Emirates Group profit grows 8% to Dh1.2bn

Dubai: Emirates Group, which includes Emirates Airline and its ground handling and ticketing arm Dnata, reported an 8 percent growth in profits to Dh1.2 billion (US$320 million), despite a 2 percent decline in group revenues to Dh53.3 billion (US$14.5 billion) for the first six months of 2019-2020 financial year, starting April 1, 2019, compared to Dh54.4 billion (US$14.8 billion), during the same period last year, due to unfavourable currency movements in key markets that wiped off Dh1.2 billion from profits.

The decline in revenue took place despite a 13 percent decline in fuel cost that helped Emirates save Dh2 billion in fuel costs. However, profit growth was driven by increased passenger yield and seat load factor, coupled with operational efficiency.

“Profitability was up 8 percent compared to the same period last year, with the Group reporting a 2019-20 half-year net profit of Dh1.2 billion (US$320 million). The profit improvement was primarily due to the decline in fuel prices of 9 percent compared to the same period last year, however the gain from lower fuel costs were partially offset by negative currency movements.

“Emirates Group revenue was declined 2 percent to Dh53.3 billion (US$14.5 billion) for the first six months of 2019-20, from Dh54.4 billion (US$14.8 billion) during the same period last year. This slight revenue decline was mainly due to planned capacity reductions during the 45-day Southern Runway closure at Dubai International airport (DXB), and unfavourable currency movements in Europe, Australia, South Africa, India, and Pakistan.

The Group’s cash position on 30th September 2019 stood at Dh23.0 billion (US$6.3 billion), compared to Dh22.2 billion (US$6.0 billion) as at 31st March 2019.

Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group, said: “The Emirates Group delivered a steady and positive performance in the first half of 2019-20, by adapting our strategies to navigate the tough trading conditions and social-political uncertainty in many markets around the world. Both Emirates and dnata worked hard to minimise the impact of the planned runway renovations at DXB on our business and on our customers. We also kept a tight rein on controllable costs and continued to drive efficiency improvement, while ensuring that our resources were deployed nimbly to capitalise on areas of opportunity.

“The lower fuel cost was a welcome respite as we saw our fuel bill drop by Dh2.0 billion compared to the same period last year. However, unfavourable currency movements wiped off approximately Dh1.2 billion from our profits.

“The global outlook is difficult to predict, but we expect the airline and travel industry to continue facing headwinds over the next six months with stiff competition adding downward pressure on margins. As a Group we remain focussed on developing our business, and we will continue to invest in new capabilities that empower our people, and enable us to offer even better products, services, and experiences for our customers.”

The Emirates Group’s employee base remained unchanged compared to 31 March 2019, at an overall average staff count of 105,315. This is in line with the company’s planned capacity and business activities, and also reflects the various internal programmes to improve efficiency through the implementation of new technology and workflows.

“The half-yearly result shows that Emirates is capable of navigating through challenging economic conditions by strengthening operating efficiencies. Despite losing Dh1.2 billion in currency exchange, it was able to manage profits, with a Dh1 billion gain in fuel cost. The airline was able to offset the loss in passenger number with higher passenger yield and higher seat load factors. In addition to these, a stricter control on cost has helped the Group to report profits in a very challenging economic environment,” an aviation analyst said, requesting anonymity.

Emirates Airline net profit jumped 282 percent to Dh862 million (US$235 million) in the first half of the 2019-20 financial year, compared to last year, despite a 3 percent decline in revenue, to Dh47.3 billion (US$12.9 billion) compared with to Dh48.9 billion (US$13.3 billion) recorded during the same period last year.

“This result was driven by increased agility in capacity deployment, with healthy customer demand for Emirates’ products driving improved seat load factors and better margins,” the airline said.

Emirates operating costs shrunk by 8 percent against the overall capacity decrease of 7 percent. On average, fuel costs were 13 percent lower compared to the same period last year, this was largely due to a decrease in oil prices (down 9 percent compared to same period last year), as well as a lower fuel uplift due to reduced capacity during 45-day runway closure at DXB. Fuel remained the largest component of the airline’s cost, accounting for 32 percent of operating costs compared with 33 percent in the first six months of last year.

During the first six months of 2019-20, Emirates received 3 Airbus A380s, with 3 more new aircraft scheduled to be delivered before the end of the 2019-20 financial year. It also retired 6 older aircraft from its fleet with a further 2 to be returned by 31 March 2020. The airline’s long-standing strategy to invest in the most advanced wide-body aircraft enables it to improve overall efficiency, minimise its emissions footprint, and provide high quality customer experiences.

In the first six months of its financial year, Emirates added two new passenger routes: Dubai-Bangkok-Phnom Penh, and Dubai-Porto (Portugal). As of 30 September, Emirates’ global network spanned 158 destinations in 84 countries. Its fleet stood at 267 aircraft including freighters.

Overall capacity during the first six months of the year declined by 7percent to 29.7 billion Available Tonne Kilometres (ATKM) mainly due to the DXB runway closure and reduction in fleet during this 45-day period. Capacity measured in Available Seat Kilometres (ASKM), shrunk by 5 percent, whilst passenger traffic carried measured in Revenue Passenger Kilometres (RPKM) was down by 2 percent with average Passenger Seat Factor rising to 81.1 percent, compared with last year’s 78.8 percent.

Emirates carried 29.6 million passengers between 1 April and 30 September 2019, down 2 percent from the same period last year, however, passenger yield increased by 1 percent period-on-period. The volume of cargo uplifted at 1.2 million tonnes has decreased by 8 percent while yield declined by 3 percent. This reflects the tough business environment for air freight in the context of global trade tensions and unrest in some key cargo markets.

Dnata

The revenue of Dubai National Air Travel Agency (Dnata) including other operating income, increased 5 percent to Dh7.4 billion (US$2.0 billion), from Dh7.0 billion (US$1.9 billion) last year. This performance was underpinned by robust business growth and further global expansion, particularly in its catering business.

However, overall profit for Dnata was down by 64 percent to Dh311 million (US$85 million), compared to last year’s result which included an Dh321 million one-off gain from the divestment of Dnata’s 22 percent stake in the travel management company Hogg Robinson Group (HRG). Dnata’s half year profit for 2019-20 was further impacted by the bankruptcy of Thomas Cook, one of its major customers for Dnata’s travel and catering businesses in the UK, resulting in an impairment loss on trade receivables and intangible assets amounting to Dh84 million.

Dnata continued to strengthen its global capabilities in ground handling, catering and travel services, with operations spanning over 35 countries. In the first half of 2019-20, Dnata’s international operations accounted for over 72 percent of its revenue, compared to 68 percent during the same period last year.

Dnata’s airport operations remains the largest contributor to revenue with Dh3.6 billion (US$983 million), a slight increase as compared to the same period last year. Across its operations, the number of aircraft handled by Dnata remained steady with 351,194, and it handled 1.5 million tonnes of cargo, down 6 percent.

Organic growth across Dnata’s international ground handling business with key contract wins across US locations, and improved performance in markets such as Italy, Singapore, Switzerland and Iraq, helped drive Dnata’s revenue and compensate for the negative currency impact of approximately Dh86 million. In the UAE, Dnata acquired full ownership of freight forwarding company, Dubai Express, which bolstered its revenues in the first half year of 2019-20, and helped soften the impact of losses due to the 45-day runway closure at DXB.

Dnata’s travel division contributed Dh1.8 billion (US$488 million) to revenue, up 7 percent from the same period last year. The division’s underlying total transactional value sales remained at Dh5.9 billion (US$1.6 billion).

The strong revenue contributions from its new acquisitions including Tropo in Germany, and Dunya Travel, helped offset weaker travel demand in other key travel markets, as well as the negative impact of the strong US dollar against the Euro and Pound Sterling.

Dnata’s flight catering operation, contributed Dh1.8 billion (US$479 million) to its total revenue, up 54 percent. The number of meals uplifted increased by 67percent to 51.9 million meals for the first half of the financial year.

This significant uptick is largely attributed to the contributions from its recently-acquired catering businesses in Australia (Q Catering Limited and Snap Fresh Pty Limited), and in the US (121 Inflight Catering); as well as the expansion of Dnata’s own catering facilities in the US including at Houston, Boston, and Los Angeles.