Emirates airline has reported profits of Dh871m ($237m) in the 2018-2019 financial year compared to Dh2,796 in the prior financial year. Revenue grew by 6% to Dh97.9bn.
Costs, specifically fuel costs and currency volatility, reduced profitability and the airline’s profit margin significantly.
Total operating costs increased mainly due to the sharp 22% upswing in jet fuel prices, on top of last year’s 15% surge. Fuel now forms 32% of Emirates operating costs, while the airline was also negatively impacted by the strengthening of the US dollar to the tune of Dh572 million, a swing of Dh1.2 billion from the previous year
“2018-19 has been tough, and our performance was not as strong as we would have liked,” Sheikh Ahmed bin Saeed Al Maktoum, chief executive of Emirates Group, said in a statement. “Higher oil prices and the strengthened US dollar eroded our earnings, even as competition intensified in our key markets . . . and we also saw travel demand weaken, particularly in our region.”
Emirates increased passenger capacity by 3.6%, with available seat kilometres (ASKMs) reaching 390.8bn (2017-18: 377.1bn). The seat factor, although reducing slightly, stayed strong at 76.8% (2017-18: 77.5%). Emirates served a record 58.6 million passengers during the financial year. Passenger traffic measured in revenue per kilometer (RPKM) increased by 2.7% and the yield at DH26.2 fils per RPKM (2017-18: Dh25.4 fils per RPKM) improved by 3.1%. These factors contributed to a 5.8% growth in passenger revenue (including excess baggage) to Dh79.0bn (2017-18: Dh74.7bn).
Emirates stated that it remains a string believe in the A380 programme, despite Airbus’ decision to stop production in 2021, and it continues to invest in the aircraft with the introduction of Premium Economy in 2020. Emirates will receive 14 more A380s from 2019 until the end of 2021, taking the total A380 fleet to 123 aircraft.
In 2018-19, Emirates received 13 new aircraft – seven A380s and six Boeing 777-300ERs – and retired 11 older aircraft, bringing the fleet count to 270 on 31 March 2019. In 2019-20, Emirates plans to receive six A380s and retire eight Boeing 777s.
During the financial year, Emirates raised a total of Dh14.2bn (2017-18: Dh18.7bn) in aircraft financing (largely through a combination of term loans, finance and operating leases). The airline states that it has committed offers in hand to finance all six A380s to be delivered in the forthcoming financial year.
As Export Credit Agency (ECA) support was reinstated for Airbus deliveries, Emirates devised an innovative finance lease structure to combine the traditional export lease debt with junior debt from Korean investors to finance two A380 deliveries in the year.
Testament to the increasing depth of the Japanese structured financing market for Emirates, all six Boeing 777-300ER aircraft delivered were financed via a Japanese Operating Lease with a Call Option (JOLCO) raising funding of more than $1bn during the year. Emirates has now raised over $7.6bn from the Japanese structured financing market since 2014.
Emirates also funded two A380s delivered in the financial year through a $600 million corporate Sukuk issued in March 2018.
The airline also successfully refinanced and termed out a commercial bridge facility (initially put in place due to non-availability of ECA cover) of Dh3.8 bn ($1.0bn) via a novel hybrid finance lease structure for five A380 aircraft delivered last year. By maintaining access to an institutional investor and bank market base from Korea, Germany, the United Kingdom and the Middle East, Emirates continued to use this structure for a further two A380 aircraft delivered in the current financial year.