Cost cuts, exchange rate help Emirates’ profit rebound 77 per cent.

November 10, 2017
Emirates profit rebound
Emirates' profitability has rebounded. Photo: Emirates.

Profitability at the Emirates Group has rebounded from last year’s low as the Gulf company Thursday posted a 77 per cent increase in its half-yearly result to $US631 million.

The airline group attributed the 2017-18 interim profit jump to a combination of capacity optimization and efficiency initiatives, steady business growth and a more favorable foreign exchange situation compared to the same period last year.

Group revenue for the six months to September 30 was up 6 per cent to $US13.5 billion compared with the same period last year. Staff numbers fell 3 per cent due to attrition and a  slower recruitment rate.

Revenue at Emirates’ airline operations also increased by 6 per cent to $US12.1 billion as profit rose 111 per cent to $US452 million. Passenger numbers were up 4 per cent to 29.2 million.

Despite the encouraging results, chief executive Sheikh Ahmed bin Saeed Al Maktoum warned margins at the airline continued to face strong downward pressures from increased competition.

Sheik Ahmed said oil prices had also risen and the airline continued to face “uncertain political realties’’ in many parts of the world.  Brent crude oil prices rose through the $US60 per barrel mark during October and were 40 per cent higher than a year ago.

“Yet, the Group has improved revenue and profit performance,’’ he said. “This speaks to the resilience of our business model, and the agility of our people.

“The easing of the strong US dollar against other major currencies helped our profitability. We are also seeing the benefit from various initiatives across the company to enhance our capability and efficiency with new technologies and new ways of working.

“Moving forward, we will continue to keep a careful eye on costs while investing to grow our business and provide our customers with world-class products and services.”

Emirates took delivery of 10 wide-body aircraft in the first six months of the financial year  – four  Airbus A380s, and six  Boeing 777s — and has nine more to come before the end of the financial year. It also retired five older aircraft from its fleet with further four  to be returned by March 31.

Its  fleet stood at 264 aircraft, including freighters, at September 30, servicing a global network spanning  156 destinations in 84 countries.

Capacity as measured in available seat kilometres rose  by 3 per cent while revenue passenger kilometres rose by 5 per cent.

This saw the average load factor rise to 77.2 per cent compared with last year’s 75.3 per cent.

The airline said operating costs were up by 4 per cent while average fuel costs increased by 14 per cent, mainly due to the rise in oil prices.

Emirates is not alone in warning of second-half headwinds: Qantas and Singapore Airlines have also said they expect tough times to continue.

Nonetheless, the International Air Transport Association said initial financial data for the third quarter of 2017 indicated a healthy industry 16.3 per cent margin on earnings before interest and tax (EBIT), down only slightly on a year ago.

European carriers overtook their North American counterparts to post the widest profit margin as underlying industry-wide passenger yields remained stable after trending down between late 2014 and late 2016.

IATA attributed the rise in oil prices to signs OPEC-led production cuts could be extended until the end of 2018 and rising tensions between Saudi Arabia and Iran.