Emirates' net profit plummets 75% in first half

Steep half-year drop attributed to dampened global travel demand, revenue down 1%
Emirates' net profit plummets 75% in first half
By Sarah Townsend
Wed 09 Nov 2016 11:59 AM

Emirates airline has reported a 75 percent drop in net profit in the first half of the 2016-17 financial year – attributed to economic uncertainty and subdued travel demand.

The airline’s net profit was AED786 million ($214 million), down 75 percent from the same period last year, when Emirates reported one of its best half-year performances.

Revenue including other operating income was AED41.9 billion ($11.4 billion) was down by 1 percent compared with AED42.3 billion ($11.5 billion) in the first half of last year, Emirates said.

Its operating costs grew by 5 percent against an overall capacity increase of 9 percent. On average, fuel costs were 10 percent lower compared to the same period last year, according to the half-year financial statement

However, fuel remained the largest component of the airline’s cost, accounting for 24 percent of operating costs compared with 28 percent in the first six months of last year, Emirates said.

Meanwhile, overall capacity during the first six months of the year rose by 9 percent to 30.2 billion available tonne kilometres (ATKM).

Capacity measured in available seat kilometres (ASKM) grew by 12 percent while passenger traffic measured in revenue passenger kilometres (RPKM) was up 8 percent, with average Passenger Seat Factor dropping to 75.3 percent, compared with 78.3 percent last year.

Emirates also reported a 9 percent increase in passengers compared to last year, up to 28 million passengers between 1 April and 30 September. The volume of cargo remained stable at 1.3 million tonnes, it said.

The airline attributed the drop in profit and revenues to the unfavourable currency environment and increased competition resulting in lower average fares.

In particular, it was impacted by currency devaluation and hard currency shortage in some African countries, as well as dampened travel demand due to ongoing economic uncertainty and security concerns across several markets in its network, the statement said.

The company added that it continues to invest in wide-body aircraft to improve efficiency – during the first six months of the financial year, Emirates received 16 wide-body aircraft (8 Airbus A380s, and 8 Boeing 777s) and 20 more are scheduled for delivery before the end of the financial year. The airline retired 19 older aircraft from its fleet with a further eight to be returned by March 31 2017.

Emirates expanded its global route network in the first half of 2016-17 by launching services to four new destinations – Yinchuan, Zhengzhou, Yangon and Hanoi.

Emirates Group net profit was down 64 percent to AED1.3 billion ($364 million) and revenue was up 1 percent to AED46.5 billion ($12.7 billion), “reflecting a challenging operating environment”.

Its ground handling division Dnata reported a 14 percent revenue increase to AED6billion ($1.6 billion) attributed to growth in aircraft, cargo and catering volumes. Its overall profit was down by 1 percent to AED549 million ($150 million), mainly due to the impact of the strong US dollar on currency repatriation from its international businesses, and to start-up investment costs in some of its new acquisitions, the company said.

Dnata’s airport operations remained the largest contributor to revenue with AED 3.1 billion (US$ 843 million), a 31 percent increase compared to the same period last year.

Sheikh Ahmed bin Saeed Al Maktoum, chairman and CEO of Emirates Airline and Group, said: “Our performance for the first half of the 2016-17 financial year continues to be impacted by the strong US dollar against other major currencies.

“Increased competition, as well as the sustained economic and political uncertainty in many parts of the world has added downward pressure on prices as well as dampened travel demand.

“The bleak global economic outlook appears to be the new norm, with no immediate resolution in sight. Against this backdrop, the Group has remained profitable and our solid business foundations continue to stand us in good stead.

“In the first six months of this year, both Emirates and dnata continued to grow in capability and capacity. Our past investments in product and services are now paying off, enabling us to retain valued clients and attract new customers - reflected in the airline’s passenger growth of 2.3 million.

“We continue to make strategic investments, because we know we have to work even harder for every customer, and make every dollar spent go even further through innovation and driving efficiency across our business.”

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