Emirates Group posts Dh1.7 billion profit for 2019-20
By Waheed Abbas
Published: Sun 10 May 2020, 10:18 AM
Last updated: Mon 11 May 2020, 4:45 PM
Emirates Group today announced its 32nd consecutive year of profit, against a drop in revenue mainly attributed to reduced operations during the planned DXB runway closure in the first quarter, and the impact of flight and travel restrictions due to the Covid-19 pandemic in the fourth quarter.
Emirates Group posted a profit of Dh1.7 billion ($456 million) for the financial year ended 31 March 2020, down 28 per cent from last year.
The Group's revenue reached Dh104 billion ($28.3 billion), a decline of 5 per cent over last year's results. The Group's cash balance was Dh25.6 billion ($7.0 billion), up 15 per cent from last year mainly due to a strong business performance up to February 2020 and lower fuel cost compared to previous year.
Due to the unprecedented business environment from the ongoing pandemic, and to protect the Group's liquidity position, the Group has not declared a dividend for this financial year after last year's dividend of Dh500 million ($136 million) to the Investment Corporation of Dubai.
Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group, said: "For the first 11 months of 2019-20, Emirates and dnata were performing strongly, and we were on track to deliver against our business targets. However, from mid-February things changed rapidly as the COVID-19 pandemic swept across the world, causing a sudden and tremendous drop in demand for international air travel as countries closed their borders and imposed stringent travel restrictions.
"Even without a pandemic, our industry has always been vulnerable to a multitude of external factors. In 2019-20, the further strengthening of the US dollar against major currencies eroded our profits to the tune of Dh1.0 billion, global airfreight demand remained soft for most of the year, and competition intensified in our key markets.
"Despite the challenges, Emirates and dnata delivered our 32nd consecutive year of profit, due to healthy demand for our award winning products and services, particularly in the second and third quarters of the year, combined with lower average fuel prices over the year.
"Every year we are tested on our agility and ability. While tackling the immediate challenges and taking advantage of opportunities that come our way, our decisions have always been guided by our long-term goal to build a profitable, sustainable, and responsible business based in Dubai."
In 2019-20, the Group collectively invested Dh11.7 billion ($3.2 billion) in new aircraft and equipment, the acquisition of companies, modern facilities, the latest technologies, and employee initiatives, a decrease following last year's record investment spend of Dh14.6 billion ($ 3.9 billion). It also continued to invest resources towards supporting communities, environmental initiatives, as well as incubator programmes that nurture talent and innovation to support future industry growth.
At the 2019 Dubai Air Show in November, Emirates placed a US$ 16 billion order for 50 A350 XWBs, and a $ 8.8 billion order for 30 Boeing 787 Dreamliner aircraft. With first deliveries expected in 2023, these new aircraft will add to Emirates' current fleet mix, and provide deployment flexibility within its long-haul hub model. In line with Emirates' long-standing strategy to operate a modern and efficient fleet, these new aircraft will also keep its fleet age well below the industry average.
dnata's key investments during the year included: the significant expansion of catering capabilities in North America with the opening of new operations in Vancouver, Houston, Boston, Los Angeles and San Francisco. dnata also completed the purchase of the remaining stake in Alpha LSG, to become sole shareholder of the UK's biggest inflight catering, on-board retail and logistics company.
Across its more than 120 subsidiaries, the Group's total workforce remained nearly unchanged with 105,730 employees, representing over 160 different nationalities.
Sheikh Ahmed said: "In 2019-20, we were steadfast with our cost discipline while investing to expand our business and revenues opportunities. Through ongoing reviews of our work structures and the implementation of new technology systems, we've improved productivity and retarded manpower cost increases. As the pandemic hit, we've taken all possible measures to protect our skilled workforce, and ensure the health and safety of our people and our customers. This will remain our top priority as we navigate a gradual return to operations in the coming months."
He concluded: "The Covid-19 pandemic will have a huge impact on our 2020-21 performance, with Emirates' passenger operations temporarily suspended since 25 March, and dnata's businesses similarly affected by the drying up of flight traffic and travel demand all around the world. We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption. We expect it will take 18 months at least, before travel demand returns to a semblance of normality. In the meantime, we are actively engaging with regulators and relevant stakeholders, as they work to define standards to ensure the health and safety of travellers and operators in a post-pandemic world. Emirates and dnata stand to reactivate our operations to serve our customers, as soon as circumstances allow."
Emirates AirlineEmirates' total passenger and cargo capacity declined by 8 per cent to 58.6 billion ATKMs at the end of 2019-20, due to the DXB runway closure capacity restrictions and Covid-19 impact with a complete suspension of passenger services as directed by the UAE government during March 2020.
Emirates received six new aircraft during the financial year, all A380s. During 2019-20, Emirates phased out six older aircraft comprising of four Boeing 777-300ERs, its last 777-300 and one Boeing 777 freighter leaving its total fleet count unchanged at 270 at the end of March. Emirates' average fleet age remains at a youthful 6.8 years.
It reinforces Emirates' strategy to operate a young and modern fleet, and live up to its "Fly Better" brand promise as modern aircraft are better for the environment, better for operations, and better for customers.
During the year, Emirates launched three new passenger routes: Porto (Portugal), Mexico City (Mexico) and Bangkok-Phnom Penh. It also supplemented its organic network growth with a new codeshare agreement signed with Spicejet that will provide Emirates customers with more connectivity options in India.
Additionally, Emirates expanded its global connectivity and customer proposition through interline agreements with: Vueling, adding connections to over 100 destinations around Europe via Barcelona, Madrid, Rome and Milan; with Turkish low-cost airline Pegasus Airline (PC), offering customers connections onto selected routes on PC's network; and with Interjet Airlines, opening new routes for passengers travelling between Mexico, the Gulf and Middle East and beyond.
Emirates also marked two years of successful strategic partnership with flydubai. Over 5.3 million passengers have benefitted from seamless connectivity on the Emirates and flydubai network since both Dubai-based airlines began their partnership in October 2017.
While Emirates recorded a very strong revenue performance during its 2nd and 3rd quarters of 2019-20, the DXB runway closure and Covid-19 crisis in the other quarters impacted its total revenue for the financial year with a decline of 6 per cent to Dh92.0 billion ($25.1 billion). The relative strengthening of the US dollar against currencies in many of Emirates' key markets had an Dh963 million ($262 million) negative impact to the airline's bottom line, a substantial increase compared to the previous year's negative currency impact of Dh572 million ($156 million).
Total operating costs decreased by 10 per cent over the 2018-19 financial year. The average price of jet fuel declined by 9 per cent during the financial year after last year's 22 per cent increase. Including a 6 per cent lower uplift in line with capacity reduction, the airline's fuel bill declined substantially by 15 per cent over last year to Dh26.3 billion ($7.2 billion) and accounted for 31 per cent of operating costs, compared to 32 per cent in 2018-19. Fuel remained the biggest cost component for the airline.
Despite continued strong competitive pressure and the unfavourable currency impact, the airline reported a profit of Dh1.1 billion ($ 288 million), an increase of 21 per cent over last year's results, and a profit margin of 1.1 per cent. Profit would have been higher without a loss of Dh1.1 billion ($ 299 million) due to fuel hedge ineffectiveness at year end.
Overall passenger traffic declined, as Emirates carried 56.2 million passengers (down 4 per cent). With seat capacity down by 6 per cent, the airline achieved a Passenger Seat Factor of 78.5 per cent. The positive development in passenger seat factor compared to last year's 76.8 per cent, reflects the airline's successful capacity management and positive travel demand across nearly all markets up until the outbreak of vod-19 in the last quarter.
An increase in market fares and a favourable route mix was completely offset by the strengthening of the US dollar against most currencies and left the passenger yield unchanged at 26.2 fils (7.1 US cents) per Revenue Passenger Kilometre (RPKM).
During the year, Emirates raised a total of Dh9.3 billion ($2.5 billion) in aircraft financing, funded through term loans.
Emirates secured Bpifrance (French Sovereign Export Credit Agency) Assurance Export backed financing that also combined a commercial loan tranche sourced from Korean investors for all six aircraft delivered in 2019-20.
As part of an initiative to reduce costs and benefit from the prevailing global rates environment, Emirates refinanced and repriced more than Dh5.5 billion ($ 1.5 billion) in 2019-20, resulting in estimated overall future cost savings in excess of Dh110 million ($ 30 million).
Emirates' management have taken several measures to protect the Group's cash flow through cost saving measures, reductions to discretionary capital expenditure, and engaging with our business partners in improving working capital. Additionally, we have partially drawn existing credit lines before 31 March, and are in the process of securing additional lines to further improve the liquidity buffer. In the last quarter of 2019-20, Emirates successfully raised additional liquidity through term loans, revolving credit and short term trade facilities to the tune of Dh4.4 billion ($ 1.2 billion). It will continue to tap the bank market for further liquidity in the first quarter of 2020-21 to provide a cushion against the impact of COVID-19 on the cash flows in the short term.
Emirates closed the financial year with a healthy level of Dh20.2 billion ($5.5 billion) of cash assets.
Revenue generated from across Emirates' six regions continues to be well balanced, with no region contributing more than 30 per cent of overall revenues. Europe was the highest revenue contributing region with Dh26.1 billion ($ 7.1 billion), down 8 per cent from 2018-19. East Asia and Australasia follows closely with Dh24.1 billion (US$ 6.6 billion), down 9 per cent. The Americas region recorded revenue growth at Dh14.6 billion (US$ 4.0 billion), up 1 per cent. West Asia and Indian Ocean revenue increased by 4 per cent to Dh9.8 billion (US$ 2.7 billion). Africa revenue decreased by 4 per cent to Dh8.7 billion (US$ 2.4 billion), whereas Gulf and Middle East revenue decreased by 8 per cent to Dh7.7 billion (US$ 2.1 billion).
Through the year, Emirates introduced product and service improvements on board, on the ground, and online. Highlights include: the launch of Emirates' first remote check-in terminal at Dubai's Port Rashid to provide smooth sea-air connections for cruise travellers; the launch of EmiratesRED, our revamped inflight retail offering; and innovative enhancements to the Emirates app as customers increasingly choose to interact with us via their mobile devices.
For frequent flyers, Emirates launched Skywards Exclusives which offers access to the airline's unique, money-can't-buy sponsorship experiences; and Skywards Everyday, a location based app that enables members to earn Skywards Miles at more than 1,000 retail, entertainment and dining outlets across the UAE.
Emirates SkyCargo continued to deliver a solid performance in a highly competitive market, contributing to 13 per cent of the airline's total transport revenue.
With the lingering weakness in air freight demand over most of the year, Emirates' cargo division reported a revenue of Dh11.2 billion (US$ 3.1 billion), a decrease of 14 per cent over last year.
Freight yield per Freight Tonne Kilometre (FTKM), after two consecutive years of growth, declined by 2 per cent, largely impacted by the reduction in fuel price, and a strong US dollar.
Tonnage carried decreased by 10 per cent to reach 2.4 million tonnes, due to the capacity reduction with the retirement of one Boeing 777 freighter and reduced available bellyhold capacity in the first and last quarters of the year. At the end of 2019-20, Emirates' SkyCargo's total freighter fleet stood at 11 Boeing 777Fs.
Emirates SkyCargo continued to develop innovative, bespoke products. In October, it launched Emirates Delivers, an e-commerce platform that helps individual customers and small businesses consolidate online purchases in the US and have them delivered in the UAE. More origin and destination markets are being planned in the future, leveraging Dubai as a hub for regional e-commerce fulfilment. During the year, Emirates Skycargo also strengthened its pharma capabilities with the opening of new facilities in Chicago and Copenhagen.
Emirates' hotels portfolio recorded revenue of Dh584 million (US$ 159 million), a decline of 13 per cent over last year with competition further on the rise in the UAE market impacting average room rates and occupancy levels.
DnataFor 2019-20, dnata recorded a sharp profit decline (57 per cent) to Dh618 million ($ 168 million). This includes a one-time gain from a transaction where dnata divested its minority stake in Accelya, an IT company that was acquired by Vista Equity Partners. Without this one-time transaction, dnata's profit would have been down 72 per cent compared to the same period last year, which included a one-time gain from the sale of dnata's stake in travel company HRG. Comparing profit performance without both disinvestment gains from Accelya and HRG, dnata's profit for 2019-20 would have been lower by 64 per cent compared to previous year.
dnata's total revenue grew to Dh14.8 billion ($ 4.0 billion), up 2 per cent. This reflects its continued business growth particularly in its Catering division, and strong customer retention and new contract wins across its four divisions. dnata's international business now accounts for 72 per cent of its revenue.
Laying the foundations for its future growth, dnata invested more than Dh800 million ($ 218 million) in acquisitions, new facilities and equipment, leading-edge technologies and people development during the year.
In 2019-20, dnata's operating costs increased by 8 per cent to Dh14.3 billion ($ 3.9 billion), in line with organic growth across its business divisions, coupled with integrating the newly acquired companies mainly across its catering division and international airport operations.
dnata's cash balance was Dh5.3 billion ($1.4 billion), an increase of 4 per cent. The business delivered an Dh1.4 billion ($ 380 million) cash flow from operating activities in 2019-20, which is in line with its enhanced cash balance and puts the business in a solid position to finance its investments.
Revenue from dnata's UAE Airport Operations, including ground and cargo handling remained steady at Dh3.2 billion ($864 million).
-waheedabbas@khaleejtimes.com