A 21 percent jump in profits during the past fiscal year for Emirates is a good number. But that kind of performance may just become a thing of the past for the uncertain future.
The Middle East’s biggest carrier, Emirates, announced on Sunday profits of $288 million over the past year even as revenue declined due to flight suspensions sparked by the coronavirus, offering a glimpse of the financial toll now facing airlines around the world.
The Dubai-based carrier said that although profits were up by 21%, revenue had dipped by 6% to $25 billion over the past fiscal year, which ended March 31. The airline said the erosion of its revenue was mainly because of the suspension of flights in March due to the pandemic and planned runway closures at its hub in Dubai International Airport, which is the world’s busiest for international passengers.
“From mid-February things changed rapidly as the COVID-19 pandemic swept across the world, causing a sudden and tremendous drop in demand for international air travel as countries closed their borders and imposed stringent travel restrictions,” said Emirates Group chairman and chief executive Sheikh Ahmed bin Saeed Al Maktoum.
The airline’s parent company Emirates Group, meanwhile, posted lower profits at $456 million compared to last year’s $631 million, a 28% decline. Revenue, however, was up by $1.7 billion reaching $28.3 billion.
The airline’s success is seen as a bellwether for Dubai’s own economy, which draws heavily from tourism and aviation. Before the pandemic, Dubai’s economic growth had already slowed down, with real estate prices in decline and companies freezing hiring of firing employees.
Dubai had been looking to Expo 2020, the World’s Fair, to attract new visitors and ignite its sluggish economic growth. It was set to host the six-month-long fair starting this fall, but like other major events around the world, it has been pushed back to next year as the world grapples with the virus and stay-at-home orders.
In a sign of just how important Emirates Air is to Dubai, the government announced in late March it will inject equity into the carrier, crediting its “strategic importance” to the economy of the United Arab Emirates. Like other Gulf Arab states, the UAE’s economy is in recession this year due to double blows from the pandemic and low oil prices.
The state-owned airline said it would not pay a dividend for this financial year after last year’s dividend of $136 million to the Investment Corporation of Dubai. To trim costs, the airline has reduced salaries for its staff, with cuts ranging from 25-50%.
Over the past 12 months, the airline said passenger traffic declined from 58.6 million passengers to 56.2 million. Emirates was forced to ground passenger flights in March on orders from the UAE government. Limited flights have resumed since, mostly outbound for visitors and expatriate residents wishing to leave the country.
Emirates Group operates the global dnata — or Dubai National Air Transport Association — ground and travel services provider. That division of the company had revenue of $4 billion and profits of $168 million.
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Photo credit: Emirates Air's fiscal year was a testament to earlier growth in Dubai. No certainty now that it will ever return to those levels. Adam Schreck / Associated Press