By Joanne Bladd
Dubai flag carrier saw $1bn hike in fuel costs in first half, reports profits of AED827m
Dubai’s flag carrier Emirates Airline reported a 76 percent slump in first half net profit to AED827m ($225m) as rising fuel costs and regional unrest squeezed margins.
The largest international carrier saw net profit fall to AED827m from AED3.39bn in the year-earlier period, the airline said in a statement to Dubai bourse on Thursday.
Revenue for the six months to Sept 30 reached AED30.3bn, a 15 percent rise on the AED26.4m generated in the same period a year earlier, the statement said.
The carrier’s financial year runs April 1 to March 31.
“Emirates remains focused on its long-term strategy despite global instability [and] ever-climbing fuel prices, which resulted in Emirates paying $1bn more in fuel costs over the same period last year and fluctuating exchange rates,” said chairman Sheikh Ahmed bin Saeed Al-Maktoum.
The airline said currency translation differences resulted in a AED24m loss in the period compared to a AED24m gain last year.
“The global challenges of the past six months have again put Emirates to the test,” said Sheikh Al Maktoum. The company will remain focused on its long-term strategy, he said.
The largest buyer of the Airbus A380 superjumbo said its passenger seat factor, a key industry benchmark of profitability, was above 79 percent.
Emirates said its cash position “remained strong” at AED13.8bn on 30 Sept, after settling capital outflows of more than AED4bn, primarily towards aircraft pre-delivery payments. The carrier took delivery of 10 new wide-body aircraft during the period, and added 3,400 staff.
The Dubai government-owned airline has an order book valued at more than $66bn, to include around 199 planes scheduled for delivery through to 2019.
Emirates counts 90 Airbus A380s worth $34bn at list price among its outstanding orders, and said in July it plans to spend around $4bn annually over the next three to four years.
The overall fleet features 161 Airbus and Boeing aircraft.
The group launched a $1bn bond in June, which was over five times oversubscribed.
Industry body IATA has warned that it expects airlines to suffer a weak end to the year due to waning consumer confidence, sluggish international trade and high fuel prices. European carriers including Lufthansa and Air Berlin reported a drop in third-quarter profits last month.
At this announcement, which comes as no surprise to anyone in real business, AB should eat its proverbial hat.
In a leader only three weeks ago, readers were asked to swallow the hype that EK and Etihad could between them account for 20% of global aviation profits in the coming year. EK's contribution according to the article would amount to $1.7 billion in net profit.
Now, many of us realise that you chaps are paid for attention grabbing taglines rather than cogent argument but is there any chance of you eating a little humble pie together with that headgear?
Tell you what, we'll settle for less soundbite and more substance in future. If on the other hand, EK throws up over $1 billion in H2 profit, I'll eat my computer.
I believe that it was written that Dubai's debt repayments of $14 billion due in 2012, would be assisted by several of the emirate's high performance cash generating businesses. Among which one would assume would be Emirates, therefore these numbers must come as a bit of a blow.
The implication being that a partial delve into reserve cash is required to pay costs/overheads in the coming six months. You can also see why Abu Dhabi is holding back on big projects as while it needs higher oil prices above $100 bbl that factor also saps the profitability of other industries.
I see two positives in this news :
1. The European airlines will once and for all stop complaining that Emirates benefits from fuel subsidies. Their argument just doesn't hold water any more, and;
2. Emirates will be able to increase its market share at the expense of less efficient and not as well managed airlines, who will be force to cut capacity in the face of rising costs.
Nice to see such an optimist. You may want to take a look at RS comment though:
As already pointed by RS, if Emirates was supposed to contribute a similar amount to the 2010 profits they will need to delve into their reserves. According to their financial statements, http://www.theemiratesgroup.com/english/images/06C_ECFS_tcm409-565510.pdf, this will take roughly 15% of them.
I am sure not everybody is as cheerful as you seem to be.
Oh, BTW unless my numbers are wrong, the ROE is a paltry 5%. I am not sure many companies would be so keen on investing additional capital to make 200 basis points over a (risk-free?) US T bill.
This may be quite likely a temporary situation, next year things may go back to 2010 levels, but you should consider that profit were even lower in 2009. Projecting the future based on the boom years is never a good practice, I got tired of explaining this to no avail; it seems some people do not get it yet.
I look forward to the usual constructive comments
Let's clarify the term "The Largest International Carrier", what this should say is 'The Largest International Carrier By Avavilable Seats"....roughly translated means lots of planes in the air but nothing about the number of passengers in them.
In addition to this being bad news for Emirates there will also be significant impact on their supply chain if their passenger numbers are down, such as Dubai Airport.