Emirates, the biggest long-haul airline, said first-half net profit plunged 86 per cent, as rebounding oil prices and a stronger dollar pressured its margins.
The Dubai-based carrier's profits tumbled to Dh226 million in the six months to September 30 from the same period last year, Emirates said in a statement on Thursday. First-half revenues increased 10 per cent to Dh49 billion from the year-earlier period.
"We are proactively managing the myriad challenges faced by the airline and travel industry, including the relentless downward pressure on yields, and uncertain economic and political realities in our region and in other parts of the world," said Sheikh Ahmed bin Saeed Al Maktoum, Emirates' chairman. "We are keeping a tight rein on controllable costs and will continue to drive efficiency improvement through the implementation of new technology and business processes."
The profit decline comes as Emirates grapples with a 42 per cent increase in its fuel bill after Brent oil rose by more than 37 per cent in the first half of 2018 compared to the previous period. Brent was trading at $66 on Thursday. Adding to the woes weighing down on its profit margin are weaker currency exchange rates and uncertainty in the global economy. The US dollar was at a 16-month high this week against most currencies because of uncertainty related to Brexit and a showdown between Italy and Brussels over Rome's proposed budget.
"The results do not come as a surprise because when you look at the physical size of Emirates you understand just how big an impact fuel really has and the pressures of cost escalation and how they try to balance and mitigate against it," said Saj Ahmad, chief analyst at Strategic Aero Research. "If Emirates is not immune and is having a tough time, then you can bet your last dollar that every other airline is grappling with these and other issues - and they aren't likely to be as astute or flexible as Emirates."
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Emirates' passenger count rose 3 per cent to 30.1 million in the period between between April and September, as the airline added new destinations such as Santiago in Chile and London Stansted. While it took delivery of new aircraft, including Airbus A380 double-deckers and Boeing 777s, the average load factor rose to 78.8 per cent.
Profit at the Emirates Group, which includes airport and airline services arm Dnata, declined 53 per cent to Dh1.1 bn. Sales increased 10 per cent to Dh54.4bn.
Battling tough operating conditions, Dubai government-owned Emirates and Flydubai last year agreed to widen commercial ties through dozens of codeshare agreements that would feed passenger traffic to each others' networks.
"The future linkage with Flydubai will help both airlines manage capacity on routes better, where they can mix airplanes on different routes," Mr Ahmad said.
Earlier this week, Emirates' chief commercial officer Thierry Antinori said the first half of the year "has not been a walk in the park" but that the airline was not pessimistic about the outlook and adopted a "glass half-full" approach to the challenges.
Inflated fuel bills are one of the biggest costs that have pressured regional airlines. Low-cost carrier FlyDubai said it is facing a "tough" year because of higher oil prices and Air Arabia reported a 20 per cent drop in third-quarter profits on Tuesday, citing fuel costs and currency volatility.
“The next six months will be tough, but the Emirates Group’s foundations remain strong," said Sheikh Ahmed. "Moving forward we are firmly focused on sustaining our business. We will do this by being agile to capitalise on opportunities, and investing to serve our customers even better with high quality products that they value.”
The number of employees at Emirates airline declined 3 per cent in the first half of the year to 60,253. The number of employees at Emirates Group increased 1 per cent to 101,983.