Emirates airline, the world’s biggest operator of wide-body aircraft, reported a 124 per cent rise in profit for its last fiscal year on the back of higher revenues and a decline in the US dollar against major currencies in most of its key markets.
The world's biggest long-haul airline on Wednesday said net profit rose to Dh2.8 billion in its fiscal year ending March 31, 2018, while the parent company Emirates Group, which also includes its Dnata ground-handling operations and cargo, posted a 67 per cent rise in profit to Dh4.1bn in the same period.
“Business conditions in 2017-18, while improved, remained tough,” said Sheikh Ahmed bin Saeed, chairman of Emirates. “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 benefited from a healthy recovery in the global air cargo industry, as well as the relative strengthening of key currencies against the US dollar.”
Emirates carried 4 per cent more passengers, serving a record 58.5 million people. It reported a 77.5 per cent seat load factor in the period compared to 75.1 per cent previously. The airline's revenue increased 9 per cent to Dh92.3bn, supported by strong cargo performance, while group revenue climbed 8 per cent to Dh102.4bn over last year’s results. Total passenger and cargo capacity crossed 61 billion available tonne kilometres (ATKM) in the last fiscal year.
An expanded codeshare agreement with low-cost sister flydubai benefited the airline as will closer collaboration in the future with Abu Dhabi’s Etihad Airways – in catering, ground-handling and lounge facility sharing, Sheikh Ahmed told reporters.
“The relationship with Etihad is going in the right direction, and my view is we can continue this,” he said.
In line with profit growth, the group declared a dividend of Dh2bn to majority shareholder the Investment Corporation of Dubai. The strong results come after Emirates saw profits plunge 82 per cent in the 2016-17 fiscal year. Like other Middle Eastern carriers, Emirates was hit hard by tough operating conditions at the start of 2017, including travel restrictions on US routes, a ban on large electronic devices in cabins and currency fluctuations.
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“Emirates' business environment has markedly improved over the last financial year,” said Diogenis Papiomytis, director of commercial aviation at management consultancy Frost & Sullivan. “The US presidency has not been as disruptive to Gulf carriers’ US operations as previously expected, while socio-political destabilising events have reduced in their number and impact.”
Global airline yields are projected to bounce back after five years of consecutive declines, according to the International Air Transport Association.
Emirates has implemented several measures to boost revenues in the last fiscal year, including charging for advance seat selection and reducing its payroll by 3 per cent from the previous year.
“The recovery was fast because the reaction was fast,” said Andrew Charlton, managing director of consultancy Aviation Advocacy. “They did the right things – trimmed capacity, trimmed costs and looked at their operations through gimlet eyes. The plan to refresh the fleet will save fuel too, which is just as well as the oil price goes up past $70 [per barrel] again.”
Looking ahead Sheikh Ahmed said he expects a “good” 2018/19 and that escalating fuel costs will be the single biggest challenge for the coming year. Emirates plans to keep identifying efficiencies, he said.
The carrier’s fuel bill increased 18 per cent in the 2016/17 fiscal year and total operating costs rose by 7 per cent. Emirates is unlikely to hedge fuel because of rising oil prices, Sheikh Ahmed said.
The airline has no immediate plans to stop flights to Iran following the US decision on Tuesday to exit the Iran nuclear deal, he said.
“We continue to fly to Iran and through its airspace. The airline cannot control geopolitical issues and we will do what we always do in such situations: look at which new markets to go to.”
In February, Emirates confirmed a preliminary $16bn order from Airbus for 20 A380 aircraft and options for 16 more. The carrier is expected to exercise its A380 options “soon”, Sheikh Ahmed said.
Meanwhile, the expanded codeshare partnership between Emirates and flydubai announced last July has helped boost the bottom line as the two carriers ratchet up a bigger slice of the regional aviation market. The partnership launched codeshare routes to more than 80 destinations to date, with plans to build a joint network of 240 destinations by 2022.
Dnata's ground handling business achieved its highest profit ever reaching Dh1.3bn.