Emirates Group reports $3.8b first half loss

Emirates Group, which operates Emirates Airline — the world’s largest carrier of international passengers – reported a US$3.8 billion (Dh14.1 billion) loss in the first half of its 2020-21 financial year starting April 1 to September 30, 2020, with a 74 percent fall in revenues to US$3.7 billion (Dh13.7 billion), down from US$ 14.5 billion (Dh53.3 billion) during the same period last year, due to COVID-19 travel restrictions and the lockdown since March 2020.

This includes US$3.4 billion (Dh12.6 billion) losses incurred by Emirates Airline and US$396 million (Dh1.5 billion) suffered by Dubai National Air Travel Agency (Dnata), the ticketing, reservation, airport operations and ground handling arm of Emirates Group.

This is the first recorded loss in more than 33 years in the company’s 35-year history. Despite the losses, the Group’s cash position on 30 September 2020 remained healthy at US$5.6 billion (Dh20.7 billion), compared to US$7 billion (Dh25.6 billion) as at 31 March 2020. Other than this, Emirates suffered losses only in its second year of operations. The airline, established in 1985, is part of Investment Corporation of Dubai, an investment arm of Dubai Government.

“This dramatic revenue decline was due to the COVID-19 pandemic which brought global air passenger travel to a halt for many weeks as countries closed their borders and imposed travel restrictions. As part of pandemic containment measures, Emirates and Dnata’s hub in Dubai also suspended scheduled passenger flights for 8 weeks during April and May,” the airline said in a statement.

Emirates Group managed to reduce its losses by undertaking certain drastic cost-cutting measures, including reducing its large manpower – one of the largest cost components – in its business. Its employee base, compared to 31 March 2020, is substantially reduced by 24 percent to an overall count of 81,334 as at 30 September 2020.

“This is in line with the company’s expected capacity and business activities in the foreseeable future and general industry outlook. Emirates and Dnata continue to look at every means to protect its skilled workforce, including participating in job saver programmes where these exist,” it said.

Emirates carried 1.5 million passengers between 1 April and 30 September 2020, down 95 percent from the same period last year.

Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group said: “We began our current financial year amid a global lockdown when air passenger traffic was at a literal standstill. In this unprecedented situation for the aviation and travel industry, the Emirates Group recorded a half-year loss for the first time in over 30 years.

“As passenger traffic disappeared, Emirates and dnata have been able to rapidly pivot to serve cargo demand and other pockets of opportunity. This has helped us recover our revenues from zero to 26% of our position same time last year.

“The Emirates Group’s resilience in the face of current headwinds is testimony to the strength of our business model, and our years of continued investment in skills, technology and infrastructure which are now paying off in terms of cost and operational efficiency. Emirates and dnata have also built strong brands and agile digital capabilities which continue to serve us well, and enabled us to respond adeptly to the accelerated shift of customer and business activities online over the past 6 months.”

Emirates half-yearly losses are better compared to the overall industry losses predicted by the International Air Transport Association (IATA), the global aviation industry watchdog.

IATA recently said the global aviation industry is expected to lose $84.3 billion in 2020. Revenues will fall 50 percent to $419 billion from $838 billion in 2019. In 2021, losses are expected to be cut to $15.8 billion as revenues rise to $598 billion.

“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion. It means that — based on an estimate of 2.2 billion passengers this year — airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash,” said Alexandre de Juniac, IATA’s Director General and CEO.

Passenger revenues are expected to fall to $241 billion (down from $612 billion in 2019). This is greater than the fall in demand, reflecting an expected 18 percent fall in passenger yields as airlines try to encourage people to fly again through price stimulation. Load factors are expected to average 62.7 percent for 2020, some 20 percentage points below the record high of 82.5 percent achieved in 2019.

Emirates Airline

Emirates, the largest carrier of international passengers, recorded loss of US$3.4 billion (Dh12.6 billion), compared to profit of US$235 million (Dh862 million), recorded in the same period last year.

This is the airline’s first recorded loss in more than three decades.

Emirates revenue, including other operating income, fell 75 percent to US$3.2 billion (Dh11.7 billion) compared with the US$12.9 billion (Dh47.3 billion) recorded during the same period last year. This result was due to severe flight and travel restrictions around the world relating to the COVID-19 pandemic.

Sheikh Ahmed added: “No one can predict the future, but we expect a steep recovery in travel demand once a COVID-19 vaccine is available, and we are readying ourselves to serve that rebound. In the meantime, Emirates and dnata remain responsive in deploying resources to serve our customers and meet demand.

“We have been able to tap on our own strong cash reserves, and through our shareholder and the broader financial community, we continue to ensure we have access to sufficient funding to sustain the business and see us through this challenging period. In the first half of 2020-21, our shareholder injected US$2 billion into Emirates by way of an equity investment and they will support us on our recovery path.”

Emirates reduced its operating costs by 52 percent against the overall capacity decrease of 67 percent. Fuel costs were 83 percent lower compared to the same period last year. This was due to a decrease in oil prices (down 49 percent compared to same period last year), as well as a 76 percent lower fuel uplift from substantially reduced flight operations during the six months period up to end of September. Fuel, which was the always the largest component of the airline’s cost in past reporting cycles, only accounted for 11 percent of operating costs compared with 32 percent in the first six months of last year.

Despite the significant drop in operations during the six months, Emirates’ EBITDA stood positive at US$79 million (Dh290 million) compared to US$3.6 billion (Dh13.2 billion) for the same period last year.

During the first six months of 2020-21, Emirates retired 3 older aircraft from its fleet as part of its long-standing strategy to improve overall efficiency, minimise its emissions footprint, and provide high quality customer experiences.

“As directed by the UAE General Civil Aviation Authority, Emirates temporarily suspended passenger flights on 25 March and worked closely with governments and embassies to operate repatriation services until Dubai International airport (DXB) re-opened for transit passengers and later for scheduled passenger flights. The airline also partnered with the health authorities to implement comprehensive pandemic health and safety measures onboard and on the ground, to safeguard its customers, employees and the communities it serves,” the airline said in a statement.

The airline also took its customer commitment to the next level, by expediting refunds, offering rebooking flexibility, setting up a COVID-19 travel information hub on its website to offer the latest updates on ever-changing travel requirements, and by launching the industry’s first COVID-19 medical cover for all passengers at no additional cost.

Emirates gradually restarted scheduled passenger operations on 21 May. By 30 September, the airline was operating passenger and cargo services to 104 cities.

Overall capacity during the first six months of the year declined by 67 percent to 9.8 billion Available Tonne Kilometres (ATKM) due to a substantially reduced flight programme over the past months, including the suspension of passenger flights at Dubai international airport for 8 weeks. Capacity measured in Available Seat Kilometres (ASKM), shrunk by 91 percent, whilst passenger traffic carried measured in Revenue Passenger Kilometres (RPKM) was down by 96 percent with average Passenger Seat Factor falling to 38.6 percent, compared with last year’s pre-pandemic figure of 81.1 percent.

Emirates carried 1.5 million passengers between 1 April and 30 September 2020, down 95 percent from the same period last year. The volume of cargo uplifted at 0.8 million tonnes has decreased by 35 percent while yield has more than doubled by 106 percent. This reflects the extraordinary market situation for air freight during the global COVID-19 crisis, where drastically reduced passenger flights led to limited available capacity while airfreight demand rose strongly.

Emirates was able to uplift 65 percent of its cargo volumes compared to the same period last year, which shows its cargo division’s outstanding agility in adapting its operations to provide air freight services in this new environment. In a very short time, Emirates Skycargo completed the partial retrofit of 10 Boeing 777-300ER passenger aircraft to transport freight on the main deck, introduced new operation protocols to enable the safe uplift of cargo in passenger cabins, rapidly restarted and scaled up its global cargo network, and put in place comprehensive bio-safety protocols for employees.

Dnata

Dubai National Air Travel Agency (Dnata), the ticketing, reservation, airport operations and ground handling arm of Emirates Group, revenue including other operating income declined 68 percent to US$644 million (Dh2.4 billion), compared to US$2 billion (Dh7.4 billion) last year.

Overall loss for Dnata is US$396 million (Dh1.5 billion), compared to last year’s profit of US$85 million (Dh311 million). This figure includes impairment charges of Dh689 million across Dnata’s international business divisions, mainly pertaining to goodwill.

Dnata’s Airport Operations remains the largest contributor to revenue with US$454 million (Dh1.7 billion), a 54 percent decline as compared to the same period last year. Across its operations, the number of aircraft handled by Dnata declined sharply by 71 percent to 102,917, and it handled 1.3 million tonnes of cargo, down 12 percent only.

Dnata’s Travel Division contributed US$26 million (Dh95 million) to revenue after US$488 million (Dh1.8 billion) for the same period last year, down 95 percent. The division reported a negative underlying total transactional value sales of US$67 million (Dh246 million) for the first time, after a positive contribution of US$1.6 billion (Dh5.9 billion) for the same period last year. This reflects the significant refund volume and pay-out in cancelled customer bookings mainly during the beginning of the pandemic.

Dnata’s Flight Catering operation, contributed US$116 million (Dh426 million) to its total revenue, down 76 percent. The number of meals uplifted declined by 84 percent to 8.3 million meals for the first half of the financial year after last year’s 51.9m record performance.