Complex Made Simple

What’s wrong with Emirates?

* Airline’s net profit down by 75 per cent

* Hit by strong dollar, competition and tough market conditions

* Group profit down 64 per cent to AED1.3bn


Dubai’s Emirates Airlines has just reported a 75 per cent decline in its first-half net profit.

The world’s largest carrier of international passengers made a net profit of AED786 million for the six months to September 30. This compares to AED3.1 billion in the same period a year earlier.

The airline has blamed the strong dollar and tougher competition in the market for the sinking profits.

“Our performance for the first half of the 2016-17 financial year continues to be impacted by the strong US dollar against other major currencies. Increased competition, as well as the sustained economic and political uncertainty in many parts of the world has added downward pressure on prices as well as dampened travel demand,” Sheikh Ahmed bin Saeed Al Maktoum, Chairman of Emirates Group said in a statement.

Emirate’s average passenger seat factor fell to 75.3 per cent in the first half from 78.3 per cent in the corresponding period in 2015.


Nigeria crisis

The airline said its performance was also impacted by currency devaluation and hard currency shortage in some African countries.

Emirates had suspended its four times weekly service between Dubai and Abuja, Nigeria, effective October 30 (Read more here). Foreign airlines flying to the African city are refueling abroad because jet fuel supplies there have become more expensive and scarce as the country battles a hard currency shortage.

These negative factors overshadowed a ten per cent fall in the average cost of fuel. Fuel costs accounted for 24 per cent of operating costs, down from 28 per cent a year earlier.

It s six-month revenue, including other operating income, was AED41.9bn, down 1 per cent compared with AED42.3bn recorded last year. The airline’s decision not to hedge on fuel costs, however, had boosted its earnings in the first half the 2015-16 fiscal year.


Bleak global economic outlook

Meanwhile, the half yearly net profits of the Emirates Group, the parent company of the airline, also fell by 64 per cent to AED1.3bn from last year’s AED3.7bn.

“The bleak global economic outlook appears to be the new norm, with no immediate resolution in sight,” Sheikh Ahmed said.

Revenue of the group, which includes airline services arm Dnata, was, however, up by one per cent to reach AED46.5bn.


Trump’s America

There are fears looming that Donald Trump’s victory in the presidential election would affect travel from the Middle East to the United States. In December last year, the Republican had called for a total shutdown of Muslims entering the US, which attracted sharp rebuke from many governments and business leaders across the globe and from the Arab world in particular.

 Read: Donald Trump wins US elections 2016: What it means for MENA

(With inputs from Reuters)