Emirates SkyCargo suffers from weak demand and strong fuel prices

Emirates has had tough year and Emirates SkyCargo seems to have shared in that. The latest results published today (May 9) show that the whole Emirates Group saw revenue 7% higher, the airline saw revenue increase by 5.3% to AED97.9bn (US$26.7bn) whilst SkyCargo was up 5% at AED13.1bn (US$3.5bn). Profits were a different picture however, with the Group seeing profits down 44% at AED2.3bn (US$631m) whilst the airline division, that includes SkyCargo, fell by 69% to AED871m (US$237m). Emirates did not break-out profit numbers for SkyCargo. However, looking at the reasons for the airline operation’s worsening performance the increase in fuel costs by 24.5% would suggest that pain was shared across both parts of the business. Currency also played a role.

That said, the comments from Emirates imply that it has ridden out a tough market well. The company said that it has faced “unrelenting downward pressure on yields and slowing demand” yet had increased revenue by 5% on a tonnage increase of just 1%. Its yield measured in ‘freight tonne kilometres’ had continued to increase, up a further 3% in 2018. This, Emirates said, illustrated its ability to “retain and win customers on value despite fuel price increases”. The rise in cargo carried saw it achieve a record tonnage of 2.7m tonnes. As far as can be measured, the cargo load-factor looks to be at the industry average in the mid-sixty percents. The company has reduced its fleet of freighters from 13 to 12.

The main problem that Emirates is facing across its business is the difficulty of passing on higher fuel costs to customers in a weak market. Many, but not all, of its rivals are feeling similar pain. Lower demand for air freight suggests a slowing economy, which could drive down fuel prices, although much of the problem in the oil market is caused by political tensions. As far as can be seen, Emirates SkyCargo is still a leading service in the air freight market but the days of strong growth now seem distant.  

Source: Transport Intelligence, May 9, 2019

Author: Thomas Cullen


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