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Emirates Group Announces profitable 2019-20 results but cloudy skies ahead

Group revenue of $28.3 billion impacted by planned Dubai International airport (DXB) runway closure in Q1 and COVID-19 pandemic in Q4.

Emirates Group posted a profit of $456 million The Group’s total workforce remained nearly unchanged with 105,730 It'll probably be the last time we see profitability for a long while due to the COVID-19 pandemic

The 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.

Released today in its 2019-20 Annual Report, the Emirates Group posted a profit of AED 1.7 billion ($456 million) for the financial year ended 31 March 2020, down 28% from last year. The Group’s revenue reached AED 104.0 billion ($28.3 billion), a decline of 5% over last year’s results. The Group’s cash balance was AED 25.6 billion ($7.0 billion), up 15% 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 AED 500 million ($136 million) to the Investment Corporation of Dubai.

In 2019-20, the Group collectively invested AED 11.7 billion ($3.2 billion) in new aircraft and equipment, the acquisition of companies, modern facilities, the latest technologies, and employee initiatives,

Across its more than 120 subsidiaries, the Group’s total workforce remained nearly unchanged with 105,730 employees, representing over 160 different nationalities. 

Read: Emirates announces first passenger flights post suspension

Saj Ahmad, Chief AnalystStrategicAero Research told AMEinfo:

“Emirates annual results will probably be the last time we see profitability for a long while due to the ever-growing fall out as a result of the COVID-19 pandemic and some of that impact is bore out in the performance already.

“Notwithstanding theimpact of the 45-day runway upgrade last year at Dubai International Airport which led to a capacity reductions across its network, Emirates still churned out a profit of $288 million, a 21% rise on last years results even though there was a 6% decline in overall revenues. Helping Emirates’ overall financial performance is the collapse in oil pricing. Emirates reduced its fuel bill by 15% so that it now comprised 31% of its total capital outlay.

Read: The Emirates Group’s business response to COVID-19 includes no layoffs

“With 4% fewer passengers flown as a result of the runway modernisation, Emirates still managed to cater for over 56 million passengers by better utilisation of its A380 and 777-300ER fleets, alongside its ever-growing partnership with flydubai to mitigate the reduction of slot availability at Dubai International.

“Despite its robust group cash balance of $7bn, this will be ebbed away by refunds to passengers who cannot fly due to the pandemic causing flight cancellations. Emirates has managed to offset some revenue decimation by using its passenger 777-300ER fleet to support its SkyCargo operations, complementing its 777F fleet. But this will not be enough to avoid losses in the coming year. Every airline around the world its putting out eye-watering, if not blood-curdling losses as a direct results of  the pandemic totally destroying passenger demand and Emirates, like others, is not immune to this devastation.

“Emirates’ robust branding, loyalty and extensive passenger network will again be reinstated over time, but this will largely be paced by how quickly the global medical community can develop a COVID-19 vaccine or some sort of medicinal suppressant that will allow confidence for travellers to want to be able to fly again as well as regulatory requirements around pre-flight health checks and screening to ensure added safety wherever possible.

“Going forward, Emirates will have, like other airlines, very important product, strategy, marketing and positioning decisions to make. While every one of its massive Airbus A380s remain grounded, the first of whom whose leases expire this year, the airline will have to decide whether of not some of its early 2008 vintage examples ever resume service again. Add in to the mix the Premium Economy product that may be deferred, if not dropped altogether because of travellers losing incomes due to global job losses directly caused by the pandemic – will there be the same penchant for travel with disposable incomes under pressure?

Read: Emirates tops the 2020 Women’s Choice Brand Rankings in the UAE: YouGov

“On the plus side, Emirates does have good things to look forward to, despite the lack of any clarity about the global aviation scene today. Boeing has quietly been making rapid progress on the 777-9 flight test program as that airplane gears up for certification in 2021 with first delivery to Emirates. Its arrival next year will allow Emirates to reap even more fuel savings and environmental performance as the airline starts its strategic shift away from the ageing Airbus A380 fleet. The lower fuel pricing environment coupled with a fuel saving jet makes for a compelling asset when re-establishing its network.

“Add in the planned arrivals of the 787-9 and A350-900 which will allow Emirates to “right size” its city pairs with demand and align itself even better with partner flydubai, Emirates’ modernisation and revamp is under way, regardless of whether COVID-19 had happened or not. The real question now is just how long this fallout will last for and whether Emirates needs to seek more cash to ride out this storm because it doesn’t look like 2020 will be a good year for anyone in the industry. Managing the impact is critical and there’s no escaping the reality that Emirates, like other airlines is going to suffer some dire financial times within the next 12-18 months.”