Emirates profit grows 165% in 1H2009, while large cost and yield reductions; sees slow recovery

Despite a strong result for the six months to 30-Sep-2009, Emirates Chairman and Chief Executive, Sheikh Ahmed bin Saeed Al-Maktoum, said that while “some say the green shoots of economy recovery are sprouting”, he expects “it will take at least another year or two, before demand for air transport and travel services starts picking up again.”

In the meantime, he says.  “Emirates is well-placed to weather the rest of the storm. We will continue to chart our course with long-term goals in mind while staying flexible to maximise opportunities and mitigate risks.”

The carrier has said it will not postpone delivery of its existing orders. President, Tim Clark, was reported as saying earlier this week that it hoped delays in the A380 deliveries would not affect it: “Emirates has 53 Airbus A380 aircraft on firm order, with two of these due for delivery in Dec-2009. Emirates currently has five A380s in its fleet and we will receive a further 15 up till the end of Nov-2010. We remain in close discussions with Airbus in relation to our order,”

There is certainly little to suggest that Emirates has anything in mind other than a long term dominance in most of the markets it serves. This week it confirmed plans to increase Asia Pacific frequencies significantly over the next couple of months, with an additional 17 services per week, representing 13% capacity (seats) growth. This brings the the carrier's services to the Asia Pacific region to 187 per week.  The main increases involve additional daily services to Bangkok (a fourth) and Sydney (a third), each effective 2-Dec-2009.

The strong profit improvement for the first half came on the back of substantial reductions in both revenue and costs, as the carrier cut back drastically on non-essentials.

But a 13.5% reduction in revenue despite a passenger traffic increase of 21%, implies a very substantial yield reduction over the period. If Emirates can remain profitable in those circumstances, this says a lot about the versatility of the model that goes far beyond casual criticisms of government support and low priced fuel.

Emirates’ financial results for the six months ended 30-Sep-2009 were as follows:

  • Total revenue: USD5.4 million, -13.5% year-on-year;
  • Total costs: USD5.2 million, -15.8%;
  • Net profit: USD204.9 million, +164.8%;
  • Passenger traffic (RPMs): +21%;
  • Passenger load factor: 77.5%, -0.8 ppt.

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