Sunday, May 13, 2012
(This story was originally published Thursday.)
- Airline posts AED1.5 billion FY net profit vs. AED5.38 billion year ago
- Admits to a challenging year
- Revenues up 15% to AED62.3 billion on passenger growth
- Analyst says no quick fix for airlines trying to beat high fuel costs
By Alex Delmar-Morgan
Of ZAWYA DOW JONES
DOHA (Zawya Dow Jones)-Emirates Airline, the world largest carrier by international traffic, became the latest industry casualty of high oil prices, posting a 72% drop in full year net profit thanks to a soaring fuel bill.
Full year profit was 1.5 billion U.A.E dirhams ($409 million) compared to AED5.38 billion last year, it said in a statement as fuel costs rose 44% to AED24.3 billion.
In March, Emirates president Tim Clark told Dow Jones Newswires the airline would take a $1.6 billion hit from high fuel costs in its latest financial year, introducing some hefty fuel surcharges to mitigate the impact. He said the airline was cutting costs and using less fuel-efficient planes on shorter routes.
European airlines such as Air France-KLM and Deutsche Lufthansa have reported weak first quarter results blaming high fuel costs. The Franco-Dutch airline warned that a EUR1 billion rise in this year's fuel bill could offset the benefit of a rebound in passenger traffic.
Analysts said there was no quick fix for airlines trying to overcome high fuel costs. "They are all going to have to work out what to do," said Andrew Charlton of Geneva-based consultancy, Aviation Advocacy. "Getting more efficient airplanes is a long term game and finding cheaper fuel sources is proving to be quite difficult."
The Dubai-based airline, the largest customer for Airbus' A380 superjumbo with 69 on order, admitted operationally it had been "a challenging year". As well as "bearing the brunt of the crippling cost of fuel" political unrest across the Middle East and North Africa also played havoc with flight schedules, it said.
Emirates' profit was also dented after it grounded some of its A380s due to the discovery of wing cracks.
Despite the fuel price burden, the airline forges ahead with its heady expansion. During its 2011/2012 financial year, which runs from April 1 to March 31, Emirates received 22 new aircraft--the highest number ever in a single year--and added 11 new destinations, with a total aircraft order book of over $84 billion.
Revenues at Emirates rose 15% on the year to AED62.3 billion as the airline carried 34 million passengers on its network in 2011-12, flying to 123 destinations in 73 countries. Seat load factor was 80%, it added.
"Other airline executives must read these results and weep," said Mr.Charlton at Aviation Advocacy. "More passengers are flying and they're paying more for it," he added.
Emirates is expanding its long haul operations from its hub in Dubai by deploying its biggest planes like the Airbus A380 and the Boeing 777-300ER on its busiest routes to Asia, and North and South America.
It competes regionally with Abu Dhabi's Eithad Airways and Qatar Airways. Dominant in Asia and Australasia, it's eyeing a big push into the U.S., a relatively weak market for the airline.
Emirates and its Gulf rivals have capitalized on their geographical position to use the new generation of long-range aircraft to funnel business through their Middle East hubs. The proximity of Qatar Airways and Etihad in Abu Dhabi also has raised questions about how the region can support three major airlines.
Nevertheless their dominance has drawn criticism from more established carriers in the U.S. and Europe who accuse the Gulf triumvirate of receiving state subsidies and tax-breaks, something that Middle East airlines deny.
Passenger yield increased 7.8% to AED0.305 per revenue passenger kilometer, a key industry benchmark, up from AED0.283 in 2010-11.
Parent Emirates Group posted AED2.3 billion net profit compared to AED5.95 billion a year ago as revenues jumped 18% to AED67.4 billion.
-By Alex Delmar-Morgan, Dow Jones Newswires; +974 6659 9818; alex.delmar-morgan@dowjones.com
(Doug Cameron in Chicago contributed to this story.)
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
13-05-12 0345GMT
