Emirates Reports Profit of Dh2.8b, 124% Over Last Year
Image © Robert Pothorcki.
The Emirates Group posted a profit of Dh4.1 billion, up 67 per cent from last year.
The Emirates Group today announced its 30th consecutive year of profit and steady business expansion.
Released today in its 2017-18 Annual Report, the Emirates Group posted a profit of Dh4.1 billion ($ 1.1 billion) for the financial year ended 31 March 2018, up 67 per cent from last year. The Group’s revenue reached Dh102.4 billion ($ 27.9.billion), an increase of 8 per cent over last year’s results, and the Group’s cash balance increased by 33 per cent to Dh25.4 billion ($ 6.9 billion) supported by the bond issued in March and strong sales due to the early Easter holidays at the end of March.
In line with the overall profit, the Group declared a dividend of Dh2.0 billion ($ 545 million) to the Investment Corporation of Dubai.
Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group, said: “Business conditions in 2017-18, while improved, remained tough. We saw ongoing political instability, currency volatility and devaluations in Africa, rising oil prices which drove our costs up, and downward pressure on margins from relentless competition. On the positive side, we benefitted from a healthy recovery in the global air cargo industry, as well as the relative strengthening of key currencies against the US dollar.
“We’ve always responded to the challenges of each business cycle with agility, while never losing sight of the future, and this year was no exception. In 2017-18, Emirates and dnata delivered our 30th consecutive year of profit, recorded growth across the business, and continued to invest in initiatives and infrastructure that will secure our future success.”
In 2017-18, the Group collectively invested Dh9.0 billion (US$ 2.5 billion) in new aircraft and equipment, the acquisition of companies, modern facilities, the latest technologies, and staff initiatives.
Emirates announced two significant commitments for new aircraft during the year: a $15.1 billion agreement for 40 Boeing 787-10 Dreamliners which will be delivered from 2022, and a US$ 16 billion agreement for 36 additional A380 aircraft, including 16 options.
Dnata’s key investments during the year included: acquisition of AirLogistix USA, marking its entry in the US cargo market; expansion of cargo handling capabilities with new warehouses and equipment at London Gatwick, Amsterdam-Schiphol, and Adelaide; new catering facilities in Dublin and Melbourne; and new marhaba lounges in Karachi and Melbourne.
Sheikh Ahmed said: “While expanding our business and growing revenues, we also tightened our cost discipline. Across the Group, we progressed various initiatives to rebuild and streamline our back office operations with new technology, systems and processes. In 2017-18, our reduced recruitment activity, coupled with restructured ways of working gave us gains in productivity, and a slowdown in manpower cost increases.”
Across its more than 80 subsidiaries, the Group’s total workforce declined by 2 per cent to 103,363, representing over 160 different nationalities, as part of the overall productivity improvement initiatives in Emirates and dnata.
Sheikh Ahmed concluded: “Looking ahead, Emirates and dnata remain focused on delivering safe, efficient and high quality services consistently to our customers. Our ongoing investments in our people, technology, and infrastructure will help us maintain our competitive edge, and ensure that we are ready to meet the opportunities and stay on course for sustainable and profitable growth.”
Emirates’ total passenger and cargo capacity crossed the 61 billion mark, to 61.4 billion ATKMs at the end of 2017-18, cementing its position as the world’s largest international carrier. The airline moderately increased capacity during the year over 2016-17 by 2 per cent, with a focus on yield improvement.
Emirates received 17 new aircraft, after last year’s record number during a financial year, comprising of eight A380s and nine Boeing 777-300ERs. At the same time, eight older aircraft were phased out, bringing its total fleet count to 268 at the end of March. This fleet roll-over involving 25 aircraft was again one of the largest managed in a year, keeping Emirates’ average fleet age at a youthful 5.7 years.
It underscores Emirates’ strategy to operate a young and modern fleet which is better for the environment, better for operations, and better for customers. The airline remains the world’s largest operator of the Boeing 777 and A380 – both aircraft being amongst the most modern and efficient wide-bodied jets in the sky today.
During the year, Emirates launched two new passenger destinations: Phnom Penh (Cambodia) and Zagreb (Croatia). It also added flight capacity to 15 existing destinations, offering customers more choice of flight timings and onward connections.
Emirates also grew its global connectivity and customer proposition through strategic partnerships. During 2017-18, Emirates entered into significant partnerships with flydubai and Cargolux, expanding the choice of air services on offer to passenger and cargo customers respectively. Emirates also received authorisation to extend its partnership with Qantas until 2023.
In spite of political challenges impacting traveller demand and fare adjustments due to a highly competitive business environment, Emirates managed to increase its revenue to Dh92.3 billion (US$ 25.2 billion). The decline of the US dollar against currencies in most of Emirates’ key markets for the first time in a number of years had an Dh661 million (US$ 180 million) positive impact to the airline’s bottom line.
Total operating costs increased by 7 per cent over the 2016-17 financial year. The average price of jet fuel increased sharply by 15 per cent during the financial year. Including a 3 per cent higher uplift in line with capacity increase, the airline’s fuel billincreased substantially by 18 per cent over last year to Dh24.7 billion (US$ 6.7 billion). Fuel is now 28 per cent of operating costs, compared to 25 per cent in 2016-17, and it remained the biggest cost component for the airline.
The airline successfully managed strong competitive pressure across all markets and increased its profit to Dh2.8 billion (US$ 762 million), an increase of 124 per cent over last year’s results, and a profit margin of 3.0 per cent.
Overall passenger traffic growth continues to demonstrate the consumer desire to fly on Emirates’ state-of-the-art aircraft, and via efficient routings through its Dubai hub.
Emirates carried a record 58.5 million passengers (up 4 per cent), and achieved a Passenger Seat Factor of 77.5 per cent. The increase in passenger seat factor compared to last year’s 75.1 per cent, is a result of successful capacity management in response to political uncertainty and strong competition in many markets despite a moderate 2 per cent increase in seat capacity.
Supported by the weakening of the USD against most currencies, passenger yield increased to 25.3 fils (6.9 US cents) per Revenue Passenger Kilometre (RPKM).
To fund its fleet growth during the year with high ongoing new aircraft deliveries, Emirates raised Dh17.9 billion (US$ 4.9 billion), using a variety of financing structures, including the successful execution of a US$ 600 million sukuk in March to fund the acquisition of two A380 aircraft to be delivered in 2018.
Emirates continues to tap the Japanese structured finance market in conjunction with debt from a wide-ranging group of institutions in China, France, the United Kingdom, and Japan. The company raised in excess of Dh3.7 billion (US$ 1 billion) during the year from this source. Emirates has also refinanced a commercial bridge facility (due to non-availability of ECA cover) of Dh3.8 billion (US$ 1.0 billion) via an innovative finance lease structure for five A380-800 aircraft, accessing an institutional investor and bank market base from Korea, Germany, the United Kingdom and the Middle East.
These deals align with Emirates’ financing strategy and demonstrates its ability to unlock diverse financing sources through access to global liquidity. It also underscores its sound financials and the strong investor confidence in the airline’s business model.
Emirates closed the financial year with a healthy and increased level of Dh 20.4 billion (US$ 5.6 billion) of cash assets.
Revenue generated from across Emirates’ six regions continues to be well balanced, with no region contributing more than 30 per cent of overall revenues. Europe was the highest revenue contributing region with Dh26.7 billion (US$ 7.3 billion), up 12 per cent from 2016-17. East Asia and Australasia follows closely with Dh25.4 billion (US$ 6.9 billion), up 12 per cent. The Americas region recorded revenue growth at Dh13.4 billion (US$ 3.7 billion), up 7 per cent. Gulf and Middle East revenue decreased by 2 per cent to Dh8.5 billion (US$ 2.3 billion) whereas revenue for Africa increased by 8per cent to Dh9.4 billion (US$ 2.6 billion). West Asia and Indian Ocean revenue increased by 5 per cent to Dh 7.8 billion (US$ 2.1 billion).
Through the year, Emirates introduced product and service improvements on board and on the ground.
Key highlights include: the launch of fully-enclosed suites in First Class together with refreshed Business Class and Economy Class cabins on the 777-300ER aircraft; new, wider Business Class seats arranged in a 2-2-2 layout on the 777-200LR aircraft; and a refreshed version of the popular Onboard Lounge on the Emirates A380.
On the ground, Emirates added a new dedicated lounge in Boston for its premium passengers and frequent flyers; refurbished existing lounges in Singapore and Bangkok, and completed a US$ 11 million makeover of its lounges in Dubai airport Concourse B.
Emirates also invested in new channels and technology to offer even better and more personalised customer experiences online, on mobile, as well as via its retail and contact centres.
For 2018-19, Emirates has announced new routes to London Stansted in the UK, Santiago in Chile, Edinburgh in Scotland, and an additional flight between Dubai and Auckland via Bali, aside from capacity upgrades to existing destinations.
Emirates SkyCargo recorded a strong performance in a resurgent market, and continues to play an integral role in the company’s expanding operations, contributing 14 per cent of the airline’s total transport revenue.
In an airfreight market with fast-changing demand patterns, Emirates’ cargo division reported a revenue of Dh12.4 billion (US$ 3.4 billion), an impressive increase of 17 per cent over last year, while tonnage carried slightly increased by 2 per cent to reach 2.6 million tonnes.
This year, freight yield per Freight Tonne Kilometre (FTKM) increased by 14 per cent, reflecting a very positive market environment for the industry, and the weakening of the USD against major currencies.
Emirates’ SkyCargo’s total freighter fleet stood at 13 Boeing 777Fs. In addition to belly-hold capacity to Emirates’ new passenger destinations, Emirates SkyCargo launched new freighter services to Maastricht (Netherlands), Luxembourg, and Aguadilla (Puerto Rico).
Emirates SkyCargo continued to develop innovative, bespoke products tailored to key industry sectors. In November, it signed an MoU with Dubai CommerCity to develop new solutions for the e-commerce sector using Dubai as a hub.
During the year, Emirates SkyCargo launched Emirates Fresh for perishable commodities such as fresh cut flowers, fruits and vegetables. For temperature-sensitive Pharma products, Emirates SkyCargo rolled out a pharma corridors programme to offer enhanced origin-to-destination protection, and it also partnered with DuPont to introduce White Cover Xtreme, a next generation thermal blanket to protect sensitive cargo.
Emirates’ hotels recorded revenue of Dh746 million (US$ 203 million), a moderate increase of 1 per cent over last year in a highly competitive market mainly in the UAE.