Meh: Emirates Reports Half Year Financial Results

Filed Under: Emirates

While US airlines are reporting impressive financial results, airlines in some other parts of the world are struggling. For example, we’ve seen a flurry of European airline bankruptcies, and the Gulf carriers overall haven’t been reporting great results either.

Etihad lost about $1.28 billion in 2018, and Qatar Airways recently reported a $639 million loss for the past financial year, which was their biggest loss ever. Meanwhile in May Emirates reported a $237 million profit for the past financial year, which was down 69% compared to the previous year.

Well, Emirates has now reported their performance for the first half of the 2019-2020 financial year (April 1 through September 30, 2019), so how did they do?

Emirates Reports $235 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). So let’s take a look at some of the key financial figures:

  • Emirates profits were up 282%, to $235 million
  • Revenue was down 3%, to $12.9 billion
  • Their profit margin was 1.8%

Emirates A380

Key Figures Of Emirates’ Performance

The profit margin and dollar amount will only tell you so much, so here are some other interesting statistics about Emirates’ performance:

  • Load factor was up 2.3%, to 81.1%
  • 29.6 million passengers were carried
  • Overall capacity decreased by 5%, measured by available seat kilometers
  • Passenger yield increased by 1%
  • Emirates operating costs shrunk by 8% (compared to overall capacity decrease by 7%), with fuel costs being 13% lower due to a decrease in oil prices and reduced capacity
  • Fuel accounted for 32% of operating costs for the airline

Interestingly Emirates is also highlighting that they carried 7.9% more passengers to Dubai, rather than just having them connect. Obviously one of the goals of the Gulf carriers is to get people to actually visit their hubs, so I guess that’s impressive in a way.

Emirates notes that revenue was down a bit due to:

  • The 45-day southern runway closure at Dubai Airport
  • Unfavorable currency movements in Europe, Australia, South Africa, India, and Pakistan

As far as Emirates’ fleet goes:

  • During this sixth month period the company received three new A380s, with three more to be delivered before the 2019-2020 financial year is up
  • Emirates retired six older aircraft, with a further two to be retired by March 2020

Emirates A380 first class

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. It will be interesting to see what Emirates’ operations look like post-A380.

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

Eventually the 777X will be the biggest plane in Emirates’ fleet

Bottom Line

While perhaps not that impressive in absolute terms, Emirates is doing spectacularly well compared to Etihad and Qatar, which are losing money with no end in sight.

It’s nice to see Emirates’ improved results, though I’d still hardly say the margins are impressive, when you consider the size of their operation.

What do you make of Emirates’ financial results?

Comments
  1. How about not paying a living wage to most of their staff? They live in Government owned houses or EK houses. Excluding pilots and maybe even flight attendants many live in dormitory style housing and send most of their wages back to their country of origin. Poor to non existent labor and work laws all add up to more impressive profit. Not sure if all of that is reported in these international audits that the ME3 like to shove in front of peoples face.

  2. Then again, stopping QR from going to Dubai will help EK numbers to Dubai and the cheaper connecting route is no longer an option.

  3. I was a real emirates sceptic, but the fact that the Qantas a380s transpacific are making them so much money, along with British Airways super Juno routes has somewhat dimmed my heavy scepticism. Surprised BA didn’t order more a380 as nothing else can like for like replace the transatlantic super J 747s.

  4. Never flew Emirates and probably never will due to their non being part of any airline Alliance. That means no lounge or status best benefits

  5. Is it just me or has Dubai become d
    So “has been”. I know at least more than a dozen folks who left executive jobs in Dubai over the past 2 years

  6. @SteveK

    Are you sure you have the right information? Or you are just guessing? I live in Dubai since 2004. Half of my friends work for Emirates in various jobs. pilots, cabin crew and other staff. Over 60,000 employees. They work hard this is for sure, but they are well paid. None of the European employees wants to return back to their countries which leads me to question your statement. It’s the largest airline by international passengers and it is scrutinized in every aspect. I live in Dubai and meet with EK employees with first hand information. I’d love to know your sources.

  7. Economies of scale, popularity, and reliability. They got that trifecta. Booked F from London to Australia and back for our December-January holiday. Woop!

  8. @ Nicola – lived in Dubai for two years working at US Consulate. Now retired. Some staff receive good pay as I referenced in my original comment. Many do not including cleaners, catering, some ramp services, check in staff, etc. Most of those are third country nationals who are bussed into work everyday from dorm style living outsides the city. Labor laws and worker rights are not up to international standards. That is why the US Government continues to rate the UAE as a Tier 2 country in many human rights and other reports. Never disputed employees don’t work hard. I met some wonderful EK staff. Speak to some of the non-European staff and ask them how they feel about EK and the other ME3. Just my opinion of course, but I saw a lot of sad and unhappy people working in the UAE.

  9. @SteveK – cleaning is subcontracted to external companies. Check-in staff is getting paid in average (depending on seniority) 25% less compared to most countries in Europe, but they get flights and accommodation paid for or provided which results in a higher cost. And by the way check-in personnel is the same for all airlines in Dubai airports. Emirates and Dnata is part of Emirates Group and Dnata serves the airports for all airlines. Don’t know about the catering staff but you made me curious and will seek infos. In terms of human rights, Amnesty every year ranks the UAE better considering that as a Nation UAE was formed in 1971. I personally employ non EU workers and all of them send 90% of their earnings back to their home countries. None of them spend any money on their well being or enjoyment. Those that aspire to different lifestyles migrate elsewhere.

    Emirates is an important airline, so important that it is scrutinized by international third party agencies on everything. Wages, human rights and other important aspects. Emirates (which has been managed by British execs since it’s inception) is simply a very well managed company to what they owe their success and consistent performance. Despite my personal appreciation for the airline I am not all positive about it because we Dubai residents are charged the highest prices to fly outbound and I choose alternative solutions for my travel in the US or to the Far East. I simply can’t afford it. But that’s not affecting my opinion which I hope it’s seen as unbiased. Thanks for your views.

  10. @Nicola — Gotta say, SteveK sounds like he knows what he’s talking about. I live in the Gulf: it sounds believable to me.

  11. Frankly I don’t really care if they are bleeding cash or flying in sustainably. My money goes to the one who gives me the best value for the buck and no one else does it better than ME3 and maybe Oman included as well.

    So what if US3 makes big bucks or LH and IAG group makes tonnes of profit, there is nothing in it for me and doesn’t benefit me.

  12. US airlines complaining about foreign airlines being subsidized is a bit rich when they themselves benefit from all sorts of tax breaks / rebates from the various levels of US governments!

    A tax break is a subsidy by another name.

  13. @SteveK spent two years working in the US Consulate in Dubai. @malc does not live in the UAE but in the “Gulf”. Nicola has lived in Dubai since 2004. I lived in Al Ain from 91-94 and Abu Dhabi/Dubai from 99-2007. I definitely side with Nicola in this discussion.

    Yes, by the living standards of the top Tier countries (UK/US/Germany) some workers in the UAE have working conditions that would not be tolerated in a union environment back at home. Most workers lately have seen massively improved working and living conditions that place the UAE at the top of their alternative choices almost anywhere other than the Top Tier countries (and maybe even some of them). Mind you, when third world immigrants arrive in most countries they also live in the same style of living conditions, mainly to accumulate the maximum wealth in the shortest time. Multiple workers sharing a flat or rental house? Necessary. Using a bus for work? Guaranteed (if they can afford it). Air con? Not affordable but often just as necessary. Fed by employer? Nope.

    Most foreign third world workers in the UAE accumulate enough wealth after 10-15 years to be able to return home, build a very nice house, start a business and basically are set for life. While they were overseas in the UAE they sent home a significant part of their salary and their families lived very well while they were away.

    I agree with Nicola that EK was too expensive or not good enough to capture my business. I flew with them when they were first leasing planes and the experience was horrid. At the time Gulf Air was far superior and had much better pricing and routing connections.

    I am obviously not supporting EK in any way. But I do draw the line when people make comments about the terrible bosses in the UAE who are the worst exploiters in the world. I think these people are either allowing their politics to interfere with logic or are basing their opinions not on fact but on hearsay. And definitely taking everything out of context.

    People who work in the UAE are not forced at gunpoint. They are well aware that the experience might not 100% perfect but understand that most will be treated reasonably and will achieve incredible financial reward compared with staying in their home country and suffering in poverty for the rest of their lives.

  14. Call me a conspiracy theorist but I would put money on these results being completely fabricated. How does this company make any money? Can someone explain?

  15. Dubai has an issue with weak labor law and a lot of labor from low income countries and the fact that they get an economy flight in that cost the salary difference for one month out of 24 on a contract doesn’t justify it. One reason I left ME.

    However that doesn’t change that Emirates has done and are doing a great job, first choice for many people who wants the best and can pay for it. I barely flew them as they are more expensive, though have on occasion done both economy and business and neither disappoints if you compare to any competitors.

  16. EK has been off direct subsidies for many years (though they get masses of indirect benefits afforded a government business). So yes I believe their financial reports.

    1.8% operating profit margin is terrible. It’s up from last (full year’s) 0.9% but still bad. And that’s with their salaries/wages much lower than US/EU carriers and almost zero corporate taxes on income. Delta’s Q2 and Q3 operating margins were 16.3% and 17.1% (United’s were 13.5% abd 13.2%). And DL and UA (and all US carriers) gets none of the favorable benefits (tax, lax labor laws, etc) that EK gets. 1.8% is awful.

    Without the favorable indirect benefits there’s no way EK could survive in its current form. Yet because of those benefits they try undercutting overseas airlines’ local routes with unnecessary 5th freedom routes (look at SE Asia). They’ve got unprofitable 5th freedoms to the US from MXP and ATH but don’t cut them to improve profitability; when times get tough they cut the non stops from DXB instead which would be lunacy if they had to fully stand on their own feet.

  17. @SteveK spent two years working in the US Consulate in Dubai. @malc does not live in the UAE but in the “Gulf”. Nicola has lived in Dubai since 2004. I lived in Al Ain from 91-94 and Abu Dhabi/Dubai from 99-2007. I definitely side with Nicola in this discussion.

    Yes, by the living standards of the top Tier countries (UK/US/Germany) some workers in the UAE have working conditions that would not be tolerated in a union environment back at home. Most workers lately have seen massively improved working and living conditions that place the UAE at the top of their alternative choices almost anywhere other than the Top Tier countries (and maybe even some of them). Mind you, when third world immigrants arrive in most countries they also live in the same style of living conditions, mainly to accumulate the maximum wealth in the shortest time. Multiple workers sharing a flat or rental house? Necessary. Using a bus for work? Guaranteed (if they can afford it). Air con? Not affordable but often just as necessary. Fed by employer? Nope.

    Most foreign third world workers in the UAE accumulate enough wealth after 10-15 years to be able to return home, build a very nice house, start a business and basically are set for life. While they were overseas in the UAE they sent home a significant part of their salary and their families lived very well while they were away.

    I agree with Nicola that EK was too expensive or not good enough to capture my business. I flew with them when they were first leasing planes and the experience was horrid. At the time Gulf Air was far superior and had much better pricing and routing connections.

    I am obviously not supporting EK in any way. But I do draw the line when people make comments about the terrible bosses in the UAE who are the worst exploiters in the world. I think these people are either allowing their politics to interfere with logic or are basing their opinions not on fact but on hearsay. And definitely taking everything out of context.
    People who work in the UAE are not forced at gunpoint. They are well aware that the experience might not 100% perfect but understand that most will be treated reasonably and will achieve incredible financial reward compared with staying in their home country and suffering in poverty for the rest of their lives.

  18. Interesting – my post was blocked on this site and has nothing in it that would be objectionable to anyone other than the two people who have limited contact with the UAE.

  19. @USbusinessTraveller
    “And DL and UA (and all US carriers) gets none of the favorable benefits (tax, lax labor laws, etc) that EK gets.”

    That’s nonsense. If you look, you’ll find subsidies from states and the feds to operate “non-commercial” routes; you’ll find subsidies from city- or state-owned airports trying to increase their connectivity so subsidising routes or offering route launch incentives; and you’ll find all sorts of tax breaks (in a related field, why do you think Boeing is headquartered in Illinois rather than its traditional home of Seattle?).

    All US legacy carriers are shovelling pork into their fat faces as fast as they can, all the while trying to play on the weird patriotism of most Americans (“our military wont be able to reach conflict zones if you don’t block the ME3 (with whom we can’t compete because we couldn’t care less about customer service)” — if that’s true, the US military should be a world laughing-stock but, you know, it’s not).

    Turning to EK, I wouldn’t try too hard to compare accounts for different airlines all produced under different accounting “standards”. Even within the same country it’s hard to compare accounts: as was drummed into me early into my career, “cash is a fact; everything else is an opinion”.

  20. @Azamaraal

    New posters or an old poster using a different computer or web browser gets a time delayed to check for Spam on this website in my experience.

    Same goes when post a link, only more so.

  21. I think the real question is the strategy of the UAE in terms of long term growth and the economy. Obviously when the oil is depleted the UAE must find other sustainable means of funding the country. Dubai has no direct oil revenues and has been through a few major ups and downs financially. Notably the huge loan from Abu Dhabi in response to re-naming the Burg Dubai into the Burg Khalifa.

    When you consider that most of the eggs are in the tourism basket (and the second home market) it makes sense that transporting the clientele at a reasonable cost is a major keystone to the puzzle.

    So to encourage the growth perhaps the fact that EK shows even a minimal (1.8%) profit is deemed acceptable or even better than acceptable given the losses incurred by the other ME carriers.

    I’m not totally convinced by other bloggers who claim that salaries at EK are at the low end of the scale compared with the US. In this day and age with the huge expansion of China airlines and elsewhere (even Westjet says they need 350 pilots next year) the front seat of most EK flights is still filled and the accents indicate they are expats. Possibly cabin crew are less favorably compensated however I know of Canadians who are crew and find it much better that other employers they have worked with.

    Time will tell. Are we entering a period of economic slowdown that will wreak havoc in the Middle East and especially EK?

  22. @ Azamaraal

    You make some good points. I think all of the gulf states — even Saudi Arabia — have a growing awareness that the hydrocarbons won’t last forever and that they need to start now in building sustainable economies. From my travels, Qatar strikes me as the most future-focussed: to them the 2020 World Cup is not an end in itself, but a hard date which signals a new beginning.

    The abolition earlier this year of most advance visa requirements was a very strong signal: Qatar is now the most open country in the Gulf.

    Having been one of the more conservative, it’s now openly proclaiming that everyone will be welcome during the World Cup — unmarried couples, gays, and Israeli passport holders. No other Gulf state has gone that far.

    And none has anything like Al Jazeera. While many of them have been trying to build world class museums (notably the Louvre Dubai), Qatar also has a rather staggering new National Library, which is a rather potent symbol of a different approach. And it has permanent campuses occupied by some of the western world’s leading universities — NorthWestern, Cornell, Texas A&M, UCL among others.

    The west has taken hundreds of years to transition from feudal states to modern liberal democracies. The Gulf transformation is being attempted in a staggeringly shorter period (and obviously still is a work in progress).

    In that context, Emirates, Etihad and Qatar are potent tools designed to position themselves centrally in the wider world, and to act as a Trojan Horse to bring people to their countries (it’s no accident that most offer generous “free” stopover stays when you transit through their home hubs).

    And what we see as a few billions in losses, they see as an investment in the future.

  23. Nicola is right. Maybe salaries are not the best but you have to remember that in places like India or Pakistan, where most of workers in Dubai come from, 90% of people live in slums or eat one meal a day.

    Living in a dorm room sharing with 6 others is a 5 star luxury for them. As is eating 3 meals a day.

    As for salaries, a 3rd world worker can easily survive on 300 dirhams a month. If they get 10,000, that leaves 9,700 dhs to send back home.
    And given that India is so cheap, the family of a cleaner in Dubai lives like an emperor in India, enjoying luxurious lifestyle.

    Yes, it shocks first world sensibilities, but Dubai, and the Gulf has s system that works. The Arabs and Europeans are rich, Filipinos are the middle class, while India, Pakistanis are the worker class. You will not find any rich Indian in Dubai, nor you will you find a poor Arab.

    That is the way it is, and the system works, as can be seen by Arab airlines being the best in the world.

  24. Back to your original question, Ben: True or fake? Emirates publishes its annual financial statements in accordance with IFRS and also publishes the (clean) audit opinion wich is based on ISA. It can therefore be assumed that the statements present a true and fair view, un the sense they are complete and apply generally recognized principles e.g. for measurement of revenue and cost.

    The half year result, however, is NOT an audited and standard based financial report. So in theory, it could be tweaked. But this is rather unlikely since it would have to be “tweaked back” at year end.

    Whether salaries are high or low is obviously not a matter of accounting standards. Also the big three US carriers pay some of their staff really low wages …. and do not disclose them in their financial reports …

  25. Talking of low salaries, the bulk of Dubai’s workforce comes from India and Pakistan, the economic conditions in those countries are so bad that 90% of people live in slums and most eat only one meal a day.

    So when they come to the Gulf, even sharing a room with other workers is a jump in living conditions for them.

    The typical South Asian worker can easily survive on 300 dirhams a month, and he will send the rest home, allowing his family a life of luxury. Let’s not forget that cost of living in South Asia is so low that even a baggage handler in Dubai can live more lavishly than a doctor in India

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