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Emirates’ performance proves it can withstand economic challenges, says GlobalData

Posted 15 November 2019 · Add Comment

Following the news that Dubai-based aviation company Emirates Group reported a profit of AED1.2bn ($320m) in the first half of its current fiscal year, which ends in March 2020.

 

Jennifer Aguinaldo, transport and technology editor at GlobalData, a leading data and analytics company, offers  her view by saying:

“The current fiscal year appears to offer better profitability prospects for Dubai-based Emirates Group, barring no major escalation in the region’s geopolitical landscape and a major misstep in international trade and foreign policies.

“The group’s net profit in the first half of fiscal year 2019-20 stood at AED1.2bn ($327m), which is 8% higher than the previous reporting period and equivalent to more than half (52%) of its total net profit in the previous entire fiscal year. Notably, the aviation group delivered this profit amid a challenging environment, which saw a 2% reduction in overall revenue of AED53.3bn.

“Operationally, the 45-day closure of one of Dubai International Airport’s two runways in the first half resulted in capacity and fleet reduction – 7% and 5%, respectively – which meant the airline carried fewer overall passengers during the period.

“‘Unfavourable currency movements’ wiped off AED1.2bn from the aviation group’s profit, which offset the AED2bn gains made from a 13% reduction in its total fuel bill due to lower jet fuel prices and reduced capacity.

“A major reshuffling in key commercial and senior management positions also took place during the first half. In early September, Emirates appointed Adel al-Redha, who has been with Emirates for 31 years as chief operating officer; Adnan Kazin as chief commercial officer; and Sheikh Majid al-Mualla as divisional senior vice-president of international affairs. Further reshuffles and appointments ensued, which resulted in 42 United Arab Emirates (UAE) nationals being appointed to key leadership roles by the end of the first half. 

“Nevertheless, completed renovation works on Dubai International’s southern runway and a busy holiday season in the second half point to a strong possibility that the aviation group could register a profitable full fiscal year. Indeed, despite competition and currency upheavals in certain regions, it is notable that Emirates carried 8% more passengers to its main hub in the first half, which means the tourism and recreation facilities in Dubai and the UAE will likely continue to draw visitors and tourists.

“On the downside, it is expected that geopolitical tensions will inevitably have some impact on business performance, with recent developments in Lebanon, Iraq and Syria pointing to a potential escalation. There will also be a 12-month wait-and-see period as the US heads to a presidential election, where increased unpredictability in policies towards the Middle East, particularly on Iran, will be closely watched.

“Such an environment will test how Emirates’ revamped leadership team will respond to ensure the group’s fiscal performance does not deteriorate.”

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