Emirates is world's 'largest' airline

As the initial euphoria of The Emirates Group and airlines’ stellar results dissipates into analysis, forecast and growth buoyancy for Dubai, it is note-worthy that the airline and its management now see the title of ‘world’s largest airline’ within their grasp.

Amid the myriad notes that formed the annual report released yesterday here in the emirate lay this statement by Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group: "With 182,757 million available seat kilometres, we are now the world's largest airline by scheduled international passenger kilometres flown."

Needless to say the claim comes on the back of the Emirates Group marking its 23rd consecutive year of profit with a record performance of Dh5.9bn ($1.6bn) net profit, despite a challenging business climate.

Emirates airline’s revenues grew by an outstanding 25 per cent from last year to reach Dh54.4bn ($14.8bn). Airline profits of Dh5.4bn ($1.5bn) marked an increase of 51.9 per cent over 2009-10’s profits of Dh3.5bn ($964m).

Mohammed hails developmental role of Emirates Group

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has lauded the role of Emirates Group in supporting development in the UAE.

He said in an introductory to the annual report of Emirates Group, which includes Emirates airline and Dnata, for 2010-2011, that "we are proud of Emirates Group, being one of our major national corporations that supports the comprehensive development. We are proud of the group's expertise, cumulative knowledge, efficiency and flexibility that enables it to overcome a number of challenges, which trailed the regional and international changes."

Sheikh Mohammed underscored that Emirates airline has consolidated the position of Dubai and the UAE as the world's top centre, not only for trade and business, but also for culture, sports, as well as the strategic link for the six continents, indicating that the advanced infrastructure of civil aviation in the country also contributed to the global ranking of the UAE.

"We are optimistic about future of Emirates airline and its ambitious plans. The optimism does not come from vacuum but comes in the light of historic qualitative achievements being scored by the group," he added.

Testimony to determination and vision

Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group, said the outstanding results in challenging times were testimony to the airline’s determination and vision.

“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,” said Sheikh Ahmed.

In the face of many challenges, both political and environmental, the group’s revenue increased by 26.4 per cent reaching a remarkable new level at Dh57.4bn ($15.6bn). Strong revenue has been the main driver for the group’s record financial performance. The group’s cash balance rose substantially to hit a record high at Dh16bn ($4.4bn).

"We had a year full of growth and expansion" the head of Dubai's flagship carrier told a news conference. Emirates made a net profit of $954m in the previous year. “We are fortunate to be based in the Middle East where regional passenger seats grew by 17.8 per cent compared to a global 8.2 per cent growth,” Sheikh Ahmed said. He added he didn’t see any need for an Emirates IPO in the near future.

Passenger Seat Factor, at 80 per cent, indicates the airline’s highest ever, a remarkable achievement given a substantial increase in seat capacity (Available Seat Kilometres – ASKMs) of 13 per cent. Overall capacity, measured in ATKM (Available Tonne Kilometres), rose 12.4 per cent to 32,057 million tonne-kilometres.

The group’s exceptional performance this year owes much to its dexterity and ability to adapt to changing market conditions quickly. In the first six months, Emirates was able to capitalise on strong market demand.

With political instability across parts of the world coming to the fore in the second half of the year, Emirates was able to swiftly adjust flight schedules, redeploying aircraft to balance the network and optimise revenue, the airline said.

The airline’s notable ability to drive revenue, in the midst of an unstable business environment enabled it to partially shield itself against a dramatic increase in fuel prices in the second half of the year, it added.

“A clear indication of our strength, this year’s financial result represents the tireless work of our 57,000 strong workforce. Operating without subsidy and through a well thought-out business model, we have, as a team, been able to confront adversity on many levels,” added Sheikh Ahmed.

“Emirates continues to dismiss the perceived limitations of the aviation industry, advocating for an open skies environment that stimulates competition, an undeniable positive for the customer. The customer is at the heart of our operations, evident in the 31.4 million passengers that flew with us throughout the financial year, an increase of 14.5 per cent or 4 million passengers on last year.”

"With the rising fuel prices, we ended up paying nearly $250m extra, which reduced our profit by nearly Dh1bn," said Sheikh Ahmed. "We have come through a challenging year overall, with the volcanic cloud, the natural disasters with the heavy snowfall in Europe and the earthquakes in New Zealand and Japan.

"Added to that was the political instablity in the region. The world faced these challenges and so did Emirates, but we have come through. Especially when you look at our numbers and the fact that Emirates announced its decision to scrap its fuel surcharge earlier this week and reducing prices by five per cent."

　
Any chance of seeing an IPO in the immediate future was also dismissed, with Sheikh Ahmed saying: "I can firmly say that there will be no IPO issued this year or in 2012. We see no need to do so as we are financially very stable right now."

When asked about issuing another bond, Sheikh Ahmed reiterated that there was no issue financing aircraft as they had one year of financing secured. He added: "Last year we went to the market to issue a bond, but we weren't happy with the pricing so we delayed the plan."
 

More aircraft on order?
Last week, Emirates President Tim Clarke stated that the airline, which currently has 90 A380 superjumbos on order, would be eager to increase that number to 120, however, due to space constraints here, the carrier was unable to do so; currently, Emirates has 193 aircraft on order.

Sheikh Ahmed, however, was non-commital about the airline's plans to order more aircraft in the immediate future. He said: "We have 193 currently on order. If we have anything new to say, you will see an annoucement at the Dubai Airshow in November.

"By 2020, all the aircraft we have on order will be received, if all goes well."

This year, the airline will be taking delivery of six A380s, lauching four new routes and opening seven new Emirates lounges. Sheikh Ahmed said they will have 169 aircraft by 2012.

When asked to confirm and if the increased space would make room for more aircraft or would Emirates immediatly move to operations to the new airport, Sheikh Ahmed said that he was very pleased to see phase one of Al Maktoum Airport, but they would be unable to move operations until the whole airport was finished. In the meanwhile, they will work with Dubai Airports to ensure the capacity of 95m passengers by 2020 is reached.

Competitive edge
In the recent past, Emirates' move to gain more landing rights in Europe have been thwarted, with Berlin and Stuttgard being examples. Many carriers have said Emirates is a threat to regional carriers with the airline getting aid from the government in terms of fuel subsidies.

Yet ask Sheikh Ahmed and he said confidently: "European airlines feel we are a threat because we are giving them competition. We have gained market share because of a good product and that is all."

Speaking about Canada, with Emirates being the centre of row and not being permitted to have more landing rights, Sheikh Ahmed didn't seem to bothered, saying: "It was three flights to daily. Canada is a small market and it's not the end of the day for us. With the help of the Canadian partnership, we can hopefully serve Canada soon. But there is no timeframe."

Sheikh Ahmed also refused to commit when quizzed about regional competition, saying: "I don't know who is. We are all here to focus on the job and that is what we do."

Of the airline's expansion plans, Sheikh Ahmed said that services to North and South America, along with Asia always has room for growth. In fact, the airline is also indugling in a recruitment drive in Atlanta on June 2, which is considered a major airport hub in the United States.

While the future destinations for more flights have yet to be revealed, Sheikh Ahmed did say that India wsa a very lucrative trade market and more flights into the Asian country were certainly on the agenda.

Looking ahead
Sheikh Ahmed said that for the financial year 2011-2012, they plan to target more than this year. "We are always optimistic about the market and we are sure the aviation industry as a whole will find it a fruitful year."

When asked about the instablity over fuel prices, Sheikh Ahmed said: "Fuel instablity will always be there. But when prices had reached $150 a barrel, we had still managed to make a profit and we will still make them next year."

On course with its financial commitments, a net amount of Dh1.8b ($500m) was used to repay a bond that matured on March 24, 2011. The bond, listed on the Luxembourg Stock Exchange, was originally issued in 2004 with a seven-year term.

Focusing on the theme of ‘open,’ the 2010-11 Emirates Group Annual Report reflects on many of the group’s successes that have ensured its continued profitability.

“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,” continued Sheikh Ahmed.

“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.”

Operating costs, at Dh48.9b ($13.3b), were 22.7 per cent higher than the 2009-10 financial year. This increase correlates with the rise in fuel prices and increased activity levels in addition to an overall growth in staff numbers and a rise in direct operating costs such as handling, in-flight costs and aircraft maintenance.

A sharp increase of 41.2 per cent in the cost of fuel during 2010-11 at Dh16.8b ($4.6b), accounted for a sizeable 34.4 per cent of the airline’s total operating costs, close to the record highs witnessed in 2008-09. This increase is a direct result of the 26.5 per cent hike in average fuel costs per US gallon, as well as higher overall consumption due to increased capacity.

Passenger yield increased by 8.5 per cent to 28.3 fils per RPKM (Revenue Passenger Kilometre), up from 26.1 fils (7 US cents) in 2009-10.

During the year, in line with the airlines strategic growth plan, Emirates significantly increased its order for new aircraft, adding 32 additional Airbus A380s and 30 Boeing 777-300ERs. The combined value of these orders is $13.4b and brings the airline’s total number of aircraft on order at the end of the financial year to 193, worth over $66b.

Emirates took delivery of eight new aircraft during the year including one Boeing 777-300ER and seven of the airline’s flagship A380s expanding the airline’s fleet size to a robust 148 aircraft. Emirates remains the world’s largest A380 and Boeing 777 operator with 15 A380s and 86 Boeing 777s.

Expanding its global footprint the airline launched passenger services to six new destinations – Amsterdam, Prague, Al Medinah al Munawarah, Madrid, Dakar and Basra – as well as increasing frequency and capacity to a number of high-demand cities across multiple markets, most notably the US, Asia, Middle East and Africa.

Emirates continues to benefit from a diverse revenue base, with no single region contributing more than 30 per cent of revenues.

East Asia and Australasia led the way in 2010-11 with revenue growth of 30.9 per cent at Dh3.7b ($1b), Europe followed closely with an increase of 24.3 per cent at Dh2.8b ($769m) due primarily to three new passengers destinations commencing in the region and increased capacity through larger aircraft.

The Emirates A380 network was further developed during the year with three new destinations; Beijing, Hong Kong and Manchester as well as the highly anticipated re-introduction of the A380 service to New York.

Emirates continued to invest in its product with two new airport lounges, Shanghai and New Delhi, taking the total number of Emirates dedicated lounges to 28. In total Emirates has invested Dh288m ($78m) in its global lounge network.

Employees were also a focus of the 2010-11 financial year with Emirates Airline increasing employee numbers by 5.9 per cent to reach nearly 39,000 employees, an incredible feat for an airline that only last year celebrated its silver jubilee. Many of these new employees fall within the Cabin Crew and Flight Deck departments on account of the eight new aircraft delivered throughout the year; as well as in preparation for continued aircraft deliveries in 2011-12.

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