Emirates Group announces half-year performance for 2016-17
The Emirates Group has announced its half-year results for 2016-17. The Group held steady on revenue, but profit was hit by the double impact of a strong US dollar and challenging operating environment for the airline and travel business.
The Emirates Group revenue was AED 46.5 billion (US$ 12.7 billion) for the first six months of its 2016-17 financial year, up 1% from AED 46.0 billion (US$ 12.5 billion) during the same period last year.
Following one of its best ever half-year profit performances last year, the Group for 2016-17 reported a half-year net profit of AED 1.3 billion (US$ 364 million), down 64%. The Group’s cash position on 30th September 2016 was at AED 14.9 billion (US$ 4.1 billion), compared to AED 23.5 billion (US$ 6.4 billion) as at 31st March 2016. This is due to ongoing investments mainly into new aircraft, airline related infrastructure projects, business acquisitions, and the repayments of bonds totalling AED 4.1 billion (US$ 1.1 billion), loans and lease liabilities.
“Our performance for the first half of the 2016-17 financial year continues to be impacted by the strong US dollar against other major currencies. Increased competition, as well as the sustained economic and political uncertainty in many parts of the world has added downward pressure on prices as well as dampened travel demand,” said His Highness (HH) Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group.
He added: “The bleak global economic outlook appears to be the new norm, with no immediate resolution in sight. Against this backdrop, the Group has remained profitable and our solid business foundations continue to stand us in good stead. In the first six months of this year, both Emirates and dnata continued to grow in capability and capacity. Our past investments in product and services are now paying off, enabling us to retain valued clients and attract new customers - reflected in the airline’s passenger growth of 2.3 million. We continue to make strategic investments, because we know we have to work even harder for every customer, and make every dollar spent go even further through innovation and driving efficiency across our business.”
In the past six months, the Group continued to develop and expand its employee base, increasing its overall staff count to over 103,000, a 9% increase compared with 31 March 2016. This was mainly due to recent acquisitions in dnata businesses, and also required support for Emirates’ growing fleet.
Emirates continues to invest in the most advanced wide-body aircraft to improve overall efficiency and provide better customer experience. During the first six months of the financial year, Emirates received 16 wide-body aircraft – 8 Airbus A380s, and 8 Boeing 777s, with 20 more new aircraft scheduled to be delivered before the end of the financial year. It also retired 19 older aircraft from its fleet with further 8 to be returned by 31 March 2017.
Emirates expanded its global route network by launching passenger services to four new destinations – Yinchuan, Zhengzhou, Yangon, and Hanoi. As of 30 September, Emirates’ global network spanned 155 destinations in 82 countries, with Fort Lauderdale to come online on 15 December 2016.
Operating the world’s largest fleet of A380s and the largest fleet of Boeing 777s, Emirates continues to provide ever better connections for its customers across the globe with just one stop in Dubai.
Overall capacity during the first six months of the year increased 9% to 30.2 billion Available Tonne Kilometres (ATKM). Capacity measured in Available Seat Kilometres (ASKM), grew by 12%, whilst passenger traffic carried measured in Revenue Passenger Kilometres (RPKM) was up 8% with average Passenger Seat Factor dropping to 75.3%, compared with last year’s 78.3%.
Emirates carried 28.0 million passengers between 1 April and 30 September 2016, up 9% from the same period last year. The volume of cargo uplifted remained stable at 1.3 million tonnes, a solid performance in a challenging air freight market.
In the first half of the 2016-17 financial year, Emirates net profit is AED 786 million (US$ 214 million), down 75%, following one of the airline’s best half-year performances during the same period last year.
Emirates revenue, including other operating income, of AED 41.9 billion (US$ 11.4 billion) was slightly down by 1% compared with AED 42.3 billion (US$ 11.5 billion) recorded last year. This is due to the unfavourable currency environment - where the US dollar continued to strengthen against most other major currencies; and increased competition resulting in lower average fares. The airline was also impacted by currency devaluation and hard currency shortage in some African countries, as well as dampened travel demand due to the ongoing economic malaise and looming security concerns across major markets in its network.
Emirates operating costs grew by 5% against the overall capacity increase of 9%. On average, fuel costs were 10% lower compared to the same period last year. However, fuel remained the largest component of the airline’s cost, accounting for 24% of operating costs compared with 28% in the first six months of last year.
Analyst Saj Ahmad commented: “Emirates first half profit decline of 75% comes against a combination of a challenging environment as well as the realisation that last year's performance was always going to be a battle to replicate.
“With currency fluctuations hitting the bottom line, coupled with a dent in the cash balance reduction to $4.1bn on expenses such as new airplane “procurement, Emirates still managed to increase capacity by 9% while curtailing fuel costs by 10% as a result of its new and fuel efficient fleet.”
Ahmad added: “While revenue declined only slightly, Emirates has also been hit by declining yields as competition hots up and the drive to win more passengers means fares have come down sharply - this is also reflected in the lower load factor to 75.3% for the first half of the year.
”Looking forward, Emirates has expedited the retirement of older airplanes and the planned production slow down at Airbus for the A380 as well as 777s from Boeing means that the airline can better anticipate capacity growth going forward so as no to erode yield and load factors even further.
“Heavy investment in its new business class cabins which will debut this year as well as launching a new first class product next year will see Emirates recoup that investment next year once those costs have been absorbed.
“As it stands, the airline is in great shape to modify and alter it's goals going forward. The agility and swift movement to respond to economic and market difficulties underlines the cut-throat competitive landscape prevalent now across the GCC and beyond. Emirates may not be immune, but its adaptability given its massive widebody fleet and rate of organic growth means that the airline is primed to make good on its investments and capital expenditure to rebound profitability in the second half of the year.”