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Emirates H1 profits fall to Dh827m
Revenue up 15%, but profits decline 75% as fuel costs soar
By Vicky Kapur

Published Thursday, November 03, 2011

Dubai-based Emirates airline reported net profits of Dh827 million ($225m) for the first six months of its current financial year ending September 30, 2011, the airline said in a media statement this morning.

This is 75 per cent down compared with a net profit of Dh3.4 billion ($925m) during the corresponding period last year. The airline continues to be the fastest growing airline in the world and continues to make a profit despite unstable global economic, geopolitical and environmental conditions, it said in the statement.

“Emirates remained focused on its long-term strategy despite global instability, ever climbing fuel prices which resulted in Emirates paying $1b more in fuel costs over the same period last year and fluctuating exchange rates,” said Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates airline and Group.

“The global challenges of the past six months have again put Emirates to the test, and once again we have risen to the challenge and continue to maintain our high standards of product and services,” he said in the statement.

Emirates’ revenue, including other operating income, of Dhs30.3 billion ($8.3 billion) was higher by 15 per cent compared with Dhs 26.4 billion (US$ 7.2 billion) recorded last year, largely reflecting improved passenger and cargo yields based on increased fuel prices.

“Emirates’ latest half-year performance is testament to the airline’s strong business foundations and tenacity to stay on course and continue to grow despite the unsteady marketplace,” he added. “We have continued to invest in our eco-efficient aircraft fleet; in strengthening our global route network; and also in supporting the infrastructure for our growing business and it continues to pay off.”

Emirates remains on its strong growth trajectory which over the past seven years has seen the airline grow from a fleet of 60 aircraft, in 2004, to its current 161 wide-bodied aircraft including, the largest fleet of A380s with 17 and the largest fleet of Boeing 777s with 93. In addition, the company’s revenue has increased steadily by 20 per cent per annum over the same time period resulting in a record 23 years of profitability, unmatched by any other airline.

Since 2004, when Emirates acquired its first long-haul wide-body aircraft, allowing for much broader global expansion, the airline has opened 39 new outstations and now flies to 115 destinations in 67 countries. Emirates continues to expand its global footprint, having launched Geneva, Copenhagen and St. Petersburg since April 2011 and will continue with eight additional new route launches including Baghdad on 13 November and Rio de Janeiro, Buenos Aires, Harare, Lusaka, Dallas, Seattle and Dublin in early 2012.

In the first-half of its financial year 2011-12, Emirates posted strong business growth, both in terms of capacity on offer and traffic carried, performance that has been in stark contrast to the current trend seen across the aviation industry.

Capacity measured in Available Seat Kilometres (ASKM), grew by 8.2 per cent, whilst passenger traffic carried measured in Revenue Passenger Kilometres (RPKM) was up 5.7 per cent with Passenger Seat Factor sustained at a high level, averaging 79.3 per cent despite the growth in capacity, slightly below last year’s record for a six month reporting period of 81.2 per cent. The volume of cargo uplifted was in line with last year.

Emirates’ cash position on September 30 remained strong with Dh13.8 billion ($3.8bn), compared to Dh14 billion ($3.8bn) on March 31, 2011. Maintaining this cash balance was achieved after settling capital outflows of more than Dh4 billion, primarily towards aircraft pre-delivery payments’, other aircraft assets and repayment of bond financing. During the first half, the airline has also successfully raised financing of $1bon through the issue of a new bond, as well as financing ten new aircraft deliveries, reflecting strong investor confidence in Emirates business model and financial performance.

Emirates' current fleet size is 161 aircraft. Since the beginning of its current financial year, the airline has received delivery of ten new wide body aircraft, with another 13 new aircraft scheduled to be delivered before the end of the financial year (31 March 2012).

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Global uncertainties will not dent Emirates’ growth path

Friday, Nov 04, 2011

Gulf News

Dubai Global uncertainities will not deter Emirates from its ambitious growth path, a top official said, as the world’s biggest carrier of international passengers experienced a 76 per cent decline in first half profits.

Emirates, the biggest operator of the Airbus A380, yesterday reported a net profit of Dh827 million ($225 million) on Dh30.3 billion revenues, for the first six months of its current financial year ending September 30.

Higher jet fuel prices cost the airline an additional Dh3.67 billion, wiping out most of its profits as the global aviation industry struggles to cope with high oil prices.

“Emirates remained focused on its long-term strategy despite global instability, ever-climbing fuel prices which resulted in Emirates paying $1 billion more in fuel costs over the same period last year and fluctuating exchange rates,” Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman and Chief Executive of Emirates airline and Group, said in a statement.

“The global challenges of the past six months have again put Emirates to the test, and once again we have risen to the challenge and continue to maintain our high standards of product and services.

“Emirates’ latest half-year performance is testament to the airline’s strong business foundations and tenacity to stay on course and continue to grow despite the unsteady marketplace,” he added.

“We have continued to invest in our eco-efficient aircraft fleet; in strengthening our global route network; and also in supporting the infrastructure for our growing business and it continues to pay off.”

UK-based aviation analyst Saj Ahmad said, “The decline in first-half profits is no doubt a reflection of both the effects of regional change and also because of the growth in competition. Not only does Emirates have flydubai on its doorstep, it has a growing Qatar Airways and Etihad Airways to contend with and all four of these major players, alongside other rivals like Jazeera Airways and Air Arabia are ebbing into the finite demand pool that everyone wants a slice of.”

The global economic slump, especially the latest round of crises in the Eurozone and the US is dampening the global travel market.

Profitability

The twin crises could reduce the airline industry’s profitability from $6.9 billion this year to $4.9 billion in 2012, the International Air Transport Association (IATA) said recently.

“Given the strong headwinds of high oil prices and economic uncertainty, remaining in the black is a great achievement,” Tony Tyler, IATA Director General and CEO, said.

Saj Ahmad said, “Given what’s happened economically in Europe and the US, Emirates’ first half figures should not be seen as a sign of weakness or long-term trend. There is a very good chance that the second half of the year will see big gains for them and there’s no reason why they can’t emulate last year’s record profits, which again was against a similar backdrop of what we see today.”

Emirates’ cash position on September 30 slightly declined, although remained strong with Dh13.8 billion, compared to Dh14.0 billion last March 31.

“Maintaining this cash balance was achieved after settling capital outflows of more than Dh4 billion, primarily towards aircraft pre-delivery payments, other aircraft assets and repayment of bond financing,” Emirates said.

During the first half, the airline also successfully raised financing of $1 billion through the issue of a new bond, and financed ten aircraft deliveries, reflecting strong investor confidence in Emirates’ business model and financial performance.

“Emirates revenue, including other operating income, grew 15 per cent to Dh30.3 billion, compared with Dh26.4 billion recorded last year, largely reflecting improved passenger and cargo yields based on increased fuel prices,” the airline said in a statement.

New aircraft

Emirates’ current fleet is 161 aircraft. Since the beginning of its current financial year, the airline has taken delivery of 10 new wide body aircraft, with another 13 aircraft scheduled to be delivered before the end of the financial year next March 31.

“The airline continues to be the fastest-growing airline in the world and continues to make a profit despite unstable global economic, geopolitical and environmental conditions,” the airline said.

Emirates remains on its strong growth trajectory which over the past seven years has seen it grow from a fleet of 60 aircraft in 2004 to its current 161 wide-bodied aircraft including the largest fleet of A380s with 17 and the largest fleet of Boeing 777s with 93.

In addition, the company’s revenue has increased steadily by 20 per cent per annum, resulting in a record 23 years of profitability, unmatched by any other airline.

In the first half of its financial year 2011-12, Emirates posted strong business growth, both in terms of capacity on offer and traffic carried, performance that has been in stark contrast to the current trend seen across the aviation industry.

Capacity measured in available seat kilometres (ASKM), grew by 8.2 per cent, while passenger traffic carried measured in revenue passenger kilometres (RPKM) was up 5.7 per cent with passenger seat factor sustained at a high level, averaging 79.3 per cent despite the growth in capacity, slightly below last year’s record for a six month reporting period of 81.2 per cent.

By Saifur Rahman?Business Editor

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Emirates Sticking With Superjumbo Splurge After Profit Drops 76%
By Tamara Walid and Robert Fenner - Nov 3, 2011 Singapore Airlines Ltd. (SIA), the second- largest carrier by market value, and Emirates, the world leader on international routes, reported tumbling earnings after fuel costs climbed and the economy hurt occupancy levels.

Net income at Emirates dropped 76 percent to 827 million dirhams ($225 million) in the six months ended Sept. 30 after a $1 billion surge in fuel costs without which earnings would have been “pushing 5 billion dirhams,” President Tim Clark said in an interview. Singapore Air’s second-quarter profit slumped 49 percent to S$194 million ($152 million), it said in a statement.

Industrywide earnings will fall by more than half this year and 40 percent in 2012 as a global slowdown hurts bookings, the International Air Transport Association predicts. Pressure on profit is being exacerbated by kerosene prices that averaged $125.78 a barrel in the second quarter in Singapore trading, versus $86.65 a year earlier, according to Bloomberg data.

“The underlying problem is this artificially, speculatively driven oil price which bears no resemblance to the true reality of where it should be,” Clark at Emirates said. “I don’t know where that money’s gone, but we made somebody rich.”

Advance bookings are showing “signs of weakness,” especially in Europe and the U.S., as economic uncertainty damps demand, Singapore Air said. Three-month load factors, a measure of occupancy, slid 1.9 percentage points to 77.5 percent as it lifted capacity 6.3 percent and traffic rose only 3.8 percent.

Arab Spring, Earthquake
Emirates added 8.2 percent more seating in the six months, faster than the 5.7 percent gain in traffic, pushing the load factor down to 79.3 percent from a record 81.2 percent a year earlier, it said in a statement.

In addition to fuel costs and a slowing economy, the “Arab Spring” political uprisings also hurt demand in Libya, Egypt, Tunisia and Yemen, while Japanese traffic was subdued after the earthquake and tsunami earlier in the year, Clark said by phone.

Fluctuating exchange rates also clipped earnings, and the airline added 3,400 more staff. Cargo volumes were flat, and though sales rose 16 percent to 29.9 billion dirhams, much of the gain came in surcharges used to pass on some kerosene costs.

Emirates has succeeded in growing its business by adding aircraft and routes while maintaining healthy load factors and ticket prices, “all to have that removed from the bottom line because of fuel,” Clark said. “We were of the opinion that we could manage the business without being over exposed to over- hedging and getting involved in too many derivatives,” he added.

Volatile Pricing
While Singapore Air said today that forward prices for jet fuel “remain high and volatile,” carriers should count themselves fortunate to be avoiding losses in the current environment, aviation analyst John Strickland said.

“They’re still producing profits when many airlines are struggling, and that in itself is a positive thing,” said Strickland of London-based JLS Consulting Ltd.

The slump comes as Emirates builds the largest fleet of Airbus SAS A380s in a drive to establish Dubai as a long-haul travel hub and win passengers from Air France-KLM (AF) Group and Deutsche Lufthansa AG. (LHA) Clark said he’ll stick with the strategy.

Emirates has 90 superjumbos, with 17 in service at the end of October, and is targeting a total of 120. The overall fleet features 161 Airbus and Boeing jets, including 10 planes delivered this fiscal year, with around 190 on order worth in excess of $60 billion, 13 of which are due by March 31.

The carrier has commenced routes to Geneva, Copenhagen and St. Petersburg, Russia, since April and will add eight more in the next few months, flying to Baghdad from Nov. 13 and Rio De Janeiro, Buenos Aires, Dallas, Seattle, Dublin and Lusaka in Zambia and Harare in Zimbabwe starting in early 2012.

“There will be good years and bad years, but we’ll continue our plan to grow,” Clark said. “Our cash remains positive, so we’re able to finance our aircraft. The real inhibitor is fuel. Everything else we seem to be managing.”

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