposits as well as investments in commercial paper and certificates, bonds and money market funds. Interest-bearing net debt is the net amount of interest-bearing assets and liabilities and crosscurrency interest rate swaps that are used for hedging the currency and interest rate risk arising from interestbearing loans.

Critical accounting estimates and sources of uncertainty

The preparation of IFRS financial statements requires Group management to make various judgements in applying the accounting principles that affect the reported amounts of assets and liabilities as well as income and expenses. Management judgement has to be exercised in applying the accounting principles especially when the IFRS has alternative accounting, valuation or presentation methods.

The application of the accounting policies prescribed by IFRS require making estimates and assumptions relating to the future where the actual outcome may differ from the earlier estimates and assumptions made. The estimates and assumptions made are based on past experience and management's best estimate of future events and other factors, that are believed to be reasonable given the current circumstances. The estimates and assumptions are continuously evaluated and any changes therein are reflected in the period that the changes occur.

The earlier hightened uncertaintly related to the COVID-19 pandemic and the closure of the Russian airspace diminished during the financial year 2023, which was due to the easing of the COVID-19 pandemic following

Notes to the consolidated financial statements

Accounting principles

How should Finnair's accounting principles be read?

Finnair describes the accounting principles in conjunction with each note with the aim of providing an enhanced understanding of each accounting area. The basis of preparation is described as part of this note at a general level, while the principles more directly related to a specific note are attached to the corresponding note. The Group focuses on describing the accounting choices made within the framework of the prevailing IFRS policy and avoids repeating the actual text of the standard, unless Finnair considers it particularly important to the understanding of the note's content. The table below shows in which notes the related accounting principles are presented and to which IFRS standard the accounting principle is primarily based on.

Accounting principle	Note	Nr.	IFRS
Segment reporting	Segment information	1.1	IFRS 8
Revenue recognition, other income and trade receivables	Operating income	1.2	IFRS 15, IFRS 9, IFRS 7
Provisions and contingent liabilities	Provisions	1.3.6	IAS 37
Employee benefits and share-based payments	Employee benefits	1.3.8	IAS 19, IFRS 2
Pensions	Pensions	1.3.8.2	IAS 19
Tangible and intangible assets	Fleet and other fixed assets		2.1 IAS 16, IAS 36, IAS 38
Leases	Leasing arrangements	2.2	IFRS 16
Impairment of assets	Depreciation and impairment	2.3	IAS 36
Interest income and expenses	Financial income and expenses		3.1 IFRS 7, IFRS 9, IAS 32
Financial assets	Financial assets	3.2	IFRS 9, IFRS 7
Cash and cash equivalents	Financial assets	3.2	IFRS 9, IFRS 7
Financial liabilities	Financial liabilities	3.3	IFRS 9, IFRS 7
Derivative contracts and hedge accounting	Derivatives	3.8	IFRS 9, IFRS 7
Equity, dividend and treasury shares	Equity-related information	3.9	IAS 32, IAS 33
Consolidation principles of subsidiaries	Subsidiaries	4.2	IFRS 10
Investments in associates and joint ventures	Investments in joint ventures	4.4	IFRS 11, IAS 28
Related party disclosures	Related party transactions	4.5	IAS 24
Income tax and deferred taxes	Income taxes	5.1	IAS 12

Climate-related matters in the consolidated financial statements

Finnair's environmental management is based on the principle of continuous and systematic improvement, and it is committed to the long-term goal of carbon neutral flying by the end 2045. Finnair's climate-related targets have been disclosed in more detail in the Report of the Board of Directors and Sustainability Appendix.

Finnair expects the climate-related costs to increase significantly over the next 1-5 years, resulting from carbon emission reduction targets and tightening climate legislation. Especially three initiatives included in the EU's ''Fit for 55'' legislative package are particularly relevant for the aviation industry: the reform of emissions trading (EU-ETS), the mixing quota for sustainable aviation fuel (ReFuelEU Aviation) and the proposal to introduce a kerosene tax (energy tax directive). Free emission allowances are expected to seize in 2026. An initial minimum mixing quota of two percent for sustainable aviation fuel will be introduced in 2025, reaching 70% by year 2050. When in force, the new regulation is expected to result in higher costs for Finnair due to more expensive emission allowances, increased consumption of renewable fuel and possible abolition of the aviation fuel tax exemption. Where Finnair considers such costs will be recovered through increase in ticket fares, a corresponding adjustment is added to passenger revenue. In preparing the consolidated financial statements, the expected impacts of the climate related matters on the Group's results have been considered in the management's profitability and cash flow forecasts, which are also used in the evaluation of the recovery of deferred tax assets.

Finnair expects the impact of climate-related matters on the estimated economic life of its fleet to be insignificant, as management is not aware of such regulations at the balance sheet date that would directly prevent or limit the company's ability to use its current fleet. For example, an unexpected and significant increase in emission costs could, if realized, affect the timing of the planned fleet renewal in the future, but this is not considered likely at the time of the preparation of the financial statements.

Changes in accounting principles

New and amended IFRS standards and IFRIC interpretations

In May 2023, the IASB issued an amendment to the IAS 12 Income taxes standard which provides a temporary mandatory exemption from deferred tax accounting for the top-up tax under the OECD Pillar Two model. Finnair has applied the exception in its consolidated financial statements 2023. The amendment further requires entities to disclose information on their potential exposure to Pillar Two income taxes. This is disclosed in more detail in note 5.1 Income taxes. Other changes in the IFRS standards and IFRIC-interpretations effective from periods beginning 1 January 2023 included mainly amendments or improvements to current standards that did not have material effect on Finnair financial statements.

Other standards issued that are effective from periods on or after 1st of January 2024 mainly include amendments or improvements to current standards that are not expected to have a material impact on the Group's consolidated financial statements.

= Critical accounting estimates

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

1 Operating result

Operating result includes notes related to revenue and operating result from the point of view of income statement and balance sheet.

1.1 Segment information

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group's Executive Board. Segments are defined based on Group's business areas. Group has one business and reporting segment: Airline business.

The Finnair Executive Board, defined as the chief operative decision maker according to IFRS 8 Segment reporting, considers the business as one operating segment. Thus, separate segment information is not reported. The revenue by product and geographical area is presented in the note 1.2.1 Revenue by product and traffic area. The division is based on the destination of Finnair flights. Finnair operates international and domestic routes, but the assets are almost solely owned in Finland. The fleet composes the major part of the non-current assets (see note 2.1 Fleet and other fixed assets). The fleet is owned or leased by Finnair's Finnish subsidiary and the aircraft are operated flexibly across different traffic (geographical) areas. More details about fleet management and ownership can be found in the management report in the section "Fleet".

The negative impacts of the COVID-19 pandemic and the Russian airspace closure dimished during the financial year 2023 due to the removal of travel restrictions and Finnair's successful implementation of its renewed strategy. During the financial year Finnair transported 11.0 million passengers (9.1), which was 20.8 per cent more than in 2022.

1.2 Operating income

The operating income section includes both income statement and balance sheet notes that relate to revenue. The aim is to provide a more coherent picture of income related items affecting Finnair's result and financial position. Trade receivables and deferred income containing mainly prepaid flight tickets and travel tour services are presented in connection with this section, because those are an essential part in revenue recognition.

Revenue recognition

Revenue is recognised when goods or services are delivered. Revenue is measured at fair value of the consideration received or receivable, net of discounts and indirect taxes.

Passenger revenue includes sale of flight tickets, and is recognised as revenue when the flight is flown in accordance with the flight traffic program. Recognition of unused tickets as revenue is based on the expected breakage amount of tickets remaining unused in proportion to the pattern of rights exercised by the passenger.

Sales price is allocated to a flight ticket and points in Finnair Plus' Customer Loyalty Program. Finnair loyalty customers can earn Finnair Plus Points from tickets or services purchased, and use the earned points to buy services and products offered by Finnair or its cooperation partners. The points earned are measured at fair value and recognised as a decrease of revenue and debt at the time when the points-earning event (for example, flight is flown) is recognised as revenue. Fair value is measured by taking into account the fair value of those awards that can be purchased with the points and the customer selection between different awards based on historical customer behaviour. In addition, the fair valuation takes into account the expiry of the points. The debt is derecognised when the points are used or expire.

Customer compensations for delays or cancellations is a variable consideration in the contract and it is recognised as an adjustment to revenue. = Content of the section

= Accounting principles

= Critical accounting estimates

Ancillary revenue includes sale of ticket related services, such as advance seat reservations, additional baggage fees as well as different service fees, and sale of goods in the aircraft. The service revenue is recognized when the flight is flown in accordance with the flight traffic program, since it is considered as a contract modification instead of a separate revenue transaction. The sale of goods is recognized when the goods are delivered to the customer. Cargo revenue is recognized when the cargo has been delivered to the customer.

Tour operations revenue includes sale of flight and hotel considered as separate performance obligations, which are recognized as the service is delivered.

Trade receivables

Finnair Plus Customer Loyalty Program

Valuation and revenue recognition related to Finnair Plus debt require management's judgement especially on fair valuation of points and timing of revenue recognition related to points expected to expire. The fair value of the point is defined by allocating the point to award selection based on historical behaviour of customers, after which the fair value of each award is defined. The liability is calculated by taking the total amount of points earned by customers, decreased by the expected expiry of the points. These points are then fair valued as described above, and the result is recognised as liability on the balance sheet.

1.2.1 Revenue by product and traffic area

2023

EUR mill.	Asia	North Atlantic	Europe	Middle East	Domestic	Unallo cated	Total	Share, % of revenue by product
Passenger revenue	763.2	214.9	1,045.3	206.3	172.7	9.3	2,411.6	80.7
Ancillary revenue	30.6	9.9	50.7	1.9	5.8	48.9	147.8	4.9
Cargo	133.6	28.5	26.5	1.4	0.4	1.6	192.0	6.4
Travel services	23.8	1.3	205.8	6.0	0.0	0.1	237.1	7.9
Total	951.3	254.6	1,328.3	215.6	178.9	59.9	2,988.5
Share, % of revenue by traffic area	31.8	8.5	44.4	7.2	6.0	2.0

The division of revenue by traffic area is based on destination of the Finnair flights. Since the beginning of 2023, Finnair has reported Middle East as a separate traffic area whereas in 2022, these figures were still included in the European traffic. Comparison period figures have been adjusted accordingly.

Finnair's revenue increased compared to the financial year 2022 mainly due to increase in passenger revenue. Passenger revenue increased as the COVID-19 impact was still reflected in the comparison period and as passenger yields were exceptionally high during the reporting period. The decrease in cargo revenue was mainly due to reduced cargo yields.

Due to the wide scale of customers and nature of the business, sales to any individual customer is not material compared to Finnair's total revenue.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

2022

2025	2022
1,764.0	1,365.3
282.1	193.7
128.4	96.8
109.4	978
100.6	100.9
93.6	523
829	85.4
427.5	364.2
2.988.5	2.556.6

EUR mill.	Asia	North Atlantic	Europe	Middle East	Domestic	Unallo cated	Total	revenue by product
Passenger revenue	425.0	244.3	855.0	42.9	128.2	15.3	1,710.7	72.6
Ancillary revenue	19.4	12.8	36.7	1.0	5.4	47.9	123.2	5.2
Cargo	224.7	82.6	46.3	2.4	0.4	-4.1	352.3	15.0
Travel services	7.6	0.3	156.2	5.5	0.5	0.2	170.3	7.2
Total	676.8	340.0	1,094.3	51.8	134.4	59.3	2,356.6
Share, % of revenue by traffic area	28.7	14.4	46.4	2.2	5.7	2.5

1.2.2 Revenue by currency

EUR mill.	2023	2022
EUR	1,764.0	1,365.3
USD	282.1	193.7
JPY	128.4	96.8
GBP	109.4	97.8
SEK	100.6	100.9
KRW	93.6	52.3
NOK	82.9	85.4
Other currencies	427.5	364.2
Total	2,988.5	2,356.6

The hedging policies against foreign exhange rate fluctuations are described in note 3.5 Management of financial risks.

1.2.3 Receivables related to revenue

EUR mill.	2023	2022
Trade receivables	94.1	89.4
Accrued income	60.3	45.5
Total	154.4	134.9

Most of the accrued income represents contract assets, for which Finnair has met the performance requirement prior to receiving payment from customers and these have not yet been recognized as trade receivables. Contract assets mainly include accrued income related to cargo sales and receivables from airlines involved in the Siberian Joint Business on flights between Europe and Japan, and the Atlantic Joint Business on flights between Europe and North America.

The fair value of trade receivables does not materially differ from balance sheet value.

		2023		2022
Aging analysis of trade receivables	Trade receivables, EUR mill.	Probability of not collecting, %	Expected uncollectible, EUR mill.	Trade receivables, EUR mill.	Probability of not collecting, %	Expected uncollectible, EUR mill.
Not overdue	93.7	0.6%	0.5	87.1	0.5%	0.4
Overdue less than 60 days	0.1	4.5%	0.0	0.2	19.7%	0.0
Overdue more than 60 days	0.4	3.7%	0.0	2.1	6.3%	0.1
Total	94.1	0.6%	0.6	89.4	0.7%	0.6

During the financial year, the Group recognised credit losses in total of 0.8 million euros (0.2). Trade receivables do not contain significant credit risk because of the diversified customer base. The maximum exposure to credit risk at the reporting date equals to the total carrying amount of trade receivables. The Group does not hold any collateral as security related to trade receivables.

Trade receivables by currency

EUR mill.	2023	2022
EUR	51.4	52.6
USD	11.4	5.2
KRW	4.1	3.2
NOK	3.9	6.2
JPY	3.4	3.1
GBP	3.1	3.7
SEK	2.8	3.3
Other currencies	14.0	12.1
Total	94.1	89.4

1.2.4 Deferred income and advances received

EUR mill.	2023	2022
Deferred revenue on ticket sales	394.8	356.4
Loyalty program Finnair Plus	66.7	51.3
Advances received for tour operations	32.5	27.9
Other items	12.8	16.4
Total	506.7	452.0

Most of the deferred income and advances received represent contract liabilities, for which payments have been received from customers before the performance obligation is discharged by Finnair. Deferred income and advances received includes prepaid flight tickets and package tours for which the departure date is in the future. The Finnair Plus liability is related to Finnair's customer loyalty program, and equals the fair value of the accumulated, unused Finnair Plus points. Other items mainly include gift voucher liabilities and liabilities to airlines involved in the Siberian Joint Business on flights between Europe and Japan, and the Atlantic Joint Business on flights between Europe and North America.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

1.2.5 Other operating income

Other operating income decreased when compared to the financial year 2022 mainly due to ending of the wet lease arrangements with Eurowings Discover in the first quarter of 2023. Sales gains on fixed assets mainly comprise of the purchase of two A320 and seven A321 leased aircraft.

1.3 Operating expenses

The operating expenses section includes the income statement and balance sheet notes related to operating expenses, aiming to provide a better overview of business operations and related expenses. Maintenance provisions of leased aircraft that inherently relate to aircraft overhaul costs are included in this operating expenses section. Also accrued expenses, such as liabilities related to jet fuel and traffic charges, are presented in this section. In addition, items related to employee benefits are presented at the end of this section in a separate note 1.3.8. Employee benefits. It includes the different forms of benefits received by Finnair employees, including share-based payments and pensions, their effect on staff costs and balance sheet as well as information on management remuneration.

EUR mill.	2023	2022	EUR mill.	2023	2022
Lease income	95.3	118.8	IT expenses	67.2	63.9
Sales gains on fixed assets	13.4	6.8	Property expenses	21.9	20.6
Other income	21.8	27.9	Other expenses	22.9	39.2
Total	130.5	153.5	Total	112.1	123.7

Finnair's operating expenses increased as compared to the prior year mainly due to increased capacity and longer Asian routings. Finnair continued its cost efficiency initiatives during 2023.

1.3.1 Operating expenses by currency

EUR mill. 2023 2022 EUR 1,774.4 1,490.1 USD 971.9 1,092.3 Other currencies 181.3 128.3 Total 2,927.5 2,710.6

The hedging policies against foreign exchange rate fluctuations are described in note 3.5 Management of financial risks.

1.3.2 Passenger and handling services

EUR mill.	2023	2022
Ground and cargo handling expenses	178.8	158.3
Expenses for tour operations	115.4	88.9
Catering expenses	57.3	45.0
Other passenger services	62.7	55.8
Total	414.1	348.0

1.3.3 Property, IT and other expenses

Property, IT and other expenses mainly consist of fixed costs.

Audit fees

EUR mill.	2023	2022
Auditor's fees	0.6	0.6
Tax advising	-	-
Other fees	0.2	0.0
Total	0.9	0.6

The auditor's fees of KPMG Oy Ab included fees of 614 thousand euro (466) for audit services and 9 thousand euro (127) for auditor's statements. Non-audit services to Finnair Group entities were 239 thousand euro (3).

1.3.4 Inventories and other current assets

EUR mill.	2023	2022
Credit card acquirer holdbacks	57.0	57.0
Inventories	32.2	31.1
Aircraft materials and overhaul	9.5	7.4
Jet fuels	9.3	6.6
Capacity rent receivables	7.0	6.4
VAT receivables	3.7	2.1
Interest and other financial items	2.3	1.5
Other items	13.6	9.8
Total	134.6	122.0

Credit card acquirer holdbacks relate to cash funds from passenger ticket sales that are held by credit card processors.

1.3.5 Other liabilities

EUR mill.	2023	2022
Jet fuel and traffic charges	50.4	50.9
Passenger and handling services	38.1	34.8
Aircraft materials and overhaul	22.2	14.0
Sales, marketing and distribution cost accruals	17.1	13.8
Interest and other financial items	8.2	9.0
Other items	31.2	21.9
Total	167.1	144.4

= Content of the section

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

2023	2022
1,774.4	1,490.1
971.9	1,092.3
1813	128.3
2,927.5	2,710.6

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

1.3.6 Provisions

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as the result of a past event, the fulfilment of the payment obligation is probable, and a reliable estimate of the amount of the obligation can be made. The amount to be recognised as provision corresponds to the management's best estimate of the expenses that will be necessary to meet the obligation at the end of the reporting period.

In most cases, the Group is obliged to return leased aircraft and their engines according to the redelivery condition set in the lease agreement. If at the time of redelivery, the condition of the aircraft and its engines differs from the agreed redelivery condition, Finnair needs to either maintain the aircraft so that it meets the agreed redelivery condition or settle the difference in cash to the lessor. To fulfil these maintenance obligations, the Group has recognised airframe heavy maintenance, engine performance maintenance, engine life limited part, landing gear, auxiliary power unit and other material maintenance provisions. The provision is defined as a difference between the current condition and redelivery condition of these maintenance components. The provision is accrued based on flight hours flown until the next maintenance event or the redelivery and recognised in the aircraft overhaul costs in the income statement. The provision is reversed at the maintenance event or redelivery. The price of the flight hour depends on the market price development of the maintenance costs. Estimated future cash flows are discounted to the present value. The maintenance market prices are mainly denominated in US dollars, which is why the amount of maintenance provision changes due to currency fluctuation of the dollar.

The final check and painting required at redelivery are considered unavoidable maintenance costs that realise when the aircraft is redelivered to the lessor, irrespective of the time or flight hours. The counterpart of the provision is recorded in the book value of the right-of-use asset at the commencement of the lease. Respectively, costs depending on the usage of the aircraft are not considered as part of the right-of-use asset cost, but these are recognised according to the principles presented above.

Restructuring provisions are recognised when the Group has prepared a detailed restructuring plan and has begun to implement the plan or has announced it.

Maintenance reserves of the fleet

The measurement of aircraft maintenance provisions requires management judgement especially related to the timing of maintenance events and the valuation of maintenance costs occurring in the future. The future maintenance costs and their timing are dependent on, for example, how future traffic plans actually realise, the market price development of maintenance costs and the actual condition of the aircraft at the time of the maintenance event.

	Aircraft maintenance	Other		Aircraft maintenance	Other
EUR mill.	provision	provisions	2023	provision	provisions	2022
Provision at the beginning of period	246.7	5.0	251.7	195.9	3.8	199.8
Provision for the period	49.1	1.2	50.3	56.1	4.8	60.9
Provision used	-58.9	-2.8	-61.7	-16.6	-2.6	-19.2
Provision reversed	-2.3	-0.6	-2.9	-3.1	-1.0	-4.2
Provision for right-of-use assets redelivery	-0.3	-	-0.3	-0.9	-	-0.9
Reclassifications	-90.8	-	-90.8	-	-	-
Unwinding of discount	7.8	-	7.8	6.4	-	6.4
Exchange rate differences	-7.1	-	-7.1	8.8	-	8.8
Total	144.2	2.9	147.1	246.7	5.0	251.7

Of which non-current	118.3	0.8	119.0	178.7	1.4	180.1
Of which current	25.9	2.1	28.1	68.0	3.6	71.7
Total	144.2	2.9	147.1	246.7	5.0	251.7

Non-current aircraft maintenance provisions are expected to be used by 2035. Maintenance provisions of 90.8 million euros were reclassified against the acquisition cost of purchased, formerly leased aircraft. In balance sheet, the non-current provisions and other liabilities 125.9 million euro (186.4) includes, in addition

to provisions, other non-current liabilities 6.9 million euro (6.3), which mainly consist of received lease deposits.

1.3.7 Items affecting comparability

Finnair uses alternative performance measures in its internal reporting to the chief operative decision maker, or Finnair Executive Board. The figures are referred to in the European Securities Markets Authority (ESMA) Guidelines on Alternative Performance Measures, which Finnair uses to describe its business and financial performance development between periods. The alternative performance measures do not replace IFRS indicators, but shall be read in conjunction with key figures in accordance with IFRS financial statements.

Unrealised exchange rate differences of mainly in US dollars denominated aircraft maintenance provisions and unrealised fair value changes of derivatives where hedge accounting is not applied are excluded from comparable operating result. These exchange rate and fair value effects are included in the comparable operating result only when they will realize. In addition, gains and losses on aircraft and other transactions, impairment as well as restructuring costs are not included in the comparable operating result.

		2023 Items affecting compara			2022 Items affecting compara
EUR mill.	Reported	bility	Comparable	Reported	bility	Comparable
						2,356.6
						146.7

						-447.1
						-836.0
						-102.5
						-183.6
						-206.5
						-103.1
						-348.0
						-123.3
						153.2
						-317.1
						-163.9

Items affecting comparability include gain of 7.1 million euros on the unrealized exchange rate difference of aircraft maintenance provisions, gain of 13.5 million euros mainly comprising of the purchase of nine leased aircraft and an impairment of 13.7 million euros related to lease agreements for an aircraft maintenance hangar and its land area situated in the Helsinki airport area.

= Accounting principles = Critical accounting estimates

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

1.3.8 Employee benefits

1.3.8.1 Employee benefit expenses and share-based payments

Share-based payments

Finnair provides several share-based compensation plans for its employees, under which the Group receives services from employees as consideration for share-based payments. Regarding share-based incentive plans for key personnel, the awards are paid only if performance criteria set by the Board of Directors is met. Share-based savings plan for employees (FlyShare) requires the employees to remain in Finnair's service for the defined period, but payment does not depend on any performance criteria.

The total expense for share-based payments is recognised over the vesting period, which is the period over which all of the specified vesting conditions, such as the fulfilment of goals and a valid employment relationship, are to be satisfied. Share-based payments that are settled net of taxes are considered in their entirety as equity-settled share-based payment transactions. The reward is valued based on the market price of the Finnair share as of the grant date, and recognised as an employee benefit expense over the vesting period with corresponding entry in the equity. Income tax paid to tax authorities on behalf of employee is measured based on the market price of the Finnair share at the delivery date and recognised as a decrease in equity. If the reward includes the portion settled in cash, it is accounted for as a cash-settled transaction. The liability resulting from the cash-settled transactions is measured based on the market price of the Finnair share at the balance sheet date and accrued as an employee benefit expense for service period with corresponding entry in the liabilities until the settlement date.

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to a termination. Group is demonstrably committed when it has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer.

Accounting principles related to pension benefits are described in the note 1.3.8.2 Pensions.

Staff and other crew related costs

EUR mill.	2023	2022
Wages and salaries	348.6	297.3
Defined contribution schemes	61.7	55.4
Defined benefit schemes	8.3	11.4
Pension expenses total	70.0	66.8
Other social expenses	16.3	31.6
Salaries, pension and social costs	435.0	395.7
Operative staff related costs	30.5	27.6
Leased and outsourced crew	26.0	19.0
Other personnel related costs	6.5	7.3
Total	498.1	449.6

At Finnair, the total salary of personnel consists of fixed pay, allowances, short- and long-term incentives, fringe benefits and other personnel benefits.

In the long-term Rebuild incentive plan for 1 July 2020 – 30 June 2023, employee could earn a cash reward equaling to 1–2 month base salary, when the targets set by the Board of Directors are met or exceeded. The performance criteria were the same as those of the Rebuild incentive plan established for the Executive Board, which is described in the section Share-based payments of this note. The program is available to those employee groups which have agreed to actions related to staff cost savings.

A new long-term incentive plan (Staff Incentive Plan) for 2023–2025 was commenced for the personnel, which was prepared as part of the cost-saving program in 2022. The incentive plan returns half of the one year's

= Accounting principles

permanent savings made by the personnel group, if the goal of the incentive plan set by Finnair's board of Directors is met.

The total amount of the short-term and above-mentioned long-term incentives excluding social security costs recognised for 2023 were 19.1 million euro (10.0). Staff and other crew related costs include one-off personnel related restructuring costs of 2.5 million euro in the comparison period, during the reporting period these costs did not exist.

Profit-sharing Plan (Personnel fund)

Finnair has a profit-sharing plan in which a share of Finnair's profits is allocated to the personnel. The share of profit is determined on the basis of targets set by the Board of Directors. All Finnair employees are eligible for the profit-sharing plan, excluding the CEO, other members of the Executive Board and the participants of the performance share plan. The targets for the profit-sharing plan in years 2021–2023 were not set.

Liabilities related to employee benefits

EUR mill.	2023	2022
Holiday payments	72.4	66.8
Other employee related accrued expenses	44.1	44.4
Liabilities related to employee benefits	116.5	111.2

Other employee related accrued expenses mainly include withholding tax and accrued expenses related to social security costs and remunerations. Other non-current liabilities include the long-term Staff incentive plan of 1.5 million euro, there were no long-term liabilities in the comparison period. In addition, restructuring provisions related to termination benefits (see note 1.3.6 Provisions) amounted to 0.2 million euro (2.3).

Management remuneration

The President and CEO and Executive Board remuneration

Thousand euros	President and CEO Topi Manner	Executive Board	Total 2023	President and CEO Topi Manner	Executive Board	Total 2022
Fixed pay	771	2,050	2,820	734	1,712	2,446
Short-term incentives	372	1,057	1,428	-	-	-
Fringe benefits	19	92	111	20	105	125
Share-based payments	756	1,651	2,407	287	789	1,076
Pensions (statutory)*	189	519	708	124	298	421
Pensions (voluntary, defined contribution)	-	32	32	-	20	20
Total	2,106	5,401	7,507	1,165	2,923	4,088

* Statutory pensions include Finnair's share of the payment to Finnish statutory "Tyel" pension plan.

Management remuneration is presented on an accrual basis. Share-based payments include long-term incentive plans and employee share savings plans and are recognised over the vesting period until the end of the lock-up period, according to IFRS 2. Therefore the costs accrued and recognised for the financial year include effects from several share-based payment plans independent of when the shares are delivered. Management has not been provided any other long-term incentives in addition to share-based payments.

In conjunction with the rights offering in 2020, the EU commission set restrictions to CEO and Executive Board remuneration covering years 2020-2022. The restrictions cover variable compensation payouts and any changes to fixed compensation during the years 2020-2022. As a result, the Board of Directors decided to cancel the 2018-2020, 2019-2021 and 2020-2022 LTI plans as well as the 2020-2022 STI plan for the CEO and

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Executive Board. A new share-based long-term Rebuild incentive program was established for the CEO and Executive Board for the period 7/2020-6/2023.

The voluntary pension plans of one member of the Executive Board have been arranged through a Finnish pension insurance company. The retirement age for this member of the Executive Board is 63 years. The plan is a defined contribution plan.

More information on share-based payment schemes can be found later in this note and in a separate Remuneration report as well as on company website.

Remuneration paid to Board of Directors

Compensation paid for board service, EUR	Total 2023	Fixed remuneration	Meeting compensation	Fringe benefits	Total 2022
Board of Directors	445,830	282,300	156,600	6,930	416,222
Alahuhta-Kasko Tiina	45,300	30,300	15,000	-
Brewer Montie	56,834	32,700	22,800	1,334
Erlund Jukka	47,100	32,700	12,000	2,400
Jakosuo-Jansson Hannele	50,896	32,700	15,000	3,196
Karvinen Jouko, until 23 March 2023	21,150	15,750	5,400	-
Kjellberg Henrik	53,100	30,300	22,800	-
Large Simon	53,100	30,300	22,800	-
Pajumaa Minna, from 24 March 2023 onwards	34,725	22,725	12,000	-
Strandberg Maija, until 23 March 2023	11,175	7,575	3,600	-
Suvanto-Harsaae Sanna, from 24 March 2023 onwards	72,450	47,250	25,200	-

The remuneration of the Board of Directors is presented on an accrual basis. The compensation paid to the members of the Board of Directors include annual remuneration and meeting compensation. The members of the Board of Directors are entitled to a compensation for travel expenses in accordance with Finnair's general travel rules. In addition, the members of the Board of Directors and their spouses have a limited right to use staff tickets in accordance with Finnair's staff ticket rules. These tickets constitute taxable income in Finland and are reported as fringe benefits in the table above.

Share-based payments

This note provides description and information on effects of the Group's share-based incentive schemes. More information on share-based personnel bonus schemes can be found in Remuneration report.

Performance share plan (LTI)

Finnair's share-based incentive plan is a performance-based, annually commencing long-term incentive (LTI) arrangement, and the commencement of each new plan is subject to a separate decision made by Finnair's Board of Directors. The purpose of these plans is to encourage the management to work to increase long-term shareholder value. The Finnish Government's guidance regarding the remuneration of executive management and key individuals have been taken into consideration when designing the plans.

All ongoing LTI plans include three years earning period. The potential reward will be delivered in Finnair shares. The shares are delivered to the participants during the year following the performance period, except for the Rebuild incentive where the performance period ended in June 2023 and the share of year 2023 reward was delivered at the end of the same year.

The members of Finnair's Executive Board are expected to accumulate their share ownership in Finnair until it corresponds to their annual gross base salary and thereafter retain it for as long as they are members of the Executive Board.

The target levels and maximum levels set for the criteria are based on the long-term strategic objectives set by the company's Board of Directors. Criteria are monitored against the performance on a quarterly basis. The performance criteria of the plan for 2020–2022 were not reached. In the comparison period, the performance criteria applied to the 2019–2021 plan was met at 54% level while the target was at 100% and the maximum earning level at 200%.

The expense recognised for 2023 amounted to 3.8 million euros (0.9). The amount expected to be transferred to the tax authority to settle the employee's tax obligation is 3.4 million euros (3.0). The cost related to sharebased payments is recognised in staff and other crew related costs and unrestricted equity funds, except the cash-settled portion of the Rebuild incentive plan in liabilities related to employee benefits.

Rebuild incentive plan 7/2020-6/2023

In 2020, a new share-based Rebuild incentive plan for CEO and Executive Board was launched. The program contains a three-year performance period (7/2020–6/2023) and it is designed to contain only this one plan. The potential share rewards will be delivered to the participants in a pre-determined proportion of shares and cash after the end of the performance period and the rewards are at the participants' free disposal after delivery.

If the combined value of incentive rewards in 2023 exceeds 120% of executive's annual salary, the exceeding part is deferred to coming years so that the combined incentive payout in any year does not exceed 120% of the annual base salary. The total expense for the plan is recognised over the vesting period between the grant date and each tranche of share deliveries. The grant date is at the beginning of performance period and the compensation is measured in shares.

The payout opportunity of the Rebuild plan was defined in the beginning of each plan in relation to the participants annual base salary. If the performance criteria set for the plan would have been met at the target level, the incentive paid in Finnair shares to the President and CEO or other member of the Executive Board participating in the plans would have been a total of 180% of the participant's annual base salary. If the performance criteria set for the plan would have been at the maximum level, the incentive paid in Finnair shares will be a total of 360% of the participant's annual base salary. The performance criteria of the plan were met at 69.5% of the maximum level.

The amount corresponding to tax payable at the time of payment was first deducted from the gross reward defined as shares. The net reward was delivered in a combination of cash and shares in a proportion decided by the Board of Directors. As a result of the rights issue in 2023 prior to the share delivery, the share allocation for

	2022	2024
LTI 2020–2022
LTI 2021–2023
LTI 2023–2025

LTI Rebuild
7/2020–6/2023*
Fly Share 2020
Fly Share 2021
Earnings / savings period	Lock-up period	Share delivery

Finnair share-based payment plans

* Total incentive rewards cannot exceed 120% of annual base salary in any year, possible exceeding amount is deferred from 2023 to following years.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

the Rebuild plan was adjusted in accordance with the decision of the Board of Directors in order for the earning opportunities to retain their value.

The performance criteria were set for the whole 3-year period as well as for three 12-month mid-term periods: • 7/2020–6/2021: comparable EBITDA (40% weight), gearing (40% weight), lost-time injury frequency (10% weight) and CO2 emissions measured through fuel efficiency (10% weight),

• 7/2021–6/2022: comparable EBIT (60% weight), revenue (20% weight), employee retention (10% weight) and CO2 emissions measured through fuel efficiency (10% weight) as well as

• 7/2022–6/2023: comparable EBITDA (40% weight), net promoter score (NPS, 40% weight), lost-time injury frequency (10% weight) and employee retention (10% weight).

The criteria for the whole 3-year period, was cash flow from operating activities which functioned as a multiplier (0-2) for the whole program. This meaned that the threshold level needed to be reached in order for any reward to be paid.

Other long-term incentive plans

There are two long-term incentive plans ongoing (2021–2023 and 2023–2025 with two performance periods 2023–2024 and 2023–2025). In 2022, no new long-term incentive plan was launched due to continuous business environment changes caused by the war in Ukraine.

The annually commencing performance share plans retain the three-year performance period, the exception is the two-year performance period of the 2023-2025 plan. The potential share rewards will be delivered to the participants in one tranche after the performance period and they are at the participants' free disposal after delivery.

The pay-out opportunity is defined as a fixed share amount in the beginning of each plan in relation to the participants annual base salary. Therefore, changes in the share price during the performance period impacts the value of the pay-out opportunity. If the performance criteria set for the plan are met at the target level, the incentive paid in Finnair shares to the President and CEO or other member of the Executive Board participating in the plans will be 20% of the participant's annual base salary. If the performance criteria set for the plan are met at the maximum level, the incentive paid in Finnair shares will be 60% of the participant's annual base salary. The maximum level for incentives for other key personnel is 20–50% of the person's annual base salary. As a result of the rights issue in 2023, the share allocations for the ongoing 2021–2023 and 2023–2025 plans were adjusted 6.32-fold in order for the earning opportunities to retain their value.

The maximum combined value of all variable compensation (including both short- and long-term incentives) paid to an individual participant in any given calendar year may not exceed 120% of the participant's annual gross base salary. The amounts of shares paid are stated before tax. The number of shares delivered will be deducted by an amount corresponding to the income tax payable for the incentive at the time of payment. In conjunction with the rights offering in 2020, according to the restrictions set by EU commission, the Board of Directors decided to cancel the 2018–2020, 2019–2021 and 2020–2022 LTI plans for the CEO and Executive Board.

The performance criteria applied to the plans are:

• 2020–2022 plan: earnings per share (EPS, 50% weight) and unit cost with constant currencies and fuel price (CASK, 50% weight),

• 2021–2023 plan: earnings per share (EPS, 45% weight), unit cost with constant currencies and fuel price (CASK, 45% weight) and fuel efficiency (10% weight) as well as

• 2023–2025 plan: operating result.

The total expense for the plans is recognised over the vesting period, which is three years. The grant date is at the beginning of performance period and the compensation is measured in shares.

		Rebuild
	2020–2022	2020–2023	2021–2023	2023–2025	Total
Grant date	7 Feb 2020	9 Oct 2020	26 Jan 2021	23 Jan 2023
Grant price, euros*	0.1759	0.0663	0.1049	0.0856
Number of persons at the end of the reporting year	-	6	52	66
Expenses recognised for the financial year, LTI's total (million euros)	-	1.8	-	2.0	3.8
of which share-settled (net of taxes)	-	0.8	-	2.0	2.9
of which cash-settled	-	0.9	-	-	0.9
Liability related to LTI's total	-	0.5	-	-	0.5
Shares granted, million shares	-	66.5	38.5	96.6	201.6

* Grant price in the plan 2020-2022 has been adjusted by the bonus elements included in the rights issues in 2020 and 2023, and the other plans have been adjusted by a bonus element included in the rights issue in 2023.

** As a result of the rights issue in 2023, the share allocations for the 2020–2023 Rebuild, 2021–2023 and 2023–2025 plans were adjusted based on the decision of the Board of Directors in order for the earning opportunities to retain their value. The 2020– 2022 and 2021–2023 plans were cancelled for the CEO and Executive Board.

FlyShare employee share savings plan

The saving period of the last plan of the share savings plans offered for Finnair's employees is ongoing. In 2022, Finnair's Board of Directors decided to terminate commencing the new FlyShare programs as a part of savings program.

Plan consisted of one year savings period followed by two year lock-up period. Through the plan, each eligible Finnair employee was offered the opportunity to save part of his or her salary to be invested in Finnair shares. The maximum monthly savings were 8% and the minimum 2% of each participant's gross base salary per month. Shares were purchased with the accumulated savings at the market price quarterly, after the release of Finnair's interim reports.

The plan lasts for three years, and Finnair awards each participating employee with one share for each two shares purchased and held at the end of three-year period. The awarded bonus and additional shares are taxable income for the recipient. The number of shares delivered will be deducted by an amount corresponding to the income tax payable for the shares at the time of payment. The cost related to additional shares delivered is recognised as expense during vesting period.

The expense recognised for FlyShare employee share saving plans in 2023 amounted to 0.7 million euros (0.9). The amount expected to be transferred to the tax authority to settle the employee's tax obligation is 0.3 million euros (0.9). The cost related to employee share saving plans is recognised in staff and other crew related costs and unrestricted equity funds.

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

1.3.8.2 Pensions

Defined benefit and defined contribution plans

Pension plans are classified as defined benefit and defined contribution plans. Payments made into defined contribution pension plans are recognised in the income statement in the period to which the payment applies. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. Current service cost is the present value of the post employment benefit, which is earned by the employees during the year and it is recognised as staff and other crew related costs. The liability recognised in the balance sheet in respect of defined pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligations is determined by discounting the estimated future cash flows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. If fair value of plan assets is higher than present value of funded obligations, the net amount is presented as pension assets in the Group's balance sheet.

Pension obligations

The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Any changes in these assumptions will impact the carrying amount of pension obligations. The note below includes a description of exposure to most significant risks and a sensitivity analysis on impacts of changes in actuarial assumptions.

Description of pension plans at Finnair

The statutory pension cover of the employees of the Group's Finnish companies has been arranged in a Finnish pension insurance company. The statutory pension cover is a defined contribution plan. The Group's foreign sales offices and subsidiaries have various defined contribution plans that comply with local rules and practices. CEO has no supplementary pension plan. The supplementary defined contribution pension plan of one member of the Executive Board is arranged in a pension insurance company. The retirement age for this member is 63 years.

Other supplementary pension cover of the Group's domestic companies has been arranged mainly in the Finnair Pension Fund, in which the pension schemes are defined benefit plans. These pension plans cover old age supplementary pensions and disability pensions exceeding the pension cover under the Employment Pensions Act. The survivors' pensions under the supplementary pension cover applies on a limited basis to pensioners who have retired on 1 January 2005 at the latest, as well as to recipients of benefits previously in accordance with Finnair Plc's survivor's pension rules who transferred to the pension fund on 31 December 2015. The Pension Fund's old age pension scheme has been closed to other employees since 1 February 1992 and to pilots since 1 January 2010. Pilots recruited between 1 January 2010 to 31 May 2021 , have only been covered by the limited occupational disability pension scheme if they are not switched to another work offered by the employer. The pension fund as a whole has been closed on 31 May 2021.

Old age pensions of pilots recruited in 2015 or later are defined contribution schemes arranged in a life insurance company. Supplementary pension cover has also vested pension right on a limited basis and the retirement age of the pension fund's vested pension is tied to a change in the retirement age under the Employment Pensions Act that came into force in 2017 or an event under disability pension cover under the Employment Pensions Act. Beginning from 2021, the earnings or supplementary pensions payable on which the pension fund's defined benefit supplementary pension cover is based are not adjusted by the pension index increment. The supplementary pension liability of the pension fund is fully covered in accordance with Finnish legislation. In addition, approximately 500 Finnair pilots have the right to a separate defined contribution supplementary pension arranged in a life insurance company after reaching the age of 55 years in addition to the pension fund's defined benefit old age pension cover, if the pilot continues to work as pilot over the age of 55 years and retires from his/her job. = Accounting principles

= Critical accounting estimates

Exposure to most significant risks

Volatility of plan assets: Some of the plan assets are invested in equities which causes volatility but are in the long run expected to provide higher returns than corporate bonds. The discount rate of plan obligations is defined based on the interest rates of corporate bonds.

Changes in bond yield: A decrease in corporate bond yields increases plan obligations due to the fact that the pension obligation is discounted to net present value with a rate that is based on corporate bond rates. This increase in plan obligations is partially mitigated by a corresponding increase in the value of corporate bonds in plan assets.

Life expectancy: The most significant part of the provided pension benefits relate to old age pensions. Therefore, an increase in the life expectancy rate results in an increase of plan obligations.

Defined benefit pension plans

EUR mill.	2023	2022
Items recognised in the income statement
Current service costs	3.8	6.2
Past service cost	4.4	5.3
Settlements and curtailments	-	-0.1
Service cost total, recognised in staff costs	8.3	11.4
Net interest expenses and foreign exchange differences	-4.4	-0.6
Total included in the income statement	3.8	10.8

Amounts recognised through other comprehensive income
Experience adjustment on plan obligation	-5.7	1.5
Changes in financial actuarial assumptions	15.2	-86.4
Net return on plan assets	-21.1	34.9
Amounts recognised through other comprehensive income total	-11.6	-49.9

Number of persons involved, pension fund	3,893	4,258
Number of persons involved, other defined benefit plans	51	53

Items recognised in the balance sheet

EUR mill.	2023		2022
	Pension assets	Pension obligations	Pension assets	Pension obligations
Present value of funded obligations	-260.6	-5.9	-263.2	-1.1
Fair value of plan assets	388.5	5.1	383.3	0.5
Pension assets (+) / pension obligations (-) in the balance sheet	128.0	-0.8	120.0	-0.7

Pension assets 128.0 million euro (120.0) includes 127.9 million euro (119.7) related to defined benefit plans insured through the pension fund and 0.1 million euro (0.4) related to other defined benefit plans. Pension obligations includes 0.8 million euro (0.7) related to other defined benefit plans. The change during 2023 mainly is due to change in discounting rate to 3.01% (3.69%), net return on plan assets and exprerience adjustments.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Plan assets are comprised as follows

%	2023	2022
Listed shares	14.8	12.2
Debt instruments	56.7	59.7
Property	25.2	24.2
Other	3.3	3.9
Total	100.0	100.0

Plan assets of the pension fund include Finnair Plc shares with a fair value of 0.9 million euros (0.6) and buildings used by the Group with a fair value of 22.0 million euros (13.0).

Defined benefit plans: principal actuarial assumptions

%	2023	2022
Discount rate %	3.01 %	3.69%
Annual rate of future salary increases %	0.90 %	0.60%
Future pension increases %	0.00 %	0.00%
Estimated remaining years of service	8	8

Sensitivity analysis

	Consolidated income statement	Changes in pension obligations
		EUR mill.	2023	2022
Consolidated statement of comprehensive income		Fair value of pension obligations at 1 January	264.4	361.2
		Current service costs	3.3	5.7
Consolidated balance sheet		Past service cost	4.4	5.3
		Settlements and curtailments	-	-0.5
		Interest expenses and foreign exchange differences	9.4	2.3
	Consolidated cash flow statement	Expense recognised in income statement	17.2	12.8
		Changes in actuarial assumptions	15.2	-86.4
Consolidated statement of changes in equity		Experience adjustment on plan obligation	-5.7	1.5
		Remeasurements recognised through OCI	9.5	-84.9
		Benefits paid	-24.6	-24.8

	Notes to the consolidated financial statements	Net present value of pension obligations	266.5
1.	Operating result	Changes in plan assets		264.4
2.	Fleet and other fixed assets and leasing	EUR mill.	2023	2022
	arrangements	Fair value of plan assets at 1 January	383.7	441.4
3.	Capital structure and financing costs	Administration expenses	-0.5	-0.5
4.	Consolidation	Settlements and curtailments	-	-0.4
		Interest income and foreign exchange differences	13.8	2.9
5.	Other notes	Items recognised through profit and loss	13.3	2.0
6.	Parent company financial statements	Acturial gain (loss) on plan assets	21.1	-34.9
		Items recognised through OCI	21.1	-34.9
	Board of directors' proposal on the dividend	Contributions paid	0.1	0.0
	Auditor's report	Benefits paid	-24.6	-24.8

The sensitivity analysis describes the effect of a change in actuarial assumptions on the net defined benefit obligation. The analyses are based on the change in the assumption while holding all other assumptions constant. The method used is the same as that which has been applied when measuring the defined benefit obligation recognised in the balance sheet.

Sensitivity analysis on principal actuarial assumptions

	Change in	Impact when increase in assumption,		Impact when decrease in assumption,
Actuarial assumption	assumption	EUR mill.	%	EUR mill.	%
Discount rate %	0.25%	-5.2	-2.0%	5.4	2.1%
Annual rate of future salary increases %	0.25%	1.3	0.5%	-1.3	-0.5%
Life expectancy at birth	1 year	5.6	2.1%	-	-

According to Finnish legislation, the pension fund needs to be fully funded. Finnair does not expect to pay contributions to the pension fund in 2024. The duration of defined benefit obligation is 8 years. The duration is calculated by using a discount rate of 3.01%.

2023	2022
383.7	441.4
-0.5	-0.5
	-0.4
13.8	29
13.3	2.0
21.1	-34.9
21.1	-34.9
0.1	0.0
-24.6	-24.8
393.7	333.7

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's Report

2023	2022
264.4	361.2
33	5.7
4.4	53
	-0.5
9.4	2.3
17.2	12.8
15.2	-86.4
-5.7	1.5
9.5	-84.9
-24.6	-24.8
266.5	264.4

Financial Statements

2 Fleet and other fixed assets and leasing arrangements

Fleet and other fixed assets and leasing arrangements include notes particularly related to the aircraft fleet. Notes related to the aircraft operated by the Group are combined in this section so that the general view of the fleet is easier to understand. In addition to owned aircraft, the notes cover leased aircraft under different kinds of aircraft lease arrangements.

The assets owned and leased by Finnair consist mostly of aircraft operated by Finnair and Norra. In 2023, the number of owned aircraft was 46 (37) and leased aircraft 33 (43). During the financial year, Finnair purchased two A320 and seven A321 aircraft that it had been leasing in. All aircraft were in operative use as at the balance sheet date.

Fleet in Finnair balance sheet

EUR mill.	2023	2022	Change
Advances paid for aircraft	95.8	111.2	-15.4
Owned aircraft	957.2	783.6	173.6
Right-of-use fleet	775.0	932.9	-157.9
Fleet total	1,828.0	1,827.6	0.4
Fleet lease liabilities	940.3	1,164.4	-224.1
Depreciation and impairment from fleet during the period
Depreciation for the period of owned aircraft	-139.5	-120.9	-18.6
Depreciation for the period of right-of-use fleet	-156.9	-156.0	-0.9
Impairment for the period related to owned aircraft	-	-32.7	32.7

= Content of the section = Accounting principles

Fleet

	Owned, 46	Leased, 33
Narrow-body, 54
Wide-body, 25
	A321 (15) A320 (10) A319 (5) A350 (17) A330 (8)	E190 Norra operated (12) ATR Norra operated (12)

2.1 Fleet and other fixed assets

Fleet and other fixed assets are stated at historical cost less accumulated depreciation and accumulated impairment loss if applicable. Fleet includes aircraft and aircraft prepayments. The acquisition cost of aircraft is allocated to the aircraft frame, cabin components, engines and maintenace components as separate assets. Maintenance components include heavy maintenance, C-checks, APU (auxiliary power unit) restorations, landing gear overhauls and thrust reversers of aircraft frames, as well as performance restoration and maintenance of life limited parts of engines. Aircraft frames and engines are depreciated over the useful life of the aircraft. The maintenance components are depreciated during the maintenance cycle. Cabin components are depreciated over their expected useful life. Significant modifications of owned or leased aircraft are capitalised as separate items and depreciated over their expected useful life, which in the case of leased aircraft cannot exceed the lease period. Replaced components are derecognised from the balance sheet.

Advance payments for aircraft are recorded as fleet fixed assets. Interest costs related to advance payments are capitalised as acquisition cost for the period at which Finnair is financing the manufacturing of the aircraft. Hedging gains or losses related to the fair value changes of firm, USD nominated purchase commitments for aircraft are recognised in advance payments. Advance payments, realised foreign exchange hedges and capitalised interests are recognised as part of the aircraft acquisition cost once the aircraft is delivered and taken to commercial use. Other fixed assets include rotable aircraft spare parts, other fixed assets and their prepayments. Other fixed assets are depreciated during their expected useful life.

Intangible assets mainly include computer software and connection fees. Connection fees are not depreciated. Gains and losses on disposal of tangible and intangible assets are included in other operating income and expenses.

Useful life and residual value

Depreciation of fleet and other fixed assets is based on the following expected economic lifetimes:

New aircraft and engines (fleet) as well as flight simulators (other equipment) on a straight-line basis as follows: – Airbus A350 fleet, over 20 years to a residual value of 10%
Airbus A320 and Embraer fleet, over 20 years to a residual value of 10%
Airbus A330 fleet, over 18 years to a residual value of 10%
Turboprop aircraft (ATR fleet), over 20 years to a residual value of 10%
Heavy maintenance, C-checks, APU and landing gear restorations and thrust reversers of aircraft frame, as well as performance maintenance and life limited parts of the engines, on a straight-line basis during the maintenance period
Cabin components, over 7–20 years
Rotable spare parts and components, over 15 years to a residual value of 0%
Buildings, over 10–50 years from the time of acquisition to a residual value of 10%
Other tangible assets, over 3–15 years
Computer software, over 3–8 years

The residual values and estimated useful lives of the assets are assessed at each closing date and if they differ significantly from previous estimates, the depreciation periods and residual values are changed accordingly.

Assets held for sale

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction, a sale is considered highly probable and expected to take place within the next twelve months. Assets classified as held for sale are stated at the lower of the carrying amount or fair value less cost to sell. Assets classified as held for sale are no longer depreciated.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Fleet 2023

EUR mill.	Aircraft	Advances	Total
Acquisition cost 1 Jan 2023	1,828.1	111.2	1,939.3
Additions	348.0	49.6	397.7
Disposals	-44.6	-	-44.6
Currency hedging of aircraft acquisitions	-	-10.2	-10.2
Reclassifications	-34.7	-54.8	-89.5
Acquisition cost 31 Dec 2023	2,096.8	95.8	2,192.7

Accumulated depreciation and impairment 1 Jan 2023	-1,044.5	-	-1,044.5
Disposals	44.3	-	44.3
Depreciation for the financial year	-139.5	-	-139.5
Accumulated depreciation and impairment 31 Dec 2023	-1,139.7	-	-1,139.7

Book value 31 Dec 2023	957.2	95.8	1,053.0

Additions to fleet in 2023 relate mainly to purchase of two A320 and seven A321 aircrafts that were previously leased by Finnair, cabin refurbishment of the wide-body aircraft, and investments in aircraft maintenance. Currency hedging of aircraft acquisitions is described in the notes 3.5 Management of financial risks and 3.8 Derivatives.

Fleet 2022

EUR mill.	Aircraft	Advances	Total
Acquisition cost 1 Jan 2022	1,749.4	127.7	1,877.1
Additions	69.1	12.2	81.2
Disposals	-39.5	-	-39.5
Currency hedging of aircraft acquisitions	-	20.4	20.4
Reclassifications	49.2	-49.2	-
Acquisition cost 31 Dec 2022	1,828.1	111.2	1,939.3

Accumulated depreciation and impairment 1 Jan 2022	-930.8	-	-930.8
Disposals	39.5	-	39.5
Reclassifications	0.4	-	0.4
Depreciation for the financial year	-120.9	-	-120.9
Impairment for the financial year	-32.7	-	-32.7
Accumulated depreciation and impairment 31 Dec 2022	-1,044.5	-	-1,044.5
Book value 31 Dec 2022	783.6	111.2	894.8

Other fixed assets 2023

	Aircraft rotable	Buildings	Other	Intangible
EUR mill.	parts	and land	equipment	assets	Advances	Total
Acquisition cost 1 Jan 2023	35.3	74.5	122.5	40.7	0.4	273.4
Additions	3.6	-	2.5	0.3	0.8	7.3
Disposals	-1.7	-	-0.6	-9.0	-	-11.3
Reclassifications	-	-	0.1	0.1	-0.1	0,0
Acquisition cost 31 Dec 2023	37.2	74.5	124.5	32.0	1.0	269.3
Accumulated depreciation and impairment 1 Jan 2023	-22.3	-12.7	-50.5	-37.7	-	-123.3
Disposals	1.4	-	0.6	9.0	-	11.0
Depreciation for the financial year	-3.1	-1.8	-9.4	-1.0	-	-15.3
Accumulated depreciation and impairment 31 Dec 2023	-24.1	-14.5	-59.3	-29.7	-	-127.5
Book value 31 Dec 2023	13.2	60.1	65.2	2.3	1.0	141.8

In addition to the aircraft rotable parts included in the other fixed assets, Finnair's inventories include nonrotable aircraft parts amounting to 26.7 million euro (24.4).

Other fixed assets 2022

EUR mill.	Aircraft rotable parts	Buildings and land	Other equipment	Intangible assets	Advances	Total
Acquisition cost 1 Jan 2022	34.2	74.5	119.5	47.8	0.8	276.7
Additions	2.3	-	4.4	0.2	0.4	7.2
Disposals	-1.1	-	-1.4	-7.9	-	-10.5
Reclassifications	-	-	0.1	0.6	-0.8	-
Transfers to/from assets held for sale	-	-	0.1	-	-	0,0
Acquisition cost 31 Dec 2022	35.3	74.5	122.5	40.7	0.4	273.4
Accumulated depreciation and impairment 1 Jan 2022	-19.2	-10.8	-41.9	-42.5	-	-114.4
Disposals	1.0	-	0.9	7.9	-	9.8
Transfer to/from assets held for sale	0.3	-	-	-	-	0.3
Depreciation for the financial year	-4.5	-1.8	-9.5	-3.1	-	-18.9
Accumulated depreciation and impairment
31 Dec 2022	-22.3	-12.7	-50.5	-37.7	-	-123.3
Book value 31 Dec 2022	12.9	61.8	72.0	3.0	0.4	150.1

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated income statement
-------------------------------	--

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Capitalised borrowing costs

	Aircraft			Advances		Total
EUR mill.	2023	2022	2023	2022	2023	2022
Book value 1 Jan	8.3	8.8	4.5	2.7	12.8	11.5
Additions	-	-	2.9	1.8	2.9	1.8
Depreciation	-0.5	-0.5	-	-	-0.5	-0.5

Book value 31 Dec	7.8	8.3	7.4	4.5	15.3	12.8

In 2023 borrowing costs of 2.9 million euro (1.8) were capitalised in tangible assets related to the Airbus A350 investment program. Finnair uses the effective interest rate to calculate the capitalised borrowing costs, that represents the costs of the loans used to finance the investment. The average yearly interest rate in 2023 was 5.1% (4.2%). The general borrowings used to fund the acquisition of capital assets are included in the calculation of the capitalisation rate.

Assets and liabilities held for sale

Finnair had no assets classified as held for sale at the end of the financial year 2023.

Pledged assets and other restrictions on fixed assets

Finnair does not have fixed assets pledged as a security for bank loans. Fleet assets include three A350 aircraft financed with JOLCO-loans and one A350 aircraft where the legal title is transferred to Finnair after loans are repaid. More details on these arrangements are presented in the note 3.3. Financial liabilities.

Investment commitments

Investment commitments as at the end of the year totalled 313.7 million euro (366.1) and it includes firm aircraft orders, other aircraft related investments as well as committed maintenance investments. Out of the total investment commitments 175.6 million euro is expected to take place within the next 12 months and 138.1 million euro during the following 1-5 years. The amount of the total commitments fluctuates between the order and the delivery date of the aircraft mainly due to EUR/USD exchange rate changes and escalation clauses included in airline purchase agreements. The exact amount of the commitments in relation to each aircraft is only known at the time of the delivery.

At the commencement date of a lease, Finnair recognises both a right-of-use asset and a lease liability. The lease liability is the present value of future lease payments. At Finnair, lease payments for aircraft leases typically contain variable payments that depend on interest rates and indices. The variable payments are included in the measurement of the lease liability from the commencement date of the lease. The right-of-use asset is measured at cost, comprising

the amount of the initial measurement of the lease liability;
any lease payments made at or before the commencement date, less any incentives received;
any initial direct costs incurred by Finnair; and
an estimate of costs to be incurred by Finnair in restoring the assets to the condition required by the terms and conditions of the lease.

In most cases, Finnair is obliged to return leased aircraft and their engines according to the redelivery condition set in the lease agreement. If at the time of redelivery, the condition of the aircraft and its engines differs from the agreed redelivery condition, Finnair needs to either maintain the aircraft so that it meets the agreed redelivery condition or settle the difference in cash to the lessor.

The maintenance costs can be divided into two main groups:

1) costs that are incurred independent of the usage of the aircraft / leasing period and

2) costs that are incurred dependent on the usage of the aircraft / leasing period

Respectively, costs depending on the usage of the aircraft are not considered as part of the right-of-use asset cost. Finnair remeasures the lease liability when there is a lease modification that changes the scope of a lease or the consideration for the lease, that was not part of the original terms and conditions of the lease (including changes in lease payments resulting from a change in indices and rates used in variable aircraft lease payments) or when the the likehood of Finnair using a purchase-option is changed. The amount of the remeasurement of the lease liability is generally recognised as an adjustment to the right-of-use asset. However, if the carrying amount of the right-ofuse asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the remaining measurement is recognised in profit or loss.

After initial recognition, right-of-use assets are measured at cost less any accumulated depreciations and accumulated impairment losses. The assets are depreciated with a straight-line method from the commencement date to the shorter of end of useful life of the right-of-use asset and the end of lease term. However, if the lease transfers ownership of the asset to Finnair by the end of lease term or if the cost of the right-of-use asset reflects that Finnair will exercise a purchase option, the right-of-use asset is depreciated from the commencement date to the end of useful life of the asset.

At Finnair aircraft lease contracts contain the interest rate implicit in the lease, even if the aircraft lease agreements do not clearly define the interest rate implicit in the lease. Since the fair values of the aircraft are provided publicly by third parties, Finnair is able to calculate the implicit interest rate for each qualifying aircraft operating lease. The rate implicit in the lease is defined as the rate that causes the sum of the present value of the lease payments and the present value of the unguaranteed residual value of the underlying asset at the end of the lease to equal the sum of the fair value of the underlying asset and any initial direct costs of the lessor. The implicit interest rate is determined by each aircraft lease contract separately.

For other lease contracts, an implicit interest rate cannot be usually determined. The incremental borrowing rate is therefore used and it is determined by each class of assets separately, based on management estimate. Aircraft lease contracts are usually denominated in foreign currency (US dollars) and the foreign currency lease liabilities are revalued at each balance sheet date to the spot rate. The lease payments (lease payments made) are accounted for as repayments of the lease liability and as interest expense.

The Group as lessor

Agreements, where the Group is the lessor, are accounted for as operating leases, when a substantial part of the risks and rewards of ownership are not transferred to the lessee. The assets leased under operating lease are included in the tangible assets and they are depreciated during their useful life. Depreciation is calculated using the same principles as the tangible assets for own use. Under the provisions of certain aircraft lease agreements, the lessee is required to pay periodic maintenance reserves which accumulate funds for aircraft maintenance. Advances received for maintenance are recognised as liability, which is charged, when maintenance is done. The rents for premises and aircraft are recognised in the income statement as other operating income over the lease term. Agreements, where the Group is the lessor, are accounted for as finance leases, when a substantial part of the risks and rewards of ownership are transferred to the lessee. Finnair recognises assets held under a finance lease in its balance sheet and presents them as a receivable at an amount equal to the net investment of the lease which is equal to the sum of the present values of the lease income it will receive in the future and the unguaranteed residual value. Finnair subleases aircraft and buildings as well as ground equipment from time to time, which are classified either as finance leases or operating leases based on the individual contract terms. A lease is classified on its commencement = Accounting principles

2.2 Leasing arrangements

The Group as lessee

Finnair assesses whether a contract that relates to tangible assets is, or contains, a lease in accordance with the IFRS 16. Lease agreements for tangible assets, where the contract conveys the right to use an identified asset for a period of time in exchange for consideration, are classified as leases.

The lease term is the non-cancellable period for which a lessee has the right to use an underlying asset, together with both periods covered by an option to extend the lease if Finnair is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if Finnair is reasonably certain not to exercise the option. The lease recognition requirements are not applied to short-term leases, where at the commencement date, the lease term is 12 months or less and does not contain a purchase option. Finnair considers the lease period to be the period that is enforceable. Hence, for contracts where the contract term is non-fixed and Finnair has the right to terminate the contract without the permission from the other party with no more than an insignificant penalty and there are no other indications that the contract is enforceable, Finnair classifies these contracts as short-term. The lease recognition requirements are also not applied to leases that are not material to Finnair.

For short-term leases and immaterial leases to which these exemptions are applied, the lease payments are recognised as an expense on either a straight-line basis over the lease term, or on another systematic basis if that basis is more representative of the pattern of Finnair's benefit.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated income statement
-------------------------------	--	--

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

date and is reassessed only if the lease is amended. At the commencement date, for the subleases, a net investment (lease receivable), equaling to the present value of lease payments and the present value of the unguaranteed residual value, is recognised. The proportion of the right-of-use asset subleased is derecognised from the balance sheet and the difference between the right-of-use asset and the net investment is recognised in the profit or loss, in other operating income and expenses. Subsequently, the lease payments received are accounted for as repayments of the lease receivable and as interest income.

Sale and leaseback

In sale and leaseback transactions, where Finnair sells and then leases back aircraft, Finnair measures the right-ofuse asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right-of-use retained by the Group. Accordingly, Finnair recognises only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor.

Leasing arrangements

Determining the interest rate and lease term used in discounting the lease payments, estimating the redelivery obligations of aircraft leases and the classification of sublease agreements to operating and financial leases require management discretion in interpretation and application of accounting standards.

The carrying value of the right-of-use assets are tested for impairment as part of cash generating unit at the balance sheet date. More details is presented in the note 2.3.

Right-of-use assets 2023

		Buildings	Other
EUR mill.	Aircraft	and land	equipment	Total
Book value 1 Jan 2023	932.9	114	31.4	1,078.20
New contracts	0.2	18.6	5.5	24.3
Reassessments and modifications	45.0	9.0	-3.5	50.5
Disposals	-46.2	-	-	-46.2
Depreciation for the financial year	-156.9	-13.1	-7.7	-177.8
Impairment	-	-13.7	-	-13.7
Book value 31 Dec 2023	775.0	114.8	25.6	915.3

Reassesments and modifications are mainly related to index changes in existing lease contracts and changes of office and parking space contracts. Disposals are related to purchase of two leased A320 and seven leased A321 aircraft, for which the leasing contracts were terminated in connection with the acquisition.

Right-of-use assets 2022

		Buildings	Other
EUR mill.	Aircraft	and land	equipment	Total
Book value 1 Jan 2022	1,025.3	123.0	33.4	1,181.7
Additions	0.0	0.5	9.0	9.5
Changes in contracts	63.5	3.8	-3.0	64.3
Depreciation for the financial year	-156.0	-13.3	-8.0	-177.3
Book value 31 Dec 2022	932.9	114.0	31.4	1,078.2

= Accounting principles = Critical accounting estimates

Lease liabilities

	Aircraft		Buildings and land		Other equipment
EUR mill.	2023	2022	2023	2022	2023	2022
less than one year	143.2	183.0	14.8	12.2	6.0	7.4
1–5 years	464.8	605.5	51.5	41.1	20.5	22.3
more than 5 years	332.3	375.9	81.9	80.8	0.0	2.5
Total	940.3	1,164.4	148.2	134.1	26.6	32.2

The Group leases aircraft, premises and other fixed assets, for which the lease liability is recorded on the balance sheet. The lease agreements have different terms of renewal and include index-linked terms and conditions. The Group was operating 33 leased aircraft at the end of the year with lease agreements of different tenors.

Finance lease receivables, Group as lessor

Buildings and land
2023	2022
0.3	0.3
0.3	0.3
0.0	0.3
0.0	0.0
0.0	0.0
0.1	0.1
0.8	1.1

During the period the Group had finance lease receivable related to the buildings and land area located in the airport area.

Leasing arrangements in profit and loss

EUR mill.	2023	2022
Depreciation expense of right-of-use assets	-177.8	-177.3
Interest expense on lease liabilities	-70.7	-80.1
Interest income on sublease receivables	0.0	0.1
Exchange rate changes of lease liabilities	37.0	-76.1
Hedging result of lease liabilities	-4.6	19.1
Short-term wet leases	-26.9	-28.4
Short-term office rents	-3.8	-3.2
Variable purchase traffic and cargo capacity rents	-80.3	-74.0
Total	-327.1	-419.9

Operating expenses include costs related to short-term and capacity based rental agreements, that are not material for the Group or do not contain a lease according to IFRS 16, and are therefore not recognised in the balance sheet. In the income statement, the short-term wet leases and variable purchase traffic and cargo capacity rents are included in capacity rents and the short-term office rents are included in property, IT and other expenses. Gains related to sale and leaseback transactions are recorded in other operating income in profit and loss. Total cash outflow relating to leases was -376.3 million euro (-376.7).

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's

Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Off-balance sheet lease commitments, Group as lessee

	Premises rents			Other rents
EUR mill.	2023	2022	2023	2022
less than one year	2.6	2.5	0.9	1.5
1–5 years	4.7	5.5	0.5	0.9
more than 5 years	7.0	6.7	-	-
Total	14.3	14.7	1.5	2.4

Off-balance sheet lease commitments are short-term lease agreements and other lease agreements for which the underlying asset is of low value or contracts that do not contain a lease according to IFRS 16. Therefore, these contracts are not recognised as right-of-use assets and lease liabilities in the balance sheet. The most significant item in the rents for premises is the right-to-use a test cell, which is excluded from the lease liabilty on the basis that it is not for the exclusive use of Finnair. Other rents include IT equipment leases, that are not material.

Off-balance sheet lease receivables, Group as lessor

	Aircraft		Buildings and land
EUR mill.	2023	2022	2023	2022
less than 12 months	23.5	23.5	2.3	2.1
13–24 months	23.5	23.5	2.2	2.1
25–36 months	23.5	23.5	1.9	2.1
37–48 months	11.3	23.5	1.9	2.1
49–60 months	3.4	11.3	0.8	1.8
more than 60 months	0.4	3.8	0.0	2.5
Total	85.6	109.0	9.1	12.7

The Group has leased 15 owned aircraft as well as premises with irrevocable lease agreements. Additionally, Finnair has subleased 9 aircraft classified as operating leases. These agreements have different terms of renewal and other index-linked terms and conditions.

= Accounting principles

2.3 Depreciation and impairment

Depreciation

Depreciation of assets is determined based on their expected useful life or maintenance cycle and residual value. Depreciation for all assets is calculated using straight-line method. Depreciation is started when the asset is available for use. Depreciation is ceased when the asset is either classified as held for sale or derecognised. The useful life and residual value for assets are described in more detail in the note 2.1.

EUR mill.	2023	2022
Amortisation of intangible assets	1.0	3.1
Depreciation of own fleet	139.5	120.9
Depreciation of right-of-use fleet	156.9	156.0
Depreciation of other tangible assets	14.3	15.8
Depreciation of other right-of-use assets	20.9	21.3
Amortisation and depreciation	332.6	317.1
Impairment of assets	13.7	32.7
Impairment	13.7	32.7
Total	346.2	349.8
Total depreciation and impairment in income statement	346.2	349.8

Depreciation and impairment include both planned depreciations on fixed assets as well as impairment. The depreciation of own fleet increased mainly due to nine purchased aircrafts.

An impairment of 13.7 million euro was recorded in 2023 related to lease agreements a land area and the related building located in the airport area. The impairment was caused by low utilization of the leased property resulting from reorganization of certain operational activities in cooperation with Nordic Regional Airlines AB. At the end of the review period, the respective lease liability related to the property reported on the consolidated balance sheet totalled to 13.4 million euro.

Impairment testing

Finnair reviews its fleet, other fixed assets and other non-current assets for indication of impairment on each balance sheet date. The recoverable amount of an asset or a cash generating unit is determined as the higher of value in use and the fair value less cost to sell. An impairment loss is recognized if an asset's recoverable amount is less than its carrying amount.

The recoverable amount is defined for the cash generating unit, and the impairment is evaluated at the cash generating unit level. Finnair is a network carrier with highly integrated fleet operations and it considers all its fleet (including the right-of-use fleet) and other closely related assets as one cash-generating unit. Also intangible assets with indefinite useful life have been identified to belong to the one cash-generating unit. Assets that are either idle or held for sale are excluded from the cash-generating unit and reviewed for impairment separately.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Calculation of the recoverable amount

Finnair applies the value in use model as its primary method for determining the recoverable amount of the assets. The value in use measurement is based on a discounted cash flow model where the cash flow projections are based on Finnair's strategy approved by the Board of Directors and a management forecast covering a five-year period. The cash flow projections beyond the five-year period are based on the management's long-term growth assumptions. Preparation of the calculations used for impairment testing requires the use of significant management judgement and estimates, which is why the actual outcome may differ from the current management estimates and assumptions made.

Finnair has not identified indications of possible impairment in connection with the preparation of its 2023 consolidated financial statements. As part of Finnair's internal process, in addition to the evaluation of separate impairment indicators, Finnair's management prepares an annual impairment test which indicated no need for impairment. In impairment testing, a possible change in any single key assumption would not result in an impairment.

In 2022, Finnair still considered the adverse economic and business implications relating to the COVID-19 pandemic and the closure of the Russian airspace as indications of possible impairment. Based on the impairment test performed as at the end of 2022, the recoverable amount of the CGU (2,059.2 million euros) exceeded the carrying value of the assets (1 ,635.0 million euros). The post-tax discount rate based on weighted average cost of capital was 8.5% and pre-tax discount rate 9,9%. In order to consider the hightened uncertainty, Finnair applied the expected cash flow approach which considered three forecast scenarios for which the management had assigned different probabilities. The impairment testing and its assumptions are described in more detail in the consolidated financial statements 2022.

= Critical accounting estimates

= Content of the section = Accounting principles

3 Capital structure and financing costs

3.1 Financial income and expenses

The notes related to financial assets, liabilities and equity have been gathered into the capital structure and financing costs-section in order to give a better overview of the Group's financial position. The note ´Earnings per share´ has been added to the equity section.

Interest income and expenses

Interest income and expenses are recognised on a time-proportion basis using the effective interest method. Interest expenses related to the financing of significant investments are capitalised as part of the asset acquisition cost and depreciated over the useful life of the asset.

More detailed information about financial assets can be found in note 3.2 and about interest bearing liabilities in note 3.3.

EUR mill.	2023	2022
Interest income on leases	0.0	0.1
Gains on investment instruments held at FVPL	38.0	3.7
Interest from assets held at amortised cost	14.7	2.7
Other interest income	0.0	0.0
Other financial income	3.4	0.1
Dividend income	0.0	0.0
Financial income total	56.2	6.5

Interest on leases	-70.7	-80.1
Other financial expenses	-25.4	-29.7
Interest expenses for liabilities measured at amortised cost	-46.0	-28.1
Financial expenses total	-142.2	-137.9

Foreign exchange gains and losses	13.7	-38.8

Financial expenses, net	-72.3	-170.2

In the effectiveness testing of the Group's hedge accounting, both cash flow and fair value hedging were found to be effective at year end 2023. Thus, as in the comparison year 2022, no inefficiency is included in the financial items for 2023. Financial income and expenses include an identical amount of profit and loss for fair value hedging instruments and for hedged items resulting from the hedged risk.

In 2023, foreign exchange gains and losses recognised in financial expenses consist of a net realised exchange loss of 1.1 million euro and a net unrealised exchange gain of 14.8 million euro which were mostly caused by strenghtening of US dollar relative to euro. During the year 2023, 3.0 million euros of interest expense was capitalised in connection with the A350 investment program (1.8). More information about the capitalised interest can be found in note 2.1 Fleet and other fixed assets.

Other financial expenses include for example guarantee fees as well as interest and penalties related to taxes.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

3.2 Financial assets

Financial assets

In the Group, financial assets have been classified into the following categories according to the IFRS 9 standard "Financial Instruments": amortised cost and fair value through profit and loss. The classification is made at the time of the original acquisition based on the objective of the business model and the characteristics of contractual cash flows of the investment, or by applying a fair value option. All purchases and sales of financial assets are recognised on the trade date.

Financial assets at fair value through profit and loss include such assets as investments in bonds and money market funds. Financial assets at fair value through profit and loss have mainly been acquired to obtain a gain from shortterm changes in market prices. All those derivatives that do not fulfil the conditions for the application of hedge accounting are classified as financial assets at fair value through profit and loss and are valued at fair value in each financial statement. Realised and unrealised gains and losses arising from changes in fair value are recognised in the income statement in the period in which they arise. Financial assets recognised at fair value through profit and loss, as well as those maturing within 12 months, are included in current assets.

In Finnair Group, unquoted shares are valued at their acquisition price in the absence of a reliable fair value. Investments in debt securities are measured at amortised cost, but only when the objective of the business model is to hold the asset to collect the contractual cash flows and the asset's contractual cash flows represent only payments of principal and interest. Financial assets recognised at amortised cost are valued using the effective interest method. Financial assets valued at amortised cost include trade receivables and security deposits for aircraft operating lease agreements. Due to the nature of short-term receivables and other receivables, their book value is expected to be equal to the fair value.

Derecognition of financial assets takes place when the Group has lost its contractual right to receive cash flows or when it has substantially transferred the risks and rewards outside the Group.

Impairment of financial assets

Finnair Group recognises impairment provisions based on lifetime expected credit losses from trade receivables in accordance with IFRS 9. Finnair has chosen to apply a simplified credit loss matrix for trade receivables as trade receivables do not have a significant financing component. Accordingly, the credit loss allowance is measured at an amount equal to the lifetime expected credit losses. The expected credit loss model is forward-looking, and expected default rates are based on historical realised credit losses. The lifetime expected credit loss allowance is calculated using the gross carrying amount of outstanding trade receivables in each aging bucket and an expected default rate. The changes in expected credit losses are recognised in other expenses in the consolidated income statement. More information on the credit loss provision on trade receivables can be found in note 1.2.3. Receivables related to revenue. The impairment model does not apply to financial investments, such as bonds and money market funds, included in other financial assets as those are measured at fair value through profit and loss under IFRS 9, which already takes into account expected credit losses. With respect to the assets measured at amortised cost, Finnair is actively following such instruments and will recognise impairment through profit and loss if there is evidence of deterioration in

credit quality.

Cash and cash equivalents

Cash and cash equivalents consist of cash reserves and short-term bank deposits with maturity of less than three months. Foreign exchange-denominated items have been converted to euro using the mid-market exchange rates on the closing date.

= Accounting principles

3.2.1 Other current financial assets

EUR mill.	2023	2022
Commercial paper, certificates and bonds	53.4	47.8
Money market funds	723.4	690.8
Total	776.8	738.6

Ratings of counterparties
Better than A
A	-	11.0
BBB	21.7	12.0
BB	3.9	2.0
Unrated	751.2	713.7
Total	776.8	738.6

As of 31 December 2023, investments in instruments issued by unrated counterparties mostly include investments in money market funds (EUR 723.4 million euro).

The Group's financial asset investments and risk management policy are described in more detail in Note 3.5 Management of financial risks. The IFRS classifications and fair values of the financial assets are presented in Note 3.6 Classification of financial assets and liabilities.

3.2.2 Cash and cash equivalents

EUR mill.	2023	2022
Cash and bank deposits	145.1	785.8
Total	145.1	785.8

The items include cash and bank deposits realised on demand. Foreign currency cash and bank deposits have been valued using the closing date mid-market exchange rates. The reconciliation of cash and cash equivalents is illustrated in the notes of the consolidated cash flow statement.

3.3 Financial liabilities

Financial liabilities

Finnair Group's financial liabilities are classified into two different classes: amortised cost and fair value through profit and loss. Financial liabilities are initially recognised at fair value on the basis of the original consideration received. Transaction costs have been included in the original book value of financial liabilities. Thereafter, all non-derivative financial liabilities are valued at amortised cost using the effective interest method. Financial liabilities are included in long- and short-term liabilities, and they can be interest-bearing or non-interest-bearing. Loans that are due for payment within 12 months are presented in the short-term liabilities. Foreign currency loans are valued at the midmarket exchange rate on the closing date, and translation differences are recognised in the financial items. Accounts payable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

Derecognition of financial liabilities takes place when the Group has fulfilled the contractual obligations.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

transactions affecting interest-bearing liabilities during 2023 were the repayments of the pension premium loan of 100 million euro during June 2023 and 220 million euro during December 2023. Non-interest-bearing liabilities mainly include leases and maintenance reserves related to the aircraft leased to other airlines.

The Group's JOLCO loans and other include the JOLCO loans (Japanese Operating Lease with Call Option) for three A350 aircraft and export credit support for one A350 aircraft. Export credit support is a debt arrangement to finance aircraft. The transactions are treated as loans and owned aircraft in Finnair's accounting. Non-interest-bearing liabilities mainly include leases and maintenance reserves related to the aircraft leased to other airlines.

Current interest-bearing liabilities

EUR mill.	2023	2022
Loans from financial institutions, current	80.0	199.6
JOLCO loans and other	40.4	40.4
Lease liabilities	164.0	202.7
Total	284.3	442.7

JOLCO loans and other include the JOLCO loans (Japanese Operating Lease with Call Option) for three A350 aircraft and export credit support for one A350 aircraft. The transactions are treated as loans and owned aircraft in Finnair's accounting.

Fair value			Book value
2023	2022	2023	2022
1115.0	1330.7	1115.0	1330.7
272.1	512.9	279.7	598.8
371.9	298.0	381.3	397.9
231.9	217.3	249.5	301.8
1,990.9	2,358.9	2,025.6	2,629.2

Fair values of interest-bearing liabilities (excluding lease liabilities) have been calculated by discounting the expected cash flows using the market interest rate and company's credit risk premium at the reporting date. Fair value of bonds has been calculated by using the quoted price of reporting date (97.2).

Consolidated income statement	Non-current liabilities
Consolidated statement of comprehensive income	EUR mill.	2023	2022
	Loans from financial institutions, non-current	199.8	399.2
	JOLCO loans and other	209.2	261.3
Consolidated balance sheet	Bonds	381.3	397.9
	Lease liabilities	951.0	1,128.0
Consolidated cash flow statement	Interest-bearing liabilities total	1,741.3	2,186.4
	Non-interest-bearing liabilities	6.9	6.3
	Total	1,748.1	2,192.7
Consolidated statement of changes in equity	Finnair's interest-bearing liabilies decreased during the financial year 2023. Most significant financing

Short-term borrowings	Long-term borrowings	Short term lease liabilities	Long term lease liabilities	Total
240.0	1,058.4	202.7	1,128.0	2,629.1
-239.8	-137.5	-198.1	-	-575.5
-	-	3.1	73.1	76.1
-	-	-	-56.9	-56.9
-	-12.4	-5.7	-31.0	-49.1
120.0	-120.0	162.1	-162.1	0.0
0.1	1.7	-	-	1.8
120.3	790.2	164.0	951.1	2,025.6

	Short-term borrowings	Long-term borrowings	Short term lease liabilities	Long term lease liabilities	Total
Total liabilities from financing activities, 1 January 2022	441.7	986.2	176.9	1,204.1	2,808.9
Repayments	-144.0	-	-193.4	-	-337.4
Additions	-	-	3.9	69.2	73.1
Decreases	-	-	-	-5.7	-5.7
Foreign exchange adjustments	-	14.4	9.1	66.5	90.0
Reclassification between short term and long-term liabilities	-57.2	57.2	206.1	-206.1	0.0
Other non-cash movements	-	0.6	-	-	0.2
Total liabilities from financing activities, 31 December 2022	240.0	1,058.4	202.7	1,128.0	2,629.1

Maturity dates of interest-bearing financial

2024	2025	2026	2027	2028	Later	Total
-	23.4	11.7	-	-	-	35.1
40.4	85.9	31.9	10.0	10.1	39.3	217.5
80.0	200.0	-	-	-	-	280.0
-	382.5	-	-	-	-	382.5
127.6	131.9	101.8	89.7	68.5	329.0	848.5
36.4	36.4	35.9	37.7	35.0	85.2	266.5
284.4	860.1	181.2	137.3	113.7		453.4 2,030.1
872.4	2.3	2.7	-	1.7	-	879.1
-864.9	-	-	-	-		- -864.9
15.8	1.5	-	-	-	-	17.4
274.1	-	-	-	-	-	274.1
96.8	73.2	45.1	34.6	27.6	84.1	361.3
678.5	937.2	229.1	171.9	142.9		537.5 2,697.0

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

2023	2022
80.0	199.6
40.4	40.4
164.0	202.7
284.3	44927

Financial Statements

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Interest-bearing financial liabilities total	443.1	450.8	916.5	183.6	131.2		510.4 2,635.5
Payments from currency derivatives	809.4	-	-	-	-	-	809.4
Income from currency derivatives	-792.1	-8.7	-	-	-		- -800.8
Commodity derivatives	4.4	0.2	-	-	-	-	4.6
Trade payables and other liabilities	234.7	-	-	-	-	-	234.7
Interest payments	121.4	98.9	69.5	39.9	29.8	92.8	452.3
Total	820.9	541.2	986.0	223.5	160.9		603.2 3,335.7
The interest rate re-fixing period is three months for variable interest loans and for variable interest lease liabilities. The bonds maturing do not include the amortised cost of 1.2 million paid in 2021 and due on 2025. JOLCO loans do not include the amortised cost of 3.1 million euros paid on 2016 and due in 2025 and loans from financial institutions do not include 0.3 million euros paid as an arrangement fee from the pension premium loan in 2022. Therefore, the total amount of interest-bearing financial liabilities differs from the book value by the amount equal to the amortised costs. Finnair has repaid 320 million euro of the pension premium loan during 2023. The remaining loan amount is 280 million euros and has an amortization schedule of one 80 million euro and one 200 million euro instalments. The first instalment of 80 million euro is due during the second quarter of 2024 and the second one of 200 million euro is due during the second quarter of 2025.

The minimum lease payments, discount values and present values of lease liabilities are presented in note 2.2 Leasing arrangements.

The currency mix of interest-bearing liabilities is as follows:

EUR mill.	2023	2022
EUR	841.2	1,170.7
USD	1,149.2	1,418.7
JPY	35.1	39.6
HKD	0.1	0.1
SGD	-	0.0

2,025.6	2,629.1

The weighted average effective interest rate on interest-bearing liabilities was 5.0% (4.0%).

Interest rate re-fixing period of interest-bearing liabilities

2023	2022

Total	100.0%	100.0%

More than 5 years	33.8%	29.3%
1–5 years	43.9%	43.2%
6–12 months	0.1%	3.9%
Up to 6 months	22.2%	23.6%

State aid relating to Finnair's refinancing

State aid in rights issue

	Consolidated income statement	Maturity dates of interest-bearing financial liabilities 31 Dec 2022 EUR mill.	2023	2024	2025	2026	2027	Later	Total
	Consolidated statement	JOLCO loans and other, fixed interest	-	-	26.0	13.0	-	-	39.0
	of comprehensive income	JOLCO loans and other, variable interest	40.4	41.8	89.0	33.0	10.3	51.2	265.8
		Loans from financial institutions, variable interest	200.0	200.0	200.0	-	-	-	600.0
	Consolidated balance sheet	Bonds, fixed interest	-	-	400.0	-	-	-	400.0
		Lease liabilities, fixed interest	144.4	148.0	150.0	104.6	86.3	353.7	987.0
	Consolidated cash flow statement	Lease liabilities, variable interest	58.2	61.0	51.5	32.9	34.6	105.5	343.7
		Interest-bearing financial liabilities total	443.1	450.8	916.5	183.6	131.2		510.4 2,635.5
	Consolidated statement	Payments from currency derivatives	809.4	-	-	-	-	-	809.4
of changes in equity		Income from currency derivatives	-792.1	-8.7	-	-	-		- -800.8
		Commodity derivatives	4.4	0.2	-	-	-	-	4.6
	Notes to the consolidated	Trade payables and other liabilities	234.7	-	-	-	-	-	234.7
	financial statements	Interest payments	121.4	98.9	69.5	39.9	29.8	92.8	452.3
		Total	820.9	541.2	986.0	223.5	160.9		603.2 3,335.7
1.	Operating result
2.	Fleet and other fixed assets and leasing arrangements	The interest rate re-fixing period is three months for variable interest loans and for variable interest lease liabilities. The bonds maturing do not include the amortised cost of 1.2 million paid in 2021 and due on 2025. JOLCO loans do not include the amortised cost of 3.1 million euros paid on 2016 and due in 2025 and loans from
3.	Capital structure and financing costs

Finnair announced on 27 October 2023 the terms and conditions of the planned rights issue and completed the rights issue on 23 November 2023. The gross proceeds from the rights issue were announced to be approximately 570 million euros by offering up to 19,012,413,069 offer shares for subscription in the Offering with pre-emptive rights for existing shareholders in Finnair.

State of Finland irrevocably committed to subscribe for their respective pro rata share of the offering subject to customary terms and conditions of the right issue. The participation of the State of Finland to the rights issue was paid by offsetting the aggregate subscription price against a corresponding amount of the principal of the capital loan. The overall offset amount was approximately 318.6 million euros and after the completion of the rights issue Finnair repaid the remainder of the capital loan of approximately 81.4 million euros, to the State of Finland. In addition, Finnair paid the related interest and other fees of 48.9 million euros to the State. Therefore the capital loan has been fully repaid and is no longer part of Finnair's balance sheet.

State aid in pension premium loan extension

The EU Commission's competition authority approved the extension of the 540-million-euro guarantee related to the pension premium loan on 20 June 2022. The pension premium loan maturity is extended until 2025 and the repayment schedule is amended so that the company will amortise the loan by 100 million euros every 6 months. However, the remaining two 100-million-euro tranches will be paid in full on 15 May 2025. In accordance with the loan terms, the pension premium loan is required to have a guarantee. The guarantee is granted by the State of Finland and a commercial bank..

Maturity dates of interest-bearing financial liabilities

C - 100 -

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's
Report

Financial Statements

1. Consolidation
1. Other notes
1. Parent company financial statements

3.4 Contingent liabilities

EUR mill.	2023	2022
Guarantees on behalf of group companies	51.5	52.5
Total	51.5	52.5

3.5 Management of financial risks

Principles of financial risk management

The nature of Finnair Group's business operations exposes the company to a variety of financial risks: foreign exchange, interest rate, credit, liquidity and commodity price risks. The Group's policy is to limit the uncertainty caused by such risks on cash flow, financial performance, balance sheet items and equity.

The management of financial risks is based on the risk management policy prepared by the Financial Risk Steering Committee and approved by the Board of Directors. The policy specifies the minimum and maximum levels permitted for each type of risk. Financial risk management is directed and supervised by the Financial Risk Steering Committee. Practical implementation of the risk management policy and risk management have been centralized to the parent company's treasury department.

For the management of foreign exchange, interest rate and jet fuel the company uses different derivative instruments, such as forward contracts, swaps and options. At inception, derivatives are designated as hedges of highly probable cash flows (cash flow hedges), hedges of firm orders (hedges of the fair value of firm commitments) or as financial derivatives where the hedging relationship does not qualify for hedge accounting (economic hedges). Finnair Group implements cash flow hedging through foreign exchange hedging of highly probable forecasted sales and costs denominated in foreign currencies and jet fuel price risk, in accordance with the hedge accounting principles of IFRS 9. Hedge accounting compliant fair value hedges of Finnair Group consist of interest rate hedges of the issued bond and fair value hedges of firm aircraft purchase commitments.

Fuel price risk in flight operations

Fuel price risk means the cash flow and financial performance uncertainty arising from fuel price fluctuations. Finnair hedges against jet fuel price fluctuations using jet fuel forward contracts and options. The Jet Fuel CIF Cargoes NWE index is used as the underlying asset of jet fuel derivatives, since approximately 64 per cent of Finnair's fuel purchase contracts are based on the benchmark price index for Northwest Europe jet fuel deliveries.

Finnair applies the principle of time-diversification in its fuel hedging. Finnair updated its risk management policy in December 2023, and hedging horizon was extended from 12 months to 18 months. The risk management policy states that hedging ratio must be increased during each quarter of the year, so that for the first three months of the hedging period the hedge ratio is approximately between 70 per cent and 95 per cent, with target ratio being 80 per cent. Thereafter, lower hedge ratio limits apply for each quarter. Due to hedging, the fuel cost per period is not as low as the spot-based price when prices fall, but when spot prices rise, the fuel cost rises more slowly.

The hedges of jet fuel consumption are treated as cash flow hedges in accounting, in accordance with the hedge accounting principles of IFRS 9. During 2023, Finnair has hedged the jet fuel price risk in its entirety, without separating it into underlying risk components, such as crude oil price risk. However, Finnair has used proxy hedging for certain layer components of its jet fuel consumption, as described below.

In the hedging of jet fuel price risk, Finnair Group designates layer components of its jet fuel consumption as hedged items. The layer components are defined as jet fuel consumption linked to different jet fuel price benchmarks. The first layer is defined as jet fuel purchases based on the Jet Fuel CIF Cargoes NWE index, with consumption linked to other price benchmarks, notably Cargoes FOB Singapore, representing other layers. Since the Jet Fuel CIF Cargoes NWE index is used as the underlying of all jet fuel derivatives, they are designated as proxy hedges for consumption based on other price benchmarks. Therefore, ineffectiveness may arise if

the correlation between the NWE index and the price benchmark for the underlying consumption is not high enough for the fair value changes in the hedged item and the hedging instrument to be exactly offsetting. Any ineffectiveness resulting from overhedging or insufficient correlation is recognised in fair value changes in derivatives and changes in exchange rates of fleet overhauls.

Update in financial risk management

During the year 2023 Finnair has continued normal hedging operations. Finnair increased the hedging ratios in jet fuel and foreign exchange steadily during the year 2023 and revised the risk management policy during the the last quarter of 2023. The risk management policy was updated so that the hedging limits and target level were increased by 5% for each of the hedged quarters. Furthermore, hedging horizon was extended from 12 months to 18 months.

Timing of the notional	Hedged price	Notional amount (tonnes)	Maturity
and hedged price	\$/tonne		Under 1 year	1 to 2 years
31 December 2023
Jet fuel consumption priced with NWE index	892.1	655,264	626,264	29,000
Jet fuel consumption priced with SING index	918.3	21,736	21,736	-
31 December 2022
Jet fuel consumption priced with NWE index	1,042.9	358,000	338,000	20,000
Jet fuel consumption priced with SING index

The average hedged price of the instruments hedging highly probable jet fuel purchases is calculated by taking into account only the hedging (bought) leg of collar option structures, and therefore represents the least favorable hedged rate. The most favorable rate, calculated by including only the sold leg of collar option structures, is 798.96 US dollars per tonne for NWE consumption, and 809.38 US dollars for SING consumption. Options excluded from hedge accounting are excluded in both cases.

At the end of the financial year, Finnair had hedged 73 per cent of its forecasted fuel purchases for the first six months of 2024 and 42 per cent of the purchases for the second half of the year. In the financial year 2023, fuel used in flight operations accounted for approximately 30 per cent of Group's turnover. At the end of the financial year, the forecast for 2024 is approximately 29 per cent of the Group's turnover. On the closing date, a 10 per cent rise in the market price of jet fuel – excluding hedging activity – increases annual fuel costs by an estimated 77 million euro. On the closing date – taking hedging into account – a 10 per cent rise in the market price of jet fuel lowers the operating profit by around 49 million euro.

Foreign exchange risk

Foreign exchange risk means the uncertainty in cash flows and financial performance arising from exchange rate fluctuations.

Finnair Group's foreign exchange risk mainly arises from fuel purchases, aircraft lease liabilities, acquisition and divestment of aircraft, aircraft maintenance, overflight royalties and foreign currency revenue. About 59 per cent of the Group's revenue is denominated in euros. The most important foreign revenue currencies are the US dollar (9 per cent, percentage of revenue), the Japanese yen (4 per cent) and the British pound sterling (4 per cent). Approximately 40 per cent Group's operating costs are denominated in foreign currencies. The most important purchasing currency is the US dollar, which accounts for approximately 34 per cent of all operating costs. The most significant US dollar-denominated expense is fuel costs. The largest investments – aircraft and their spare parts – are also mainly made in US dollars.

The risk management policy divides the foreign exchange position into three parts, namely exposure to forecasted cash flows, balance sheet position and investment position.

The cash flow exposure mainly consists of sales denominated in a number of different currencies and US dollar-denominated expenses. Forecasted jet fuel purchases, aircraft materials and overhaul expenses and

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

traffic charges form a group of similar items that are hedged with the same hedging instrument. The purpose of currency risk hedging – for cash flow exposure – is to reduce the volatility of cash flows and the comparable operating result due to fluctuating currency prices. This is done using a layered hedging strategy for the two biggest sources of currency risk and utilising diversification benefits of the portfolio of various currencies. The contracts are timed to mature when the cash flows from operating expenses are expected to be settled. The hedging limits are set only for the main contributors to currency risk: the Japanese yen and the US dollar basket consisting of the US dollar and the Hong Kong dollar. Finnair updated its risk management policy in December 2023, and hedging horizon for both Japanese yen and US dollar basket was extended from 12 months to 18 months. The hedging horizon of 18 months is divided into six three-month periods. The risk management policy states that hedging ratio must be increased during each quarter of the year, so that for the first three months of the hedging period the hedge ratio is approximately between 70 per cent and 95 per cent, with target ratio being 80 per cent. Thereafter, lower hedge ratio limits apply for each quarter.

The investment position includes all foreign currency denominated aircraft investments for which a binding purchase agreement has been signed as well as commitments for sale and leaseback transactions in the next four years. According to its risk management policy, Finnair Group hedges 50-100% of its aircraft investment exposure. New hedges of investments in aircraft are made as an IFRS 9 fair value hedge of a firm commitment. Balance sheet exposure consists of foreign currency denominated financial assets and liabilities, as well as other foreign currency denominated balance sheet items, such as provisions, trade receivables, trade payables and assets held for sale. Maximum hedge ratio for balance sheet position is 100% and minimum is 0%. At the end of the financial year, Finnair had a hedge level for net operating cash flows of 57 per cent in the

USD-basket and 50 per cent in JPY for the coming 12 months. On the closing date – excluding hedges – a 10 per cent strengthening of the US dollar against the euro has a negative impact on the 12-month operating result of around 62 million euro and a 10 per cent weakening of the Japanese yen against the euro has a negative impact of around 12 million euro. On the closing date – taking hedging into account – a 10 per cent strengthening of the US dollar weakens the operating result by around 29 million euro and a 10 per cent weakening of the Japanese yen weakens the operating result by around 5 million euro. In the above numbers, the USD-basket risk includes the Hong Kong dollar, which historical correlation with the US dollar is high.

The hedge levels for balance sheet position at the end of the financial year were 89 per cent for USD and 86 per cent for Japanese yen. On the closing date – excluding hedges – a 10 per cent strengthening of the US dollar against the euro has a negative impact on the result of around 115 million euro and a 10 per cent strengthening of the Japanese yen against the euro has a negative impact of around 4 million euro. On the closing date – taking hedging into account – a 10 per cent strengthening of the US dollar weakens the result by around 13 million euro and a 10 per cent strengthening of the Japanese yen weakens the result by around 0.6 million euro.

		Maturity
Timing of the notional EUR mill. 31 December 2023	Notional amount (gross)	Less than 1 year	1 to 2 years	2 to 4 years
USD	1,179.8	923.4	114.0	142.5
JPY	103.1	103.1	-	-

Cross-currency interest rate swaps are included in the nominal amount calculation.

Foreign exchange P&L exposure

EUR mill. 31 December 2023	JPY	USD-basket
Net forecasted operating cash flows, next 12m	136.3	-639.7
Net operating cash flow hedges, next 12m	-69.8	373.2
Weighted average exchange rate of hedging instruments against the euro	152.09	1.09
Foreign exchange exposure from operating cash flows after hedging, next 12m	66.6	-266.5

The average exchange rate of the instruments hedging highly probable forecasted sales and purchases denominated in foreign currencies is calculated by taking into account only the hedging (bought) leg of collar option structures, and therefore represents the least favorable hedged rate. The most favorable rate, calculated by including only the sold leg of collar option structures, is 1.10 for USD contracts and 152.09 for JPY instruments.

Foreign exchange balance sheet exposure

EUR mill. 31 December 2023	JPY	USD
Net balance sheet items	-39.3	-718.6
Net hedges of balance sheet items	33.4	590.9
Weighted average exchange rate of hedging instruments against the euro	155.92	1.09
Foreign exchange exposure from balance sheet items after hedging	-5.9	-127.7

Foreign exchange investment exposure

EUR mill. 31 December 2023	USD
Net investment position	-289.2
Net hedges of investment position	158.9
Weighted average exchange rate of hedging instruments against the euro	1.11
Foreign exchange exposure from investment position after hedging	-130.3

Foreign exchange P&L exposure

EUR mill. 31 December 2022	JPY	USD-basket
Net forecasted operating cash flows, next 12m	83.4	-707.1
Net operating cash flow hedges, next 12m	-26.2	258.5
Weighted average exchange rate of hedging instruments against the euro	141.05	1.05
Foreign exchange exposure from operating cash flows after hedging, next 12m	57.1	-448.7

Foreign exchange balance sheet exposure

EUR mill. 31 December 2022	JPY	USD
Net balance sheet items	-43.8	-988.5
Net hedges of balance sheet items	38.9	564.1
Weighted average exchange rate of hedging instruments against the euro	141.36	1.10
Foreign exchange exposure from balance sheet items after hedging	-4.9	-424.5

Foreign exchange investment exposure

EUR mill. 31 December 2022	USD
Net investment position	-320.8
Net hedges of investment position	183.7
Weighted average exchange rate of hedging instruments against the euro	1.01
Foreign exchange exposure from investment position after hedging	-137.1

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

In Finnair Group, the interest rate risk is measured using the interest rate re-fixing period. If necessary, interest rate derivatives are used to adjust the interest rate re-fixing period. According to the risk management policy, the mandate for the investment portfolio's interest rate re-fixing period is 0-12 months and for interestbearing liabilities 36-72 months. On the closing date, the investment portfolio's interest rate re-fixing period was approximately 3 months and approximately 57 months for interest-bearing liabilities. On the closing date, a one percentage point rise in interest rates increases the annual interest income of the investment portfolio by approximately 7.0 million euros and the interest expenses of the loan portfolio by approximately 3.7 million euros. The situation as of December 31 2023 is a reasonable representation of conditions throughout the year given the current market environment.

Future lease agreements expose the group to interest rate risk, as the interest rate is one component of the lease price. The interest rate is fixed when the lease payments start. If necessary, the group can hedge this exposure with cash flow hedges.

			Maturity
Timing of the notional EUR mill. 31 December 2023	Notional amount (gross)	Less than 1 year	1 to 2 years	2 to 4 years
Interest rate derivatives	310.4	53.9	114.0	142.5

Cross-currency interest rate swaps are included in the nominal amount calculation. Finnair has not entered into any interest rate derivatives on which it is paying a fixed rate.

Credit risk

The Group is exposed to counterparty risk when investing its cash reserves and when using derivative instruments. The credit risk is managed by only making contracts with financially sound domestic and foreign banks, financial institutions and brokers, within the framework of the risk management policy for counterparty risk limits. Liquid assets are also invested in money market funds, bonds and commercial papers issued by conservatively selected companies, according to company-specific limits. This way, risk exposure to any single counterparty is not significant. Changes in the fair value of Group loans arises from changes in FX and interest rates, not from credit risk. The Group's credit risk exposure arises from other current financial assets presented in note 3.2.1, cash and cash equivalents presented in note 3.2.2, trade receivables presented in note 1.2.3 and derivatives presented in note 3.8.

Interest rate risk Interest rate risk means the cash flow, financial performance and balance sheet uncertainty arising from interest rate fluctuations. optimal capital structure the Group also aims to minimize the cost of capital and maximize the return on capital employed. The capital structure is influenced via, for example, dividend distribution and share issues. The Group can vary and adjust the level of dividends paid to shareholders, the amount of capital returned to them or the number of new shares issued. The Group can also decide on sales of asset items in order to reduce debt.

Liquidity risk

The goal of the Finnair Group is to maintain good liquidity. Liquidity is ensured by cash reserves, bank account limits, liquid money market investments and committed credit facilities. Counterparties of groups' long term loans are solid financial institutions with good reputations.

The war in Ukraine has not had a direct impact on the basic principles of Finnair's liquidity risk management. Finnair executed several financing transactions to strenghten its balance sheet and maintain liquidity levels. The most significant financing transactions during the year 2023 were the rights issue of net proceeds of approximately 558 million euros, conversion and repayment of the 400 million euro capital loan, repayment of the 200 million euro hybrid bond, and amortisations of the pension premium loan totalling 320 million euro. The Group's cash funds were 922.0 million euro at the end of financial year 2023. Finnair Plc has a domestic commercial paper program of 200 million euro, which was not in use as of the closing date.

Capital management

The aim of Finnair's capital management is to secure access to the capital markets at all times despite the volatile business environment, as well as to support future business development. Through maintaining an

During the year 2023 Finnair strenghtened its capital structure with the rights issue of net proceeds of approximately 558 million euros, conversion and repayment of the 400 million euro capital loan, repayment of the 200 million euro hybrid bond and amortisations of the pension premium loan totalling 320 million euro. The development of the Group's capital structure is continuously monitored using the adjusted gearing ratio. When calculating adjusted gearing, adjusted interest-bearing net debt is divided by the amount of shareholders' equity. The Group's adjusted gearing at the end of 2023 was 193.2 per cent (266.4).

Sensitivity analysis of the fair value reserve

If the price of Jet fuel CIF NWE had been 10 per cent higher, the balance of the reserve would have been 27.9 million euro (16.1) higher. Correspondingly, a 10 per cent weaker Jet fuel CIF NWE price would have reduced the reserve by 35.3 million euro (17.6). In terms of the US dollar, a 10 per cent weaker level would have lowered the balance of the fair value reserve by 35.9 million euro (25.4) and a 10 per cent stronger dollar would have had a positive impact of 33.3 million euro (25.4). In terms of Japanese yen, a 10 per cent stronger yen would have had a negative impact of 6.8 million euro (2.6), and a 10 per cent weaker level would have increased the balance of the fair value reserve by 6.8 million euro (2.6). The effect of change in interests to the fair value reserve in own equity is not material. The enclosed sensitivity figures do not take into account any change in deferred tax liability (tax assets).

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

3.6 Classification of financial assets and liabilities

	Hedge accounting	Fair value through profit	Amortised
EUR mill.	items	and loss	cost	Book value
31 Dec 2023
Financial assets
Receivables	-	-	2.6	2.6
Other financial assets	-	776.8	-	776.8
Trade receivables and other receivables	-	-	289.0	289.0
Derivatives	10.0	1.8	-	11.8
Cash and cash equivalents	-	-	145.1	145.1
Book value total	10.0	778.6	436.7	1,225.3
Fair value total	10.0	778.6	436.7	1,225.3
Financial liabilities
Interest-bearing liabilities	-	-	910.6	910.6
Lease liabilities	-	-	1,115.0	1,115.0
Derivatives	34.4	8.9	-	43.4
Trade payables and other liabilities	-	-	274.1	274.1
Book value total	34.4	8.9	2,299.7	2,343.0

Fair value total	34.4	8.9	1,990.9	2,034.2

	Hedge	Fair value
	accounting	through profit	Amortised
EUR mill.	items	and loss	cost	Book value
31 Dec 2022
Financial assets
Receivables	-	-	3.7	3.7
Other financial assets	-	738.6	-	738.6
Trade receivables and other receivables	-	-	256.9	256.9
Derivatives	8.6	14.9	-	23.5
Cash and cash equivalents Book value total	- 8.6	- 753.5	785.8 1,046.3	785.8 1,808.5

Fair value total	8.6	753.5	1,046.3	1,808.5

Financial liabilities
Interest-bearing liabilities	-	-	1,298.5	1,298.5
Lease liabilities	-	-	1,330.7	1,330.7
Derivatives	33.1	3.5	-	36.7
Trade payables and other liabilities	-	-	234.7	234.7
Book value total	33.1	3.5	2,863.8	2,900.5

	Hedge accounting	Fair value through profit	Amortised
EUR mill.	items	and loss	cost	Book value
31 Dec 2023
Financial assets
Receivables	-	-	2.6	2.6
Other financial assets	-	776.8	-	776.8
Trade receivables and other receivables	-	-	289.0	289.0
Derivatives	10.0	1.8	-	11.8
Cash and cash equivalents	-	-	145.1	145.1
Book value total	10.0	778.6	436.7	1,225.3
Fair value total	10.0	778.6	436.7	1,225.3
Financial liabilities
Interest-bearing liabilities	-	-	910.6	910.6
Lease liabilities	-	-	1,115.0	1,115.0
Derivatives	34.4	8.9	-	43.4
Trade payables and other liabilities	-	-	274.1	274.1
Book value total	34.4	8.9	2,299.7	2,343.0
Fair value total	34.4	8.9	1,990.9	2,034.2
	Hedge accounting	Fair value through profit	Amortised
EUR mill.	items	and loss	cost	Book value

31 Dec 2022
Financial assets
Receivables	-	-	3.7	3.7
Other financial assets	-	738.6	-	738.6
Trade receivables and other receivables	-	-	256.9	256.9
Derivatives	8.6	14.9	-	23.5
Cash and cash equivalents	-	-	785.8	785.8
Book value total	8.6	753.5	1,046.3	1,808.5
Fair value total	8.6	753.5	1,046.3	1,808.5

Financial liabilities Interest-bearing liabilities	-	-	1,298.5	1,298.5
Lease liabilities	-	-	1,330.7	1,330.7
Derivatives	33.1	3.5	-	36.7
Trade payables and other liabilities	-	-	234.7	234.7
Book value total	33.1	3.5	2,863.8	2,900.5

In this note interest rate derivatives (currency and interest-rate swaps) are included in derivatives. Item Receivables mainly includes USD-denominated security deposits for leased aircraft. Trade payables and other liabilities include: trade payables and other interest-bearing and non-interest-bearing liabilities.

Derivatives are valued at fair value, with further details in the fair value hierarchy. Financial assets valued at fair value are money market funds (fair value hierarchy level 1) and bonds, or commercial papers (fair value hierarchy level 2). Receivables are mainly current and the book value is equivalent to the fair value, because the discount effect is not significant. Pension premium loan and issued bond make the most significant part of the loans valued at amortised cost. Breakdown of fair values of financial liabilities is presented in note 3.3. The valuation principles of financial assets and liabilities are outlined in the accounting principles.

Fair value hierarchy of financial assets and liabilities valued at fair value

Fair values at the end of the reporting period

EUR mill.	31 Dec 2023	Level 1	Level 2
Assets
Financial assets at fair value
Securities held for trading	776.8	723.4	53.4

Derivatives
Currency derivatives	2.3	-	2.3
- of which in fair value hedge accounting	0.1	-	0.1
- of which in cash flow hedge accounting	2.0	-	2.0
Commodity derivatives	9.5	-	9.5
- of which in cash flow hedge accounting	7.9	-	7.9
Total	788.7	723.4	65.3

Liabilities
Financial liabilities at fair value
Derivatives
Currency and interest rate swaps and options	8.9	-	8.9
Currency derivatives	7.6	-	7.6
- of which in fair value hedge accounting	1.5	-	1.5
- of which in cash flow hedge accounting	6.1	-	6.1
Commodity derivatives	26.8	-	26.8
- of which in cash flow hedge accounting	26.8	-	26.8
Total	43.4	-	43.4

During the financial year, no significant transfers took place between fair value hierarchy Levels 1 and 2. The fair values of hierarchy Level 1 are fully based on quoted (unadjusted) prices in active markets of the same assets and liabilities.

The fair values of Level 2 instruments are, to a significant extent, based on input data other than the quoted prices included in Level 1, but still mainly based on directly observable data (price) or indirectly observable data (derived from price) for the particular asset or liability.

On the other hand, the fair values of Level 3 instruments are based on asset or liability input data that is not based on observable market information (unobservable inputs). The fair values are based on confirmations supplied by counterparties, based on generally accepted valuation models.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

3.7 Offsetting financial assets and liabilities

2023	2022
11.8	23.5
11.8	23.5
-11.8	-21.2
0.0	2.3

EUR mill.	2023	2022
Derivative assets gross amounts	11.8	23.5
Amounts of financial assets presented in the balance sheet	11.8	23.5
Enforceable master netting agreement	-11.8	-21.2
Derivative assets net amount	0.0	2.3
EUR mill.	2023	2022

Derivative liabilities gross amounts	-43.4	-36.7
Amounts of financial liabilities presented in the balance sheet	-43.4	-36.7
Enforceable master netting agreement	11.8
		21.2

Derivative liabilities gross amounts	-43.4	-36.7
Amounts of financial liabilities presented in the balance sheet	-43.4	-36.7
Enforceable master netting agreement	11.8	21.2
Derivative liabilities net amount	-31.5	-15.5

For the above financial assets and liabilities, subject to enforceable master netting arrangements or similar arrangements, each agreement between the Group and the counterparty allows net settlement of the relevant financial assets and liabilities when both parties choose to settle on a net basis. In the absence of such mutual decision, financial assets and liabilities will be settled on a gross basis. However, each party of the master netting agreement, or similar agreement, will have the option to settle on a net basis in the event of default of the other party. Depending on the terms of each agreement, an event of default includes failure by a party to make a payment when due, failure by a party to perform any obligation required by the agreement (other than payment), if such failure is not remedied within periods of 30 to 60 days after notice of such failure is given to the party, or bankruptcy.

3.8 Derivatives

Derivative contracts and hedge accounting

According to its risk management policy, Finnair Group uses foreign currency, interest rate and commodity derivatives to reduce the exchange rate, interest rate and commodity risks which arise from the Group's balance sheet items, foreign currency denominated purchase agreements, anticipated foreign currency denominated purchases and sales as well as future jet fuel purchases. It is the Group's policy not to enter into derivative financial contracts for speculative purposes. The derivatives are initially recognised as well as subsequently valued at fair value in each financial statement and interim report. The fair values of the derivatives are based on the value at which the instrument could be exchanged between knowledgeable, willing and independent parties, with no compulsion to sell or buy in the sales situation. The fair

values of derivatives are determined as follows:

The fair values of all derivatives are calculated using the exchange rates, interest rates, volatilities and commodity price quotations on the closing date. The fair values of currency forward contracts are calculated as the present value of future cash flows. The fair values of currency options are calculated using the Black-Scholes option pricing model. The fair values of interest rate swap contracts are calculated as the present value of future cash flows. The fair values of crosscurrency interest rate swap contracts are calculated as the present value of future cash flows. The fair values of interest rate options are calculated using generally accepted option valuation models. The fair values of commodity forward contracts are calculated as the present value of future cash flows. The fair values of commodity options are calculated using generally accepted option valuation models.

The Group uses credit valuation adjustment for cross-currency interest rate swaps as the maturities of these derivatives are long. The credit valuation adjustment is not done for the rest of the derivatives as the maturities for these are short and the impact would not be material. Credit risk management is described in more detail in note 3.5.

Gains and losses arising from changes in the fair value are presented in the financial statements according to the original classification of the derivative. Gains and losses on derivatives qualifying for hedge accounting are recognised in accordance with the nature of the risk being hedged. At inception, derivative contracts are designated as hedges of future cash flows, hedges of the fair value of recognised assets or liabilities and binding purchase contracts (cash flow hedges or fair value hedges) or as derivatives not meeting the hedge accounting criteria or to which hedge accounting

= Accounting principles

is not applied (economic hedges). Hedging of the fair value of net investments of foreign units or embedded derivatives have not been used.

At the inception of hedge accounting, Finnair Group documents the economic relationship and the hedge ratio between the hedged item and the hedging instrument, as well as the Group's risk management objectives and the strategy for the inception of hedging. At the inception of hedging, and at least at the time of each financial statement, the Group documents and assesses the effectiveness of hedge relationships by examining the past and prospective capacity of the hedging instrument to offset changes in the fair value of the hedged item or changes in cash flows. The values of derivatives in a hedging relationship are presented in the balance sheet item Short–term financial asset and liabilities.

Finnair Group implements the IFRS hedge accounting principles in the hedging of future cash flows (cash flow hedging). The principles are applied to the price and foreign currency risk of jet fuel, the foreign currency risk of lease payments and the foreign currency risk of highly probable future sales and costs denominated in foreign currencies. The IFRS fair value hedge accounting principles are applied to the hedging of foreign exchange and interest rate risk of aircraft.

The change in the fair value of the effective portion of derivative instruments that have been designated and qualify as cash flow hedges are recognised in comprehensive income and presented within equity in the fair value reserve, to the extent that the requirements for the application of hedge accounting have been fulfilled and the hedge is effective. The gains and losses, recognised in the fair value reserve, are transferred to the income statement in the period in which the hedged item is recognised in the income statement. When a hedging instrument expires or is sold, terminated or exercised, or the criteria for cash flow hedge accounting are no longer fulfilled, but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in the hedge reserve and is recognised in accordance with the above policy when the transaction occurs. If the underlying hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in the hedge reserve with respect to the hedging instrument is recognised immediately in the consolidated income statement.

The effectiveness of hedging is tested on a quarterly basis. The effective portion of the hedges is recognised in the fair value reserve of other comprehensive income, from which it is transferred to the income statement when the hedged item is realised or, in terms of investments, as an acquisition cost adjustment.

Fair value hedging is implemented on firm orders of new aircraft, and in order to hedge the fixed interest rate bond. The binding purchase agreements for new aircraft are treated as firm commitments under IFRS, and therefore, the fair value changes of the hedged part arising from foreign currency movements are recognised in the balance sheet as an asset item, and corresponding gains or losses recognised through profit and loss. Similarly, the fair value of instruments hedging these purchases is presented in the balance sheet as a liability or receivable, and the change in fair value is recognised in profit and loss.

The gain or loss related to the effective portion of the interest rate swap, which hedges the fixed interest rate bond, is recognised as financial income or expenses in the income statement. The gain or loss related to the ineffective portion is recognised within other operating income and expenses in the income statement. The change in the fair value attributable to the interest rate risk of the hedged fixed interest rate loans is recognised in the financial expenses in the income statement.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item, for which the effective interest method is used, is amortized to profit or loss over the period to maturity.

Finnair Group uses cross-currency interest rate swaps in the hedging of the interest rate and foreign exchange risks of foreign currency denominated loans. Cross-currency interest rate swaps are excluded from hedge accounting, and therefore the fair value changes are recognised in derivative assets and liabilities in the balance sheet, as well as in the financial income and expenses in the income statement. The fair value changes of the loans are simultaneously recognised in the financial income and expenses. Realised foreign exchange rate differences, as well as interest income and expenses, are recognised in the financial income and expenses against the exchange rate differences and interest income and expenses of the loan

Finnair Group uses jet fuel swaps (forward contracts) and options in the hedging of jet fuel price risk. Unrealised gains and losses on derivatives hedging jet fuel, which are designated as cash flow hedges and fulfil the requirements of IFRS hedge accounting, are recognised in the hedging reserve within other comprehensive income. Accrued derivative gains and losses, recognised in shareholders' equity, are recognised as income or expense in the income statement in the same financial period as the hedged item is recognised in the income statement. If a forecasted cash flow is no longer expected to occur, and as a result the IFRS hedge accounting criteria are not fulfilled, the fair value changes and the accrued gains and losses reported in shareholders' equity are transferred to the items affecting comparability in the income statement. Changes in the fair value of jet fuel swaps and options excluded from hedge accounting are recognised in fair value changes in derivatives in the income statement, while the realised result is presented in fuel costs. For forward and option contracts, an economic relationship exists between the hedged item and the hedging instrument as the hedging instrument and the hedged item are expected to move in opposite directions because of the same underlying exposure. This is true for all hedge relationships except for the SING consumption hedged with NWE hedges (as described in section 3.5). In that case, the underlying is different, but the underlying hedged item (SING)

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

and the hedge (NWE) have a historical correlation of 0.99. Therefore, it can be classified as a relationship where the underlying and the hedge are economically closely related. Ineffectiveness on fuel derivatives can also arise from timing differences on the notional amount between the hedged instrument and hedged item, significant changes in credit risk of parties to the hedging relationship and changes in the total amount of the hedged item, for instance if the underlying fuel consumption forecast is not accurate enough, that can result in overhedging. However, as Finnair usually hedges less than 100% of its exposure, the risk of overhedging is insignificant. Finnair has established a hedge ratio of 1:1 for hedging relationships.

Finnair uses forward contracts and options to hedge its exposure to foreign currency denominated cash flows. The hedges of cash flows denominated in foreign currencies are treated as cash flow hedges in accounting, in accordance with the hedge accounting principles of IFRS 9. Unrealised gains and losses on hedges of forecasted cash flows qualifying for hedge accounting are recognised in the hedging reserve in OCI, while the change in the fair value of such hedges not qualifying for hedge accounting is recognised in Fair value changes in derivatives and changes in exchange rates of fleet overhauls in the income statement. The change in fair value recognised in the hedging reserve in equity is transferred to the income statement when the hedged transaction is realised. Forward points are included in the hedging instrument and in the hedge relationship. Potential sources of ineffectiveness include changes in the timing of the hedged item, significant changes in the credit risk of parties to the hedging relationship and changes in the total amount of the hedged item, for instance if the underlying cash flow forecast is not accurate enough, that can result in overhedging. However, as Finnair usually hedges less than 100% of its exposure, the risk of overhedging is insignificant. Realised profit or loss on derivatives hedging JPY-denominated operating cash flows is presented in revenue, realised profit or loss on derivatives hedging a group of similar USD costs is proportionally recognised in corresponding expense lines, while profit or loss on derivatives hedging cash flows denominated in other currencies is presented in Other expenses.

The hedge ratio is defined as the relationship between the quantity of the hedging instrument and the quantity of the hedged item in terms of their relative weighting. With currency hedging, the hedge ratio is typically 1:1. For forward and option contracts, an economic relationship exists between the hedged item and the hedging instrument as there is an expectation that the value of the hedging instrument and the value of the hedged item would move in opposite directions because of the common underlying exposure.

Changes in the fair value of interest rate derivatives not qualifying for hedge accounting are recognised in financial income and expenses in the income statement. Changes in the fair value as well as realised gain or loss on forward contracts used to hedge foreign currency denominated balance sheet items of Finnair Group are recognised in financial expenses. Changes in the fair value and the realised result of hedges of assets held for sale are recognised in Items affecting comparability.

Cost of hedging

At Finnair, the time value of an option is excluded from the designation of a financial instrument and accounted for as a cost of hedging. Upon initial recognition, Finnair defers any paid premium in the cost of hedging reserve within other comprehensive income. The fair value changes of the time value are recognised in the cost of hedging reserve within other comprehensive income. The premium will be transferred to the consolidated income statement in the same period that the underlying transaction affects the consolidated income statement for transaction-related hedges. As of 31 December 2023, Finnair has deferred premiums only on transaction-related hedges.

Critical accounting estimates and sources of uncertainty

Finnair accounts for its cash flow hedges of forecasted foreign currency denominated purchases and sales and future jet fuel purchases in accordance with the IFRS 9. Under the hedge accounting principles, a forecast transaction can be designated as a hedged item only if that transaction is considered as highly probable. The evaluation of probability is based on the management forecasts about the future level of Finnair's operations and cash flows. Such forecasts require the use of management judgement and assumptions, which inherently contain some degree of uncertainty. Should the expected circumstances or outcome change in the future, the management would need to reassess whether a hedged forecast transaction is still highly likely to occur. This could be the case if, for example, the expected recovery and thus the expected jet fuel consumption levels would not realize as expected. Should the forecast transaction no longer be highly probable, it would no longer qualify as an eligible hedged item and hedge accounting would need to be discontinued. Should it no longer be expected to occur at all, the balance of the cash flow hedge reserve included in other comprehensive income would need to be reclassified to profit or loss.

= Accounting principles = Critical accounting estimates

	2023			2022
EUR mill.	Nominal value	Positive fair values	Negative fair values	Fair net value	Nominal value	Positive fair values	Negative fair values	Fair net value
Currency derivatives
Jet fuel currency hedging
Operational cash flow hedging (forward contracts)	389.7	2.0	-5.5	-3.5	284.7	0.1	-7.4	-7.3
Operational cash flow hedging, bought options	53.3	0.0	-	0.0	-	-	-	-
Operational cash flow hedging, sold options	48.9	-	-0.6	-0.6	-	-	-	-
Fair value hedging of aircraft acquisitions	158.9	0.1	-1.5	-1.4	183.7	-	-11.6	-11.6
Hedge accounting items total	650.7	2.1	-7.6	-5.5	468.4	0.1	-19.0	-18.9
Balance sheet hedging (forward
contracts)	321.8	0.2	-0.1	0.2	337.7	0.4	-0.7	-0.3
Items outside hedge accounting total	321.8	0.2	-0.1	0.2	337.7	0.4	-0.7	-0.3

Currency derivatives total	972.6	2.3	-7.6	-5.3	806.1	0.5	-19.8	-19.3
Commodity derivatives
Jet fuel forward contracts, tonnes	422,000	5.3	-14.9		-9.6 209,000	3.4	-6.0	-2.5
Bought options, jet fuel, tonnes	255,000	2.6	-		2.6 149,000	4.9	-0.2	4.8
Sold options, jet fuel, tonnes	255,000	-	-12.0		-12.0 149,000	0.2	-7.9	-7.8
Hedge accounting items total	-	7.9	-26.8	-18.9	-	8.6	-14.1	-5.6
Bought options, jet fuel, tonnes	187,000	1.6	-		1.6 149,000	0.9	-	0.9
Items outside hedge accounting total	-	1.6	-	1.6	-	0.9	-	0.9
Commodity derivatives total	-	9.5	-26.8	-17.4	-	9.5	-14.1	-4.6
Cross currency interest rate swaps	310.4	-	-8.9	-8.9	253.1	13.5	-2.8	10.7
Items outside hedge accounting
total	310.4	-	-8.9	-8.9	253.1	13.5	-2.8	10.7
Interest rate derivatives total	310.4	-	-8.9	-8.9	253.1	13.5	-2.8	10.7
Derivatives total *	-	11.8	-43.3	-31.5	-	23.5	-36.7	-13.2

* Positive (negative) fair value of hedging instruments as of 31.12.2023 is presented in the statement of financial position in the item derivative financial instruments within current assets (derivative financial instruments within current liabilities). However, during the year 2023 Finnair has resumed normal hedging operations.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Hedged items in hedge relationships

	Carrying amount of the hedged item	Accumulated amount of fair value hedge adjustments included in the carrying amount of the hedged item	Line item in the statement of financial position in which the hedged item is included	Changes in fair value of the hedged item used for calculating hedge inef fectiveness, previous 12 months	Changes in fair value of the hedging instrument used for calculating hedge inef fectiveness, previous 12 months
31 December 2023	Assets Liabilities	Assets Liabilities
Cash flow hedges
Jet fuel price risk
- Forecasted jet fuel purchases	- -	- -	-	145.6	-9.7
Foreign exchange risk
- Forecasted sales and purchases, USD	- -	- -	-	24.6	-0.9
- Forecasted sales and purchases, JPY	- -	- -	-	-8.4	2.3
Fair value hedges
Foreign exchange risk
- Aircraft acquisitions	1.4	1.4	Non-current assets	11.1	-3.0

Ratings of derivative counterparties

EUR mill.	2023	2022
Better than A	-3.9	0.7
A	-20.9	-11.9
BBB	-6.7	-2.0
Total	-31.5	-13.2

Derivatives realised through profit and loss

		2022
Fuel costs	0.6	21.3
Fuel costs	-7.2	8.4
Aircraft materials and overhaul	-0.8	0.4
Traffic charges	-0.2	0.5
Revenue	4.2	0.3
	-3.3	31.0
Fuel costs	-6.1	-3.2
Financial expenses	-8.4	16.6
Financial expenses	3.7	5.5
	-10.8	18.9
		2023

3.9 Equity-related information

Shareholders' equity

The nominal value of shares had been recognised in the share capital before an amendment to the Articles of Association registered on 22 March 2007. Share issue profit and gains on sale of own shares had been recognised in other restricted funds before the change in the Limited Liability Company Act in 2006.

The subscription proceeds from the 2007 share issue less transaction costs after taxes as well as share-based payments according to IFRS 2 have been recognised in the unrestricted equity funds.

The rights issue proceeds from 2020 and 2023 less the transaction costs has been recognized in the unrestricted equity funds.

Hedging reserve and other OCI items include changes in the fair value of derivative instruments used in cash-flow hedging, in addition to actuarial gains and losses related to defined benefit pension plans, cost of hedging and translation differences.

The acquisition cost of repurchased owned shares less transaction costs after taxes is charged to equity until the shares are cancelled or reissued. The consideration received for sale or issue of own shares is included in equity. The dividend proposed by the Board of Directors is not deducted from distributable equity until approved at the Annual General Meeting.

Number of shares	2023	2022
Number of outstanding shares in the beginning of the financial year		1,407,001,962 1,405,980,132
Rights issue	19,012,413,069	-
Shares granted from the share-bonus scheme 2019-2021	-	119,737
Shares granted from FlyShare employee share savings plans	1,487,760	902,093
Executive Board Rebuild Incentive Plan	10,670,826	-
Number of outstanding shares at the end of the financial year	20,431,573,617 1,407,001,962
Own shares held by the parent company	49,565,650	399,303
Total number of shares at the end of the financial year	20,481,139,267 1,407,401,265

Finnair Plc's share capital, paid in its entirety and registered in the trade register, was at 75,442,904.30 euros at the end of 2022 and 2023. The shares have no nominal value. During the year 2023, Finnair transferred a total of 1,487,760 shares to FlyShare participants, total of 10,670,826 shares to Executive Board Rebuild Incentive Plan participants.

= Accounting principles

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

5

Financial Statements

Consolidated income statement
-------------------------------	--	--

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Group's hedging reserve and other OCI items

EUR mill.	2023	Amounts reclassified to profit or loss	Unrealised gains and losses recognised in OCI	2022	Line item affected in profit or loss because of the reclassification

Jet fuel price hedging	-13.2	-0.6	-6.8	-5.9	Fuel costs
					Revenue and cost
Operating cash flow hedging	-3.5	3.9	-0.1	-7.3	lines*
Hedging of interest related to future					Lease payments
lease payments	-2.8	0.7	-	-3.6	for aircraft
The actuarial gains and losses of
defined benefit plan	82.0	-	11.6	70.4
Cost of hedging reserve	-1.7	-	-4.9	3.3
Tax effect	-12.2	-	1.9	-14.1
Total	48.6	4.1	1.7	42.8

*Forward and option contracts hedging forecasted sales and purchases denominated in foreign currencies are hedges of a group of similar hedged items, and the amounts reclassified from OCI to P&L are proportionally allocated to different cost lines based on the realised cost amounts. Amounts reclassified to revenue and different cost lines are specified in the table "Derivatives realised through profit or loss" in note 3.8.

Maturity dates of fair values recognised in the hedging reserve

EUR mill.	2024	2025	2026	2027	2028	Later	Total
Jet fuel price hedging	-11.7	-1.5	-	-	-	-	-13.2
Operating cash flow hedging	-3.5	-	-	-	-	-	-3.5
Hedging of interest related to future lease payments	-0.7	-0.7	-0.7	-0.7	0.0	-	-2.8
The actuarial gains and losses of defined benefit plan	82.0	-	-	-	-	-	82.0
Cost of hedging reserve	-1.7	-	-	-	-	-	-1.7
Tax effect	-12.9	0.5	0.1	0.1	0.0	-	-12.2
Total	51.5	-1.8	-0.6	-0.6	0.0	-	48.6

Rights issue

During third quarter of 2023, Finnair organised a rights issue to strenghten its financial position. The aim of the rights issue was reducing Finnair's financing costs, supporting the implementation of the strategy for sustainable profitable growth in the new operating environment shaped by the COVID-19 pandemic and the closure of Russian airspace and ensuring the Company's ability for future investments. Through the rights issue Finnair also seeked to reinstate its ability for shareholder distributions.

According to the final results of the rights issue, a total of 19,038,769,224 new shares were subscribed for in the offering, corresponding to approximately 100.14 per cent of the offer shares, and thus, the offering was oversubscribed. A total of 18,102,803,535 offer shares were subscribed for pursuant to the exercise of subscription rights. The remaining 909,609,534 offer shares subscribed for without subscription rights were allocated in the secondary subscription in accordance with the terms and conditions of the offering. The subscription price was EUR 0.03 per Offer Share. Gross proceeds of the rights issue were approximately 570.4 million euro, and net proceeds of the rights issue were approximately 558.2 million euro. Gross and net proceeds include the 318.6 million euro pro rata subscription by the State of Finland through the offset of a corresponding amount of the capital loan, granted to Finnair by the State of Finland, which did not generate any proceeds in cash to Finnair.

Hybrid bond

Finnair issued a 200 million euro hybrid bond during 2020, which was booked to shareholders' equity (after equity belonging to the holders). The hybrid bond was redeemed in full during third quarter of 2023.

Capital loan

During 2022 Finnair withdrew a 400 million euro capital loan, which was booked to equity. In Finnair's rights offering of approximately 558 million euros executed in November 2023, the State of Finland subscribed for its pro rata share of the new shares on the basis of subscription rights allocated to it. The State of Finland paid the subscription price of the shares by offsetting it against a corresponding amount of the principal of the capital loan. This totaled 318.6 million euros. Finnair repaid the remainder of the capital loan, i.e. 81.4 million euros, on 24 November 2023 to the State of Finland. In addition, Finnair paid the related interest and other fees of 48.9 million euros to the State.

Earnings per share

The basic earnings per share figure is calculated by dividing the result for the financial year attributable to the parent company's shareholders by the weighted average number of shares outstanding during the financial year. The result for the financial year is adjusted for the after-tax amounts of hybrid bond interests and capital loan interests and other fees regardless of payment date, as well as transaction costs of the new hybrid bond issued and premium paid, when a hybrid bond is redeemed. When calculating the earnings per share adjusted for dilution, the weighted average of the number of shares takes into account the diluting effect resulting from the conversion into shares all potentially diluting shares. Finnair has not granted any options.

EUR mill.	2023	2022
Result for the financial year, EUR mill.	254.3	-476.2
Hybrid bond interest, EUR mill.	-13.7	-20.5
Capital loan cost, EUR mill.	-32.9	-15.9
Tax effect	9.3	7.3
Adjusted result for the financial year	216.9	-505.3

Weighted average number of shares, mill. Pcs	9,640.7	8,380.5
Basic earnings per share, EUR	0.022	-0.060
Diluted earnings per share, EUR	0.022	-0.060
Effect of own shares, EUR	0.000	0.000

Dividend

The Board of Directors proposes to the Annual General Meeting that no dividend is paid for 2023. In accordance with the proposal of the Board of Directors, the Annual General Meeting on 23 March 2023 resolved that no dividend be paid based on the balance sheet adopted for the year 2022.

Finnair Plc's distributable equity

EUR mill.	2023
Hedging reserve	-14.7
Unrestricted equity funds	1,344.4
Retained earnings	-1,088.0
Result for the financial year	231.5
Distributable equity total	473.1

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated income statement
-------------------------------	--	--

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

4 Consolidation

Notes under the Consolidation section include a description of the general consolidation principles and methods of consolidation. The aim of the section is to provide an overall picture of the group's structure and principles applied in preparing consolidated financial statements and classifying ownership interests. In addition, notes include information about subsidiaries and joint ventures held, acquired or sold by the group.

4.1 General consolidation principles

Consolidation

Consolidation, the consolidation method and classification of ownership interests depend on whether Group has power to control or jointly control the entity or if it has significant influence or other interests in the entity. When Group has the power to control the entity, it is consolidated as a subsidiary in the group according to principles described in the note 4.2 Subsidiaries. When Group has joint control or significant influence over an entity but does not have the power to control, an entity is accounted for by using the equity method according to principles set in note 4.4 Investments in associates and joint ventures. If Group does not have power to control nor significant influence in the entity, its ownership interests are classified as financial assets available for sale and accounted for according to principles described in the note 3.2 Financial assets.

4.2 Subsidiaries

Consolidation principles of subsidiaries

Finnair Plc's consolidated financial statements include the parent company Finnair Plc and all of its subsidiaries. Subsidiaries are defined as companies in which Finnair has control. Control exists when Finnair has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Usually Finnair has power over the entity when it owns more than 50% of the votes or where Finnair otherwise has the power to govern the financial and operating policies. The acquired subsidiaries are included in the consolidated financial statements from the day the Group has control, and disposed subsidiaries until the control ceases. Acquired and established companies are accounted for using the acquisition method of accounting. Accordingly, the acquired company's identifiable assets, liabilities and contingent liabilities are measured at fair value on the date of acquisition. The excess between purchase price and fair value of the Group's share of the identifiable net assets is

recognised as goodwill.

All inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless there is evidence of impairment related to the transferred asset. The accounting principles of subsidiaries have been changed to correspond Group's accounting policies.

Subsidiaries

Name of the company	Group ownership %	Name of the company	Group ownership %
Finnair Cargo Oy, Finland		100.0 Amadeus Finland Oy, Finland	95.0
Finnair Aircraft Finance Oy, Finland	100.0	Oy Aurinkomatkat - Suntours Ltd Ab, Finland	100.0
Finnair Technical Services Oy, Finland		100.0 Aurinko Oü, Estonia	100.0
Finnair Engine Services Oy, Finland		100.0 Matkayhtymä Oy, Finland	100.0
Finnair Kitchen Oy, Finland		100.0 FTS Financial Services Oy, Finland	100.0
Kiinteistö Oy Lentokonehuolto, Finland		100.0 Finnair Business Services Oü, Estonia	100.0
Northport Oy, Finland	100.0

= Content of the section = Accounting principles

4.3 Acquisitions and divestments

There were no business acquisitions or divestments in 2023 and 2022.

4.4 Investments in joint ventures

Companies where the Group has joint control with another entity and significant decisions require both parties approval are considered as joint ventures and those are accounted for using the equity method. The group has no joint arrangements classified as joint operations in which the group would have rights to shares in the assets or liabilities of the joint ventures and which it would combine with its balance sheet.

The investment in joint ventures include goodwill recognized at the time of acquisition. The Group recognises its share of the post-acquisition results in joint ventures in the income statement. When the Group's share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does not recognise further losses, unless it has incurred obligations on behalf of the joint venture.

Results from the transactions between the Group and its joint ventures are recognised only to the extent of unrelated investor's interests in the joint ventures. The Group determines at each reporting date whether there is any objective evidence that the investment in the joint ventures is impaired. In case of such indications, Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value. The impairment is recognised in share of results in joint ventures.

Accounting policies of joint ventures have been changed to correspond with the accounting policies adopted by the Group. If financial statements for the period are not available, the share of the profit of certain joint ventures is included in the consolidated accounts based on the preliminary financial statements or latest available information.

Information on the Group's joint ventures

Nordic Regional Airlines AB (Norra) operates mainly purchased traffic for Finnair. The owners (Finnair 40% and Danish Air Transport 60%) have joint control over the entity. In the balance sheet of Finnair, Norra has been classified as a joint venture.

EUR mill.	Domicile	Assets	Liabilities		Revenue Profit/Loss Holding %
31 Dec 2023	Sweden	110.7	110.4	84.0	0.5	40.00
31 Dec 2022	Sweden	133.9	134.2	77.1	0.5	40.00

The result of associated companies and joint ventures for 2023 was 0.5 (0.5) million euros, of which Finnair's share was 0.0 (0.0) million euros. Investments in joint ventures in consolidated balance sheet were 0.0 (0.0) million euros. More information on transactions with joint ventures can be found in the note 4.5 Related party transactions.

4.5 Related party transactions

Related parties of the Finnair group includes its subsidiaries, management (the Board of Directors, the President and CEO and the Executive Board), their close family members and companies controlled by them or their close family members, associated companies and joint ventures, Finnair pension fund and Finnair Group sickness fund. Subsidiaries are listed in the note 4.2 and joint ventures in note 4.4. Related party transactions include such operations that are not eliminated in the group's consolidated financial statement.

The State of Finland which has control over Finnair owns 55.7% (55.9%) of Finnair's shares. During financial year 2023 the State of Finland participated in the rights issue in proportion to its holding by offsetting the aggregate subscription price 318.6 million euros against a corresponding amount of the principal of the capital loan. Guarantee related to the pension premium loan from the State of Finland and during the reporting period repaid capital loan to the State of Finland are described in the note 3.3 Financial liabilities. All the transactions with other government owned companies and other related parties are on arm's length basis, and are on similar

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

5 Other notes

Other notes include all such notes that do not specifically relate to any previous subject matters.

5.1 Income taxes

The tax expense for the period includes current and deferred tax and adjustments to previous years' taxation. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or other equity items.

Deferred taxes are calculated for temporary differences between accounting and taxation using the valid tax rates for future years at the closing date. Deferred tax asset is recognised to the extent that realisation of the related tax benefit through future profits is probable. Temporary differences arise mainly from sales of tangible assets and depreciation, right-of-use assets, lease liabilities and tax losses. Deferred tax is recognised for foreign subsidiaries' undistributed earnings only when related tax effects are probable.

Deferred tax assets and liabilities are netted when they are levied by the same taxing authority and Finnair has a legally enforceable right to set off the balances.

Deferred taxes

Recognition of deferred tax asset is based on management estimates and require the use of management judgement in order to assess whether there will be sufficient taxable profits flowing to the company in the future. The expectations used in the calculation are based on the latest management forecast at the reporting date and use assumptions that are consistent with those used elsewhere in the financial statements. The level of uncertainty in Finnair's operating environment has decreased significantly during 2023 as a result of the improved business conditions and the successful execution of the new strategy. This has resulted in significant increase in passenger revenue and profitability, on top of which the management's profitability outlook has improved. Although the closure of Russian airspace is expected to affect the routings and operating costs of Finnair flights to Asia for a longer time, the management estimated in connection with its strategy update made in the second quarter of 2023 that Finnair will reach comparable operating profit margin target of 6 per cent by the end of 2025. As a result of the normalization of the business environment, Finnair's management has prepared a single forecast scenario in connection with the preparation of the consolidated financial statements as opposed to the multiple scenarios used in the prior year financial statements. In financial year 2022, deferred tax asset was written down from the taxable losses of 2020-2021, and deferred tax asset from the 2022 loss was not recognized. In financial year 2023, deferred tax asset written down in the previous financial year was fully re-recognised and a major part of deferred tax asset for taxable loss of 2022 was recognised in the balance sheet. Finnair expects to be able to use the tax losses remaining on balance sheet in advance of 10 years expiry date.

Global minimum tax framework (Pillar Two)

The OECD introduced Global Anti-Base Erosion (GloBE) Rules rules for a new global minimum tax framework (Pillar Two) at the end of 2021 and in December 2022, the EU Minimum Tax Directive (Pillar Two) was entered into force. The EU Directive is set to implement a global minimum tax rate of 15% for multinational enterprises and large-scale domestic groups and it is applicable within EU starting from 2024. To provide transitional relief for Pillar Two tax compliance and administrative burden, the OECD has introduced a Framework for Transitional Safe CbCR Safe Harbours applicable for Transition Period covering fiscal years 2024–2026.

Finnair has taken measures for assessing its potential exposure to Pillar Two rules and based on its initial assessment it does not anticipate material top-up tax adjustments during the transitional period 2024–2026. Finnair will monitor the development of regulatory updates, as OECD is expected to publish additional guidance and details concerning for example aviation industry, permanent safe harbours frameworks and Qualified Domestic Minimum Tax Regimes.

= Content of the section

= Accounting principles

= Critical accounting estimates

terms than transactions carried out with independent parties. The following transactions have taken place with related party entities:

EUR mill.	2023	2022
Sales of goods and services
Joint venture	25.4	25.7
Pension fund	0.2	0.3
Sickness fund	0.3	0.0
Employee benefits
Pension fund	8.3	11.2
Sickness fund	0.8	0.6
CEO and Executive Board	7.5	4.1
The Board of Directors	0.4	0.4
Purchases of goods and services
Joint venture	84.7	78.2
Pension fund	1.6	2.0
Financial income
Pension fund	4.4	0.6
Receivables
Joint venture	6.7	6.4
Pension fund	128.1	119.9
Liabilities
Joint venture	4.6	4.3
Pension fund	25.6	13.0
Sickness fund	0.1	-

Employee benefits and non-current receivables from pension fund are related to defined benefit pension plans in Finnair pension fund. These are described more detailed in the note 1.3.8.2. Management remuneration is presented in note 1.3.8. Management has not been granted any loans and there have not been any other transactions with management. More information on joint venture can be found in the note 4.4.

Finnair pension fund

The Finnair pension fund in Finland is a stand-alone legal entity which mainly provides additional pension coverage to Finnair's personnel in the form of defined benefit plan, and manages related pension assets. The assets include Finnair's shares representing 0.1% (0.1%) of the company's outstanding shares. Real estate and premises owned by the pension fund have been mainly leased to Finnair. In 2023 and 2022 Finnair did not pay any contributions to the fund. Pension asset was 127.9 million euros (119.7) at the end of the financial year.

Finnair sickness fund

The Finnair sickness fund in Finland is a stand-alone legal entity which provides its members the possibility to seek best possible care by compensating related medical costs. The fund's sphere of operation consists of persons (members) employed by group companies (shareholders). The activities of the insurance fund are financed by contributions collected from shareholders and members.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Deferred tax assets and liabilities

The Group has evaluated the nature and classification of deferred tax assets. Based on the evaluation, deferred tax assets and liabilities levied by the same taxing authority met the requirements for offset eligibility in accordance with IAS 12 standard. The deferred tax assets and liabilities are shown net on the balance sheet.

Changes in deferred taxes during 2023:

* The deferred tax asset (145 million euros) related to confirmed losses recognised in the income statement during the reporting period is offset against the deduction of the deferred tax asset recognised against taxable profit for the reporting period (29 million euros). In addition, the deferred tax asset related to confirmed losses was recognized in equity for capital loan costs (9.8 million euros).

Consolidated income statement	Income taxes			Changes in deferred taxes during 2023:
	EUR mill.	2023	2022			Recognised	Recognised in
Consolidated statement	Taxes for the financial year					in the income	shareholders'
of comprehensive income	Current tax	-0.1	-	EUR mill.	2022	statement	equity	2023
	Adjustments recognised for current tax of prior periods	-	-	Deferred tax assets
Consolidated balance sheet	Deferred taxes	135.3	-105.4	Confirmed losses	93.7	116.0 *	9.8 *	219.5
	Total	135.2	-105.4	Property, plant and equipment**	60.4	-10.4	-	49.9
Consolidated cash flow statement			Leases**	279.2	-53.1	-	226.0
	The reconciliation of income taxes to theoretical tax cost calculated at Finnish tax rate			Valuation of derivatives at fair value	-	-	4.2	4.2
Consolidated statement	EUR mill.	2023	2022	Other temporary differences	16.9	-6.1	6.4	17.3
of changes in equity	Result before taxes	119.1	-370.7	Total	450.2	46.4	20.5	517.0
				Netted from deferred tax liabilities	-369.6	88.9	-2.3	-283.0
Notes to the consolidated	Taxes calculated using the Finnish tax rate 20%	-23.8	74.1	Deferred tax assets in balance sheet	80.6	135.3	18.1	234.0
financial statements	Different tax rates of foreign subsidiaries	0.1	0.1
	Tax-exempt income	0.4	0.4
1. Operating result	Non-deductible expenses	3.2	-3.9				Recognised Recognised in in the income shareholders'
2. Fleet and other fixed assets and leasing	Non-capitalized tax loss carryforwards	-	-33.9	EUR mill.	2022	statement	equity	2023
arrangements	Non-capitalized temporary differences	-3.3	-25.2	Deferred tax liabilities
3. Capital structure and financing costs	Write-down of deferred tax on taxable losses 2020-2021	-	-117.0	Defined benefit pension plans	-24.0	0.8	-2.3	-25.5
4. Consolidation	Re-recognized deferred tax on taxable losses 2020-2021	117.0	-	Property, plant and equipment**	-109.2	32.8	-	-76.4
5. Other notes	Recognized temporary differences in taxation 2022	13.9	-	Leases**	-236.4	55.3	-	-181.1
6. Parent company financial statements	Recognized deferred tax on taxable loss 2022	27.7	-	Total	-369.6	88.9	-2.3	-283.0
	Adjustments recognised for taxes of prior periods	0.0	0.0	Netted from deferred tax assets	369.6	-88.9	2.3	283.0
Board of directors' proposal on the dividend	Income taxes total	135.2	-105.4	Deferred tax liabilities in balance sheet	-	-	-	-
	Distributing retained earnings of foreign subsidiaries as dividends would cause a tax effect of 0.4 million euros (0.3).			* The deferred tax asset (145 million euros) related to confirmed losses recognised in the income statement during the reporting

** The amendment to IAS 12 applicable from 1 January 2023 requires that a separate deferred tax asset and deferred tax liability are recognised related to lease agreements and aircraft presented as owned in Finnair's accounting and financed by the JOLCO loans and export credit support, when the temporary differences arising on the initial recognition of an asset and a liability are equal. The comparison period has been adjusted accordingly. The amendment has no effect on Finnair's consolidated balance sheet, as deferred tax assets and liabilities can be netted.

Finnair's taxable result turned profitable in year 2023 and a part of tax losses for 2020–2021 were utilized. Finnair's management is continuously monitoring the probability of utilizing deferred tax assets and considers both positive and negative evidence in the assessment. Based on the criteria outlined in IAS 12 and the management's assessment of the Finnair Group's forecasted future profits and performance, in the financial year 2023 Finnair fully re-recognized to its balance sheet a deferred tax assets of 117 million euros, which was written down in the financial year 2022. In addition, to the extent that the positive evidence supported, a deferred tax asset of 28 million euros was recognized for part of the tax losses accumulated during 2022. The management has concluded at the time of the preparation of the consolidated financial statements, that Finnair's successful implementation of its renewed strategy and the re-established pattern of profitability as well as the management forecast of future taxable profit provide positive evidence about its ability to utilize the unused tax losses and other deductible temporary differences.

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's Report

Financial Statements

Changes in deferred taxes during 2022:

EUR mill.	2021	Recognised in the income statement	Recognised in shareholders' equity	2022
Deferred tax assets
Confirmed losses	216.6	-122.8	-	93.7
Property, plant and equipment**	66.5	-6.1	-	60.4
Leases**	279.2	-	-	279.2
Valuation of derivatives at fair value	0.9	-	-0.9	-
Other temporary differences	16.2	-3.3	4.1	16.9
Total	579.2	-132.3	3.2	450.2
Netted from deferred tax liabilities	-387.4	26.9	-9.1	-369.6
Deferred tax assets in balance sheet	191.9	-105.4	-5.8	80.6

		Recognised in the income	Recognised in shareholders'
EUR mill.	2021	statement	equity	2022
Deferred tax liabilities
Defined benefit pension plans	-16.1	2.2	-10.0	-24.0
Property, plant and equipment**	-134.0	24.7	-	-109.2
Leases**	-236.4	0.0	-	-236.4
Valuation of derivatives at fair value	-0.9	-	0.9	-
Total	-387.4	26.9	-9.1	-369.6
Netted from deferred tax assets	387.4	-26.9	9.1	369.6
Deferred tax liabilities in balance sheet	-	-	-	-

Finnair has not recognized deferred tax assets related to temporary differences as presented in the table below.

Unrecognized deferred taxes:

		2023		2022
EUR mill.	Expiry year	Gross amount	Tax effect	Expiry year	Gross amount	Tax effect
Tax losses	2032	31.1		6.2 2030–2032	754.4	150.9
Leases	-	-	-	No expiry	64.1	12.8
Interest expenses under the limitation of the right to deduct interest	No expiry	73.1	14.6	No expiry	56.7	11.3
Valuation of derivatives at fair value	-	-	-	No expiry	13.5	2.7
Other temporary differences	-	-	-	No expiry	5.4	1.1
Total	-	104.2	20.8	-	894.1	178.8

The deferred tax asset is recognized up to the amount where it is probable that future taxable income will be generated against which the temporary difference can be utilized, also taking into account the tax planning methods available to Finnair relating to accumulated tax depreciations. The management's assessment of the future taxable profit is based on the latest forecast approved by the Board of Directors in connection with the financial statements. The statutory period of limitation relating to confirmed losses is 10 years and the respective deferred tax currently recognized in the balance sheet are expiring in 2030–2032.

5.2 Disputes and litigation

Finnair reports only cases of which the interest is material and that are not insured. As of 31 December 2023 there were no such disputes pending.

5.3 Events after the closing date

There were no events after the closing date that would have a material financial impact.

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Auditor's Report

Financial Statements

Consolidated income statement
-------------------------------	--

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Finnair Plc balance sheet

				EUR mill.	Note	2023	2022
Finnair Plc income statement				ASSETS
				Non-current assets
EUR mill.	Note	2023	2022	Intangible assets	6.11	16.5	20.8
Revenue	6.2	2,830.0	2,241.4	Tangible assets	6.12	81.1	84.1
Other operating income	6.3	131.3	159.6	Investments
Operating income		2,961.3	2,401.0	Holdings in group undertakings		649.4	649.4
				Participating interests		0.0	0.0
Materials and services	6.4	1,573.3	1,423.9	Other shares and similar rights of ownership		0.4	0.4
Staff expenses	6.5	343.9	308.6	Loan and other receivables	6.14	2.4	2.5
Depreciation and reduction in value	6.6	10.9	13.1	Total investments	6.13	652.2	652.3
Other operating expenses	6.7	1,045.0	972.6	Deferred tax assets	6.15	237.1	104.0
Operating expenses		2,973.0	2,718.2	Total non-current assets		986.9	861.1
				Current assets
Operating profit/loss		-11.7	-317.2	Current receivables	6.16	783.4	622.7
				Marketable securities	6.17	776.8	738.6
Financial income and expenses	6.8	-41.6	-44.0	Cash and bank equivalents	6.18	144.3	784.7
				Total current assets		1,704.5	2,146.1
Profit/loss before appropriations and taxes		-53.3	-361.1
				TOTAL ASSETS		2,691.4	3,007.2
Appropriations	6.9	165.0	127.9
				EQUITY AND LIABILITIES
Income taxes	6.10	119.7	-117.0	Equity
				Share capital		75.4	75.4
Profit/loss for the financial year		231.5	-350.2	Share premium account		24.7	24.7
				Other reserves
				Unrestricted equity funds		1,344.4	772.9
				Legal reserve		147.7	147.7
				Hedging reserve		-14.7	-9.9
				Retained earnings		-1,088.0	-698.7
				Capital loan		-	400.0
				Profit/loss for the financial year		231.5	-350.2
				Total equity	6.19	721.0	361.9
				Accumulated appropriations	6.20	17.0	18.2

				Provisions	6.21	143.7	235.8
				Liabilities
				Non-current liabilities	6.22	587.7	1,004.3
				Current liabilities	6.23	1,222.0	1,387.0
				Total liabilities		1,809.6	2,391.2
				Equity and liabilities total		2,691.4	3,007.2

6 Parent company financial statements

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Notes to Finnair Plc financial statements

6.1 Accounting principles

General

Finnair Plc is the parent company in Finnair Group, domiciled in Helsinki, Finland. Financial statements are prepared in accordance with accounting principles required by Finnish law.

Foreign currency items

Business transactions in foreign currencies have been valued using the exchange rate at the date of transaction. Receivables and liabilities on the balance sheet date are valued using the exchange rate on the balance sheet date. Advances paid and received are valued in the balance sheet using the exchange rate at the date of payment. Exchange rate differences on trade receivables and payables are treated as the adjustments to turnover and other operating expenses. Exchange rate differences on other receivables and liabilities are entered under financial income and expenses.

Derivative contracts

According to its risk management policy, Finnair uses foreign exchange, interest rate and commodity derivatives to reduce the exchange rate, interest rate and commodity risks which arise from the Finnair's balance sheet items, currency denominated purchase agreements, anticipated currency denominated purchases and sales as well as future jet fuel purchases. The balance sheet exposure is hedged only at group level, except for Finnair Aircraft Finance that has hedged its own exposures. The combined entity-level exposure for all Group companies differs from the Group-level exposure by the amount of intercompany items. Therefore, the balance sheet position and contracts hedging it are presented only in note 3.5. of the Group financial statements. Similarly, the foreign currency cash flow exposure is only hedged at the Group level to take advantage of the netting effect, and is presented in note 3.5 of the Group financial statements. Derivative contracts are valued using the rates on the balance sheet date according to Accounting Act 5:2 a §.

The derivatives are initially recognized at original acquisition cost (fair value) in the balance sheet and subsequently valued at fair value in each financial statement and interim report. The fair values of the derivatives are based on the value at which the instrument could be exchanged between knowledgeable, willing and independent parties, with no compulsion to sell or buy in the sales situation.

The fair values of all derivatives are calculated using the exchange rates, interest rates, volatilities and commodity price quotations on the closing date. The fair values of currency forward contracts are calculated as the present value of future cash flows. The fair values of currency options are calculated using the Black-Scholes option pricing model. The fair values of interest rate and currency swap contracts are calculated as the present value of future cash flows. The fair values of interest rate options are calculated using generally accepted option valuation models. The fair values of commodity forward contracts are calculated as the present value of future cash flows. The fair values of commodity options are calculated using generally accepted option valuation models.

Gains and losses arising from changes in the fair value are presented in the financial statements according to the original classification of the derivative. Gains and losses on derivatives qualifying for hedge accounting are recognized in accordance with the underlying asset being hedged. At inception, derivative contracts are designated as future cash flows hedges, hedges of binding purchase contracts (cash flow hedges or fair value hedges) or as derivatives not meeting the hedge accounting criteria or to which hedge accounting is not applied (economic hedges). Hedging of the fair value of net investments of foreign units or embedded derivatives have not been used.

At the inception of hedge accounting, Finnair documents the economic relationship and the hedge ratio between the hedged item and the hedging instrument, as well as the company's risk management objectives and the strategy for the inception of hedging. At the inception of hedging, and at least at the time of each financial statement, Finnair documents and assesses the effectiveness of hedge relationships by examining the past and prospective capacity of the hedging instrument to offset changes in the fair value of the hedged item or changes in cash flows. The values of derivatives in a hedging relationship are presented in the balance sheet items current assets and current liabilities.

Finnair Plc cash flow statement

EUR mill.	2023	2022
Cash flow from operating activities
Result before appropriations	-53.3	-361.1
Depreciation	10.9	13.1
Other non-cash transactions	-98.0	49.6
Financial income and expenses	41.6	44.0
Changes in working capital	114.7	161.5
Interest and other financial expenses paid	-88.0	-76.2
Received interest and other financial income	52.2	13.8
Cash flow from operating activities	-19.8	-155.4
Cash flow from investing activities
Investments in intangible and tangible assets	-3.6	-2.1
Proceeds from sales of tangible assets	0.0	0.0
Change in loan and other receivables	-84.0	3.1
Received dividends	0.0	0.0
Cash flow from investing activities	-87.7	1.0
Cash flow from financing activities
Loan repayments and changes	-742.9	-232.1
Proceed from share issues*	570.4	-
Proceeds from capital loan	-	400.0
Repayment of capital loan*	-400.0	-
Capital loan interests and expenses	-48.9	-
Received and given group contributions	126.6	244.3
Cash flow from financing activities	-494.8	412.2
Change in cash flows	-602.3	257.9
Change in liquid funds
Liquid funds, at beginning	1,523.4	1,265.5
Change in cash flows	-602.3	257.9
Liquid funds, at end	921.1	1,523.4

* The participation of the State of Finland to the rights issue was paid by offsetting the aggregate subscription price against a corresponding amount of the principal of the capital loan. The overall offset amount was 318.6 million euros and net proceeds from the rights issue amounted to 251.8 million euros. After the completion of the rights issue Finnair repaid the remainder of the capital loan of approximately 81.4 million euros, to the State of Finland.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Income taxes

Income taxes in the income statement include taxes calculated for the financial year based on Finnish tax provisions, adjustments to taxes in previous financial years and the change in deferred taxes.

The deferred tax receivable or liability is calculated for the temporary differences between taxation and the financial statements using the tax rate confirmed on the closing date. The balance sheet includes the deferred tax receivable or liability at the amount of the estimated likely receivable.

Pension schemes

The mandatory pension cover of the company's domestic employees has primarily been arranged through a Finnish pension insurance company and other additional pension cover through the Finnair pension fund or a Finnish pension insurance company. Since 1992, the pension fund has no longer accepted employees other than pilots for additional pension coverage. The Finnair pension fund's pension obligation is fully covered with respect to additional coverage. Pension fund liabilities are presented in the notes to the financial statements.

Provisions

Provisions in the balance sheet and entered as expenses in the income statement comprise those items which the company is committed to covering through agreements or otherwise in the foreseeable future and which have no corresponding revenue and whose monetary value can be reasonably assessed.

The company is obliged to return leased aircraft at the required redelivery condition. To fulfil these maintenance obligations the company has recognised provisions based on flight hours flown during the maintenance period.

6.2 Revenue by business area

EUR mill.	2023	2022
Revenue by division
	2,830.0	2,241.4
Passenger revenue	2,511.9	1,786.0
Ancillary services	126.4	103.0
Cargo revenue	191.8	352.4

Distribution of turnover by market areas based on flight routes, % of turnover
Finland	6%	6%
Europe	42%	45%
Middle East	7%	2%
Asia	33%	30%
North Atlantic	9%	15%
Unallocated	2%	3%
Total	100%	100%

Since the beginning of 2023, Finnair has reported Middle East as a separate traffic area whereas in 2022, these figures were still included in the European traffic. Comparison period figures have been adjusted accordingly.

6.3 Other operating income

EUR mill.	2023	2022
Aircraft lease income	81.0	105.4
Other rental income	24.4	22.0
Other income	25.9	32.1
Total	131.3	159.6

Finnair applies the IFRS hedge accounting principles in the hedging of future cash flows (cash flow hedging). The principles are applied to the foreign currency risk of foreign currency denominated purchases and sales, the price risk of jet fuel purchases and the price risk of electricity.

The change in the fair value of the effective portion of derivative instruments that fulfil the terms of cash flow hedging are directly recognised in the fair value reserve of other comprehensive income, to the extent that the requirements for the application of hedge accounting have been fulfilled. The gains and losses, recognised in fair value reserve, are transferred to the income statement in the period in which the hedged item is recognised in the income statement. When an instrument acquired for the hedging of cash flow matures or is sold, or when the criteria for hedge accounting are no longer fulfilled, the gain or loss accrued from hedging instruments remains in equity until the forecast transaction takes place. However, if the forecasted hedged transaction is no longer expected to occur, the gain or loss accrued in equity is immediately recognised in the income statement.

Financial assets and liabilities

Financial assets have been classified into the following categories: amortised cost and fair value through profit and loss. The classification is made at the time of the original acquisition based on the objective of the business model and the contractual cash flows of the investment. All purchases and sales of financial assets are recognised on the trade date. Liabilities are recognised at acquisition cost. Financial assets at fair value through profit and loss as well as assets and liabilities maturing within 12 months are included in current assets and liabilities. Investments in debt securities are measured at amortised cost, but only when the objective of the business model is to hold the asset to collect the contractual cash flows and the asset's contractual cash flows represent only payments of principal and interest. Financial assets recognised at amortised cost are valued using the effective interest method. Financial assets valued at amortised cost include trade receivables, deferred charges and security deposits for aircraft lease agreements. Due to the nature of short-term receivables and other receivables, their book value is expected to be equal to the fair value. Derecognition of financial assets takes place when Finnair has lost its contractual right to receive cash flows or when it has substantially transferred the risks and rewards outside the company.

Finnair recognises credit loss provisions based on lifetime expected credit losses from trade receivables in accordance with IFRS 9. Finnair has chosen to apply a simplified credit loss matrix for trade receivables as trade receivables do not have a significant financing component. The expected credit loss model is forwardlooking, and expected default rates are based on historical realised credit losses. The lifetime expected credit loss allowance is calculated using the gross carrying amount of outstanding trade receivables in each aging bucket and an expected default rate. The changes in expected credit losses are recognised in other expenses in the consolidated income statement. The impairment model does not apply to financial investments, such as bonds and money market funds, included in other financial assets as those are measured at fair value through profit and loss under IFRS 9, which already takes into account expected credit losses. With respect to the assets measured at amortised cost, Finnair is actively following such instruments and will recognise impairment through profit and loss if there is evidence of deterioration in credit quality.

Fixed assets and depreciation

Buildings, 10–50 years from the time of acquisition to a residual value of 10%.
Other tangible assets, over 3–15 years

Research and development costs

Except for major software development costs, research and development costs are expensed as they occur. Research and development of aircraft, systems and operations is conducted primarily by the manufacturers.

Leasing

Lease payments for aircraft are significant. Annual lease payments are treated as rental expenses. Lease payments due in future years under aircraft lease contracts are presented as off-balance sheet items.

Appropriations

The difference between total and planned depreciation is shown as accumulated appropriations in the balance sheet and the change during the financial year in the income statement. Appropriations contain also given and received group contributions.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Audit fees in other expenses

EUR mill.	2023	2022
Authorised Public Accountants	KPMG	KPMG
Auditor's fees	0.4	0.3
Tax advising	-	0.0
Other fees	0.2	0.2
Total	0.7	0.5

6.8 Financial income and expenses

6.4 Materials and services

			EUR mill.	2023	2022
6.5 Staff costs			Dividend income
			From other companies	0.0	0.0
EUR mill.	2023	2022	Total	0.0	0.0
Wages and salaries	280.8	236.3
Pension expenses	50.8	45.9	Interest income
Other social expenses	12.2	26.4	From group companies	16.3	8.9
Total	343.9	308.6	From other companies
			Net gains on debt instruments held mandatorily at FVPL	36.3	3.7
Salary and bonus expenses of Chief Executive Officer and Members of the Board			Other interest income	16.4	2.7
of Directors			Total	69.0	15.3
Chief Executive Officer and his deputy	2.1	1.2
Board of Directors	0.4	0.4	Interest expenses
			To group companies	-6.5	-
Personnel on average	3,801	3,979	To other companies	-57.5	-54.8
			Total	-64.0	-54.8
6.6 Planned depreciation and amortisation			Other financial income
			Other	3.3	-
EUR mill.	2023	2022	Total	3.3	-
On other long-term expenditure	6.3	8.5
On buildings	1.2	1.2	Other financial expenses
On other equipment	3.4	3.3	Revaluation of shares	-	4.1
Total	10.9	13.1	Other	-32.3	-28.1
			Total	-32.3	-23.9
6.7 Other operating expenses			Exchange gains and losses	-17.6	19.5
EUR mill.	2023	2022
			Financial income and expenses total	-41.6	-44.0

			EUR mill.	2023	2022
6.5 Staff costs			Dividend income
			From other companies	0.0	0.0
EUR mill.	2023	2022	Total	0.0	0.0
Wages and salaries	280.8	236.3
Pension expenses	50.8	45.9	Interest income
Other social expenses	12.2	26.4	From group companies	16.3	8.9
Total	343.9	308.6	From other companies
			Net gains on debt instruments held mandatorily at FVPL	36.3	3.7
Salary and bonus expenses of Chief Executive Officer and Members of the Board			Other interest income	16.4	2.7
of Directors			Total	69.0	15.3
Chief Executive Officer and his deputy	2.1	1.2
Board of Directors	0.4	0.4	Interest expenses
			To group companies	-6.5	-
Personnel on average	3,801	3,979	To other companies	-57.5	-54.8
			Total	-64.0	-54.8
6.6 Planned depreciation and amortisation			Other financial income
			Other	3.3	-
EUR mill.	2023	2022	Total	3.3	-
On other long-term expenditure	6.3	8.5
On buildings	1.2	1.2	Other financial expenses
On other equipment	3.4	3.3	Revaluation of shares	-	4.1
Total	10.9	13.1	Other	-32.3	-28.1
			Total	-32.3	-23.9
6.7 Other operating expenses
			Exchange gains and losses	-17.6	19.5
EUR mill.	2023	2022	Financial income and expenses total	-41.6	-44.0

EUR mill.	2023	2022
Materials and supplies
Ground handling and catering expenses	280.1	220.8
Fuel costs	899.6	836.0
Aircraft materials and overhaul	275.0	266.3
IT expenses	17.2	14.2
Other items	101.4	86.7
Total	1,573.3	1,423.9

6.5 Staff costs

EUR mill.	2023	2022
Lease payments for aircraft	431.4	407.9
Other rents for aircraft capacity	106.7	102.4
Office and other rents	46.3	34.1
Traffic charges	233.8	206.5
Sales and marketing expenses	111.3	95.6
Other expenses	115.4	126.2
Total	1,045.0	972.6

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

6.12 Tangible assets

Tangible assets 31.12.2023

Tangible assets 31.12.2022

Change in depreciation difference	1.2	1.2				Other	Advances
Received group contribution	163.8	126.6	EUR mill.	Land	Buildings	equipment	paid	Total
Total	165.0	127.9	Acquisition cost 1 January	0.7	54.2	60.2	0.3	115.4
			Additions	-	-	1.1	0.8	1.8
The group contributions received in 2023 relate to 121,9 million euro received from Finnair Aircraft Finance Oy,		Disposals	-	-	-0.4	-0.2	-0.6
18.6 million euro from Oy Aurinkomatkat – Suntours Lth Ab, 9.2 million euro from Finnair Kitchen Oy, 8.8 million euro from Finnair Technical Services Oy, 2.9 million euro Finnair Cargo Oy, 1.7 million euro from Amadeus Finland			Acquisition cost 31 December	0.7	54.2	60.8	0.9	116.6
Oy, 0.4 million euro from Finnair Engine Services Oy, 0.2 million euro from Northport Oy and 0.1 million euro from FTS Financial Services Oy.			Accumulated depreciation 1 January	-	-7.9	-23.5	-	-31.4
			Disposals	-	-	0.3	-	0.3
6.10 Income taxes			Depreciation and reduction in value	-	-1.2	-3.3	-	-4.5
			Accumulated depreciation 31 December	-	-9.1	-26.4	-	-35.5
EUR mill.	2023	2022
Income tax for the financial year	-17.0	-	Book value 31 December	0.7	45.1	34.3	0.9	81.1
Change in deferred taxes	136.8	-117.0
Total	119.7	-117.0	The share of machines and equipment in the book value of tangible assets 31 December			40.7%

6.9 Appropriations

EUR mill.	2023	2022
Change in depreciation difference	1.2	1.2
Received group contribution	163.8	126.6
Total	165.0	127.9

EUR mill.	2023	2022				Other	Advances
Other long-term expenditure			EUR mill.	Land	Buildings	equipment	paid	Total
Acquisition cost 1 January	79.1	84.9	Acquisition cost 1 January	0.7	54.2	59.9	0.8	115.6
Additions	2.0	2.2	Additions	-	-	0.3	0.3	0.7
Disposals	-9.2	-7.9	Disposals	-	-	-0.1	-0.8	-0.9
Acquisition cost 31 December	71.9	79.1	Acquisition cost 31 December	0.7	54.2	60.2	0.3	115.4
Accumulated depreciation 1 January	-58.4	-57.7	Accumulated depreciation 1 January	-	-6.7	-20.2	-	-26.9
Disposals	9.2	7.8	Disposals	-	-	0.1	-	0.1
Depreciation and reduction in value	-6.2	-8.4	Depreciation and reduction in value	-	-1.2	-3.3	-	-4.6
Accumulated depreciation 31 December	-55.4	-58.4	Accumulated depreciation 31 December	-	-7.9	-23.5	-	-31.4
Book value 31 December	16.5	20.8	Book value 31 December	0.7	46.3	36.7	0.3	84.1
Intangible assets Total 31 December	16.5	20.8	The share of machines and equipment in the book value of tangible assets 31 December			41.4%

6.11 Intangible assets

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

6.14 Non-current loan and other receivables

The taxable result of Finnair Plc turned profitable in year 2023 and a part of tax losses for 2020–2021 were utilized. Finnair's management is continuously monitoring the probability of utilizing deferred tax assets and considers both positive and negative evidence in the assessment. In the financial year 2023 Finnair fully rerecognized to its balance sheet a deferred tax assets of 117.0 million euros, which was written down in the financial year 2022. In addition, to the extent that the positive evidence supported, a deferred tax asset of 26.0 million euros was recognized for part of the tax losses accumulated during 2022. The management has concluded at the time of the preparation of financial statements, that Finnair's successful implementation of its renewed strategy and the re-established pattern of profitability as well as the management forecast of future taxable profit provide positive evidence about its ability to utilize the unused tax losses and other deductible temporary differences.

EUR mill.	2023	2022	EUR mill.	2023	2022
Group companies			From other companies	2.4	2.5
Acquisition cost 1 January	649.4	653.6	Total	2.4	2.5
Revaluation of shares	-	-4.1
Book value 31 December	649.4	649.4	6.15 Deferred tax assets
Associates and joint ventures			EUR mill.	2023	2022
Acquisition cost 1 January	0.0	0.0
Book value 31 December	0.0	0.0	Deferred tax assets 1 January From result for the financial year	104.0 -17.0	220.0 -
Shares in other companies			From temporary differences	4.6	-
			From valuation of derivates at fair value	3.7	0.9
Acquisition cost 1 January	0.4	0.4	Adjustments recognised for taxes of prior periods	141.9	-117.0
Additions Book value 31 December	-0.0 0.4	0.0 0.4	Deferred tax assets 31 December	237.1	104.0

Finnair Plc has not recognised a deferred tax asset of 7.8 million euros for the share of 38.9 million euros of the confirmed tax loss for the financial year 2022, which expires in 2032. In addition, a deferred tax asset of 13.4 million euros related to interest expenses of 67.1 million euros that are subject to the limitation of the right to deduct interest expenses, and which do not have a limitation period have not been recognised.

6.13 Investments

	Share of
	parent
Associates and joint ventures	company %
Nordic Regional Airlines AB, Sweden	40.00

Group companies	Share of parent company %		Share of parent company %
Finnair Cargo Oy, Finland		100.00 Kiinteistö Oy Lentokonehuolto, Finland	100.00
Finnair Aircraft Finance Oy, Finland		100.00 Amadeus Finland Oy, Finland	95.00
Northport Oy, Finland	100.00	Oy Aurinkomatkat - Suntours Ltd Ab, Finland	100.00
Finnair Technical Services Oy, Finland		100.00 FTS Financial Services Oy, Finland	100.00
Finnair Engine Services Oy, Finland		100.00 Finnair Business Services OÜ, Estonia	100.00
Finnair Kitchen Oy, Finland	100.00

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

6.18 Cash and bank equivalents

EUR mill.	2023	2022
Funds in group bank accounts and deposits maturing in three months	144.3	784.7

6.19 Shareholder's equity

		Share			Un restricted
EUR mill.	Share capital	premium account	Legal reserve	Hedging reserve	equity funds	Retained earnings	Capital loan	Equity total
Equity 1.1.2023	75.4	24.7	147.7	-9.9	772.9	-1,048.9	400.0	361.9
Change in fair value of equity instruments	-	-	-	-4.8	-	-	-	-4.8
Share issue	-	-	-	-	570.4	-	-	570.4
Share-based payments	-	-	-	-	1.1	-	-	1.1
Repayment of capital loan	-	-	-	-	-	-	-400.0	-400.0
Capital loan interests and fees	-	-	-	-	-	-39.1	-	-39.1
Result for the financial year	-	-	-	-	-	231.5	-	231.5
Equity 31.12.2023	75.4	24.7	147.7	-14.7	1,344.4	-856.5	0.0	721.0

2025	20222
163.8	126.6
55.8	41.4
2.2	09
36.0	299
257.8	198.8

EUR mill.	Share capital	Share premium account	Legal reserve	Hedging reserve	Un restricted equity funds	Retained earnings	Capital loan	Equity total
Equity 1.1.2022	75.4	24.7	147.7	3.7	772.4	-698.7	-	77.4
Change in fair value of equity instruments	-	-	-	-13.6	-	-	-	-13.6
Share-based payments	-	-	-	-	0.6	-	-	0.6
Withdrawal of capital loan	-	-	-	-	-	-	400.0	400.0
Result for the financial year	-	-	-	-	-	-350.2	-	-350.2
Equity 31.12.2022	75.4	24.7	147.7	-9.9	772.9	-1,048.9	400.0	361.9

6.16 Current receivables

EUR mill.	2023	2022
Short-term receivables from group companies
Trade receivables	22.4	18.4
Group contribution receivable	163.8	126.6
Accrued income and prepaid expenses	2.7	2.8
Other receivables	334.6	245.6
Total	523.5	393.4
Short-term receivables from associates and joint ventures
Trade receivables	-	0.0
Prepaid expenses	6.7	6.5
Total	6.7	6.5
Short-term receivables from others
Trade receivables	91.0	85.8
Prepaid expenses	84.6	62.9
Derivative financial instruments	11.5	9.6
Other receivables	66.1	64.6
Total	253.2	222.9
Short-term receivables total	783.4	622.7

Accrued income and prepaid expenses 2023 2022 Group contribution 163.8 126.6 Sales accruals 55.8 41.4 Employee related deferred charges and receivables 2.2 0.9 Other prepaid expenses 36.0 29.9 Prepaid expenses total 257.8 198.8

6.17 Investments

EUR mill. 2023 2022

Short-term investments at fair value 776.8 738.6

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

6.22 Non-current liabilities

EUR mill.	2023	2022
Loans from financial institutions	200.0	400.0
Bonds	382.5	400.0
Hybrid loan	-	200.0
Other liabilities	5.2	4.3
Total	587.7	1,004.3

Maturity of interest-bearing liabilies
1–5 years	582.5	800.0
after 5 years	-	200.0
Total	582.5	1,000.0

6.23 Current liabilities

rights issue was reducing Finnair's financing costs, supporting the implementation of the strategy for sustainable profitable growth in the new operating environment shaped by the COVID-19 pandemic and the closure of Russian airspace and ensuring the Company's ability for future investments. Through the rights issue Finnair also seeked to reinstate its ability for shareholder distributions.

rights. The remaining 909,609,534 offer shares subscribed for without subscription rights were allocated in the secondary subscription in accordance with the terms and conditions of the offering. The subscription price was			EUR mill.	2023	2022
EUR 0.03 per Offer Share. Gross proceeds of the rights issue were approximately 570.4 million euro, and net			Current liabilities to group companies
proceeds of the rights issue were approximately 558.2 million euro. Gross and net proceeds include the 318.6			Trade payables	114.8	51.1
million euro pro rata subscription by the State of Finland through the offset of a corresponding amount of the			Accruals and deferred income	18.3	13.8
capital loan, granted to Finnair by the State of Finland, which did not generate any proceeds in cash to Finnair.			Group bank account liabilities	166.3	371.7
Share and dividends information is available in Financial statements in group note 3.9.			Total	299.4	436.6

6.20 Accumulated appropriations			Current liabilities to associates and joint ventures
			Trade payables	0.3	0.1
EUR mill.	2023	2022	Accruals and deferred income	1.0	1.0
Accumulated depreciation difference 1 January	18.2	19.5	Total	1.3	1.1
Change in depreciation difference	-1.2	-1.2
Accumulated depreciation difference 31 December	17.0	18.2	Current liabilities to others
			Loans from financial institutions	80.0	200.0
Accumulated appropriations total	17.0	18.2	Trade payables	91.8	79.7
			Accruals and deferred income	739.4	661.5
			Other liabilities	10.0	8.2
6.21 Provisions			Total	921.2	949.3
EUR mill.	2023	2022	Current liabilities total	1,222.0	1,387.0
Provisions 1 January	235.8	182.4
Provision for the period	58.5	67.0	Accruals and deferred income
Provision used	-143.5	-22.5	Unflown air transport revenues	394.5	356.2
			Jet fuels and traffic charges	50.4	50.9
Exhange rate differences	-7.1	8.8	Holiday payment liability	60.9	56.0
Provisions 31 December	143.7	235.8	Other employee related accrued expenses	29.8	34.2
Of which long-term	113.9	164.3	Loyalty program Finnair Plus	67.0	51.5
Of which short-term	29.8	71.5	Derivative financial instruments	32.9	21.5
Total	143.7	235.8	Accrued other charges	94.7	78.0
Provisions contain mostly aircraft maintenance provisions. Long-term aircraft maintenance provisions are			Other items	28.5	27.9
expected to be used by 2035.			Total	758.7	676.2

Consolidated income statement	Distributable equity
Consolidated statement of comprehensive income	EUR mill.	2023	2022
	Hedging reserve	-14.7	-9.9
	Unrestricted equity funds	1,344.4	772.9
Consolidated balance sheet	Retained earnings	-1,088.0	-698.7
	Received grants	-	-6.0
Consolidated cash flow statement	Profit/loss for the financial year	231.5	-350.2
	Total	473.1	-291.9
Consolidated statement	During third quarter of 2023, Finnair organised a rights issue to strenghten its financial position. The aim of the

6.21 Provisions

rights. The remaining 909,609,534 offer shares subscribed for without subscription rights were allocated in the secondary subscription in accordance with the terms and conditions of the offering. The subscription price was			EUR mill.	2023	2022
EUR 0.03 per Offer Share. Gross proceeds of the rights issue were approximately 570.4 million euro, and net			Current liabilities to group companies
proceeds of the rights issue were approximately 558.2 million euro. Gross and net proceeds include the 318.6	Trade payables	114.8	51.1
million euro pro rata subscription by the State of Finland through the offset of a corresponding amount of the			Accruals and deferred income	18.3	13.8
capital loan, granted to Finnair by the State of Finland, which did not generate any proceeds in cash to Finnair.			Group bank account liabilities	166.3	371.7
Share and dividends information is available in Financial statements in group note 3.9.			Total	299.4	436.6
6.20 Accumulated appropriations			Current liabilities to associates and joint ventures
			Trade payables	0.3	0.1
EUR mill.	2023	2022	Accruals and deferred income	1.0	1.0
Accumulated depreciation difference 1 January	18.2	19.5	Total	1.3	1.1
Change in depreciation difference	-1.2	-1.2
Accumulated depreciation difference 31 December	17.0	18.2	Current liabilities to others
			Loans from financial institutions	80.0	200.0
Accumulated appropriations total	17.0	18.2	Trade payables	91.8	79.7
			Accruals and deferred income	739.4	661.5
			Other liabilities	10.0	8.2
6.21 Provisions			Total	921.2	949.3
EUR mill.	2023	2022	Current liabilities total	1,222.0	1,387.0
Provisions 1 January	235.8	182.4
Provision for the period	58.5	67.0	Accruals and deferred income
Provision used	-143.5	-22.5	Unflown air transport revenues	394.5	356.2
Exhange rate differences	-7.1	8.8	Jet fuels and traffic charges	50.4	50.9
Provisions 31 December	143.7	235.8	Holiday payment liability	60.9	56.0
			Other employee related accrued expenses	29.8	34.2
Of which long-term	113.9	164.3	Loyalty program Finnair Plus	67.0	51.5
Of which short-term	29.8	71.5	Derivative financial instruments	32.9	21.5
Total	143.7	235.8	Accrued other charges	94.7	78.0
Provisions contain mostly aircraft maintenance provisions. Long-term aircraft maintenance provisions are			Other items	28.5	27.9
Total expected to be used by 2035.				758.7	676.2

expected to be used by 2035.

Review of the year 2023

The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

6.25 Derivatives

2023				2022
	Positive	Negative			Positive	Negative
							Fair net value


							-7.3
53.3	0.0	-	0.0	-	-	-	-
48.9	-	-0.6	-0.6	-	-	-	-
491.8	2.0	-6.1	-4.1	284.7	0.1	-7.4	-7.3

							-7.3

422,000	5.3	-14.9			3.4	-6.0	-2.5
255,000	2.6	-			4.9	-0.2	4.8
255,000	-	-12.0			0.2	-7.9	-7.8
	7.9	-26.8	-18.9		8.6	-14.1	-5.6

							0.9
							0.9

	9.5	-26.8	-17.4		9.5	-14.1	-4.6
	11.5	-32.9	-21.4		9.6	-21.5	-12.0
	Nominal value 389.7 491.8 187,000 187,000	fair values 2.0 2.0 1.6 1.6	fair values -5.5 -6.1 - -	Fair net value -3.5 -4.1	Nominal value 284.7 284.7 -9.6 209,000 2.6 149,000 -12.0 149,000 1.6 149,000 1.6 149,000	fair values 0.1 0.1 0.9 0.9	fair values -7.4 -7.4 - -

*Positive (negative) fair value of hedging instruments on 31 Dec 2023 is presented in the statement of financial position in the item derivative assets within current assets (derivative liabilities within current liabilities).

6.24 Collateral, contingent liabilities and other commitments

EUR mill.	2023	2022
Guarantees and contingent liabilities
On behalf of group companies	51.5	52.5
Total	51.5	52.5

Aircraft lease payments
Within one year	412.9	379.9
After one year and not later than 5 years	1,169.5	1,117.7
Later than 5 years	527.9	517.7
Total	2,110.3	2,015.3
Parent company has leased the aircraft fleet from the fully owned subsidiary.
Other lease payments
Within one year	16.2	26.3
After one year and not later than 5 years	86.9	65.0
Later than 5 years	174.5	158.7
Total	277.6	250.0
Pension obligations
Total obligation of pension fund	301.4	321.3
Non-mandatory benefit covered	-301.4	-321.3
Total	-	-
Capital loan
Accrued interest from capital loan	-	9.1
Other accrued fees from capital loan	-	6.9
Total	-	16.0

Finnair withdrew 290 million euros of hybrid bond on 22 June 2022, which was converted into capital loan on 30 June 2022 with the decision by plenary session of the Government. The remaining 110-million-euro amount of the capital loan was withdrawn on 2 September 2022. Therefore Finnair drew down the entire amount of 400 million euros during 2022. The capital loan was booked to the parent company's equity as its own tranche.

In Finnair's rights offering of approximately 558 million euros executed in November 2023, the State of Finland subscribed for its pro rata share of the new shares on the basis of subscription rights allocated to it. The State of Finland paid the subscription price of the shares by offsetting it against a corresponding amount of the principal of the capital loan. This totaled 318.6 million euros. Finnair repaid the remainder of the capital loan, i.e. 81.4 million euros, on 24 November 2023 to the State of Finland. In addition, Finnair paid the related interest and other fees of 48.9 million euros to the State.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

6.26 Financial assets and liabilities measured at fair value

Fair value hierarchy of financial assets and liabilities valued at fair value Fair values at the end of the reporting period

EUR mill.	2023	Level 1	Level 2
Financial assets at fair value
Securities held for trading	776.8	723.4	53.4

Derivatives
Currency derivatives	2.0	-	2.0
- of which in cash flow hedge accounting	2.0	-	2.0
Commodity derivatives	9.5	-	9.5
- of which in cash flow hedge accounting	7.9	-	7.9
Total	788.3	723.4	64.9

Financial liabilities at fair value
Derivatives
Currency derivatives	6.1	-	6.1
- of which in cash flow hedge accounting	6.1	-	6.1
Commodity derivatives	26.8	-	26.8
- of which in cash flow hedge accounting	26.8	-	26.8
Total	32.9	-	32.9

6.27 Fuel price risk in flight operations

Timing of the notional and hedged price

			Maturity
	Hedged price	Notional
31 December 2023	\$/tonne	amount (tonnes)	Under 1 year	1 to 2 years
Jet fuel consumption priced with NWE index	892.1	655,264	626,264	29,000
Jet fuel consumption priced with SING index	918.3	21,736	21,736	-

Foreign exchange risk

			Maturity
Timing of the notional EUR mill. 31 December 2023	Average exchange rate of hedging instruments against the euro	Notional amount (gross)	Less than 1 year
USD	1.1	422.1	422.1
JPY	152.1	69.8	69.8

Cross-currency interest rate swaps are included in the nominal amount calculation.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend Auditor's Report

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements
1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements

Board of directors'proposal on the dividend

Finnair Plc's distributable equity on 31 December 2023 amounts to 473,123,719.36 euros, of which the net result for the financial year 2023 is 231,458,763.52 euros.

The Board of Directors proposes to the Annual General Meeting that no dividend be paid based on the balance sheet to be adopted for the financial year, which ended on 31 December 2023, and the result be retained in the equity.

Signing of the Report of the Board of Directors and the Financial Statements

Helsinki, 13 February 2024 The Board of Directors of Finnair Plc

Sanna Suvanto-Harsaae Tiina Alahuhta-Kasko Montie Brewer

Jukka Erlund Hannele Jakosuo-Jansson Henrik Kjellberg

Simon Large Minna Pajumaa

Jaakko Schildt Interim CEO of Finnair Plc

Review of the year 2023 The Report of the Board of Directors

Financial Statements Board of Directors' Proposal on the Dividend

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements
Board of directors' proposal on the dividend
Auditor's report

Auditor's report (This document is an English translation of the Finnish auditor's report. Only the Finnish version of the report is legally binding.)

To the Annual General Meeting of Finnair Plc

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Finnair Plc (business identity code 0108023-3) for the year ended 31 December 2023. The financial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including material accounting policy information, as well as the parent company's balance sheet, income statement, statement of cash flows and notes.

In our opinion

— the consolidated financial statements give a true and fair view of the group's financial position, financial performance and cash flows in accordance with IFRS Accounting Standards as adopted by the EU — the financial statements give a true and fair view of the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.

Our opinion is consistent with the additional report submitted to the Audit Committee.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 1.3.3 to the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Materiality

The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of the financial statements. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The significant risks of material misstatement referred to in the EU Regulation No 537/2014 point (c) of Article 10(2) are included in the description of key audit matters below.

We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.

The key audit matter	How the matter was addressed in the audit
Financial position and funding arrangements (Refer to Accounting principles for consolidated financial statements and Notes 3.3, 3.5 and 3.9)
At the end of the financial year consolidated liquid funds amounted to € 708 million and interest-bearing liabilities € 2,026 million, of which € 284 million will mature during 2024. The equity amounted to € 577 million.	With the involvement of KPMG IFRS specialists, we assessed the terms of the funding arrangements and the impacts on classification and recognition in relation to accounting principles and accounting standards
To strengthen its balance sheet Finnair continued executing several financing transactions including rights issue, conversion and repayment of capital loan, repayment of hybrid bond and pension loans as well as several fleet related transactions.	applied in the consolidated financial statements. Our procedures have included assessing the accounting treatment of financial transactions as well as comparing the changes in equity to the terms and proceeds of the rights issue.
Financial position and funding arrangements are considered a key audit matter as funding arrangements have significant impact on the cash flows and financial	We have also reconciled the balance sheet values of financial transactions to external confirmations at the balance sheet date.
position as well as the view given of those in the consolidated financial statements.	In addition, we assessed the appropriateness of the disclosures provided on the financing arrangements and financial position.

Review of the year 2023 The Report of the Board of Directors Board of Directors' Proposal on the Dividend

Financial Statements

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Notes to the consolidated financial statements

1. Operating result
1. Fleet and other fixed assets and leasing arrangements
1. Capital structure and financing costs
1. Consolidation
1. Other notes
1. Parent company financial statements