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Good day, ladies and gentlemen. I'm Erkka Salonen from Finnair Investor Relations. And it's my pleasure to welcome you all to Finnair's First Quarter 2023 Earnings Call. I have here with me Finnair CEO, Mr. Topi Manner, and were joined by our CFO, Mr. Kristian Pullola for the Q&A session.
I will now turn this call over to you, Topi, please.
Thank you, Erkka, and good day, everybody, and welcome to this fine Q1 earnings call. The main headline for our Q1 is that the strong demand and well-progressing strategy implementation led to breakeven results during the seasonally weakest quarter. So operating -- comparable operating profit was EUR1 million on the positive side. That would not be a good result for any other quarter. But for Q1, that's a solid start for the year. This was the third consecutive quarter of comparable operating profit after the impact of the pandemic isn't. And then this was also second quarter in a row when we achieved a positive net result. This time, the net result being plus EUR3 million. The strong demand was reflected in the number of passengers that we carried that was 2.6 million passengers during the quarter. And our load factors basically normalized to prepandemic levels, the Q1 number being 75%. We operated 80% of our capacity in terms of great Circle Mile ASKs as our own scheduled flights. And then when we calculate in the wet lease operations for our partners, that number is extended to 86%. Our unit revenue RASK developed strongly during the quarter with plus 30% improvement in comparison to Q1 2019. And this is reflecting, on one hand, the strong demand, but also the numerous initiatives that we have been taking during the past years to improve our commercial performance, one of them being the dynamic continues pricing that we have been taking into use in our revenue management as one of the first airlines in the world. And also the transformation that has taken place in our distribution as increasing the share of direct distribution to 65%.
And in parallel to that is improving and intensifying the digital sales and marketing and the relevance of our offers to customers. Also, we are gradually getting better in terms of ancillary sales and all that goes into this one number, which is the single biggest lever behind the result this quarter. The customer satisfaction remained at a good level. Net Promoter Score being 42. So that edged upwards from last year where the last year average was at 40 in terms of Net Promoter Score. The Net Promoter Score and customer satisfaction was greatly helped by the on-time performance, which was 82% for the quarter, which can be regarded as a good number, remembering that the vent conditions in Finland in January and February are making the on-time performance more challenging during this quarter than during the summer months. Well, after the pandemic and the Russian airspace closure is worthwhile to take a bit of perspective into Q1 numbers. And there, we, of course, see the sort of heavy drain of the pandemic during the last 3 years. But when we look back to 2019, which is probably the best comparison here in terms of operating environment, Q1 EBIT in 2019 was minus EUR16 million, whereas the full year EBIT for the year '19 was a plus EUR163 million. 2018 was the all-time best year in the history of Finnair in the soon 100-year history of in air us enjoying up cycle in terms of economy and also getting new Airbus 350 deliveries and increasing Asian traffic at that time.
So this year differs from all the other years in this picture in a sense that Russian aerospace has been closed, and that suddenly has been increasing our operating costs significantly on the Asian routes. So it has been a solid -- a good start for the year. But we need to remember that the uncertain operating environment persists despite of the strong demand that we are seeing per se. Fuel price, as you know, is still high. And given that there is a war in Europe, the development remains uncertain. Unfortunately, there is no end in sight for the Russian air space closure, high inflation, higher interest rates, all come into this equation. And then of course, we will be -- we will need to remember that during the double crisis of last three years, Finnair has been accumulating a lot of debt. So that means that we will need to stay the course. We will determinedly continue to implement our strategy, both in terms of increasing revenue and in terms of increasing the efficiency, reducing the unit costs of the company. When we look at our individual businesses, Aurinkomatkat our packaged travel arm had a strong quarter. Overall, Aurinkomatkat Suntours, the share of it from total revenue has recovered well from the pandemic. Aurinkomatkat has an excellent customer satisfaction with a Net Promoter Score of 55.
During the course of last year, we got the Best Customer Experience award in Finland, all industries, all companies included. And we are indeed seeing a strong demand for the summer in the package travel business. Clearly, whereas in a couple of years ago, there was a discussion of a trend-like weakening of the package travel product prospects. What we see now is that package travel is appealing to customers in the uncertain economic environment. And we are also attracting new types of customers for the package travel product, more premium type of leisure travelers. And in this environment, Aurinkomatkat market has been able to increase each market share. And clearly, what we are seeing that based on the way the bookings in Aurinkomatkat markets are developing, we will be basically selling out our capacity for the summer months. And therefore, for friends and family, it's a good advice to book the summer trips now. The same applies to the rest of our business. So when we look at our ticket sales. First of all, we see our booking curve normalizing. And when we look at the sold tickets at the end of March, we see that we have -- the order book for the summer is notably more full than it was at the same time last year. And we see strong demand of travel for the summer months up until end of the summer season in September. And clearly, we are looking toward a busy summer season where the capacity constraints of airlines are contributing together with the strong demand to a positive yield environment.
So taking a deeper look at the Q1 numbers. Of course, when you compare to Q1 last year, that was still heavily impacted by the pandemic and the Russian aerospace closure, there has been a remarkable shift in terms of the profitability numbers as witnessed by the comparable operating result or the result for the period. But as stated, Q1 2019 is a more meaningful comparison in terms of operating environment. And there we see that our revenue increased from that quarter. The same goes for comparable EBITDA as well as for comparable EBIT and net result. So in addition, to successful commercial management to boost the revenues. We have been able to proceed with our agenda of reducing unit costs. And our excess expense management has been successful. Clearly, when sort of reading the numbers and integrating the numbers, you will need to take into account the fact that the increased flight time to Asia has significantly increased the costs of these routes. Our unit cost decreased, excluding fuel with 3% when we compare to the same period last year.
So in terms of cash, our cash flow during the quarter was strong, especially the singles intake for the summer months is visible in the changes in the working capital. During the quarter, we also made a bit of investments. We report 3 narrow-body aircraft that we have been having as leased aircraft in our fleet, and that is visible in the CapEx part of the cash flow chart. The cash flow and the cash reserves at the end of the quarter was -- were EUR1.6 billion roughly. And when we look at the cash to sales ratio for the past 12 months, we are close to 60% that can be regarded as a strong number. So in terms of balance sheet, the strong cash flow -- operating cash flow has contributed to gearing becoming better now at 240 level roughly, and of course, a notable shift from Q1 last year, as stated on the back of the cash flow. When looking at the equity ratio. The equity ratio decreased with a notch despite of the positive net results, and that was attributable to a decline in fuel price, which negatively impacted our fair value reserve. So then when we dig deeper into the strategy implementation and the progress in strategy implementation.
During the quarter, we successfully stabilized the new, more balanced network -- on the back of that, we have now also optimized our fleet -- and we don't see any big changes happening in our fleet from now on. Of course, we will continuously optimize the fleet when it comes to sort of individual tails, but now the big changes have taken place. We also adjusted the delivery schedule during the quarter of our 2 upcoming Airbus 350s. The first one of those will be entering the fleet in Q4 2024. And then the last one, we extended a bit until Q2 ‘26. So those are the changes that took place on the fleet side. Network-wise, we stopped the shortest domestic flights with flight times a little above 20 minutes to Tampere and Turku simply because the load factors were around 30% and thereby, nowhere near the commercial feasibility. In terms of strengthening unit revenues, I think that the number of 30% improvement in RASK speaks for itself, and I basically touched upon all the measures that we have been doing in that space already. We will continue with that agenda, and we see that there is further upside to be realized also in terms of unit revenues. In terms of unit cost, during the quarter, we achieved an agreement with Cabin crew on new savings. This means that 90% of our employees now have agreed to a savings package with the company. And for the remaining 10% of employee groups, we have already implemented alternative savings measures of similar size.
We stopped our in-flight sales, not the food and beverage sales in flight, but other categories like cosmetics, liquor, candy, simply because we did the math, and we had seen a deteriorating customer demand for these products over the years. And then the revenue did not warrant the cost and resource investment, the this piece of the operation and then therefore, we decided to stop the sales. We also did some changes to our service concepts on our flights. And all of these measures are part of the agenda to improve the efficiency of the company and to reduce the unit costs as stated. In terms of sustainability, we purchased so far the biggest individual batch of sustainable aviation fuel from Neste 750 tonnes. And while this is a small portion of our total jet fuel consumption, it is still a meaningful step in our long-term journey to scale up sustainable aviation fuel usage. Also, the shortest flight connections to Turku and Tampere replacing them with bases moving forward with intermodality agenda has a sustainability angle to it. So in terms of guidance, we reiterate that during this year, we will be operating between 80% to 85% of our capacity measured with ASKs to create Circle Miles. And that will be depending on the development on the Chinese market as well as potential leases of aircraft and crude to other airlines.
When we look at our booking curve, as stated, we see the strong demand for travel to continue. And especially for the summer period, that will be supporting our revenues. Beyond the summer period, based on booking curve, we still do not have more visibility. And of course, as stated in the operating environment, all of these uncertainties that I listed previously prevailed and that we have been repeating in our outlook. So putting all of this together, we estimate that during whole of this year, our revenue as well as profitability, comparable EBIT will significantly improve year-on-year. But at the same time, even though Q1 revenue and Q1 comparable EBIT were better than in 2019, we estimate that the revenue and comparable EBIT will not yet reach the level of 2019. And this is especially because the latter half of 2019 was a strong one and therefore, a tougher compare. So that basically wraps up our outlook and guidance from here onward, and we will be, as per usual, updating this in connection to Q2. But I stated a solid start for the year. We are clearly progressing according to plan in terms of our strategy implementation. And now when we look into the summer, we are seeing strong demand, and we are getting ready for a busy summer season. I will stop at that. Thank you.
Thank you, Topi. That would be a convenient time for any questions you may have. So please follow the operator's instructions to present them.
[Operator Instructions] The next question comes from Jaakko Tyrvainen from SEB.
Firstly, congrats on the strong Q1, happy to see your numbers coming to [Indiscernible] territory again. So great performance there. But my first question goes to the yield development going forward. And if I look at the quarter-on-quarter yield difference in 2018, 2019, we saw that from Q1 to Q2, the yields were always up by a few percentage points. Given the current booking visibility that you have, should we expect same kind of a quarter-on-quarter development this year?
Thank you, first of all, for those nice remarks at the start of your comment. So then when we look at the RASK development, I think that what we have been stating previously is that we are seeing the normal seasonality patterns returning in terms of our business that is visible in the overall booking curve. And what we are experiencing currently is that the bookings are coming in on a good rate that clearly is strong demand. And already during Q1, it was visible that the strong demand combined with the revenue management actions that we have been doing as part of our strategy implementation as well as the capacity constraints that global aviation and European Aviation are having -- they are contributing to a positive yield in environment. So as we speak, we are seeing the yields rather to edge upwards rather than anything else reflecting the normal seasonality patterns.
Then a bit more on the summer season and perhaps regarding your capacity. In your outlook, you state that you will be operating 80% to 85% of 2019 capacity, and the third quarter was 80%. Should we expect the capacity to go upper end -- towards the upper end of the guidance range towards year-end.
So I think, first of all, it is fair to say that as Topi said, we do expect normal seasonality -- as a result, we will have a busier summer season ahead of us. And we'll -- we are preparing for that, both from capacity as well as ensuring that we have sufficient personnel to operate that capacity. So I think it's fair that we do see a busier summer season ahead here. That's one thing. The second thing to note is that when we talk about capacity now, we talk about it in terms of kind of traditional ASKs measured in a similar way as we've always measured them. However, we all know that actual flight length to many places in Asia is actually 30%, 35%, 40% longer than the theoretical ASK that is used in the capacity calculations. As a result of that, we did provide both in our quarterly release as well as in the presentation, an approximation of an estimate that, okay, overall, we think that we are having 15% more ASKs if you measure them on actual length of travel. So if you use that, then in a way, our capacity is actually quite well utilized currently. And because of that, it's difficult to get much higher from here. But -- to your question, summer season at the higher end of that range is a good estimate.
Then on the Asian traffic and the still recovering Chinese demand, which is still, if I understood correctly, on a rather early phase, could you remind us how much Chinese travel was such a share of total of your pre-pandemic Asian traffic, trying to understand the upside potential that still lies in your rate and traffic.
Yes, that particular number I don't recall from the top of our mind. So perhaps what we can do is that our Head of Investor Relations, Erkka Salonen can find that number for you and potentially either we can come back to that towards the back end of the call, or alternatively, Erkka will deliver that number to you via e-mail. But when we talk about generally the Chinese market, first of all, it needs to be stated that the opening of China was a surprise, I guess, to everybody around the year-end, including the Chinese themselves. And therefore, -- the economy in China on the overall, including travel has been probably slower to start than many anticipated just based on the headlines. And what we are seeing currently is that the impediments of travel to and from China are gradually being removed. For example, as late as 2 days ago, the Chinese government sort of removed the PCR test requirement from all travelers entering China, and that will now come into force on the 29 April. We have been just lifting the mask requirement from our Chinese flights.
And all of these things are important to actually get the travel experience to normalcy and then therefore, seeing the demand coming through. And then clearly, especially when we are talking about Chinese travel to Europe, there are still quite long queues in terms of passports and visas. Therefore, the Chinese travel for the time being is directed to those countries where they don't need the visa like Thailand and Vietnam and so forth. But eventually, when the passport and visa issues are addressed, we think that there will be a significant pent-up demand for traffic to and from China. And we are observing the situation closely now, and we are ready to make decisions during upcoming weeks to increase capacity to China. But the timing of that discussion is and the timing of the decision is very important for us because as stated, we have now successfully implemented our new more geographically balanced network for the routes that we have. We see strong demand for summer. We have deployed basically our capacity.
So therefore, when we add capacity to China, we will need to make sure that it will be profitable capacity. And there, of course, the sort of underlying thing is that China is different from the rest of our markets in a sense that there is no level playing field. The Chinese carriers can fly through the Russian air space, whereas all of the European carriers will need to go around the Russian air space. And that, of course, will be -- is giving them quite a bit of competitive advantage. But then when we discuss that in more granular fashion, we still think that Europeans especially flying to China will be choosing European carriers. For example, it is questionable whether European companies, corporate travelers could fly through Russian air space with Chinese carriers, at least that would not be in the spirit of the sanctions. So when we look at China, we especially look at increasing frequencies to Shanghai and then potentially reopening Beijing at some point, but we will be making those decisions in the next phase during the upcoming weeks.
Then briefly on cargo situation where the yield is coming down and we are seeing the fuel price sliding all the time on the screen. So should we expect the yield to continue be under pressure going forward?
I think the cargo yields have normalized now from the very elevated levels they were at during COVID time. So I think it's reasonable to expect that this is the level of activity and pricing that we will see clearly as anything else, subject to what happens to fuel to some extent. Then of course, there has been an overall destocking in many industries, which most likely have affected cargo business during the start of the year. How -- that's, of course, a situation which cannot continue and should normalize the environment to some extent, which again could then maybe have a positive impact on the yields. But on the balance, I think current level of trading is a good proxy for the future.
Then one more, a bit more technical one. I noticed that your personnel costs were personal costs per employee were up quite a bit. Any normal items in the reported personnel cost number this quarter.
No, I think that in terms of people cost, I think that there would be a couple of things that you need to remember. So first of all, when we consider the amount of ASKs and the flight times to Asia, you will need to remember that the actual flight kilometers are different from the great circle distance ASKs. And therefore, the sort of variable employee costs related to those flights follows a little bit different pattern than previously. The flight times have increased so much. So that's one thing. Then the other thing is that now we have been starting to recruit pilots, we are recruiting 80 pilots. And already during the course of 6 months, we have been investing a bit to pilot training that is visible to some extent in the numbers. And then finally, this is also the quarter where we had some STI related costs in the employee cost. So I don't know, Kristian, if you want to elaborate.
Yes, it's fair to say that now when we are seeing profitability, we are also accruing variable kind of compensation in the normal course, which is, of course, different than during the COVID times when results didn't justify any variable compensation payments and there were even periods when no variable compensation was paid to management.
[Operator Instructions]
This is Achal from HSBC. First of all, congratulations on such a strong result. Sorry, I was actually dropped off. So kind excuse me if I ask something which you have already responded. But I want to understand a few things. So first of all, I'm not sure if you've discussed the profitability or performance of your Qatar business. And if you could please give us a bit of color on that, that would be helpful.
So this question has not been discussed previously. As dated currently based on the commercial cooperation that we have with Qatar Airways, we are operating daily flights from Helsinki, Stockholm and Copenhagen to Doha. And with that, we have been introducing a new traffic category, the Middle East traffic category to our business. And those flights have been starting well. So the demand and the performance of those routes have been exceeding our expectations a bit. And those routes are and have been profitable basically from the start.
Could you please give us a bit more color in terms of how many aircraft are you flying? What kind of -- I mean, do you have any limitations or can you increase number of aircraft? And what kind of challenges would you face in case you want to increase the number of aircraft would you need to agree with your pilots and all? And then what is your plan in terms of -- and are you are you still sort of continuing to want to fly from Helsinki in Stockholm to Doha -- or you have plans to connect some other markets to Doha as well?
Well, I mean, first of all, when we look at our fleet, as stated during the quarter, we successfully implemented a geographically more balanced network, which is now stable. And that means that we are effectively deploying our capacity. There's a notch of increased utilization that we can take out from our fleet. But we don't see any big changes happening in our fleet right now. Of course, we will continuously continue to optimize on tail-by-tail basis. So when we look at the availability of resources, I mean, increasing -- I mean, if we take the pilot CLAs or the CLAs with any given employee group, there are no constraints for us to increase the number of aircraft. But what we do notice in the market that the availability of aircraft is very tight out there. And then that is contributing to the capacity constraints that the industry is experiencing. And then, of course, there seems to be also a global shortage of pilots, especially and all kinds of crew shortages. Our situation in that one is a little bit better that -- for example, now when we opened up the pilot recruitment, recruiting some 80 pilots, we've got, I don't know, more than 500 applicants. And that means that in the market of Finland, we have readily available talent pool, both for pilot and cabin crew jobs and that situation is a little bit different in comparison to many other markets, aviation markets in the world.
And maybe just if the question was specifically to the Qatar relationship, we have 3 planes flying daily back and forth from Helsinki, Stockholm and Copenhagen to Doha. The majority of the seats are sold in a block to Qatar, they sell them forward and then we sell a portion of those flights with own tickets. And of course, it's a commercial negotiation then with Qatar if we would both feel that it would make sense to increase the frequencies of these cities or take the partnership to other cities. These cities are, of course, very natural for us to operate from…
No, that's perfect. The other thing I wanted to understand on Asia. I remember you're talking about very strong cargo demand. And of course, cargo demand was very strong during COVID and even after COVID, but now the cargo has sort of normalized back. And I think your Asian operations were kind of subsidized by the strong cargo. But now given that cargo has normalized, -- how do you see the sort of profitability on the Asian routes, where your flight lengths have increased significantly. So I mean, do you still plan to continue in Asia? I know you're growing, but I mean at what cost? I mean, are you sort of -- is the profitability declining? Or do you have something else in mind to make these light profitable? Is it the yield which is sort of making that operations happen are profitable? I mean could you give us a bit more color about on the Asia side, please?
If I start on the Asian market generically and then Kristian, perhaps you can continue on the cargo topic. So when we look at Asian markets, excluding China, when we look at Japan, Korea, Hong Kong, Singapore, Thailand, India, all of these markets, we will need to take into consideration that there is a level playing field in a sense that both European carriers as well as the local carriers flying from those countries to Europe are going around the Russian airspace. So that means that all players have been meeting the similar cost increases for those flights. And even though those cost increases have been significant, then also the market has adjusted. So the yield levels are significantly up on all of those markets, making the Asian flying profitable in this situation. And then you need to remember also that in the Asian traffic, Finnair had and still has an established position.
So we have a number of strengths in the Asian traffic. First of all, we have the brand for providing the Asian network that is known by the customers as well as by travel agents. That's one thing. We have the slots on the megacities on the airports of the Asian megacities like Haneda, Narita, [Budong] and all of these things, all of the airports. And then we have the local partnerships like with Japan Airlines on the Japanese market in the form of the Siberian joint business. And all of these things are accumulating to us having strengths on the Asian flights. And that is very visible in the sense that we have been able to keep our market position on the Asian traffic. The whole market has adjusted and the number of flights has -- the capacity has reduced for the Asian market, but we have been able to keep our position. And as stated, those yield levels are justifying profitable flying. So to sum up, we see growth opportunities in Asia for profitable flying going forward. And then cargo suddenly is part of that equation and perhaps you, Kristian continue on that.
And I think the good thing with the Asian cargo traffic is that there is a natural flow of product both ways. Fresh fish going that way and high-value components coming the other way. If you kind of very simplify it. And we do see that, that traffic flow will continue. It's air cargo relevant. So it's not -- there are no alternatives for that. And as a result of that, this continues to be an important part of the overall profitability of flying between Europe and Asia.
And perhaps one thing still to add is that when you look at some of the Asian markets, take Japan, as an example, when we look at the traffic that has so far been flying between Japan and Europe, it's heavily dominated by corporate travelers and basically the first movers of the leisure travelers. So the masses in terms of leisure travelers have actually not yet started from Japan. And thereby, I think that in terms of leisure travel, the market in Japan is still recovering, and that represents clearly a potential also going forward. And to some extent, this is the case also in some of the other Asian markets.
I mean, you just -- I think you said that generally, European passengers prefer to fly with European carriers and or the Chinese one and probably that makes sense. But then I think you had a lot of business from Chinese groups. You used to carry a lot of Chinese group from China and all. But now given that Chinese do have access to Russian Air and probably they would prefer to fly Chinese, what's the status in that business?
Well, the group travel from China has not yet really started. As stated it, it falls down to the passport and visa issues. And there's also a very specific sort of an ADS list, it is called an ADS list where the Chinese government basically lists the countries where group travel is possible. And some of the European countries are not yet on that list. We expect Finland to be included in that list relatively shortly. And thereby, I think that what we are seeing now is that also the impediments for group travel are currently gradually being removed. So yet again, this comes back to the impediments of travel gradually being removed on the Chinese market, and that's taking some time. And therefore, our hypothesis is that Q3 is the right time to deploy additional capacity on the Chinese market.
Moving to the balance sheet. So basically, you're giving your gearing is still very high. I mean, so I mean do you have any plans to sort of do a bit of restructuring or issue fresh equity or whatever it is? Or do you think you would actually prefer to wait and let that settle down gradually as the business recovers. So what's your plan on the balance sheet side to repair your balance sheet?
So while we recognize that the balance sheet needs to be strengthened, so that the company can down the road invest going forward. The current focus is on improving the profitability and through that, putting ourselves in a stronger position also from a balance sheet point of view.
So do you think -- so is that fair to assume that we should not expect any fresh capital anytime in the near future?
As I said, I think the current focus of management is to improve the profitability of the company, try to execute the business as profitably as possible in this demand environment, which is very, very strong and then through that put ourselves in a stronger position also from a balance sheet point of view.
In terms of wet leasing, could you please remind us how many aircraft do you have in wet lease? And do you have any plans to further lease out some of the capacity?
So we have currently 4 narrow-body aircraft at least to BA for the next 12 months. So we started that operation at the end of March. And as stated at this point of time, we are largely deploying our capacity. So we stay open to additional wet lease deals as long as they fulfill our commercial and operational criteria. But clearly, I mean, for the network that we are flying with our own capacity as our own scheduled service, we see strong demand. So if there would be wet lease deals long -- wet lease deals available, then we would need to weigh that against the profitability that we are seeing from our own flying. And that is basically our approach to additional wet lease deals.
Also in terms of competitive landscape, could you please give us a bit color in terms of competitive landscape on your North Atlantic operations and the operations within Europe, please?
Well, to start with, we have been finding new travel flows from U.S. to Europe. -- from U.S. to India and likewise from India to U.S. via our Helsinki hub. So that is sort of a new type of travel flows that we have not had previously. And here, of course, our partnership, especially with BA and American Airlines in the form of Atlantic joint business is helping us greatly. So -- when we now look at the development of the Atlantic routes, I mean, the winter months are typically seasonally slower in the North Atlantic traffic, but we are now seeing improving demand yet again reflecting normal seasonality patterns for North Atlantic traffic. And clearly, the capacity on the Atlantic and thereby the competitive situation, it still reflects the overall phenomenon that we are seeing in global aviation that demand is strong at this point of time and various airlines are somewhat capacity constraints for various reasons. For some, it's about lack of aircraft for others, it's about lack of pilots or other types of crew or the airports being too congested. So this is impacting the competitive landscape on the overall.
Also, if you could please give us a bit color about ancillary. So basically, you just said that you've stopped on sale -- onward sale of liquid and all. So does that mean should we expect a bit of a decline in your unit Ancillary revenue going ahead?
I think we -- ancillary revenues continues to be an important area. It's one category that where you could argue the profitability hasn't been that high to start with that we are now dropping off. So yes, it will be a headwind now when we work through the comparable periods but the attention and activity on driving ancillary business across the board is so strong that I do see that we'll be able to offset that decline by being active in other categories.
And I said this is a very big part of our strategy implementation. And our digital sales and marketing capabilities have been greatly improving over the past couple of years. So that creates a notably stronger platform for us to sell ancillaries going forward. And now it's more of a matter for us to find the right offerings to write customers and scale up the sales effort.
My last question is around your unit cost. So basically, you reported ex fuel unit cost, a decline of 3%. So just a clarification, is that on the basis of the long flight length? Or is that apple-to-apple comparison versus Q1 2019 or Q1 2022?
So that 3% that Topi referred to is calculated in a similar way as we've always calculated with the kind of theoretical flight lengths. If you do a calculation based on the adjusted ASKs or the true lengths, then the decline of unit cost is approximately 4% against 2019. And then it's, of course, good to also remind people that during that time period, the cumulative inflation has been north of 15%. So those are maybe good numbers to have in mind that CAS on an adjusted basis is down 4 points since '19. And then during that time, there was 15% of cumulative inflation.
And 4% versus 2019? And how about versus Q1 last year? Maybe not a relevant compare, I would say, given the adjusted calculation. So that's why I wanted to give you the '19 number.
Before the next question, I had a quick comment on Jaakko's previous question. So share of Mainland China was less than 10% of sales pre-pandemic.
Yes, I think that a good addition to that one would be that when we look at our outlook and guidance for this year, it is not in any way meaningfully dependent on the Chinese traffic. As stated, we have implemented our new geographically more balanced network, we are deploying largely our capacity as we speak, and we are seeing good demand to those routes.
The next question comes from Pia Rosqvist-Heinsalmi from Carnegie Investment Bank.
Congratulations Topi and Kristian and whole Finnair team to the strong part of this year. I've got a few short questions, if I may. So firstly, postponing the delivery of the A350 to ‘26, I think it was. So are there any meaningful costs related to this postponement?
First of all, thank you for the congratulations. No, I wouldn't say so. I mean, of course, there's always a bit of cost associated with a prolongation, but I would not characterize that as meaningful.
And then maybe to a question which was discussed in the -- in conjunction with the Q4 results. So with regards to the hybrid bond, any news, any light you want to share? Do you intend to redeem this hybrid bond in June to avoid a step up?
So I think we've said all along that when the time is right, we'll make decisions and then we'll communicate. And we are now kind of accumulating information to be able to make the right decision. The same facts are true. Capital is important during a turnaround period, the company continues to have a strong liquidity position, particularly after a strong cash flow period in Q1, those are factors that we'll take into account when making the decision.
Then is there any light you can shed on the expected quarterly development now towards your profitability target of exceeding 5% on EBIT by mid-2024, please?
I don't -- so we haven't provided any guidance for on a quarterly basis. The only thing we've said is that we do see that we've entered into a more normal seasonality pattern now. At the same time, we are operating in a strong demand environment, which will continue at least over the summer period. At the same time, we also understand that we will need to continue our strategy implementation to ensure that the company is also profitable in a more normal demand environment, which will come at some point. So I think those are maybe the only comments that I'll make, and you'll have to then make your judgment based on that in terms of what is a reasonable quarterly progression to expect from here to mid-'24.
And then perhaps just to add to that, I mean, almost needless to say, but in our outlook and guidance, we are saying that there will be a significant improvement of both revenue and profitability during the course of this year. And even though Q1 was better than Q1 2019 in terms of revenue and profitability, we still don't think that the full year revenue and profitability will yet not reach 2019 levels. In 2019, the second half was strong, so it's a tougher compare, especially Q4.
Then the two more questions. And one is I think I started by saying it's clear that your focus is strongly on restoring profitability. But looking ahead and looking beyond now 2024. So have you started or when do you prepare -- when do you expect to start preparing for a renewal of your narrow-body fleet?
So the renewal of narrow body fleet is not actual right now. Our sole focus to your point, is restoring profitability and reaching pre-pandemic levels of profitability by mid '24 onwards. And that 5% of EBIT is important in a sense, as stated even with a more normal demand environment for us to restore our investment capability. And that investment capability will eventually be needed for the narrow body renewal. We are quite happy with our narrow body fleet right now. It's very reliable technology. For example, we have altogether avoided the engine issues that so many other airlines have with the new engines, new technology engines and the higher maintenance costs associated. So therefore, right now, the narrow body fleet is serving our purpose in a good way. But at the same time, we acknowledge that in some years, we will need to start the renewal and that certainly will be part of our updates going forward.
And my final question is with regards to the decisions or the loss adopted by the European Commission yesterday with the target and part of the fit for 55 package and the climate related climate action. So my question is what impact do you expect for Finnair -- and are you ready and capable and able to meet these requirements?
Well, first of all, I mean, the -- your decision that came during this week, that turned out to be actually a little bit better than we expected. -- for example, the raw material base, wider raw material-based being accepted for biofuels and those kinds of synthetic fuels being also accepted where the electricity source was nuclear. So I think that these are good developments, common sense developments in terms of regulation vis-a-vis what was expected. Then when we come back to the sort of bigger picture of what will be the impact to start with, I think that we need to remember that the supply of sustainable aviation fuel simply is not there. So even if airlines would want to buy significantly more sustainable aviation fuel, they could not find it from the market. So we understand that the regulation is needed in order to create the kind of demand environment for SaaS producers that they can invest in scaling up the production. And scaling up the production is the core thing in all of this. But when we look at the regulation, by and large, it, of course, will be increasing the costs of aviation. The profitability of airlines is not of the sort that airlines could be absorbing the cost. So any additional cost from decarbonizing aviation will eventually be transferred to ticket prices. And then this is how we are seeing it from here onwards.
It would seem that we have no further questions. So many thanks for all the excellent questions and joining the call. Just a quick note that we're traveling to London with Kristian on 10 May. So if you are interested in scheduling a meeting with us, please contact me or [Indiscernible]. Thanks a lot, and have a great day.