Abu Dhabi, UAEFriday 22 November 2019

Emirates first-half profit nearly quadruples on lower oil prices

Dubai-based carrier made Dh862m in profits during the first six months of the fiscal year

An Emirates Airbus A380 at Dubai International Airport. The carrier nearly quadrupled its half year profits. EPA
An Emirates Airbus A380 at Dubai International Airport. The carrier nearly quadrupled its half year profits. EPA

Emirates, the world's biggest long-haul carrier, nearly quadrupled its half-year profit as a drop in oil prices boosted earnings but warned of continuing headwinds facing the carrier and the travel industry globally in the next six months amid tough operating conditions.

The Dubai-based airline's profit jumped 282 per cent to Dh862 million in the six months to September 30 from Dh226m in the prior-year period, Emirates said in a statement on Thursday. First-half revenue fell 3 per cent to Dh47.3 billion.

"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," Sheikh Ahmed bin Saeed Al Maktoum, the carrier's chairman said. The airline improved its earnings "by adapting our strategies to navigate the tough trading conditions and social-political uncertainty in many markets around the world."

The cautious outlook comes as the aviation industry grapples with tough market conditions including a global economic slowdown, uncertainty related to US-China trade tensions, political upheaval and exposure to the UK's bankrupt tour operator Thomas Cook. Sheikh Ahmed's warning echoed Iata's forecast in June that trade tariffs and higher costs will squeeze global carriers' profits in 2019. The state-owned carrier has decreased capacity and rationalised routes in response to a deteriorating global economy that it said has "flattened" growth.

"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," Sheikh Ahmed said.

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The Airbus A380 through the years

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Emirates Group, which includes airport and travel services arm dnata, posted an 8 per cent rise in first-half profit of Dh1.2bn mainly attributed to a 9 per cent decline in fuel prices year-on-year. Global oil prices fell by 18 per cent during the period.

The lower fuel cost was a "welcome respite" but those gains were partially offset by negative currency movements, Sheikh Ahmed said.

The airline's fuel bill was cheaper by Dh2bn compared to the same period last year but unfavourable currency swings wiped Dh1.2bn from its profits, he said.

Emirates Group revenue fell two per cent to Dh 53.3bn, which the company blamed on planned capacity reductions during a 45-day closure of the southern runway closure at Dubai International airport (DXB) over the summer, exposure to UK's bankrupt tour operator Thomas Cook and unfavourable currency swings in Europe, Australia, South Africa, India, and Pakistan.

"Both Emirates and dnata worked hard to minimise the impact of the planned runway renovations at DXB on our business and on our customers," Sheikh Ahmed said.

Emirates carried 29.6 million passengers during the first half of its fiscal year, down two per cent, as the number of available seats reduced by five per cent during the runway closure earlier this year, it said.

However passenger yield, a measure of average fare per kilometre flown, increased marginally by one per cent year-on-year. Passenger seat factor, which measures how well an airline fills seats, rose to 81.1 per cent, compared with last year’s 78.8 per cent.

Freight volumes at Emirates, the largest international cargo airline in the world, dropped 8 per cent to 1.2m tonnes and yields fell three per cent.

"This reflects the tough business environment for air freight in the context of global trade tensions and unrest in some key cargo markets," it said.

This is in line with a global decline in air freight of 4.5 per cent in September compared to the same month a year ago--the 11th consecutive month of decline in freight volumes and the longest period since the 2008 global financial crisis, Iata said in a report on Thursday.

"The US-China trade war continues to take its toll on the air cargo industry. October’s pause on tariff hikes between Washington and Beijing is good news," Alexandre de Juniac, Iata's director general said. "But trillions of dollars of trade is already affected... and we can expect the tough business environment for air cargo to continue,” Alexandre de Juniac, IATA's director general said.

Dnata, the group's airport services unit that operates globally, took a 64 per cent hit to profits of Dh311m. The unit recorded an impairment loss of Dh84m after its client Thomas Cook, the world's largest travel company, filed for bankruptcy in September.

Emirates' rebound in earnings comes as global peers struggle with slowing economies and the fallout from global trade wars. On Thursday Lufthansa, Europe's biggest airline group, said profit declined 8 per cent in the third quarter as cost cuts could not offset declining fares.

Updated: November 7, 2019 04:14 PM

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