Finnair has cut its average fuel hedging ratio to 34 percent for next year, down from more than 70 percent, exposing the airline to fuel costs at precisely the moment its turnaround strategy begins to pay off.

The Finnish carrier presented its long-awaited new strategy in November a year ago, and few observers believed it would produce the performance now visible. Profitability has improved, demand is strong and earnings are growing. The strategy rests on three cornerstones: the loyalty program, investment in additional services, and retail sales.

Geographically, the plan concentrates on Finland, Europe and the North Atlantic. Analysts describe it as realistic but modest.

Why did Finnair need a new strategy?

The past few years have been notoriously difficult for the carrier. Finnair's competitive advantage rested for a long time on its Asian strategy and the exceptionally strong structural advantage it brought. Russia's war of aggression ended that abruptly and unexpectedly, forcing the airline to build a new vision while still recovering from the corona era.

Last year added another burden: persistent labor disputes weighed on the company throughout.

What is driving the good year?

Demand has held firm. Travel is popular again as consumers prioritize experiences, and although plane tickets have become more expensive in recent years, higher prices have not weakened demand.

The single most important factor in Finnair's well-run year has been its fuel protection. A year ago, the airline extended its fuel protection horizon to two years — a decision that has proven to be an excellent move. Aviation fuel is one of the biggest expenses for any airline, and this year's sharp rise in fuel prices has driven many of Finnair's competitors into difficulties and even flight cancellations.

Finnair escaped that fate because it locked in its costs early. Its competitors did not.

What is the risk ahead?

The hedge that protected Finnair this year is thinning. The company disclosed in its recent earnings announcement that its average hedging ratio for next year stands at 34 percent, against more than 70 percent previously.

The big question for the near future is whether Finnair can shield its fuel costs as effectively in a geopolitically uncertain environment. If fuel costs rise, ticket prices can be expected to rise with them.

Where is Finnair flying next?

The carrier's newest route openings are scheduled flights to Turku and Tampere — destinations it discontinued three years ago and now serves again. The motive is a desire to serve customers who need further connections.

The domestic network will expand again in 2028. Following Turku and Tampere, Finnair will launch commercial flights to:

• Jyväskylä
• Joensuu
• Kajaani
• Kemi
• Kokkola

Timetables will be planned around further connections through Helsinki.

When operations to the five provincial cities begin, Finnair's commercial flights will replace state-subsidized provincial flights. That is a reasonable and healthy development for Finland, and it demonstrates that a national airline in good condition is an advantage for the whole country.

The strategy is working. The hedge, however, is not what it was.