Emirates’ Half-Year Results – Why Is Profit Flat?

The carrier’s marginal growth was caused in part by a cracked wings issue suffered by the A380, says aviation analyst Saj Ahmad.



Emirates has reported net profit of Dhs1.7 billion for the first half of its fiscal year – a rise of two per cent on the same period in 2012.

While revenues were up 12 per cent, the net profit rise was comparatively modest to the carrier’s 52 per cent year-on-year rise for its 2012/2013 financial year.

Gulf Business spoke to Saj Ahmad, aviation analyst at StrategicAero Research, to explain what Emirates’ half-year financial results mean and what to expect from the airline at the Dubai Airshow.

Why is Emirates Airline’s growth almost flat at two per cent?

“Emirates rise in profits, while slightly flat at just two per cent over the same period last year still demonstrates a robust showing of $475m – it appears that the reason for this sort of marginal growth has been hampered by the wing repairs to its A380s which has meant less capacity available to it.

“Each A380 takes almost two months to repair the cracked wings, and with the biggest A380 fleet, it’s inevitable that Emirates would be hit hardest. Had it not been for the more robust performer in the 777-300ER fleet which is the backbone of Emirates’ long haul operations for both passengers and freight, there’s a good chance that profits could have been lower, despite carrying 15 per cent more passengers and driving revenue passenger kilometres up by some 16 per cent.

What are your predictions for HY2?

“The second half of the financial year looks better. With no fasting month to consider and with the Dubai Airshow too, Emirates will almost certainly sport double-digit profit growth come May 2014. Tourism too and transit passengers via Dubai during the cooler months will be a big catalyst as well.

“Fuel costs, despite operating a modern fleet of 777-300ERs and A380s, amounted to 39 per cent of its expenditure, but Emirates’ health cash balance still allowed the airline to repay Dhs2 billion in bond repayments while ploughing a further Dhs7 billion back into the wider business, leaving almost $5 billion on hand – a figure rivals will no doubt be green with envy to see.

“It’s near term financial commitments have been paid down, so Emirates is in a financially stronger position to leverage greater income during the second half of its fiscal year.

What do you think Emirates will announce at the Dubai Airshow?

“The impending order for new 777X jets is, I’m told going to be “massive”. It’s clear that Tim Clark has not shied away from giving hints about what this deal for 777-8X and 777-9X jets could entail – even a deal for 100 jets could reach almost $40bn at list prices.

“Not only will the new order signal to rivals Emirates’ intent on staying the biggest GCC airline, but it also indicates the future strategy for the airline in wanting to reach deeper into cash-rich markets like the USA, where competition from ailing US airlines is non-existent and Emirates wants to get in there and take a huge chunk of that segment.”