Emirates reveals record profits

Emirates Group has reported its 19th consecutive year of profit with a new record performance backed by continued double-digit growth.Group net profits increased 23.5% to a new high of UAE Dirhams 3.5 billion (US $942 million) for the financial year ended 31st March 2007, while Group revenue increased by an impressive 28.4% to Dhs 31.1 billion ($8.5 billion), compared to Dhs 24.2 billion ($6.6 billion) last year. The Group also maintained a robust cash balance of Dhs 12.9 billion ($3.5 billion) at the end of March, an improvement of 17.8% against a year earlier.

Emirates will pay a dividend of Dhs 400 million ($109 million) to its owner, the Government of Dubai. In total, the ownership will have received Dhs 1.8 billion ($505 million) from Emirates since the financial year 2000-01. In 2006-07, the Emirates Group estimates a direct contribution of Dhs 14.5 billion ($4 billion), and another Dhs 21.7 billion ($5.9 billion) in indirect contribution to the Dubai economy.

The 2006-07 Annual Report of the Emirates Group - comprising Emirates Airline, Dnata and subsidiary companies - was released in Dubai last week 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, backed by double-digit profit and revenue growth, reflects its success in growing demand for its services, and its ability to attract more premium customers through its multi-million dollar investments in product innovations and service enhancements. This is illustrated by the three million more passengers who flew Emirates in the latest financial year, for a new record total of 17.5 million.

Sheikh Ahmed said, “It has been another outstanding year of continued profitability and rapid growth. These results, against a backdrop of rising costs and significant aircraft delivery delays which have impacted our capacity growth, demonstrate Emirates’ ability to adapt and knuckle down to the challenge.”

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He continued, “For the third year running, pressure from fuel costs has softened our profits, while the delay on our A380 aircraft deliveries has meant that we have had to revisit our expansion plans. In spite of these factors, the Group has continued to forge ahead, posting double-digit profit and revenue growth by expanding our operations into new markets and adding capacity to existing markets offering the highest returns; innovating to attract and retain premium customers; and keeping a close watch on unit costs.”

Sheikh Ahmed added, “The Emirates Group is exposed to fuel price fluctuations, rising interest rates, and the volatility of the US dollar against major currencies - all of which we have very little control over. In all other areas of our business, we have better control and in these we strive to improve efficiency and effectiveness, enhance productivity and constantly challenge the existing ways of doing business for continuous improvement. This is essential as we confidently stride ahead with our expansion plans and continue to invest in various new initiatives to manage the company’s growth.”

Across the Group, initiatives to improve efficiency and keep a tight rein on costs have also contributed to the positive results, as the Group maintained a strong net profit margin of 11.4%.

Fuel costs remained the top expenditure accounting for 29.1% of total operating costs, up from 27.2% the previous year and 21.4% the year before. Like other airlines, Emirates was forced to retain its fuel surcharges, which only covered about 50% of incremental costs.

In a year where WTI crude oil prices have fluctuated from US$50 to $78 per barrel, Emirates’ challenge was to manage its fuel risk programme within a price range that ensured its net fuel cost remained below market levels. The airline’s jet fuel risk management programme continued to help mitigate fuel costs, saving the company Dhs 724 million ($197 million) in 2006-07.

In his opening review in the 2006-07 Annual Report, Sheikh Ahmed highlighted the mutually-supportive relationship between Dubai’s rapid development and the growth of Emirates and Dnata which have directly and indirectly contributed to the city’s growing infrastructure and reputation as an international centre for commerce and tourism.

He also remarked on how Emirates Airline has grown from a small operator of eight aircraft in 1990 to become the eighth largest international carrier in the world today with 102 aircraft and over 80 international destinations.

“I often get asked how it is possible Emirates can be so successful without subsidies or preferential treatment from the government,” he said. “There is no secret formula. We simply work hard, work smart, and have built our success on a sound and simple business model that focuses on growth, keeping unit costs low, and investing in innovations to keep ahead of the competition.”

Sheikh Ahmed concluded, “The Group’s strong performance this year is very gratifying. As with previous years, we intend to plough the retained profits back into our business - ensuring we have the right infrastructure, people and resources to support the company’s future growth, while providing our customers with the high quality services they have come to expect from us.”

Emirates Airline’s revenues totalled Dhs 29.8 billion ($8.1 billion) for the year, Dhs 6.8 billion ($1.8 billion) or 29.5% higher than income of Dhs 23.1 billion ($6.3 billion) in 2005-06. Airline profits of Dhs 3.1 billion ($844 million) also surpassed the previous year’s record profits of Dhs 2.5 billion ($674 million).

With the addition of 12 new Boeing 777-300ER aircraft during the financial year, Emirates’ fleet reached 102 at the end of March, including nine freighters. The current fleet of all wide-bodied aircraft has an average age of 63 months - one of the youngest commercial fleet in the skies.
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