By Christina Zander

STOCKHOLM--Finnish airline Finnair Oyj (FIA1S.HE) said Friday its third quarter net result dropped 38% as cost reductions failed to offset declining sales.

The airline, which operates flights to European and Asian destinations, said net profit for the July to September period was 16.6 million euros ($20.9 million), down from EUR27 million the same period last year as unit revenue fell by 1.6% due to the strengthening of the euro against key Asian currencies. Unit costs declined by 0.4% during the period.

"In order for Finnair's profitability to improve, it is essential that we increase unit revenues and maintain tight control over costs," Chief Executive Officer Pekka Vauramo said in a statement.

He said that by the end of September, Finnair had nearly achieved the overall target for its EUR200 million cost reduction program and that savings agreements concluded with pilots and cabin crew in September and October will bolster the company's competitiveness from 2015 onwards.

Sales in the third quarter fell to EUR622.7 million from EUR636.9 million the same period last year. Operating profit in the third quarter was EUR26.7 million, down from EUR43.0 million a year earlier.

Finnair reiterated its guidance from August saying it expects full year 2014 turnover to be "significantly lower" than in 2013 and its operational result to show "a significant loss".

Write to Christina Zander at christina.zander@wsj.com

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