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Emirates profits plunge 82 per cent as Trump, terrorism hurt travel demand

Emirates Airline reported first decline in full-year profits in five years as Dubai-based carrier faced serious economic and political headwinds last year.

The airline’s profit attributable to the owner nosedived 82 per cent to AED1.3 billion for the 2016-2017 financial year ended March 31. It compares with AED7.1bn reported in the previous year.

Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and its parent company Emirates Group, said the 2016-17 was  one of the “most challenging years to date”.

“Over the years, we have invested to build our business capabilities and brand reputation. We now reap the benefits as these strong foundations have helped us to weather the destabilising events which have impacted travel demand during the year – from the Brexit vote to Europe’s immigration challenges and terror attacks, from the new policies impacting air travel into the US, to currency devaluation and funds repatriation issues in parts of Africa, and the continued knock-on effect of a sluggish oil and gas industry on business confidence and travel demand.”

Emirates said “the relentless rise” of the US dollar against currencies in most of the airline’s key markets had an AED2.1bn impact on revenues.

Nonetheless, the government-owned carrier’s revenues remained stable at AED85.1bn as it carried a record 56.1 million passengers, up 8 per cent from a 2015-16 period.

Cutting back

Last month, the airline said it was going reduce flights on five US routes from May citing a drop in demand after heightened restrictions imposed by President Donald Trump’s administration for travellers from Muslim-majority nations, with latest being that passengers cannot carry electronic devices into the main cabin.

Under the security measures announced that came into effect on March 25, electronics larger than a mobile phone will be banned from passenger cabins on direct flights to the US from airports in Cairo, Istanbul, Kuwait City, Doha, Casablanca, Amman, Riyadh, Jeddah, Dubai and Abu Dhabi.

Earlier, Trump also signed two executive orders to bar refugees and nationals of at least seven Muslim-majority countries in the MENA region from travelling to the US.

“The recent actions taken by the US government relating to the issuance of entry visas, heightened security vetting and restrictions on electronic devices in aircraft cabins have had a direct impact on consumer interest and demand for air travel into the US,” an Emirates spokeswoman then said.

“Over the past three months, we have seen a significant deterioration in the booking profiles on all our US routes, across all travel segments,” she added.

Emirates president Tim Clark, who called the ban disruptive, said last month that demand to the US had fallen by about a third since Trump’s orders.

Emirates, which now flies to 12 US destinations, said it was going to cut direct flights to Fort Lauderdale and Orlando to five a week in May from the one a day in April.

The airline was also planning to reduce its twice-daily flights to Seattle and Boston in June to one a day, with a similar frequency for Los Angeles from July.

After the cuts, the number of U.S.-bound flights from Dubai will drop to 101, down from 126 currently.

On Monday, the largest international airline in terms of passenger traffic announced that it will temporarily cut its daily non-stop service to New York’s JFK down to twice a day without citing reasons.

In a statement sent out to the media, the airline, which currently operates three flights to JFK, confirmed that the changes will take from June 4 until June 20, and will resume normal operations from July 1.

Demand flat

Reports have suggested that bookings to the US have drastically declined following the first travel ban in January,

Demand for travel to the US in the coming months has flattened, with flights to and from the Middle East the hardest hit, a study released by travel analysis company ForwardKeys showed in February.

No American carriers were affected by the ban, because none fly directly to the US from the airports covered under the ban.

Cautious optimism

Sheikh Ahmed Emirates and its sister firm dnata will stay attuned to the events and trends that impact their business, so that they can “respond quickly to opportunities and challenges.”

“We remain optimistic for the future of our industry, although we expect the year ahead to remain challenging with hyper competition squeezing airline yields, and volatility in many markets impacting travel flows and demand.