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Emirates, the world’s largest long-distance airline, is taking “aggressive” steps to protect its business from the impact of the Covid-19 pandemic as it navigates a gradual return to operations in the coming months after reporting an increase in 21% on annual earnings. .
The net income of the Dubai-based airline for the financial year ending March 31 increased to Dh1.1 billion, from Dh871 million a year ago, due to “healthy” demand and cheaper fuel, although the crisis Covid-19 impacted its fourth quarter, Emirates said in a statement Sunday. Annual revenue decreased six percent year-over-year to Dh92 billion due to the temporary suspension of passenger flights in March and the closure of the 45-day runway at Dubai International Airport.
“During the first 11 months of 2019-20, Emirates and dnata performed well, and we were on track to meet our business goals,” said Emirates President Sheikh Ahmed bin Saeed Al Maktoum. “However, since mid-February things changed rapidly as the Covid-19 pandemic spread across the world, causing a sudden and tremendous drop in demand for international air travel when countries closed their borders and imposed strict travel restriction”.
The virus outbreak has affected the global aviation industry, with stringent blocking measures that eliminate the demand for passenger travel. Global airlines are facing a serious liquidity crisis and bankruptcy risk as revenues decline as a result of reduced capacity or the complete suspension of passenger flights.
Emirates revenue fell 4 percent as it carried 56.2 million passengers. The airline reduced seating capacity by six percent, leading to a passenger load factor of 78.5 percent, reflecting the airline’s “successful capacity management and positive travel demand in almost all the markets until the Covid-19 burst in the last quarter. “
The UAE has suspended all passenger flights since March 25 to limit the spread of the virus. Emirates currently operates a limited number of passenger repatriation flights and continues full-load services.
Operating costs fell 10 percent as the airline’s fuel bill decreased 15 percent due to lower jet fuel prices. The drop in energy costs offers a respite, as fuel represents 31 percent of the carrier’s operating cost.
The operator ended the year with Dh20.2bn in cash assets.
Emirates plans to leverage the banking market to gain more liquidity in the first quarter of its fiscal year to “provide a cushion” against Covid-19’s impact on cash flows in the short term, he said, without disclosing how much debt will be on the rise.
“We continue to take aggressive cost management measures and other necessary steps to safeguard our business, as we plan to resume business,” said Sheikh Ahmed.
The Dubai government has already promised financial support to Emirates to help the state airline deal with the impact of the coronavirus.
Emirates Group, which includes dnata from the travel and airport services arm, reported a 28 percent annual decrease in earnings to Dh1.7bn, due to the impact of the coronavirus in the fourth quarter. Annual revenue fell five percent to Dh104bn.
A strong dollar and unfavorable currency changes eroded the group’s earnings on Dh1bn, he said.
The group will not pay dividends to its government shareholder, the Dubai Investment Corporation, due to the “unprecedented business environment” during the Covid-19 pandemic and to protect the group’s liquidity position. The group ended the year with a cash balance of Dh25.6bn.
Dnata recorded a 57% drop in earnings to Dh618m.
Sheikh Ahmed said the airline is working with regulators and relevant stakeholders on health and safety standards in a post-pandemic era.
“The Covid-19 pandemic will have a major impact on our 2020-21 performance, with Emirates passenger operations temporarily suspended from March 25, and dnata businesses equally affected by declining air traffic and demand for travel around the world. ” he said. “We expect at least 18 months to pass, before travel demand returns to normal.”
Sheikh Mohammed bin Rashid, vice president and ruler of Dubai, said he is optimistic about the group’s rebound after the Covid-19 pandemic.
“I am confident that Emirates and dnata will emerge from this difficult period, strong and ready to reclaim their position as world leaders shaping the future of the aviation, travel and tourism industries,” he said in the group’s 186-page annual report.
Emirates is in a “better position” than its Middle East peers to overcome the crisis, which would mean recovering its network with sustainable capacity, said Mark Martin, founder of Martin Consulting.
“Emirates will optimize its costs, including the current offering of the A380 fleet,” he said.
Dubai’s “strong brand, loyalty, and extensive passenger network will be restored again over time, but this will be largely explained by how quickly the global medical community can develop a Covid-19 vaccine or some type of medicinal suppressant that allows confidence for travelers wishing to be able to fly again, as well as regulatory requirements around health checks and pre-flight evaluations to ensure greater safety whenever possible, “said Saj Ahmed, chief analyst from StrategicAero Research.
“In the future, Emirates will have to make, like other airlines, very important decisions about products, strategies, marketing and positioning,” he added.
Updated: May 10, 2020 03:24 PM
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