Emirates SkyCargo takes a hit

Emirates

Over the past year the Group as a whole saw revenue edge up by 1.9% to AED94.7bn (US$25.8bn), but operating profits fell by 70% to AED2.5bn (US$670m) and margin from 10.1% to 3.9%. At the core airline business passenger demand was strong at 56.1m, which represented a rise of 8% over the previous year but results were hit by the strength of the US dollar and operational costs such as spending on fuel which rose by 6.3%.

The SkyCargo business fared worse. Although tonnage carried rose by 3% to 2.57m tonnes, revenue fell 4.9% to AED10.6bn (US$2.88bn), which reflected the fall in freight rates in the market generally. The SkyCargo business continued to expand belly freight capacity as the wider aircraft fleet grew but unsurprisingly the freighter fleet has remained at 15 aircraft, although Emirates has just announced a co-operation agreement with Luxembourg based freighter operator Cargolux. Overall, available freight tonne kilometres was up 7.2%. Frustratingly Emirates has not exploded out profit numbers for the SkyCargo division, however it would be logical to assume it took a large hit to its income.

In contrast the ground handling and logistics hub business, dnata, had a good year with revenue up 15% to AED12.2bn (US$3.3bn) with operating profit increasing in parallel to AED1.1bn. Expansion beyond Dubai was the driver behind the increase, including new business in Canada and the Czech Republic.

Emirates is now one of, if not the largest airline in the world. In such a position it would be very hard to avoid the dynamics of the air transport market generally and it has not. The underlying movement is good, with more demand for both passengers and freight. The problem is profitability. With so many competitors reducing capacity, at least in terms of freighters, Emirates’ relative position may be improving, but it has to ensure this can deliver positive results in the long-term.

Source: Transport Intelligence, May 16, 2017

Author: Thomas Cullen