Report by the Board of Directors for the Financial Year January 1 - December 31, 2002

General Review

The recovery in the economy and demand that emerged in spring 2002 did not continue into the second quarter of the financial year. Profitability was improved by cost-cutting measures and by successfully adjusting capacity. European, domestic and leisure traffic capacity was reduced while capacity was increased in the growing Asian market, which led to an improvement in cabin factor by 2.7 percentage units to 71.9 per cent. Price competition intensified in the latter part of the year.

The number of business class passengers declined during the review period by 8.3 per cent, but the fall levelled out in the final months of the year. Cargo demand grew at the end of the year, with growth for the whole year being 0.5 per cent.

Structural reform proceeded through the restructuring of IT and ground equipment operations. A Finnair and IBM joint venture company, which provides information technology services, began operating on August 1, 2002. Finnair owns 40 per cent of the new company and IBM 60 per cent. The development of IT functions will continue within the new company in collaboration with a new strategic partner. In addition, Finnair sold its motorized ground equipment and related maintenance and repair operations to ABB Service Oy.

Uncertainty about a recovery in economic growth as well as the world political situation make the operating result for 2003 difficult to estimate. Finnair will continue to focus on strengthening its competitiveness while increasing capacity on Asian routes.

The company has defined its financial targets and is aiming for an operating profit of at least six per cent in the next few years.