Emirates Group incurs $3.4 billion half-year loss, first in more than 30 years

DUBAI  — Emirates has said that Dubai would help the airline through the coronavirus crisis after losses of $3.4 billion tipped the airline’s holding company into its first half-year loss in more than thirty years.

Emirates said global travel restrictions meant revenue dropped by 75% to $3.2 billion as passenger traffic fell by 95% to 1.5 million in the six months to the end of September.

“The last time Emirates airline reported a loss was for the financial year 1987-88, and that was primarily due to the costs of its start-up operations,” a spokeswoman said.

Sheikh Ahmed bin Saeed Al Maktoum, President of the Dubai Civil Aviation Authority, Chiarman of Emirates airline and Chief Executive of Emirates Group, said the Dubai government would support the airline on its recovery path.

“We have been able to tap on our own strong cash reserves, and through our shareholder and the broader financial community, we continue to ensure we have access to sufficient funding to sustain the business and see us through this challenging period,” he said.

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Emirates temporarily suspended most of its flights at the height of the pandemic, which has decimated global travel. The airline filled just 38.6%% of the seats on offer, though saw high demand for freight due to limited availability of air cargo services globally due to the drop in passenger flights.

“We began our current financial year amid a global lockdown when air passenger traffic was at a literal standstill. In this unprecedented situation for the aviation and travel industry, the Emirates Group recorded a half-year loss for the first time in over 30 years,” Sheikh Ahmed said..

“As passenger traffic disappeared, Emirates and dnata have been able to rapidly pivot to serve cargo demand and other pockets of opportunity. This has helped us recover our revenues from zero to 26% of our position same time last year,” he said.

Emirates, which a year ago reported a $235 million half-year profit, received $2 billion in state assistance from the Dubai government between April and September this year, which the airline said was an equity investment. The airline’s entire operation is dependent on international demand as it does not operate domestic flights.

Emirates Group, which includes the airline and other aviation and travel assets, saw revenue plunge 74% to $3.7 billion and made a loss of $3.8 billion. This dramatic revenue decline was due to the Covid-19 pandemic which brought global air passenger travel to a halt for many weeks as countries closed their borders and imposed travel restrictions. As part of pandemic containment measures, Emirates and dnata’s hub in Dubai also suspended scheduled passenger flights for 8 weeks during April and May.

Sheikh Ahmed said the Emirates Group’s resilience in the face of current headwinds is testimony to the strength of our business model, and our years of continued investment in skills, technology and infrastructure which are now paying off in terms of cost and operational efficiency.

“Emirates and dnata have also built strong brands and agile digital capabilities which continue to serve us well, and enabled us to respond adeptly to the accelerated shift of customer and business activities online over the past 6 months.”

“We would like to thank our customers for their continued support, and express our appreciation for the combined stakeholder efforts that have made it possible for Dubai to resume aviation and other economic activity so quickly and safely. No one can predict the future, but we expect a steep recovery in travel demand once a COVID-19 vaccine is available, and we are readying ourselves to serve that rebound. In the meantime, Emirates and dnata remain responsive in deploying resources to serve our customers and meet demand,” he said.

The group’s cash position on September 30, 2020 stood at Dh20.7 billion ($5.6 billion), compared to Dh25.6 billion ($7 billion) as at March 31, 2020. The number of Group employees had reduced 24% between April and September to 81,334, it said, without disclosing the number of airline staff.

“We have been able to tap on our own strong cash reserves, and through our shareholder and the broader financial community, we continue to ensure we have access to sufficient funding to sustain the business and see us through this challenging period. In the first half of 2020-21, our shareholder injected $2 billion into Emirates by way of an equity investment and they will support us on our recovery path,” Sheikh Ahmed said.

Emirates airline

During the first six months of 2020-21, Emirates retired 3 older aircraft from its fleet as part of its long-standing strategy to improve overall efficiency, minimise its emissions footprint, and provide high quality customer experiences.

As directed by the UAE General Civil Aviation Authority, Emirates temporarily suspended passenger flights on March 25 and worked closely with governments and embassies to operate repatriation services until Dubai International airport (DXB) re-opened for transit passengers and later for scheduled passenger flights. The airline also partnered with the health authorities to implement comprehensive pandemic health and safety measures onboard and on the ground, to safeguard its customers, employees and the communities it serves.

The airline also took its customer commitment to the next level, by expediting refunds, offering rebooking flexibility, setting up a Covid-19 travel information hub on its website to offer the latest updates on ever-changing travel requirements, and by launching the industry’s first Covid-19 medical cover for all passengers at no additional cost.

Emirates gradually restarted scheduled passenger operations on May 21. By September 30, the airline was operating passenger and cargo services to 104 cities.

Overall capacity during the first six months of the year declined by 67% to 9.8 billion Available Tonne Kilometres (ATKM) due to a substantially reduced flight programme over the past months, including the suspension of passenger flights at Dubai international airport for 8 weeks. Capacity measured in Available Seat Kilometres (ASKM), shrunk by 91%, whilst passenger traffic carried measured in Revenue Passenger Kilometres (RPKM) was down by 96% with average Passenger Seat Factor falling to 38.6%, compared with last year’s pre-pandemic figure of 81.1%.

Emirates carried 1.5 million passengers between 1 April and 30 September 2020, down 95% from the same period last year. The volume of cargo uplifted at 0.8 million tonnes has decreased by 35% while yield has more than doubled by 106%. This reflects the extraordinary market situation for air freight during the global Covid-19 crisis, where drastically reduced passenger flights led to limited available capacity while airfreight demand rose strongly.

Emirates was able to uplift 65% of its cargo volumes compared to the same period last year, which shows its cargo division’s outstanding agility in adapting its operations to provide air freight services in this new environment. In a very short time, Emirates Skycargo completed the partial retrofit of 10 Boeing 777-300ER passenger aircraft to transport freight on the main deck, introduced new operation protocols to enable the safe uplift of cargo in passenger cabins, rapidly restarted and scaled up its global cargo network, and put in place comprehensive bio-safety protocols for employees.

In the first half of the 2020-21 financial year, Emirates loss was Dh12.6 billion ($3.4 billion), compared to last year’s profit of Dh862 million ($235 million). Emirates revenue, including other operating income, of Dh11.7 billion (U$3.2 billion) was down 75% compared with the Dh47.3 billion ($12.9 billion) recorded during the same period last year. This result was due to severe flight and travel restrictions around the world relating to the Covid-19 pandemic.

Emirates operating costs reduced by 52% against the overall capacity decrease of 67%. Fuel costs were 83% lower compared to the same period last year. This was due to a decrease in oil prices (down 49% compared to same period last year), as well as a 76% lower fuel uplift from substantially reduced flight operations during the six months period up to end of September. Fuel, which was the always the largest component of the airline’s cost in past reporting cycles, only accounted for 11% of operating costs compared with 32% in the first six months of last year.

Despite the significant drop in operations during the six months, Emirates’ EBITDA stood positive at Dh290 million ($79 million) compared to Dh13.2 billion ($3.6 billion) for the same period last year.

Dnata

Dnata’s businesses in ground handling, catering and travel services were heavily impacted by the Covid-19 pandemic as customer airlines cut their flight schedules and service requirements or suspended operations entirely, and dynamic border restrictions around the world curbed travel demand and bookings.

Where eligible, dnata participated in job saver and other government support programmes. This included retraining employees and redeploying them in other essential industries with labour shortfalls during the pandemic. dnata also introduced new flexible work models in markets where it was possible to do so, in order to retain more of its skilled workforce.

Robust airfreight traffic across markets was a bright spot for dnata’s airport operations which responded nimbly to meet customer demand. Across its business divisions, dnata implemented enhanced health and safety measures to safeguard employees and communities, and recalibrated its products and services to meet new client requirements. It also tapped on opportunities in markets as these arose, for instance partnering with healthcare providers to offer airline passengers pre-travel Covid-19 PCR tests as part of its home check-in services.

Dnata’s revenue, including other operating income, was Dh2.4 billion ($ 644 million), a 68% decline compared to Dh7.4 billion ($2 billion) last year.

Overall loss for dnata is Dh1.5 billion ($396 million), compared to last year’s profit of Dh311 million ($85 million). This figure includes impairment charges of Dh689 million across dnata’s international business divisions, mainly pertaining to goodwill.

Dnata’s airport operations remains the largest contributor to revenue with Dh1.7 billion ($454 million), a 54% decline as compared to the same period last year. Across its operations, the number of aircraft handled by dnata declined sharply by 71% to 102,917, and it handled 1.3 million tonnes of cargo, down 12% only.

Dnata’s travel division contributed Dh95 million ($26 million) to revenue after Dh1.8 billion ($488 million) for the same period last year, down 95%. The division reported a negative underlying total transactional value sales of Dh246 million ($67 million) for the first time, after a positive contribution of h 5.9 billion ($1.6 billion) for the same period last year. This reflects the significant refund volume and pay-out in cancelled customer bookings mainly during the beginning of the pandemic.

Dnata’s flight catering operation, contributed Dh426m ($116m) to its total revenue, down 76%. The number of meals uplifted declined by 84% to 8.3 million meals for the first half of the financial year after last year’s 51.9m record performance.

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