Dubai’s Emirates Group reports $6bn annual loss, records first non-profitable year in over three decades

Dubai-based Emirates Group has posted its first non-profitable year in over three decades, recording an annual loss of Dhs22.1bn ($6bn) for the financial year ending March 31, 2021, compared with a Dhs1.7bn ($456m) profit reported last year.

The group’s revenue totaled Dhs35.6bn ($9.7bn), marking a decline of 66 per cent over last year. Meanwhile, the group’s cash balance equaled Dhs19.8bn ($5.4bn), down 23 per cent from last year mainly due to weak demand caused by the pandemic related business and travel restrictions across all of the group’s core business divisions and markets, a statement said.

Sheikh Ahmed bin Saeed Al Maktoum, chairman and chief executive, Emirates Airline and group, said: “The Covid-19 pandemic continues to take a tremendous toll on human lives, communities, economies, and on the aviation and travel industry. In 2020-21, Emirates and dnata were hit hard by the drop in demand for international air travel as countries closed their borders and imposed stringent travel restrictions.

“Emirates received a capital injection of Dhs11.3bn ($3.1bn) from our ultimate shareholder, the government of Dubai, and dnata tapped on various industry support programmes and availed a total relief of nearly Dhs800m in 2020-21. These helped us sustain operations and retain the vast majority of our talent pool. Unfortunately, we still had to make the difficult decision to resize our workforce in line with reduced operational requirements.”

Redundancies were implemented across all parts of the business, resulting in a total workforce reduction by 31 per cent to 75,145 employees, representing over 160 different nationalities. Furthermore, financial obligations were restructured, contracts renegotiated, processes examined and operations consolidated, with cost reduction initiatives returning an estimated saving of Dhs7.7bn during the year, the statement added.

In 2020-21, the group collectively invested Dhs4.7bn ($1.3bn) in new aircraft and facilities, acquisition of companies and technologies.

Emirates 
The airline reported a loss of Dhs20.3bn ($5.5bn) after last year’s Dhs1.1bn ($288m) profit, and a negative profit margin of 65.6 per cent. This includes a one-time impairment charge of Dhs710m ($193m) mainly relating to certain aircraft which are currently grounded and not expected to return to service before their scheduled retirement within the next financial year.

Emirates’ total revenue for the financial year declined 66 per cent to Dhs30.9bn ($8.4bn). Total operating costs decreased by 46 per cent from the last financial year, while the cost of ownership (depreciation and amortisation) and employee cost were the two biggest cost components for the airline in 2020-21, followed by fuel, which accounted for 14 per cent of operating costs compared to 31 per cent in 2019-20.

The airline’s fuel bill declined by 76 per cent to Dhs6.4bn ($1.7bn) compared to the previous year, driven primarily by 69 per cent lower uplift in line with capacity reduction.

Emirates carried 6.6 million passengers (down 88 per cent) in 2020-21, with seat capacity down by 83 per cent. The airline also reported a passenger seat factor of 44.3 per cent, compared with last year’s passenger seat factor of 78.5 per cent.

Emirates’ total passenger and cargo capacity declined by 58 per cent to 24.8 billion ATKMs at the end of 2020-21, due to pandemic related flight and travel restrictions including a complete suspension of commercial passenger services for nearly eight weeks as directed by the UAE government from March 25, 2020.

Read: Update: Dubai’s Emirates says to stop ‘most’ passenger flights from March 25

The carrier received three new A380 aircraft during the financial year and phased out 14 older aircraft comprising of nine Boeing 777-300ERs and five A380s, leaving its total fleet count at 259 at the end of March. Emirates’ order book for 200 aircraft remains unchanged at this time.

During the year, Emirates reactivated its strategic codeshare partnership with flydubai, and entered into agreements with new partners TAP Air Portugal, FlySafair, and Airlink in South Africa, to expand connectivity. From zero scheduled passenger flights at the start of the financial year, it has grown its operations in over 120 destinations by March 31, 2021.

Read: Emirates and flydubai codeshare provides connections to 168 destinations for Dubai travellers

Emirates SkyCargo, meanwhile, contributed 60 per cent of the airline’s total transport revenue. In addition to supporting global supply chains for food, medical and other trade items, Emirates SkyCargo also supported the worldwide distribution of Covid-19 vaccines and humanitarian relief to Lebanon in the aftermath of the Beirut explosions. Emirates’ cargo division reported a revenue of Dhs17.1bn ($4.7bn), an increase of 53 per cent over last year.

Read also: Emirates, Etihad ink agreements with UNICEF for transportation of Covid-19 vaccines

Tonnage carried decreased by 22 per cent to reach 1.9 million tonnes, due to the reduced available bellyhold capacity for the entire year. At the end of 2020-21, Emirates’ SkyCargo’s total freighter fleet stood unchanged at 11 Boeing 777Fs.

Read more: Dubai’s Emirates inks agreement with TAP Air Portugal to expand partnership

Meanwhile, Emirates’ hotels portfolio recorded revenue of Dhs296m ($81m), a decline of 49 per cent over last year due to the pandemic. In addition to the Dhs14.5bn financing that was raised for aircraft and general corporate purposes in 2020-21, Emirates has already received committed offers to finance two aircraft deliveries due in 2021-22 and continues to tap the financial market for further liquidity.

Dnata
In 2020-21, dnata recorded a loss of Dhs1.8bn ($496m) for the first time, which included an impairment charges of Dhs766m ($209m) on goodwill and other intangible assets across all its divisions. Meanwhile, dnata’s total revenue decreased by 62 per cent to Dhs5.5bn ($1.5bn).

In 2020-21, dnata’s operating costs decreased by 48 per cent to Dhs7.4bn ($2bn), in line with reduced operations in its airport operations, catering and travel divisions across the world.

Dnata’s cash balance totaled Dhs4.7bn ($1.3bn), a decline by 12 per cent, with cash used in financing activities, primarily payments for loans and leases, amounting to Dhs548m ($149m). The business saw a positive operating cash flow of Dhs10m ($3m) in 2020-21 despite the sharp decline in revenues and the unprecedented volumes of refunds in its travel division.

The number of aircraft turns handled by dnata in the UAE declined by 59 per cent to 78,000. Its cargo handling declined by 18 per cent to 575,000 tonnes, reflecting the reduced available flight capacity in the overall air cargo market over the year. Meanwhile, dnata’s International Airport Operations division revenue declined by 43 per cent to Dhs2.3bn ($617m).

In 2020-21, dnata executed the US’s first green turnaround of a customer aircraft at New York JFK, while its airport services brand, marhaba, opened an expanded and refurbished lounge at Dubai International airport, and expanded its international network with a new lounge in Manila’s Ninoy Aquino International Airport.

Revenue from dnata’s Travel Services division has declined by 96 per cent to Dhs130m ($35m). The reported total transaction value (TTV) of travel services sold declined by 98 per cent to Dhs229m ($62m).