Emirates posts 29th straight year of profitability

Dubai - Dnata marks most successful and profitable year of operations yet

Delivering its 29th year of consecutive profit, Emirates, one of the fastest-growing log-haul carriers in the world, posted on Thursday a 82 per cent drop in annual income to Dh1.3 billion in the year ended March 31.
This is the first time since its 2011-12 fiscal year that the Dubai-based carrier's annual profit has fallen.
The airline said it managed to keep revenues stable at Dh85.1 billion, despite significant currency devaluations against the US dollar and fare adjustments due to a highly competitive business environment. The airline said rise of the US dollar against currencies in most of Emirates' key markets had a Dh2.1 billion impact on revenues.
"Aviation and travel are notoriously vulnerable to social, economic, and political events, as well as the ever-changing expectations of consumers. For us, this year has been a particularly testing one," said Sheikh Ahmed bin Saeed Al Maktoum, President of the Dubai Civil Aviation Authority, Chairman of Emirates airline and Chief Executive of the Emirates Group.
In April, Emirates announced that it would be reducing 20 per cent of its 126 weekly flights to the US because of a drop in demand caused by tougher US security measures and Trump administration attempts to ban travellers from some Muslim-majority nations.
Sheikh Ahmed said despite challenges of the year, Emirates carried 56.1 million passengers, eight per cent more than last year, and 2.6 million tonnes of airfreight, up three per cent. dnata handled nearly 624,000 aircraft and 2.8 million tonnes of cargo, a 60 per cent and 38 per cent increase over 2015-16 respectively. "We also served over 60 million meals to our customers at 63 airports around the world."
In 2016-17, both Emirates and dnata continued to grow their global footprint and capabilities. During the year, Emirates added 35 new aircraft to the fleet while retiring 27 older ones.
"This fleet roll-over involving 62 aircraft was the largest programme we have ever managed in a year, and it brought our average fleet age down significantly to 63 months, compared with 74 months last year, and the industry average of 140 months. It underscores our strategy to operate a young and modern fleet, which is better for the environment, better for our operations, and better for our customers," said Sheikh Ahmed.
Emirates' overall capacity grew seven per cent, supporting the launch of six new global destinations, as well as the enhancement of services with bigger aircraft or additional flights to existing destinations.
"During the year, we took significant steps to enhance our product offering and expand customer choice. We unveiled a refreshed version of our popular A380 Onboard Lounge, which will enter service from July 2017, and a range of other product enhancements for our customers both on board and on the ground," Sheikh Ahmed said.
 
History for dnata
Dnata bucked industry trends to mark its most successful and profitable year of operations yet. During 2016-17, dnata invested over Dh1 billion to expand its capabilities and portfolio, develop people, strengthen safety systems, and build a strong and sustainable business supported by modern facilities and the latest technologies.
The group's airport operations division made several key investments, which significantly grew its footprint in the Americas.
Dnata also acquired a majority stake in Air Dispatch, a global market leader in centralised load planning services to the airline community, broadening the range of services.
"Our future business will be digitally integrated into the ecosystem of partners, suppliers and in particular with Dubai, offer more personalised customer experiences, and be enabled by a new suite of the latest technologies including automation, robotics and biometrics," said Sheikh Ahmed.
Saj Ahmad, chief analyst at London-based Strategic Aero Research, said Emirates' decline in profits comes on the back of a wildly difficult and challenging year where demand has seen significant price and yield erosion that has dampened earnings.
"Despite registering an increase in passenger carriage to over 56 million in the year, this was offset by a fall in load factor to 75.1 per cent on the back of additional system capacity of around 10 per cent. This combination of low oil prices, reduced competition ticket fares and excess capacity in several markets has pushed margins lower in what has essentially become a cut throat arena for all airlines," Ahmad told Khaleej Times.
With a cash balance in excess of $4 billion, Emirates is still robust from a financial standpoint to continue expanding organically while investing in new products, such as the newly-introduced business class seating on its new 777-300ERs, he said.
Going forward, Emirates' biggest risk remains the fallout of demand on routes to North America - doubly hit by visa woes and the restrictions on electronic devices that now have to be checked into the hold, he said.
"While the issuing of [Microsoft] Surface Pros will help mitigate some of that demand loss, it will not stem the flow of some high yield passengers re-routing their journeys through other European transit points. However, if the Trump administration adds this exclusion to Europe as well, which is on the cards, then that incentive is lost and passengers may well stick with Emirates for their US-bound travel plans."
He said revenue was flat at $23 billion despite increased passenger demand, it is clear that the marketplace is difficult for Emirates and will of course be even more challenging for its rivals. Currency strength in the dollar had hurt Emirates in the last couple of years, however, the airline still managed to stay in the black.
- issacjohn@khaleejtimes.com