Bucking a wide swath of airline industry trends, Emirates Airline recently posted its 20th straight year of profit, with its income for its full fiscal year ended 31 March totaling AED5 billion (US$1.36 billion), up 62 per cent over AED3.1 billion in the prior year, despite record oil prices which added US$500 million in extra fuel costs. The result also placed the carrier amongst the top-five most profitable airlines in the world.

The Emirates Group overall, meanwhile, reported a 54 per cent rise in net profit to AED5.3 billion (US$1.45 billion) for the financial year, with a net margin growing from 11.2 per cent last year to 13.2 per cent this year.

“It was another record year for the Group in spite of a challenging business climate, particularly in the second six months where the soaring cost of jet fuel made a big dent, although the impact was greatly off set by other operating gains,” chairman and CEO Ahmed bin Saeed Al-Maktoum told reporters at the carrier’s annual results briefing in Dubai recently.

SkyCargo does well
Emirates SkyCargo also turned in a set of equally impressive results, particularly considering the turbulent year it has been
for the air cargo industry as a result of the fuel prices, US slowdown which slowed the movement of cargo from China to the
US and bad weather affecting agricultural production in key producing markets.

SkyCargo carried 1.3 million tonnes, up 10.9 per cent with a healthy boost in revenue of nearly 20 per cent to AED6.4 billion (US$1.8 billion), comprising a full 19 per cent of total airline revenue, which Emirates noted was “yet again one of the highest contributions of any airline in the world with a similar fleet.”

During the year, SkyCargo introduced feighter-only destinations to Djibouti, Hahn, Toledo and Zaragoza. At financial year-end the carrier had a fleet of five leased and five owned freighters, along with the substantial belly-hold space in 104 passenger aircraft. Sheikh Ahmed also expressed confidence that the US-led sub-prime crisis would have little impact on the carrier, saying: “I believe the threat of an economic downturn will be off set for Emirates by the boom in the Middle East, especially the thriving travel industry of tourism and commerce. Emirates is fortunate to be located in Dubai at the centre of the new Silk Road between East and West,” he added.

Spiralling fuel costs
Fuel costs remained atop the expenditures for the fourth year running, accounting for 30.6 per cent of the total operating costs compared to 29.1 per cent a year earlier. But in response to a question posed as to whether the carrier could weather a sustained US$200 per barrel oil price, Sheikh Ahmed voiced clear confidence and reiterated the carrier received no government subsidies for fuel or otherwise, despite persistent perceptions of such hand-outs.

“I’m sure it will affect some people and we will see many airlines will be out of the market, but we don’t see that happening here,” he said.

“We at Emirates with our cash balance of AED14 billion, up 8.5 per cent over the year before, and solid results will always be one of the airlines that is always there.”

And as one of those airlines that willalways be around, Sheikh Ahmed said there was still no interest in joining any of the global alliances. “We have a good relationship with many airlines including codeshares with a number of airlines, but we don’t see ourselves joining any of the alliances. We never felt at any time that we needed to go that route,” he added.

A seemingly bigger challenge considering the carrier’s audacious aircraft orders, which excluding options, now stands at 182 aircraft – worth nearly US$58 billion – Sheikh Ahmed acknowledges, is finding enough key personnel, including pilots, engineers, cabin crew and other skilled personnel across its wide ranging business units.

No decision has been made on whether to undertake an initial public offering (IPO) and that decision rests with the government who, should the decision be made to go ahead, will likely offer between 25-30 per cent of the carrier, the Sheikh said.

Emirates currently operates 115 aircraft, including its 10 freighters and plans to take delivery of its first A380 later this year which is destined for its New York JFK service and configured with 489 seats including 14 first-class suites (up from eight currently offered on the route) and 72 business class seats. The carrier is aiming to have five A-380s in service this financial year and another 12 by 2010, but delays continue to throw its planning into doubt.

The carrier has already received up to AED404 million (US$109.9 million) from Airbus as compensation for A380 delivery delays. The gain is listed in its annual report as related to “liquidating damages” with Emirates president TimClark telling Reuters that a “large part of that was part of the compensation deal for the delay of the A380s.”

The Emirates group also paid a cash dividend of AED1 billion (US$272.5 million) to its sole shareholder, the Government of Dubai.