What's Causing Emirates' Profits To Fall By 75%?

Revenue: AED46.5 billion (USD12.7 billion), +1% year-on-year;

Emirates: AED41.9 billion (USD11.4 billion), -1%;
dnata: AED6.0 billion (USD1.6 billion), +14%;

Profit: AED1.3 billion (USD364 million), -64%;

Emirates: AED786 million (USD214 million), -75%;
dnata: AED549 million (USD150 million), -1%;

Passenger numbers: 28.0 million, +9%;
Passenger load factor: 75.3%, -3.0 ppts

Capacity is up 9% -- while load factors are down three percentage points and total revenue is down 1%.

That tells me they are over expanding. They have way more capacity than they did a year ago but they couldn't fill as many seats on each flight -- and they had to heavily discount the seats they did fill, so even with a huge expansion in capacity and correspondingly higher operating costs, they got no incremental revenue. In fact revenue actually went down a bit.

I know there is some room for revenue to go down at airlines given how low fuel prices are -- but plummeting load factors with massive capacity expansion is not healthy. And the fact that they just make excuses for themselves, blaming currency, is not a good sign either. What they're really saying is they were planning for explosive growth -- but that didn't materialize.

Emirates will probably be fine since the government will just quietly "loan" then more money (I.e., bail them out). But from a financial perspective these are not numbers you would see at a healthy, well-run airline. Looks like a typical state-run, inefficient operation frittering away money in the speculative hope that massive spending will eventually lead to revenue growth.

I agree with Lucky that the U.S. government should not intervene, but I can see why U.S. airlines are pissed about irresponsible competitors like this. No one can make money if a few airlines are willing to spend like crazy because a bail out is always just a phone call away.

Lot of airlines around the world are subsidized to provide air services to their citizens, developed countries did long back and developing countries doing it now.

But ME3 subsidies are used to take down competition. Reason why US3 are OK with other subsidies and NOT OK with ME3 subsidies.

Air India is eating into Emirates' loads. AI intl flights have improved their load factors significantly meanwhile..

Financing goes on the cash flow statement, not on the income statement which in English means financing costs have nothing to do with profitability.

"The Gulf carriers are largely responsible for the challenging environment that traditional airlines around the world are facing, due to the increased competition they’ve provided."

Worded as if we are supposed to feel bad for the "traditional airlines". And btw, wth is a "traditional airline" anyways?

Emirates has way too many A380s, and not enough A350's and 787's to match properly match seats with demand. As it now stands, they need to whore out the back of the plane at or near cost just to pay the operating costs. When I was at NW, it was our intention to retire the entire 747-400 fleet (16 planes at the time) and replace them with smaller 787s. We could fill the 747s, but only at prices that did not generate a reasonable return on the investment. Flying the flag is the major concern for the ME3; not revenue management. They're good airlines, but they're not efficiently run companies with public stockholders to answer to.

Maybe they don't make as much money from their first class now that Alaska will barely sell their awards at the actual rates. I would like to see what the average occupation in first is since that day compared to before.

I used to be a very loyal Emirates customer out of Switzerland, but Qatar and Etihad have now consistently offered significantly better rates to key destinations in Business Class, so I booked my last few travels and two upcoming travels with them. The ME3 are first and foremost now outcompeting themselves in key locations, which hurts them but of course also continues to hurt (ex-ZRH) also SWISS, Singapore Airlines and Cathay eastbound.

Agree with Frank in 60's and 70's most of the national airlines were subsdized by their government to provide air service to their citizens .