The international aviation market is facing strong headwinds currently, with the high fuel cost as well as currency devaluations affecting airline financials. In the Gulf, Dubai-based Emirates has witnessed a drastic fall in its half-year profits for the first six months of 2018, as the UAE carrier battles ‘various aviation challenges’ which have led to a significant weakning in its finanicals.
Emirates, who is the largest airline in the United Arab Emirates, today posted a sharp 86% drop in half-year profits. The carrier recorded a profit of just $62 million in the first half of the 2018-2019 fiscal year compared with $452 million in the same period last year.
Sheikh Ahmed, the CEO of Emirates Group has blamed “Uncertain economic and political realities in our region and in other parts of the world”, as well as a high oil price, and currency devaluations in nations across the globe, including India, Brazil, and Iran. Sheikh Ahmed has already warned “The next six months will be tough” — suggesting that the financials at Emirates may soon proceed from bad, to worse.
Profit for the Emirates Group, which also includes Dnata, an air services provider (including ground handling), was also down by 53%.
Emirates’ mammoth 86% drop in airline profits comes at a time whereby the Dubai-based carrier has faced difficulties both at home and internationally. Earlier this year, the airline started quietly sending new planes to be stored in the desert, at the relatively empty Al Maktoum airport, amid lower demand and a pilot shortage — caused by a wave of resignations from the flight crew, who cited poor working conditions at the airline.
In May 2018, I exclusively revealed the first photo of the stored Emirates jets —
— Alex Macheras (@AlexInAir) May 4, 2018
Furthermore, Emirates have made several cuts to its route network, reducing flight frequencies to key destinations in the United States, Europe & Asia.
Last month, reports surfaced that Emirates is in talks for a potential acquisition of its neighbour in Abu Dhabi, Etihad Airways, but there have been no further developments. Etihad Airways is in the midst of aggressive cutbacks, in a bid to overcome a mammoth $1.52 billion annual net loss announced just last year. Reputable independent rating agency ‘Fitch’ have said ‘Etihad Airways is expected to continue making losses through to 2022′, and it’s been established that the Abu Dhabi airline has “very weak” financials and lower unit revenues than its Gulf and European competitor airlines, despite having cost advantages.
In terms of regional instablity, Emirates is unable to fly to Doha, Qatar, due to blockade led by Saudi Arabia and the UAE. While the effects of the blockadde are felt across the Gulf — including to Qatar Airways, who lost its two biggest local markets, and in response triggered a vast global expansion to compensate for the lost destinations — it’s also impacted Emirates. Emirates has lost a significant amount of local passenger traffic, and it has also felt the reduction of passengers that would originate in Doha, but fly Emirates — for example, between Doha-Dubai-Bangkok.
In Dubai, Emirates airline is not alone with its decline in financials. Just recently, the government confirmed that the expansion of Dubai’s Al Maktoum International Airport has been suspended. Furhermore, residential property prices have dropped by more than 15% since late 2014 and are still falling. Dubai’s stock market is also down 20% this year — the worst performance in the region.
To make matters worse, this year, major airlines have announced their exit from Dubai, citing economic reasoning. Australia’s flag carrier, Qantas have axed Dubai, replacing the UAE stopover with Singapore. Qantas said Singapore is a ‘more preferred passenger option’.
In the UK, British airline Virgin Atlantic announced the axe of its London Heathrow-Dubai route. Virgin Atlantic said “due to external factors, Dubai is no longer economically viable” — and the airline will withdraw from the UAE in March 2019.
In addition, Royal Brunei has formally axed its Dubai stopover as part of its London Heathrow-Dubai-Brunei route, with the airline saying they’re killing the Dubai stopover due to ‘a change in demand’.
Emirates’ latest results show a drastic fall in profitability at the airline, and the state-owned carrier continues to face intense headwinds, including in the Gulf region.
Even with airline cargo operations performing solidly worlwide, cargo volumes for Emirates have declined this year — unlike nearly all other major airline carriers, which have seen promising growth in their cargo divisons throughout 2018.
Several major airlines have exit the Dubai market in response to a weakening economic outlook, and a fall in passenger demand. With Emirates storing A380s and 777s in the desert this year, a fall in profits was expected — but 86% is an unexpectedly sharp drop, and the UAE carrier has already warned that the next six months will be finanically difficult for the airline.