Emirates Airline reported a 21 percent jump in profit to US$288 million (Dh1.1 billion) in 2019-2020 financial year ending March 31, 2020, compared to $245 million (Dh900 million) reported in 2018-19 financial year, despite the effects of Covid-19 that grounded its fleet in the 12th month of the reporting period.
The airline reported strong profit growth despite a 6 percent decline in revenue to $25.1 billion (Dh92 billion), compared to $26.7 billion (Dh97.9 billion) recorded in 2018-19, impacted by 45 days DXB runway closure and temporary suspension of passenger flights in March 2020. Airline capacity was reduced to 59 billion ATKM with aircraft fleet size unchanged.
“Despite continued strong competitive pressure and the unfavourable currency impact, the airline reported a profit of Dh1.1 billion (US$288 million), an increase of 21 percent over last year’s results, and a profit margin of 1.1 percent. Profit would have been higher without a loss of Dh1.1 billion (US$299 million) due to fuel hedge ineffectiveness at year end,” the airline said in a statement.
Emirates’ total passenger and cargo capacity declined by 8 percent to 58.6 billion ATKMs at the end of 2019-20, due to the DXB runway closure capacity restrictions and COVID-19 impact with a complete suspension of passenger services as directed by the UAE government during March 2020.
Emirates received six new aircraft during the financial year, all A380s. During 2019-20, Emirates phased out six older aircraft comprising of four Boeing 777-300ERs, its last 777-300 and one Boeing 777 freighter leaving its total fleet count unchanged at 270 at the end of March. Emirates’ average fleet age remains at a youthful 6.8 years.
Across its more than 120 subsidiaries, the Emirates Group’s total workforce remained nearly unchanged with 105,730 employees, representing over 160 different nationalities.
Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group, said, “In 2019-20, we were steadfast with our cost discipline while investing to expand our business and revenues opportunities. Through ongoing reviews of our work structures and the implementation of new technology systems, we’ve improved productivity and retarded manpower cost increases. As the pandemic hit, we’ve taken all possible measures to protect our skilled workforce, and ensure the health and safety of our people and our customers. This will remain our top priority as we navigate a gradual return to operations in the coming months.
“The COVID-19 pandemic will have a huge impact on our 2020-21 performance, with Emirates’ passenger operations temporarily suspended since 25 March, and dnata’s businesses similarly affected by the drying up of flight traffic and travel demand all around the world. We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption. We expect it will take 18 months at least, before travel demand returns to a semblance of normality.
“In the meantime, we are actively engaging with regulators and relevant stakeholders, as they work to define standards to ensure the health and safety of travellers and operators in a post-pandemic world. Emirates and dnata stand to reactivate our operations to serve our customers, as soon as circumstances allow.”
During the year, Emirates launched three new passenger routes: Porto (Portugal), Mexico City (Mexico) and Bangkok-Phnom Penh. It also supplemented its organic network growth with a new codeshare agreement signed with Spicejet that will provide Emirates customers with more connectivity options in India.
Additionally, Emirates expanded its global connectivity and customer proposition through interline agreements with: Vueling, adding connections to over 100 destinations around Europe via Barcelona, Madrid, Rome and Milan; with Turkish low-cost airline Pegasus Airline (PC), offering customers connections onto selected routes on PC’s network; and with Interjet Airlines, opening new routes for passengers travelling between Mexico, the Gulf and Middle East and beyond.
Emirates also marked two years of successful strategic partnership with flydubai. Over 5.3 million passengers have benefitted from seamless connectivity on the Emirates and flydubai network since both Dubai-based airlines began their partnership in October 2017.
The relative strengthening of the US dollar against currencies in many of Emirates’ key markets had an Dh963 million (US$262 million) negative impact to the airline’s bottom line, a substantial increase compared to the previous year’s negative currency impact of Dh572 million (US$156 million).
Total operating costs decreased by 10 percent over the 2018-19 financial year. The average price of jet fuel declined by 9 percent during the financial year after last year’s 22 percent increase. Including a 6 percent lower uplift in line with capacity reduction, the airline’s fuel bill declined substantially by 15 percent over last year to Dh26.3 billion (US$7.2 billion) and accounted for 31 percent of operating costs, compared to 32 percent in 2018-19. Fuel remained the biggest cost component for the airline.
Overall passenger traffic declined, as Emirates carried 56.2 million passengers (down 4%). With seat capacity down by 6 percent, the airline achieved a Passenger Seat Factor of 78.5 percent. The positive development in passenger seat factor compared to last year’s 76.8 percent, reflects the airline’s successful capacity management and positive travel demand across nearly all markets up until the outbreak of COVID-19 in the last quarter.
An increase in market fares and a favourable route mix was completely offset by the strengthening of the US dollar against most currencies and left the passenger yield unchanged at 26.2 fils (7.1 US cents) per Revenue Passenger Kilometre (RPKM).
During the year, Emirates raised a total of Dh9.3 billion (US$2.5 billion) in aircraft financing, funded through term loans.
As part of an initiative to reduce costs and benefit from the prevailing global rates environment, Emirates refinanced and repriced more than Dh5.5 billion (US$1.5 billion) in 2019-20, resulting in estimated overall future cost savings in excess of Dh110 million (US$30 million).
Emirates’ management have taken several measures to protect the Group’s cash flow through cost saving measures, reductions to discretionary capital expenditure, and engaging with our business partners in improving working capital.
“Additionally, we have partially drawn existing credit lines before 31 March, and are in the process of securing additional lines to further improve the liquidity buffer. In the last quarter of 2019-20, Emirates successfully raised additional liquidity through term loans, revolving credit and short term trade facilities to the tune of Dh4.4 billion (US$1.2 billion). It will continue to tap the bank market for further liquidity in the first quarter of 2020-21 to provide a cushion against the impact of COVID-19 on the cash flows in the short term,” Emirates said.
Emirates closed the financial year with a healthy level of Dh20.2 billion (US$5.5 billion) of cash assets.
Revenue generated from across Emirates’ six regions continues to be well balanced, with no region contributing more than 30 percent of overall revenues. Europe was the highest revenue contributing region with Dh26.1 billion (US$7.1 billion), down 8 percent from 2018-19. East Asia and Australasia follows closely with Dh24.1 billion (US$6.6 billion), down 9 percent. The Americas region recorded revenue growth at Dh14.6 billion (US$4.0 billion), up 1 percent. West Asia and Indian Ocean revenue increased by 4 percent to Dh9.8 billion (US$2.7 billion). Africa revenue decreased by 4 percent to Dh8.7 billion (US$2.4 billion), whereas Gulf and Middle East revenue decreased by 8 percent to Dh7.7 billion (US$2.1 billion).
Emirates’ ground handling and ticketing arm, Dubai National Air Travel Agency (Dnata) recorded a 57 percent fall in profit to Dh618 million (US$168 million). This includes a one-time gain from a transaction where Dnata divested its minority stake in Accelya, an IT company that was acquired by Vista Equity Partners.
Dnata’s total revenue grew to Dh14.8 billion (US$4 billion), up 2 percent. This reflects its continued business growth particularly in its Catering division, and strong customer retention and new contract wins across its four divisions. Dnata’s international business now accounts for 72 percent of its revenue.
Laying the foundations for its future growth, Dnata invested more than Dh800 million (US$218 million) in acquisitions, new facilities and equipment, leading-edge technologies and people development during the year.
In 2019-20, Dnata’s operating costs increased by 8 percent to Dh14.3 billion (US$3.9 billion), in line with organic growth across its business divisions, coupled with integrating the newly acquired companies mainly across its catering division and international airport operations.
Dnata’s cash balance was Dh5.3 billion (US$1.4 billion), an increase of 4 percent. The business delivered an Dh1.4 billion (US$380 million) cash flow from operating activities in 2019-20, which is in line with its enhanced cash balance and puts the business in a solid position to finance its investments.
Revenue from Dnata’s UAE Airport Operations, including ground and cargo handling remained steady at Dh3.2 billion (US$864 million).
The number of aircraft movements handled by Dnata in the UAE declined by 11 percent to 188,000. This reflects the impact of the DXB runway closure in April-May 2019, and the suspension of scheduled passenger flights at both Dubai airports (DXB and DWC) due to COVID-19 pandemic containment measures in March. Dnata’s cargo handling declined by 4% to 698,000 tonnes, impacted by lower demand in the overall air cargo market during the year, and the 45-day DXB runway closure in Q1.
During the year, Dnata executed the UAE’s first green turnaround of a flydubai aircraft at DXB, an achievement made possible by its previous investments in zero-emission, electric ramp ground support equipment. Its airport services brand, Marhaba, opened an expanded and refurbished lounge at Dubai International airport, and expanded its international network with a new lounge in Singapore’s Changi Airport.
Dnata also strengthened its position in the UAE and regional cargo logistics industry by joining forces with Wallenborn Transports, Europe’s largest air-cargo road feeder services (RFS) operator. The partnership will see the companies develop new products and services, and enter new markets.
Dnata’s International Airport Operations division revenue declined slightly by 1 percent to Dh3.9 billion (US$1.1 billion), reflecting strong competitive pressure. International airport operations continue to represent the largest business segment in dnata by revenue contribution.
The number of aircraft handled by the division increased by 1 percent to 493,000, on account of increasing business volumes pre-pandemic, as well as the opening of new locations and winning new contracts; whereas there was a 6 percent decline in cargo handled to 2.2 million tonnes as air freight demand across many markets remained soft for most of the year.
During 2019-20, Dnata continued to strengthen its international airport operations with the expansion of passenger and ground handling operations in Austin, New York JFK, and Washington DC on the back of new contracts and customer demand. It also inaugurated new cargo capabilities with a second warehouse in Brussels dedicated to handling imports, and a new bespoke export facility at London Heathrow, Dnata City East, which is equipped with industry-leading technology and significantly increases the cargo capacity at the UK’s busiest airport.
Dnata’s Catering business accounted for Dh3.3 billion (US$903 million) of Dnata’s revenue, significantly up by 26 percent. The inflight catering business uplifted more than 93 million meals to airline customers, a substantial increase of 32 percent mainly due to the full year impact of Qantas’ catering business in Australia which Dnata had acquired in the previous year.
In March, Dnata became sole shareholder of the UK’s biggest inflight catering, on-board retail, and logistics company, and brought Alpha LSG – previously a joint venture partner – fully in the dnata portfolio.
Revenue from Dnata’s Travel Services division has declined by 4 percent to Dh3.5 billion (US$964 million). The underlying total transaction value (TTV) of travel services sold declined by 6 percent to Dh10.8 billion (US$3.0 billion).
Dnata’s Travel division saw weak travel demand having a negative impact on its business performance, particularly in its B2C units in the UK and Europe. This led the management team to initiate a strategic business review of its entire Travel portfolio, part of which resulted in an impairment charge of Dh132 million against goodwill in our UK travel B2C brands. The review will be completed in the first quarter of 2020-21.
In the UAE and GCC region, Dnata’s Travel business remained steady. During the year, Dnata expanded its UAE retail network with the opening of new service outlets, and launched REHLATY, a new travel brand designed by Emiratis for the Emirati traveller.
Similar to other parts of its business, Dnata’s Travel division was hit hard in the last quarter by a sharp and sudden decline in travel demand due to the COVID-19 pandemic, with corporate and retail customers seeking refunds for their disrupted travel plans.
Also published on Medium.