Emirates reports impressive profitable performance in tough year

Released today in the Group’s 2011-12 Annual Report the company posted a AED 2.3 billion (US$ 629 million) net profit, with dnata marking its highest ever profit in 52 years of operation.

Despite fundamental challenges, the Group’s revenue reached a record high, climbing to AED 67.4 billion (US$ 18.4 billion) an increase of 17.8 percent on last year’s results. The Group’s cash balance grew by 9.5 percent reaching a strong AED 17.6 billion (US$ 4.8 billion).

“Achieving our 24th consecutive year of profit and maintaining an upward growth trajectory is an achievement that belies the industry norm,’ said HH Sheikh Ahmed bin Saeed Al Maktoum, chairman and chief executive, of Emirates airline and Group.

“Throughout the 2011-12 financial year the Group has collectively invested close to AED 14 billion (US$ 3.8 billion) in new products. This investment has garnered new customers and increased our international presence. Successful business growth is not a matter of luck, it is the result of sustained and calculated investment. Every dirham that we earn is strategically ploughed back into our business and it is this foresight that has allowed the Group to maintain such strong and consistent profitability.”

Commenting on the results, industry analyst Saj Ahmad said: “"Like many airlines, Emirates profit fall of 72% is down largely to the $6.6bn fuel bill and that accounted for a 44% rise over its bill the same time a year ago. That said, Emirates still managed to produce a huge profit of over $409m - a figure many other airlines can only dream of in the climate that we have today.

 “Further, with 22 new airplanes inducted in the last year as well as a slew of new routes launched with rising capacity on other popular routes, Emirates increased not just revenue per passenger by almost eight percent while increasing yields by almost 2%, so clearly it is leveraging its strength to secure greater numbers of passengers across its network.”

Ahmad was positive about Emirates future prospects.

“While fuel costs will be a challenge again this year, Emirates can enjoy the fact that it has fuel saving Airbus A380s and Boeing 777-300ERs to be introduced to its fleet and as the airline expands, particularly across cash-rich cities in the USA like Dallas and Washington, they'll be able to further drive not just their revenue growth, but harness greater economies of scale through a more efficient distribution of their fleet on their network. That'll offset some of the expected price rises in fuel and perhaps suppress the immediate need for fuel surcharge increases.

“That said, Emirates performance and massive group revenue growth, augmented by its near $5bn cash balance puts the airline far and away in a better position than any other airline in the world. What cannot speak cannot lie - Emirates' financial strength is a force to be reckoned with," he said.

 In this morning’s results presentation it was disclosed that the group  had increased its overall staff count by more than 10 percent.

“Managing volatile exchange rates, coupled with our highest ever fuel bill has required immense tenacity. Retaining growth and remaining profitable in these challenging economic times shows our profound understanding of the markets that we do business in,” said Sheikh Ahmed.

Reaching a record profit, dnata stayed true to its proven acquisition strategy, gaining a majority stake in online travel agency, Travel Republic and a 50 percent interest in Wings Inflight Services in South Africa. Importantly the results for 2011-12 highlight that 55 percent of dnata’s revenue is derived from its international operations, an increase of 17 percentage points over last year

The airline said that in addition to the cost of fuel it had an operationally challenging year with the political unrest across the Middle East and North Africa affecting flight schedules. By keeping a tight focus on operations and modifying capacity and schedules Emirates was able to maintain profitability.

“In the last five years, Emirates’ capacity measured in Available Seat Kilometres (ASK), has increased by almost 100 percent facilitating new trade links and creating a new flow of passenger traffic. Being the first to capitalise on these new opportunities has allowed us to gain a distinct competitive advantage, one that we intend to maintain,” said Sheikh Ahmed. 

Highlighting its sound financials, Emirates launched its highly successful US$ 1 billion bond in June last year and despite many traditional financing partners suffering from the Eurozone debt crisis, the bond was well received by global investors reflecting confidence in the Emirates business model. In addition to this, Emirates repaid a Singapore Dollar 250 million bond in full that matured in June 2011. The bond, listed on the Singapore Stock Exchange, was originally issued in 2006 with a five year term.

“We move into the new financial year with cautious optimism, navigating our way through the difficult economic climate with a clear vision for our continued success. We understand that succeeding in this industry requires determination and we are unapologetic about our drive to be the best.”

“We are never complacent, always striving for perfection and always acutely aware that things can be done better. Customers’ expectations only get higher and it is up to us to ensure that we move upwards with them. With the help of our 63,000 strong multicultural workforce we have no doubt that the years ahead will again be more profitable than the last,” added Sheikh Ahmed.

Bucking the industry trend, the 2011-12 financial year has also been a strong one for Emirates SkyCargo with revenues of $ 2.6 billion - an 8.4 percent increase on last year on account of an increase in freight tonnage and freight yield per Freight Tonne Kilometre (FTKM) which rose by 5.4 percent.

With the bulk of the cargo industry reporting downward tonnage, Emirates SkyCargo’s tonnage increase of 1.7 percent reaching 1,796 thousand tonnes showcases its persistence to grow revenues against the industry norm.