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Emirates warns of 'tough' trading ahead as half-year profit falls

Emirates chairman Sheikh Ahmed bin Saeed Al Maktoum has warned of a "tough" six months of trading ahead after the group's first-half profits fell more than 50% to Dhs1.1 billion ($300 million) amid rising fuel costs and unfavourable currency movements.

Group revenues rose 10% to Dhs54.5 billion. Emirates airline division’s revenues rose 10% to Dhs48.9 billion, but profits fell 86% to Dhs226 million.

Dnata experienced a 31% rise in profits to Dhs861 milliion, but Emirates says that includes a Dhs320 million cash boost from divesting its 22% stake in travel management company Hogg Robinson. Stripping out this one-off transaction, Emirates says its ground-handling arm would have experienced an 18% drop in profits.

Operating costs grew 13%, including a 42% rise in its fuel bill, which Emirates says is largely driven by a 37% increase in oil prices, as well as an increase in fuel used by 4% due to its expanding fleet operations. Fuel remained the largest component of the airline’s costs, accounting for 33% of operating costs compared with 26% in the first six months of last year.

Al Maktoum says that while Emirates and Dnata grew steadily during the period and demand remained "healthy", the group's performance had suffered as a result of currency devaluations in markets such as India, Brazil, Angola and Iran, which had wiped out approximately Dhs4.6 billion from its profits.

He says the Gulf carrier group is seeking to manage "myriad challenges", including a "relentless downward pressure" on yields, and uncertain economic and political conditions within its home region and in other parts of the world. Emirates intends to keep a "tight rein" on controllable costs and will seek to drive efficiency improvements through the implementation of new technology and business processes.

"The next six months will be tough, but the Emirates Group’s foundations remain strong," he states, adding Dubai continues to be an attractive destination with a 9% rise in passengers travelling to the city in the first half of 2018-19 compared with the same period last year.

During the first six months of the year, Emirates received three Airbus A380s and five Boeing 777s, with five more new aircraft scheduled to be delivered before the end of the financial year. It says it also retired seven older aircraft from its fleet and a further four will to be phased out by 31 March 2019.

Passenger numbers rose 3% to just over 30 million between 1 April and 30 September, while average load factors increased from 77.2% in the same six months last year to 78.8%.

The volume of cargo uplifted remained "largely unchanged" at 1.3 million tonnes but yields improved by 11%, which the group says is due to Emirates SkyCargo’s focus on investments in products and services.

The number of employees across fell by 1% from 103,363 to 101,983, largely as a result of natural attrition, together with a slower pace of recruitment, which Emirates says related to its various internal programmes to improve efficiency through the implementation of new technology and workflows.

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