Emirates rises on falling oil

12 May 2015

Strong financial performance lifts carrier’s mood as it seeks to tackle head on the accusations of unfair government support by US rivals

Sheikh Ahmed bin Saeed al-Maktoum clearly relishes a battle.  

Sitting alone on stage, facing off against more than 100 local and international journalists gathered in the cavernous auditorium of the Emirates Group headquarters in Dubai, the chairman and CEO of the Emirates Group oozed charm and confidence as he presented his company’s annual results for the financial year 2014-15.

Of course, it is always easy to present a confident and relaxed demeanour when your results are as positive as those revealed by Sheikh Ahmed on 7 May.

Despite a slowdown in global growth and trade and a worsening regional security situation that has dramatically increased the costs for safety measures in the airline industry, Emirates was able to post a stellar set of results. Add to this the strong rise of the US dollar throughout the year that knocked demand in every non-dollar-denominated market, including the eurozone and China, and an 80-day runway upgrade at Dubai International airport – Emirates’ home hub – last spring.

What we are hearing from the US will not stop us

Sheikh Ahmed bin Saeed al-Maktoum, chairman and CEO, Emirates Group

“2014-15 was a turbulent year for aviation,” said Sheikh Ahmed. “The fall in oil prices provided cost relief in the second half of our financial year. However it did not offset the hit to our profitability caused by the significant currency fluctuations, nor the hit to our revenue from operational adjustments in addressing the Ebola outbreak, armed conflicts in several regions, and the 80-day runway upgrading works at Dubai International airport.”

Despite all of this, the group, whose two main operating divisions are Emirates Airline and travel services company Dnata, saw revenues grow 10 per cent in the 12 months to 31 March 2015 to hit $26.3bn for the year.

Sheikh Ahmed also announced that at $1.5bn, the company had recorded the second-highest annual profits in its history and a 34 per cent rise in profits on the previous year.

US challenge

But even so, he will have known that what every journalist in the room really wanted to hear was his response to a recent report and lawsuit from the US’ three biggest airlines – American Airlines, Delta Airlines and United Airlines – which are accusing Emirates of unfairly benefiting from government subsidies.

From appearing relaxed when presenting the group’s financial results, Sheikh Ahmed positively sparkled when asked about the challenge from its US rivals.

“We have been hearing about this for five years,” he said. “The noise coming from these airlines. They never thought they would see Gulf carriers like the ones they are seeing today. They still think they are the best. But it is not 30 years back. We have achieved many milestones.”

It is clear from Sheikh Ahmed’s performance that Emirates does not intend to let the accusations of its US rivals stop its global expansion ambitions, and that it is ready to tackle their challenge head on.

“What we are hearing from the US will not stop us,” he said. “Everyone can look at our results. Everyone can see where where every dollar comes from. The US carriers enjoy our open skies policy and how much we have helped them grow their business in the region. Emirates is doing a lot of work to help them.”

Sheikh Ahmed clearly relished the thought of taking on Emirates’ more venerable rivals, and is looking forward to the continuing challenge of making the Dubai airline the world’s dominant carrier.

Global expansion

As the major end-user of Dubai’s biggest megaproject, the Al-Maktoum International airport at Dubai World Central near Jebel Ali, Emirates is a key player for Dubai’s projects sector.

Sheikh Ahmed confirmed that the carrier is deeply involved in the development work for the new airport, and also that many aspects of the scheme are still to be settled, ranging from design through to financing.

“Work at Al-Maktoum airport is in the design stage,” he said. “We are working hard with other stakeholders to get the final project. It is a big challenge to align everything in place to get work on site. It is difficult. So hopefully we will be there very soon.

“In terms of financing, many companies and governments are interested. We will have to see who gives us the best offer. So we are evaluating all proposals.”

For many companies in Dubai, and elsewhere in the region, the Emirates Group’s outlook provides valuable insight into the outlook for the entire region. With so much of Dubai’s economy being driven by the city’s position as a regional tourism hub, the fortunes of the carrier are a major indicator of the strength of their own prospects.

Continuing challenges

They will be delighted by Sheikh Ahmed’s bullish picture of ongoing investment, acquisition and route expansion for Emirates, although he said many of the challenges the airline had faced over the past year would continue in the year ahead.

“Currency fluctuations and the security situation around the world continue to be the biggest challenges,” he said. “Our industry is getting more competitive every day and we embrace this because competition is good for our customers, good for our industry, and good for us.”

He said the airline would add new destinations in Bali, the US and Europe in the coming months, as well as expanding its fleet and services. He added that the imminent opening of a new concourse, Concourse D, at Dubai International airport, would free up space and improve services at the airport.

“We just have to stay ahead of the competition,” said Sheikh Ahmed. “And with so much investment going back into the business, we will be able to do this.”

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