Emirates Group Profit up 5% to Dhs 2.8 billion (US $762 million)

The Emirates Group has reported another record performance with net profits of Dhs 2.8 billion (US $762 million) for the financial year ended 31st March 2006 - up 5% from the previous year’s record profits of Dhs 2.7 billion ($726 million).

Group revenue increased by an impressive Dhs 5.2 billion ($1.4 billion) or 27%, to Dhs 4.3 billion ($6.6 billion) compared to Dhs 19.1 billion ($5.2 billion) last year. The group’s cash balance was a robust Dhs 11 billion ($3 billion) at the end of March, an improvement of 28.6% against a year earlier.

For 2005-06 Emirates will pay an increased dividend of Dhs 386 million ($105 million) to its owner, the Government of Dubai, compared to Dhs 368 million ($100 million) last year. In total, the ownership will have received Dhs 1.4 billion ($396 million) from Emirates since the financial year 2000-01.

The 2005-06 Annual Report of the Emirates Group - comprising Emirates Airline, Dnata and subsidiary companies - was released in Dubai Wednesday at a news conference hosted by His Highness Sheikh Ahmed bin Saeed Al-Maktoum, Chairman and Chief Executive, Emirates Airline and Group.

Two million more passengers flew Emirates in the latest financial year, for a new record total of 14.5 million.

Sheikh Ahmed said, “These results clearly show that Emirates’ customer-oriented approach and investments in providing a quality product - the best aircraft that money can buy, top-flight service and travel experience at a competitive price – has paid off in terms of retaining and winning new customers globally.”

He continued, “It has been another tough year with pressure from fuel costs continuously dampening our robust net income production. Emirates has returned its 18th consecutive annual profit, and we are pleased to have achieved this solid performance while expanding our operations in an increasingly competitive environment.”

Across the group, initiatives to improve efficiency and keep a tight rein on costs have also contributed to the positive results, as the Group maintained a strong net profit margin of 11.8%.

Fuel costs remained the top expenditure accounting for 27.2% of total operating costs, up from 21.4% the previous year. Like other airlines, Emirates was forced to increase fuel surcharges on tickets, which only covered 41% of incremental costs.

The airline’s jet fuel risk management programme helped mitigate fuel costs, saving the company $189 million in 2005-06, 50% more than last year. The outlook however, remains sombre in a volatile global market where oil prices have hit new highs.

In his opening review in the 2005-06 Annual Report, Sheikh Ahmed debunked accusations that Emirates receives hidden government support and subsidies, reiterating that the company’s success is based on a sound and simple business model, which focuses on growth and investing in innovations to keep ahead of the competition.

He also remarked on the catalystic relationship between the transformation of Dubai into a world-class centre for business, tourism and transport, and the explosive growth of Emirates and Dnata to become world-beating companies.

“Profitability through growth seems to have become a theme of Emirates for the past decade,” he said. “I must stress that we have never set out to be a threat to any other airline. We have simply concentrated on trying to provide a superb service for our passengers and cargo customers.”

Sheikh Ahmed concluded, “We are gratified by the strong financial results of the group and intend to re-invest the retained profits into acquiring advanced equipment and facilities, hiring and training the best people for our business, and putting in place superior support services - thus keeping the airline, Dnata and group subsidiary companies competitive, while providing our customers with the high quality services they have come to expect from us.”

Emirates Airline’s revenues totalled Dhs 23.1 billion ($6.3 billion) for the year, Dhs 4.9 billion ($1.3 billion) or 27% above income of Dhs 18.1 billion ($4.9 billion) in 2004-05. Airline profits of Dhs 2.5 billion ($674 million) also topped the previous year’s record profits of Dhs 2.4 billion ($656 million).

With the addition of 16 new aircraft during the financial year, Emirates’ fleet reached 91 at the end of March. The current fleet (April 2006) comprises 92 aircraft - 83 wide-bodied passenger aircraft and nine freighters, with an average age of 61 months.

One of the key highlights of the year was Emirates’ signing of a massive Dhs 35.6 billion ($ 9.7 billion) contract for 42 Boeing 777 aircraft at the 2005 Dubai Air Show. This brought the value of Emirates’ total order book for new aircraft to Dhs 121 billion ($33 billion). Over the next eight years, the airline will receive delivery of one new aircraft per month on average.

The airline forecasts that its fleet will comprise 156 aircraft by 2010, serving 101 destinations and carrying some 26 million passengers.

Emirates launched services to eight new cities in 2005-06 - Alexandria, Abidjan, Addis Ababa, Hamburg, Kolkata, Thiruvananthapuram, Seoul and Lilongwe (cargo-only) - bringing the network total to 83 destinations, five of them cargo-only. In addition, it increased the frequency of passenger services and also added capacity with bigger aircraft - to over a dozen existing destinations adding 67 extra flights per week across its network.

Passenger seat factor increased to 75.9%, up 1.3 percentage points from the previous year, led by an increase in traffic by 20.2% and keeping pace with a capacity increase of 18.9% to 15,803 million tonne-kilometres. Breakeven load factor remained relatively low at 60.3%, and yield improved for the fourth consecutive year, to 202 fils ($0.55 cents) per RTKM (Revenue Tonne Kilometre), up from 192 fils ($0.52 cents) in 2004-05. 

Emirates also invested US $200 million on new customer facilities and service enhancements over the year. The airline upgraded its 777-200 fleet, installing new SkyCruiser seats in First Class and its award-winning ‘ice’ inflight entertainment systems across all classes. To date, all but two of the airline’s 777-200 aircraft have been refurbished, with the remaining scheduled to be retrofitted by January 2007.

New dedicated Emirates Lounges were opened at airports in New York JFK, London Gatwick, Sydney, Perth and Paris Charles De Gaulle, adding to the airline’s existing lounges at Dubai, Brisbane and Auckland airports. More Emirates Lounges are planned for another 12 major airports worldwide.

Emirates SkyCargo set a new record with over one million tonnes of cargo carried, up more than 180,000 tonnes, or 21.5% from last year’s 838,400 tonnes – reflecting strong growth from across the network. The cargo division’s revenue of Dhs 4.5 billion ($1.2 billion) was Dhs 1 billion ($274 million) or 29.2% higher than the year before, and contributed 21% to the airline’s transport revenue. During the year, five freighter aircraft - two Boeing 747-400Fs and three A310-300Fs – were added to the fleet. Scheduled freighters now operate to 26 destinations. In all, Emirates SkyCargo carries freight in 92 aircraft, including nine freighters, to 83 cities.

Destination and Leisure Management - another division of Emirates Airline – posted a robust growth in sales to Dhs 940 million ($ 256 million), an improvement of 17% over the previous year, supported by a record number of 318,000 customers. The division also announced major new projects, including Emirates Wolgan Valley Resort & Spa – a conservation-based luxury development in Australia’s Blue Mountains, a 70-storey deluxe city hotel in Dubai, and Emirates Marina Serviced Apartments & Spa in Dubai. These properties will be managed under the division’s new hospitality brand, Emirates Hotels & Resorts.

Dnata recorded a strong performance with revenue growth of 25.9% to Dhs 1.8 billion ($485 million), compared to Dhs 1.4 billion ($385 million) last year. Dnata’s profits of Dhs 324 million ($88 million) represent an increase of Dhs 64 million ($17 million) or 24.6% compared to last year’s Dhs 260 million ($71 million).

In its 48 years in operation, Dnata remains at the heart of the rapid traffic growth at Dubai International Airport, handling a record 203,000 aircraft movements and 1.3 million tonnes of cargo during the 2005-2006 fiscal year.

As of 31st March 2006, the group employed 26,906 people, up 9% from a year before. In the past 12 months, Emirates has been receiving 60 new cabin crew recruits each week, and now has over 6,000 cabin crew representing more than 100 nationalities. Its 1,350 captains and first officers represent over 70 nationalities.

The group’s Facilities Management Department currently manages Dhs 5.1 billion ($1.4 billion) worth of projects in Dubai under various stages of design and construction. This comprises new facilities to meet the demands of Emirates’ expansion, including a new Emirates Engineering Centre, the new Group Headquarters building, Emirates Crew Training College, Free Zone Logistics Centre for Dnata Cargo, as well as warehousing and building extensions.

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