Dubai airline Emirates posts 86% drop in H1 profit, warns of ‘tough’ times ahead

The airline blamed the drop in profit on high fuel costs and currency devaluations



Dubai’s Emirates airline announced an 86 per cent year-on-year drop in net profit during the first half of the 2018-19 financial year, as high fuel costs and currency devaluations hit margins.

The airline made a net profit of Dhs226m ($62m) during the six months, a statement said.

Revenues during the period, including other operating income, reached Dhs48.9bn ($13.3bn), up 10 per cent compared with Dhs44.5bn recorded during the same period last year.

Operating costs grew by 13 per cent against the overall capacity increase of 3 per cent.

On average, fuel costs were 42 per cent higher compared to the same period last year, largely due to an increase in oil prices (up 37 per cent compared to same period last year), as well as an increase in fuel uplift of 4 per cent due to Emirates’ expanding fleet operations, the airline said.

“Fuel remained the largest component of the airline’s cost, accounting for 33 per cent of operating costs compared with 26 per cent in the first six months of last year,” the statement said.

Emirates carried 30.1 million passengers between April 1 and September 30, 2018, up 3 per cent from the same period last year.

Passenger traffic carried measured in Revenue Passenger Kilometres (RPKM) rose 6 per cent with average passenger seat factor rising to 78.8 per cent, compared to 77.2 per cent last year.

The airline said it saw “increased agility in capacity deployment, and improved seat load factors despite fare increases”.

In terms of cargo, volumes lifted remained largely unchanged at 1.3 million tonnes while yield rose by 11 per cent.

Sheikh Ahmed bin Saeed Al Maktoum, chairman and CEO of Emirates Airline and Group said: “The high fuel cost as well as currency devaluations in markets like India, Brazil, Angola and Iran, wiped approximately Dhs4.6bn from our profits.

“We are proactively managing the myriad challenges faced by the airline and travel industry, including the relentless downward pressure on yields, and uncertain economic and political realities in our region and in other parts of the world.

“We are keeping a tight rein on controllable costs and will continue to drive efficiency improvement through the implementation of new technology and business processes,” he added.

During the first six months of 2018-19, Emirates received eight wide-body aircraft including three Airbus A380s, and five Boeing 777s, with five more new aircraft scheduled to be delivered before the end of the financial year.

It also retired seven older aircraft from its fleet with further four to be returned by March 31, 2019.

In terms of its network, between April – September this year, Emirates launched new passenger services to Stansted (UK) and Santiago (Chile). It also introduced a new linked service from Dubai via Bali to Auckland.

As of September 30, the airline’s global network spanned 161 destinations in 85 countries. Its fleet stood at 269 aircraft including freighters.

Looking ahead, the next six months will be “tough”, admitted Sheikh Ahmed, but added that he was positive about growth.

“Our home and hub in Dubai continues to attract travel demand, as the airline saw 9 per cent more customers enjoying Dubai as a destination in the first half of 2018-19 compared to the same period last year. We expect this demand to remain healthy as new attractions come online and the city gears up for Dubai Expo 2020.

“Moving forward we are firmly focussed on sustaining our business. We will do this by being agile to capitalise on opportunities, and investing to serve our customers even better with high quality products that they value.”

The wider Emirates Group reported a 53 per cent drop in net profit for the first six months of its financial year to reach Dhs1.1bn ($296m).

Meanwhile revenues during the period rose 10 per cent year-on-year to reach Dhs54.4bn ($14.8bn).

The group’s airport services provider dnata posted a net profit of Dhs861m ($235m) between April- September this year, marking an increase of 31 per cent year-on-year.

The amount includes gains from a one-time transaction where dnata divested its 22 per cent stake in the travel management company Hogg Robinson Group, during its acquisition by Amex Travel Business Group.

Without this one-time transaction, dnata profits will be down 18 per cent compared to the same period last year, the statement added.

The company’s revenue, including other operating income, stood at Dhs7bn ($1.9bn), up 11 per cent mainly due to growth in dnata’s international airport operations business.