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Emirates 2018-2019 report: Expert weighs in on 69% profit drop and challenges

Emirates has now witnessed its 31st year of profitability - even if at a decline. Challenges in the regional and international scene have had notable effects on the airline's performance.

Emirates reported a profit of $ 237 million, down 69% from the previous year Revenue increased by 6% to US$ 26.7 billion), supported by steady passenger and cargo performance Regional and international challenges like rising fuel prices and a strengthening dollar are putting pressure on airlines like Emirates

The Emirates Group today announced its 31st consecutive year of profit and steady business expansion. Profitability has taken a significant hit.  

Released today in its 2018-19 Annual Report, Emirates posted a profit of AED 871 million ($ 237 million) for the financial year ended 31 March 2019, 69% down from the previous year. 

However, the airline’s revenue increased by 6% to AED 97.9 billion ($ 26.7 billion), supported by steady passenger and cargo performance. 

“2018-19 has been tough, and our performance was not as strong as we would have liked,” Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group, said. “Higher oil prices and the strengthened US dollar eroded our earnings, even as competition intensified in our key markets.”

Emirates had “warned” regarding airline challenges in 2018-2019

Saj Ahmad, Chief Analyst at StrategicAero Research said that “the 69% fall in profits for the year comes as little surprise since Emirates has been warning for many months about the challenges it and other airlines face.” He also cites the strengthening US dollar causing unfavorable currency exchange for the airline. 

“With oil prices already up over 30% this year, Emirates’ first half performance for 2019-20 will be very challenging,” he continued. “Considering over a third of the airline’s total cost is now geared towards fuel, Emirates will no doubt look hard at whether hedging could be a strategy to employ in order to counteract fuel price escalation.”

As for passenger numbers, Ahmad explains that Emirates is not concerned with market share at the moment, focusing more on maintaining its profitability. 

“Despite revenue rising 6%, translating into 3% better yield on restrained capacity management, Emirates’ overall passenger growth remained steady-to-flat at 58.6m passengers. Capacity restraint aside, Emirates has managed to hike yields per seat as opposed to chasing passenger numbers that then may not have been profitably monetized, so you can see that the airline management team are keen to employ discipline and not go after market share at the expense of profits.”

Emirates faces its biggest-ever fuel bill

As per the report’s findings, Emirates remains the world’s largest international carrier. The airline moderately increased capacity during the year over 2017-18 by 3%, with a focus on yield improvement. 

During 2018-19, Emirates phased out 11 older aircraft, bringing its total fleet count to 270 at the end of March. 

Total operating costs increased by 8% over the 2017-18 financial year. The average price of jet fuel climbed by a further 22% during the financial year after last year’s 15% increase. Including a 3% higher uplift in line with capacity increase, the airline’s fuel bill increased substantially by 25% over last year to AED 30.8 billion (US$ 8.4 billion). This is the biggest-ever fuel bill for the airline, accounting for 32% of operating costs, compared to 28% in 2017-18. Fuel remained the biggest cost component for the airline.

During the year, Emirates raised AED 14.2 billion ($ 3.9 billion) to fund its fleet growth, using a combination of term loans, finance and operating leases.

Emirates closed the financial year with a healthy level of AED 17.0 billion ($ 4.6 billion) of cash assets.   

Revenue per region

Revenue generated from across Emirates’ six regions continues to be well balanced, with no region contributing more than 30% of overall revenues. 

Europe was the highest revenue contributing region with AED 28.3 billion ($ 7.7 billion), up 6% from 2017-18. East Asia and Australasia follows closely with AED 26.6 billion ($ 7.2 billion), up 5%. The Americas region recorded revenue growth at AED 14.5 billion ($ 3.9 billion), up 8%. Africa revenue increased by 9% to AED 10.2 billion ($ 2.8 billion), whereas Gulf and Middle East revenue decreased by 3% to AED 8.3 billion ($ 2.3 billion). West Asia and Indian Ocean revenue increased by 6% to AED 8.1 billion ($ 2.2 billion).