Business | Aviation
Emirates half-year profits take hit from fuel price spikes
Analysts say worst is most likely over for airline as fuel prices have fallen.
- By Saifur Rahman, Business Editor
- Published: 16:00 November 10, 2008
- Image Credit: Supplied photo
Dubai: High oil prices have finally halted Emirates' profit growth, reducing its first half net profit by 88 per cent to Dh284 million ($77 million) during the first six months of its current financial year ending last September 30 from Dh2.36 billion ($643 million) reported during the first half of 2007.
"Crude oil prices averaged $122 per barrel for the first six months of the financial year, up from an average of $67 for the same period last year, whilst the differential between crude and aviation fuel was also up from an average of $16 per barrel to $28," Emirates said in a statement. "Overall, Emirates' fuel costs were higher than budgeted by Dh1.7 billion [$469 million]."
Emirates' cash position on September 30 declined by Dh4.2 billion to Dh8.4 billion, compared to Dh12.6 billion ($3.4 billion) six months earlier.
The drop in profits reflect a 40 per cent rise in airline unit costs per tonne kilometre, with fuel spend more than doubling from last year's Dh4.1 billion ($1.1 billion) to Dh9.2 billion ($2.5 billion).
In the first-half of its fin-ancial year 2008-09, Emirates continued to post strong business growth, with operating revenues increasing by 31 per cent to Dh22.1 billion ($6 billion). Passenger traffic (RPKM) was up 11 per cent, cargo tonnes up 13 per cent, and passenger yield increased by 20 per cent, it said.
Seat factor averaged 78.3 per cent, down slightly on 79.7 per cent for last year, against a 13 per cent increase in capacity.
Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority and Chairman and Chief Executive of Emirates airline and Group, said: "The first half of the year has been very tough for the airline industry, with record fuel prices forcing many carriers to shut shop or consolidate. Emirates has worked hard to manage the impact of high fuel prices on our unit costs, while continuing to grow our business and provide our customers with a quality product and service."
Analysts say the worst might have been over for Emirates as oil price has come down significantly.
High oil prices, which peaked at $147 per barrel at one time before receding to the current level, has already taken its toll on a number of carriers, especially those in the US where a number of airlines faced bankruptcy. "Emirates has the right mix, passenger traffic, solid fundamentals. With oil prices around $60, it will make up during the next six months. So the worst is over," said an aviation expert.
Since last April, Emirates has launched passenger services to Kozhikode, Guangzhou and Los Angeles, bringing its global network to 100 cities on six continents. The airline will launch non-stop flights to San Francisco on December 15.
Shaikh Ahmad said, "Recent events show that only the most efficient businesses will survive and prosper, and these investments put us in a strong position to weather the current crunch and future challenges."
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