Emirates group full year profit falls 70 per cent as airline grapples with higher costs and reduced fares
Emirates Group, which includes the airline and ground-handling unit dnata, reported a 70 per cent year-on-year drop in profit for the financial year ending on March 31 as it grapples with lower air fares resulting from excess capacity and soft travel demand in many markets.
Profit attributable to the owner was Dh2.5 billion, compared with Dh8.2bn a year earlier. Revenue and other income for the group rose by 1.9 per cent to Dh94.7bn for 2016-17 compared with Dh92.9bn in the same period a year earlier.
Profit at the airline fell by 82.5 per cent year-on-year to Dh1.25bn even as it reported flat revenue at Dh85bn. The carrier’s profit margin fell to 1.5 per cent for the period compared with 8.4 per cent a year earlier on reduced fares, currency losses and higher costs including from jet fuel and aircraft operating leases.
The airline was sitting on Dh15.7bn in cash at the end of March, down by 21.6 per cent from the end of the previous financial year.
“Aviation and travel are notoriously vulnerable to social, economic and political events, as well as the ever-changing expectations of consumers,” said Sheikh Ahmed bin Saeed, the chairman and chief executive of Emirates Airline and Group, in its annual report. “For us, this year has been a particularly testing one.”
Fifty-six million passengers flew with Emirates, 8 per cent more than a year earlier, with an average seat load factor of 75.1 per cent, down from 76.5 per cent. The airline carried 2.6 million tonnes of air freight, up by 2.7 per cent.
In its annual report, Emirates said that it closed the year with average passenger yields down by 7.2 per cent compared with a year earlier amid strong downwards pressure on air fares as a result of overcapacity in many markets.
Sheikh Ahmed highlighted the effect on travel demand and business confidence as the “shock waves” triggered by the Brexit vote in the UK were felt across global supply chains and recruitment.
Demand was also influenced by “heightened concern” in Europe, its biggest market, around “immigration, terror attacks in Brussels, Nice, Berlin, Paris, London” and the political upheaval in Turkey. One of the group’s biggest challenges was dealing with US government actions this year on visa issuances, heightened security vetting and restrictions on electronic devices on board flights from the UAE.
Emirates’ chairman said that while the group is optimistic it expects the year ahead to remain challenging “with hyper competition squeezing airline yields and volatility in many markets impacting travel flows and demand”.
At its dnata unit, profit attributable to the owner was Dh1.21bn for the period, up by 14.8 per cent year-on-year.
It handled about 624,000 aircraft, up by 60 per cent, and 2.8 million tonnes of cargo, a rise of 38 per cent compared with a year earlier.
The number of employees at the group was up by 10.9 per cent year-on-year to an average of 105,746 for the year.
The airline’s overall capacity grew by 7 per cent in 2016-17 and the airline is expected to keep a tighter reign on its capacity growth in the short- to medium-term, according to John Strickland, an aviation analyst at the London-based JLS Consulting.
“Emirates is clearly open to reviewing its business model, whether that be its approach to on-board service or to the type of aircraft it operates and that work is already in progress,” he said.
The group invested Dh13.7bn in new aircraft, equipment, acquisitions and technology in 2016-17 but some investment, particularly in new aircraft, could be deferred, according to Saj Ahmad, the chief analyst at London-based StrategicAero Research.
“By deferring, they can keep money that would otherwise be earmarked for pre-delivery payments and bolster their already strong cash position – or they can use that to pay down on the balance of 777-300ERs still on order or for the 777Xs on order,” he said.
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Published: May 11, 2017 04:00 AM