The largest carrier in the Arab world, Emirates Airline, has posted a record-breaking full year 2010 profit of AED5.9 billion (US$1.6 billion), just shy of the unprecedented HK$14 billion (US$1.8 billion) in 2010 net profit posted by its peer Hong Kong-based Cathay Pacific Airways (“Sky is (not) the limit for Cathay Pacific“, 14th Mar, 11). However, being located at the centre of the world connecting different destinations in Asia and Europe and beyond, Dubai-based Emirates Airline is poised to tap into the lucrative growth potential which is unrivalled and forms a stark contrast to the anaemic economic recoveries seen in Europe and US and reap the benefits brought by this growth in traffic and keep soaring skywards.
Revenue for the Emirates Airline Group increased handsomely by 26.4% to AED57.4 billion (US$15.6 billion) whereas the cash position for the group reached a record high of AED16 billion (US$4.4 billion). Meanwhile, revenue at its Emirates Airline unit surged by 25% to AED54.4 billion (US$14.8 billion), outstripping a significant increase in operating costs by 22.7% to AED48.9 billion (US$13.3 billion) as the airline’s ambitious expansion continues unabated.
Traffic, measured in revenue passenger kilometres (RPKs), increased by 15.7% from 126 billion last financial year to 146 billion this year, whereas capacity, measured in available seat kilometres (ASKs), increased proportionately less by 13% from 161 billion in 2009 to 182 billion in 2010, resulting in a slight increase in passenger load factor to 80% from 78.1%.
“This year’s record results represent our drive to push the boundaries of aviation, questioning the norms and advocating for open and fair competition. Despite unforeseen challenges in the form of political instability and shocking natural disasters we have managed, through sheer determination, nimbleness and quick thinking, to produce our best ever result,” Emirates chairman and chief executive Sheikh Ahmed bin Saeed Al Maktoum said.
The number of destinations of the airline significantly increased from 102 in the prior year to 111 and the airline has now become the largest international airline in terms of international RPK, a remarkable achievement when one considers the airline is still not even the tenth largest just a decade ago. The airline now flies its flagship A380 aircraft to New York, Hong Kong, Paris, London Heathrow, Toronto, Sydney as well as secondary city Manchester. As the largest A380 customer in the world continues to expand its A380 fleet and draws in even more origin & destination (O&D) connecting traffic across the globe, the footprint of its A380 fleet is undoubtedly going to increase correspondingly.
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Yield was 8.5% higher than the prior year at 229 fills per revenue tonnage kilomtre (RTK), which was outweighed by a 9.6% surge in unit cost from 136 fills per available tonnage kilometre (CATK) to 149 fills in 2010. EBITDAR margin, in the meantime, was a staggering 24.7%. The balance sheet of the Dubai-based carrier is glamorous by every measure, including a superb 0.44 times net debt-to-equity ratio.
“Being open to competition, new ideas and most importantly the future, ensures that we stay ahead of the game. Knowing that we continue to delight our customers and motivate our employees is a true measure of our success,” Sheikh Ahmed conceded.
“Looking ahead we have no plans to deviate from our proven strategy of investing in our business and focusing on core customer service. As we continue to grow, we are ambitious enough to believe that we can stimulate change in the aero political arena, for the benefit of the industry and the customers that it serves.” Sheikh Ahmed emphasised.
For instance, Emirates’ advocation for a global liberalised air travel market with more flights to Canada should be commended. By liberalising markets around the globe, passengers will have many more choices, a better service, lower airfares. Airlines, on the other hand, will benefit from an expanded market. At least these points stand as the argument goes.
Air Canada and Lufthansa, as well as the Canadian and German governments, think otherwise. These airlines have cried foul of government subsidies provided by the UAE government towards Emirates, in addition to misconstrued allegations that Emirates does not pay landing fees, fuel costs, etc. Instead of improving and strengthening their competitiveness and raise their service quality to the level of Emirates and match its low cost base, they are seemingly laying the blame on unfair illegal government subsidies.
The decision of the German transport ministry last week in not holding talks with Emirates for the latter’s landing rights in Berlin is a testament to the notion that Emirates still faces bottlenecks which are impediment to realising its ambitious growth plan. While some may view that shrugging off Canadian troops from UAE’s Camp Mirage is too radical, others are quick to point out that it is a strategic step of the UAE government to up the ante and accelerate the pace of liberalising the air travel markets in the world.
Make no mistake, however, sooner or later these governments are going to realise the benefits and competition under a free market is going to come – the added jobs to the local economy and the expanded market will outweigh the cost involved, namely the lost traffic on the local carriers. Should these carriers not tackle and address their issues of high legacy costs and uncompetitive products and services in a timely manner, the ultimate casualty will be themselves.
The sooner these carriers wake up and face the reality and take steps to address their issues, the better they will fare in the future.
On the other hand, Aspire Aviation has learned that Emirates is mulling to order additional Boeing 777-300ERs beyond last July’s order for 30 extra 777-300ERs, with a deal likely to be announced at this November’s Dubai Airshow.
Any such order would be yet another sign that the 777-300ER remains unrivalled in terms of payload/range performance in the marketplace and would further add pressure on Airbus to increase the thrust level on the A350-1000′s Rolls-Royce Trent XWB engines to even match its original 8,000 nm range target.
Last but not least, with new destinations and more new aircraft orders in the pipeline, the Dubai-based carrier’s ambitious growth plan will unquestionably lead the airline to even higher grounds and let the airline soar skywards. For the time being, however, high oil prices and political unrest in the Middle East will continue to challenge every airline in the world, Emirates will be no exception.