Emirates Reports $237 Million Profit (Down 69%)

In March Etihad reported their awful financial results from last year, as the airline lost $1.28 billion, bringing their losses over the past three years to nearly $5 billion. The worst part is that this came after Etihad already engaged in a significant cost cutting program, which shows you just how much work they have ahead of them.

Well, today Emirates has revealed their financial results for the past financial year, ending March 31, 2019. They did much better than Etihad.

Emirates reports $237 million profit

I’m going to be sticking solely to Emirates results here, rather than results from Emirates Group, which includes dnata (their airport services provider). Emirates reported a $237 million profit this past year:

• Emirates profits are down 69% compared to the previous year
• The $237 million profit represents a 0.9% profit margin

Emirates A380

Why Emirates profits decreased

Emirates attributes the decreased profits to the following:

• Stiff competition across key markets
• Unfavorable currency impacts, as the USD strengthened relative to many of Emirates’ key markets, which they estimate cost them $156 million; interestingly the previous year Emirates estimates a $180 million positive impact from currency fluctuation
• Increased fuel costs, as the average price of jet fuel increased by 22%, after increasing by 15% the year prior; Emirates’ fuel bill for the year was $8.4 billion, which accounts for 32% of their operating costs

Emirates’ new 777-300ER first class

Key figures of Emirates’ performance

Let’s look at a few other key figures for Emirates for this past year:

• Revenue increased by 6%, to $26.7 billion
• Seat capacity increased by 4%
• Emirates increased their fleet by a net of two planes, as they took delivery of 13 planes (seven A380s and six 777-300ERs) and retired 11 planes
• The average fleet age of Emirates’ 270 planes is 6.1 years
• Emirates carried 58.6 million passengers (up 0.2%)
• The average load factor was 76.8%, down slightly from 77.5% the previous year
• The average passenger yield increased by more than 3% to 7.1 US cents per revenue passenger kilometer

It’s also interesting to note how different regions contributed towards Emirates’ revenue, with no region contributing more than 30%:

• Europe generated $7.7 billion in revenue (up 6%)
• East Asia and Australasia generated $7.2 billion in revenue (up 5%)
• The Americas generated $3.9 billon (up 8%)
• Africa generated $2.8 billion (up 9%)
• Gulf and Middle East revenue generated $2.3 billion (down 3%)
• West Asia and Indian Ocean revenue generated $2.2 billion (up 6%)

Emirates took delivery of their last 777-300ER this past year

Is this all just fake math?

When I write about the financial performance of the Gulf carriers, there are always questions about whether this is all just imaginary math, given that the Gulf carriers are state owned.

After all, US airlines have spent millions of dollars trying to convince us that these are heavily subsidized airlines that are losing billions of dollars.

My personal take is that these results are mostly accurate. After all, Emirates results are independently audited per international financial reporting standards.

However, there’s no denying that airlines like Emirates have benefited from some things over the years:

• No doubt they’ve had easier access to financing on account of being government owned, which has allowed them to grow as much and as quickly as they have
• They largely have lower operating costs than other airlines, given that they essentially have the same owner as the airport, ground handlers, catering company, etc.

I do think Emirates is “legitimately” profitable. The problem with the A380 for most airlines is that they haven’t been able to scale their operations in a way that works. Emirates has been able to scale their route network unlike any other airline.

Obviously Etihad and Qatar don’t have similar success, as both airlines are losing a lot of money.

While we’re talking about airlines having advantages on account of the countries they’re based in, let’s keep in mind how US airlines have benefitted from bankruptcy protection, at the expense of employees and creditors (just ask US airline employees from a couple of decades ago about their pensions).

Bottom line

All things considered, Emirates’ performance for the past year is pretty impressive, especially when you consider the currency issues and increased fuel prices they’ve dealt with. While their rivals continue to lose money (Etihad because they’re a basket case, and Qatar because of the blockade, and some other factors), Emirates has scaled their route network in a way that makes sense.