Dubai's carrier awash with cash

Dubai: Emirates' massive jump in half yearly net profits to Dh3.4 billion ($925 million) is going to help the airline in funding its large order book of $68 billion for 204 aircraft as its cash flow piles up to a comfortable level.

"Emirates' cash balance growth puts it in pole position for future aeroplane needs — whether that be down payments, purchase payments or financing arrangements, the airline has a very enviable position that will almost certainly mean future Airbus A380 and Boeing 777-300ER procurement to lap up the demand the airline is experiencing," Saj Ahmad, aerospace/airline analyst at the UK-based FBE Aerospace, told Gulf News.

The airline's cash balance grew to Dh12.5 billion ($3.4 billion) at the end of September, a significant improvement of 18.5 per cent or Dh1.9 billion ($529 million) when compared to March 31, 2010.

"This increase in the cash balance was achieved after settling capital outflows of Dh2.4 billion, primarily towards aircraft pre-delivery payment and other aircraft assets. During the first half, the airline has also successfully raised financing of Dh4.6 billion ($1.3 billion)," the airline said.

Emirates yesterday reported an outstanding 351 per cent jump in net profits to Dh3.4 billion ($925 million), for the first six months of its current financial year ending September 30, 2010 compared to Dh752 million ($205 million), for the same period in 2009.

"We continue to invest our profits in growing the business and our healthy financial position enables us to successfully meet all of our financial commitments and raise financing for future aircraft deliveries," said Shaikh Ahmad Bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group.

Emirates' revenue, including other operating income, grew 35.5 per cent to Dh26.4 billion ($7.2 billion) compared to revenue of Dh19.5 billion ($5.3 billion) during the same period last year.

"The results for the first half of the 2010-11 financial year are incredibly robust, and reflect Emirates' success in growing customer demand, supported by investment in new aircraft, products and customer service," Shaikh Ahmad said. John Siddharth C.P, Industry Analyst, Aerospace & Defence Practice, South Asia & Middle East, Frost & Sullivan, said: "The financial year 2010-2011 is turning out to be very profitable for most of the airline operators globally. This is primarily because of the increase in air traffic and stabilised oil prices. British Airways for example posted half yearly profits after two years."

Fuel continues to be the most significant expenditure for the airline with operating costs up 22.6 per cent to Dh23 billion ($6.3 billion).

"Our strong position today is reflective of our ability to adapt, returning us to a vigorous period of growth. With 62 new state-of-the-art aircraft ordered in the first half, we remain well positioned to capitalise on this growth," Shaikh Ahmad said.

Emirates said it has achieved the growth by carrying 15.5 million passengers and recording a strong passenger seat factor at 81.2 per cent, the highest ever for a first six month reporting period. Premium class seat factors have also risen by 2.6 percentage points, reflecting an encouraging change in the global economic outlook.

Capacity measured in Available Seat Kilometres (ASKM), grew by 13.9 percent, whilst passenger traffic carried measured in Revenue Passenger Kilometres (RPKM) was up 19.4 per cent.

Upbeat

Analysts remain upbeat about the airline's growth prospects.

"Emirates first half numbers show a couple of good key indications. Firstly, not only has the airline managed to grow its business significantly in contrast to the same period last year, a slow market recovery is indeed taking place which Emirates is exploiting with its unique transfer hub strategy in Dubai," FBE Aerospace's Ahmad said.

"It has leveraged the strength of its products and branding to capture greater numbers of customers flying in premium cabins — for other network carriers this has been a big problem area since they are having to discount seat prices to entice customers, whereas Emirates has bucked the trend and increased prices due to growing demand, yet has still seen a 2.6 per cent rise in premium traffic numbers." Emirates Group roughly contributes 25 per cent to Dubai's economy, directly and indirectly. A number of hotels and resorts largely rely on its transit and stopover passengers.

"Emirates airline has contributed about Dh25 billion during the same period in the last financial year. With the aviation and tourism picking up the economic contribution from Emirates airlines to Dubai is expected to rise," Frost & Sullivan's Siddharth said.

Emirates has launched six new destinations since April this year — Amsterdam, Prague, Madrid, Dakar in addition to freighter flights to Almaty and Bagram. Existing markets have also been given a boost with increased frequencies and capacity — through larger aircraft.

Revenue generation

Building on its current A380 network Emirates launched two new A380 destinations, Manchester and Beijing.

The A380 continues to be popular in all destinations that it serves and has become the airline's flagship in terms of passenger comfort, innovation, operating and environmental efficiency and revenue generation.

"All in all, the next six months should be equally favourable for the airline — put simply, we'll be looking at some huge profit for the year when the airline reports full year earnings in May 2011," Ahmad said.

Siddharth said: "Inducing larger aircraft in low traffic routes would directly impact the RPK of the airline, which is one of the key performance indicators in an airline business. Emirates has to be very careful to tackle this challenge."

Emirates continued to invest heavily in its product in the first half with the delivery of six new wide-body aircraft, five Airbus A380s and one Boeing 777 and the opening of a new dedicated lounge at Shanghai Pudong International Airport.

A further two new aircraft are scheduled to be delivered before the end of the financial year on March 31, 2011.

• Dh3.4b Emirates' half-year net profit
• Dh249b value of outstanding aircraft orders
• 18.5% cash balance growth rate at end-September
   

SkyCargo operations earn dividends 

Emirates SkyCargo has seen a strong half-year performance across the network, posting an increase in revenue of 48.4 per cent to Dh4.4 billion, with cargo tonnage up by 23.7 per cent to 897 thousand tonnes, compared with 725 thousand tonnes for the same period last year.

"Investing in the future and adapting our operations when required is an integral part of our corporate strategy. This flexibility affords us the option of increasing passenger and cargo services on high demand sectors. By following these positive spikes in regional economies we have been able to maximise the use of our fleet to further stimulate revenue," Shaikh Ahmad Bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group.

SkyCargo continues to post steady revenue growth contributing around 17.8 per cent of the airline's transport revenue.

Positive sign

John Siddharth C.P, Industry Analyst, Aerospace & Defence Practice, South Asia & Middle East, Frost & Sullivan, said: "There has been a significant increase in Sky Cargo tonnage numbers compared to the same period for the past two years. Cargo Tonnage number were around 700,000 tonnes for the past two years in the first six moths of the financial year.

In the first half of financial year 2010 it surpassed 800,000 Tonnes. This is a positive sign for Sky Cargo; the next key challenge would be to increase the percentage of revenue contribution."

Saj Ahmad of FBE Aerospace, said, "All in all, the next six months should be equally favourable for the airline — put simply, we'll be looking at some huge profit for the year when the airline reports full year earnings in May 2011."