Emirates profits fall

Eleanor Steed
By Eleanor Steed May 15, 2017 09:31

Emirates profits fall

Emirates Airline reported an 82% fall in profit for its fiscal year 2016-17 to AED 1.3 billion (US$ 340 million), with a profit margin of 1.5%.

Chairman and Chief Executive, Emirates Airline and Group, Sheikh Ahmed bin Saeed Al Maktoum, said the year was “one of our most challenging years to date”, pointing to the impact of Brexit, Europe’s immigration challenges and terror attacks, new policies impacting air travel into the US, currency devaluation and funds repatriation issues in parts of Africa, as well as “the continued knock-on effect of a sluggish oil and gas industry on business confidence and travel demand.”

During the year, the Group collectively invested AED 13.7 billion (US$ 3.7 billion) in new aircraft and equipment, the acquisition of companies, modern facilities, the latest technologies, and staff initiatives.

Sheikh Ahmed said: “These investments will further strengthen our resilience, even as we extend our competitive edge, and adapt our businesses to the volatile business climate and fast changing consumer expectations.

“We remain optimistic for the future of our industry, although we expect the year ahead to remain challenging with hyper competition squeezing airline yields, and volatility in many markets impacting travel flows and demand.

Emirates’ total passenger and cargo capacity crossed the 60 billion mark, to 60.5 billion ATKMs at the end of 2016-17, cementing its position as the world’s largest international carrier. The airline increased capacity during the year by 4.1 billion Available Tonne Kilometres (ATKMs), or 7% over 2015-16.

Emirates received 35 new aircraft, its highest number during a financial year, comprising of 19 A380s and 16 Boeing 777-300ERs. At the same time 27 older aircraft were phased out, bringing its total fleet count to 259 at the end of March. This fleet roll-over involving 62 aircraft was the largest programme it has ever managed in a year, and it brought Emirates’ average fleet age down significantly to 63 months, compared with 74 months last year, and the industry average of 140 months.

Against significant currency devaluations against the US dollar and fare adjustments due to a highly competitive business environment, Emirates managed to keep its revenue stable at AED 85.1 billion (US$ 23.2 billion). The relentless rise of the US dollar against currencies in most of Emirates’ key markets had an AED 2.1 billion (US$ 572 million) impact on airline revenue, and to the airline’s bottom line.

Total operating costs increased by 8% over the 2015-16 financial year. The average price of jet fuel fell slightly during the financial year. But due to an 8% higher uplift  in line with capacity increase, the airline’s fuel bill increased by 6% over last year to AED 21.0 billion (US$ 5.7 billion). Fuel is now 25% of operating costs, compared to 26% in 2015-16, but it remained the biggest cost component for the airline.

Emirates carried a record 56.1 million passengers (up 8%), and achieved a Passenger Seat Factor of 75.1%. The decline in passenger seat factor compared to last year’s 76.5%, is relative to the 10% increase in seat capacity by Available Seat Kilometres (ASKMs), and also in part due to lingering economic uncertainty and strong competition in many markets.

Under pressure from the weakening of all major currencies against the USD, passenger yield dropped to 24.7 fils (6.7 US cents) per Revenue Passenger Kilometre (RPKM).

To fund its fleet growth in a year of record aircraft deliveries, Emirates raised AED 29.1 billion (US$ 7.9 billion), using a variety of financing structures.

Emirates continued to tap the Japanese market for the Japanese Operating Lease (JOL) structure and Japanese Operating Lease with a Call Option (JOLCO) on both A380-800 and Boeing 777-300ER aircraft, while further accessing a diverse institutional investor and bank market base including Korea, the United Kingdom, Germany and Spain. Further and owing to the suspended Export Credit Agency (ECA) support, Emirates successfully structured an innovative AED 4.4 billion (US$ 1.2 billion) commercial bridge facility with US and Chinese institutions.

Emirates SkyCargo reported a revenue of AED 10.6 billion (US$ 2.9 billion), a decline of 5% over last year, while tonnage carried slightly increased by 3% to reach 2.6 million tonnes.

This year, freight yield per Freight Tonne Kilometre (FTKM) decreased by 8%, reflecting the strong downward trend across the industry, and the weakening of major currencies against the US dollar.

Emirates’ SkyCargo’s total freighter fleet remained unchanged, with 15 aircraft: 13 Boeing 777Fs, and two Boeing 747-400Fs. In addition to belly-hold capacity to Emirates’ new passenger destinations, Emirates SkyCargo launched new freighter services to Phnom Penh (Cambodia), as well as new links between Dubai-Oslo and Delhi-Hong Kong.

Eleanor Steed
By Eleanor Steed May 15, 2017 09:31