Emirates posts new record profits
April 30, 2008, Dubai, UAE - The Emirates Group today reported its 20th consecutive year of net profit, notching a new profit record despite soaring oil prices and challenging business conditions.
April 30, 2008 By Carey Fredericks
April 30, 2008, Dubai, UAE – The Emirates Group today reported its 20th consecutive year of net profit, notching a new profit record despite soaring oil prices and challenging business conditions in the second half of its 2007-08 fiscal year.
Group net profits increased 54.1 percent to US$ 1.45 billion for the financial year ending March 31st, 2008, on revenues of US$ 11.2 billion compared to the previous year’s $ 8.5 billion. The Group net margin improved to 13.2 percent from 11.4 percent in the previous year.
The Group also retained a robust cash balance of US$ 3.8 billion, compared with US$ 3.5 billion the previous year. Emirates will pay a dividend of US$ 272.5 million to its owner, the Government of Dubai. In 2007-08, the Group estimates a direct contribution of US$ 6 billion, and another US$ 6.8 billion in indirect contribution to the UAE economy.
The 2007-08 Annual Report of the Emirates Group – comprising Emirates Airline, Dnata and subsidiary companies – was released in Dubai today at a news conference hosted by His Highness Sheikh Ahmed bin Saeed Al-Maktoum, Chairman and Chief Executive, Emirates Airline and Group.
The Group’s latest record performance reflects its success in growing customer demand through the strategic expansion of its business operations across six continents, supported by ongoing investments in the latest technology, products and customer service while keeping a tight rein on costs. This is illustrated by the 21.2 million passengers who flew with Emirates in the latest financial year, which is 3.7 million more than in the previous year. In addition, Dnata’s international ground handling operations expanded to 17 airports in seven countries.
Sheikh Ahmed said: “It was another record year for the Group in spite of a challenging business climate, particularly in the second six months where the soaring cost of jet fuel made a big dent, although the impact was partly offset by other operating gains.
“Despite the long-term forecast of a decrease in the number of passengers traveling in First and Business class, I am happy to report that Emirates once again bucked the trend and boosted our seat factor in the forward cabins. Emirates is fortunate to be located in Dubai at the center of the new Silk Road between East and West. I believe the threat of an economic downturn will be offset for Emirates by the boom in the Middle East, especially the thriving travel industry of tourism and commerce.”
Fuel costs remained the top expenditure for the 4th year running, accounting for 30.6 percent of total operating costs compared with 29.1 percent the previous year and 27.2 percent the year before.
The airline’s fuel risk management program continued to reap rewards, saving the company US$ 242 million in 2007-08, as WTI crude oil prices hovered around the US$ 90 per barrel mark in the second half of the fiscal year, 50 percent more than US$ 60 per barrel in the same period the year before. In total, the fuel risk management has saved in excess of US$ 1 billion since the financial year 2000-01.
In his opening review in the 2007-08 Annual Report, Sheikh Ahmed highlighted some major milestones for the Group which included the move of most of the company’s Dubai-based staff to the new Emirates Group Headquarters; the launch of 11 new passenger and freighter destinations across the globe including Emirates’ first South American destination; and the massive 2007 Dubai Air Show aircraft order which has been described as the largest in civil aviation history worth US$ 34.9 billion at list prices.
He also noted that the continued ability to attract and retain the best talent for the company’s growing requirements will be one of the Group’s biggest challenges.
He said: “As we plan for the next decade, our biggest challenges will be to find more pilots, engineers, cabin crew and skilled staff across our various business units. Fortunately, Emirates has thus far been a strong employer brand, with more than three million unique visitors browsing job opportunities on our online recruitment website last year, from which we received over 288,000 applications for positions within the Group. Being based in Dubai also has its advantages as the city itself is already preparing to welcome 15 million visitors by 2010 and there is massive investment in infrastructure to serve and attract the increasing number of expatriates.”
He also reiterated the Emirates Group’s support for Dubai’s new low cost airline which has been established as a separate entity from the Emirates Group; and remarked on competition in the region, saying: “This is a big cake and admittedly, Emirates has a big slice of it, but there is plenty for the other airlines and we welcome them to the region.”
Sheikh Ahmed concluded: “The Group’s excellent performance this year is very satisfactory. As with previous years, we do not intend to rest on our laurels. We plan to secure our future growth by investing in the latest technology and products, so that we can continue to provide our customers with the high quality experience that they have come to expect from us.”
Emirates Airline’s revenues totaled US$ 10.8 billion, an increase of 32.3 percent from US$ 8.1 billion the previous year. Airline profits of US$ 1.37 billion marked a 62.1 percent increase over 2006-07’s record profits of US$ 844 million.
This result was due to improved yields and higher load factors on increased capacity, as well as other operating gains.
In 2007-08, the airline’s fleet expanded with 11 new Boeing 777s delivered, including Emirates’ first 777-200LR passenger aircraft. At the end of the financial year Emirates’ fleet reached 114 aircraft, including 10 freighters, boasting an average age of 67 months – one of the youngest commercial fleets in the skies.
The record aircraft order at the 2007 Dubai Air Show brings Emirates’ total order book, excluding options, to 182 aircraft at the end of March 2008, worth approximately US$ 58 billion.
During the year, the airline launched passenger services to seven new destinations – Houston, Newcastle, Venice, Sao Paulo, Ahmedabad, Toronto, and Cape Town – and strengthened its existing network by adding services onto existing routes most notably to high-demand cities in China, India, Middle East and Africa.
In the United States, Emirates currently operates two daily non-stop flights from New York’s JFK, the above-mentioned daily flight from Houston, and is set to start service from Los Angeles on September 1st and from San Francisco on October 26th.
Passenger seat factor increased to 79.8 percent from 76.2 percent the previous year. Traffic increased faster by 16.6 percent to 14,739 million tonne kilometers as compared to the capacity increase of 13.7 percent to 22,078 million tonne kilometers. While yield improved for the sixth consecutive year to 64 US cents per RTKM (Revenue Tonne Kilometre), up from 59 US cents in 2006-07; high jet fuel prices and rising costs drove breakeven load factor up to 62.7 percent from 59.9 percent last year.
Emirates continued to enhance its products in the air and on the ground, completing the refurbishment of four Boeing 777 classic aircraft with its new First, Business and Economy Class seats, as well as the latest ice in-flight entertainment system with 1,000 channels on-demand.
On the ground, chauffeur drive services were expanded to operate in about 40 destinations – including the first offline city in Lugano, Switzerland, and in Venice where an innovative adaptation saw luxury powerboats used for the airport transfers. Emirates also continued to develop its dedicated lounge product around its network, launching its latest in Brisbane that offers stunning 360 degree views and is the first in Australia capable of boarding passengers directly from lounge to the aircraft, including to the upper deck of an A380.
Skywards, Emirates’ frequent flyer program, welcomed its 3.4 millionth member over the course of the year. It also launched The Emirates High Street, an exclusive mail-order catalogue where Skywards Miles or credit card payment may be used to purchase unique items from a wide range of upmarket merchandise.
The airline’s internet and e-commerce gateway, www.emirates.com, was redesigned and launched across 76 different sites in 10 languages, offering improved online booking features and a more user-friendly experience.
Emirates SkyCargo performed well in what was a turbulent year for the air cargo industry, marking healthy revenue and tonnage carried despite high fuel prices, a U.S. slowdown from the sub-prime crisis, and bad weather affecting agricultural production in key areas. The division carried 1.4 million tons of cargo, an improvement of 10.9 percent over the previous year’s 1.3 million tons and recorded a revenue increase of 20 percent to US$ 1.8 billion, up from US$ 1.5 billion in 2006-07.
Cargo revenue contributed 19 percent to the airline’s total transport revenue, yet again one of the highest contributions of any airline in the world with a similar fleet. During the year, Emirates SkyCargo introduced freighter-only destinations to Toledo, Ohio, Djibouti, Hahn, Germany, and Zaragoza, Spain. At the end of the financial year, the freighter fleet was 10 aircraft – five leased and five owned. In all, Emirates SkyCargo carried freight in 114 aircraft, including bellyhold space in the passenger fleet, to 99 cities on six continents.
The Destination & Leisure Management division of Emirates Airline had another profitable year, reaching sales of US$ 382 million, bettering its 2006-07 performance by 22 percent. Arabian Adventures and Emirates Holidays cared for a total of 397,000 tourists, an eight percent increase. Arabian Adventures also played host to 297,000 visitors to Dubai over the year, up 13 percent from 2006-07.
Emirates Hotels & Resorts expanded from its original Al Maha property into a multi-property hotel operation with International Central Reservations, a Corporate Sales and Business Development unit, global online distribution systems and support services for the design and development of its growing resort portfolio.
The Harbour Hotel and Residence in Dubai Marina opened its doors in November 2007, quickly earning a reputation for quality and increasing occupancy to 85 percent within three months. Al Maha retained its position as one of the world’s most successful small luxury resorts, recording an average occupancy rate of 78 percent.
Operations geared up for the opening in May 2008 of Emirates Hotels & Resorts’ luxury Green Lakes Serviced Apartments; and construction began on the conservation-based Wolgan Valley Resort & Spa in Australia’s Blue Mountains, scheduled to open at the end of 2009; and Seychelles’ Cap Ternay Resort & Spa entered the detailed design phases for its late 2010 opening.
Dnata recorded strong revenue growth of 27.2 percent to US$ 718 million, compared with US$ 565 million the previous year. Profits reached US$ 83 million despite a challenging year for airport and cargo operations with ongoing construction at Dubai airport and peak traffic congestion.
As Dnata moves into its 50th year of operation in 2008, it remains at the core of Dubai’s rapid traffic growth, handling 119,510 aircraft (up nine percent), 35.6 million passengers (up 18.4 percent), and 697,265 tons of cargo (up 18.2 percent).
During 2007-08, Dnata continued to expand its international ground handling operations, investing in ground handling businesses in Switzerland, Australia and China, to bring its reach to 17 airports in seven countries. It opened FreightGate-5 in Dubai Airport Freezone to handle premium freight, and also saw operations at Dubai Terminal 2 increased with the opening of a 37,000 square foot extension that will serve 700 more flights per week and an annual throughput of approximately 5 million passengers.
Through investments in staff, technology and marketing, Dnata Travel Services continued to win new retail and corporate customers to report revenue growth of 26 percent. It expanded its retail presence across the UAE with seven new outlets including a one-stop travel shop in Abu Dhabi, extended its successful Holiday Lounge concept to new locations across Dubai, signed new GSA representation contracts, and broadened its portfolio of travel products services with innovative new offerings such as Camel Polo by Gulf Ventures.
In all, the Emirates Group’s Facilities/Projects Management department commissioned and opened US$ 578 million worth of new buildings during 2007-08, including the impressive new Emirates Group Headquarters, the Engineering Centre, Dnata Cargo’s Free Zone Logistics Centre, The Harbour Hotel & Residence, and a new crew training college. Projects currently in progress total US$ 1.1 billion, including new buildings in Dubai such as the Destination & Leisure Management Annexe, Emirates Call Centre and staff accommodation at Ras Al Khor, Al Majan and Media City.
As of March 31st, 2008, the Group employed 35,286 staff, representing 145 different nationalities. During the year, the Group hired more than 7,000 people including some 2,000 cabin crew and 400 new flight deck crew.
For the full Report and Accounts, visit: www.ekgroup.com
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Emirates currently serves 100 cities around the globe with a young and technologically advanced fleet of wide-body aircraft that are equipped with industry-leading comforts in the air. Operations on Emirates from New York and Houston connect America to the world through the airline’s route network with extensive connections to the Far East, Australia and Africa. On September 1st, Emirates will introduce service to the West Coast with a non-stop flight from Los Angeles, followed by introduction of service from San Francisco on October 26th. For more information, visit www.emirates.com/usa <http://www.emirates.com/usa/ohttp:/www.emirates.com/usa> .