Emirates Earnings Jump as Gulf Carrier Rules Out Etihad Merger
(Bloomberg) -- Dubai’s Emirates Group reported a 67 percent jump in full-year profit and said there are no plans to merge with Etihad Airways, the Abu Dhabi airline that’s shrinking operations following a record loss.
The world’s biggest long-haul carrier boosted net income to 4.11 billion dirhams ($1.1 billion) in the 12 months ended March 31 as higher oil prices spurred a revival in Middle East travel, it said in a statement Wednesday. Sales rose 8.1 percent to 102 billion dirhams.
Earnings rebounded after a slump in the previous fiscal year as Emirates pared frequencies to destinations including the U.S. and higher crude prices lifted sales from the region’s oil-based economies. The carrier is reaping benefits from closer ties to sister company FlyDubai, pushing any deal with Etihad off the agenda, according to Chairman Sheikh Ahmed bin Saeed Al Maktoum.
“Many people have reported there will be a merger,” Sheikh Ahmed said in an interview with Bloomberg Television. “There is no such thing. Not at all. I think when we talk about synergy today, it is between Emirates and FlyDubai.” There have never been talks with Etihad about a merger, he said.
Local press reports have suggested that a deal might be on the horizon after state-controlled Etihad posted a $1.87 billion loss in 2016 following the failure of an alliance-building strategy that saw it pour cash into Air Berlin Plc and Alitalia SpA, which later filed for insolvency.
The earnings indicate Emirates is emerging from the toughest operating conditions in its three-decade history. The carrier has become an industry heavyweight by exploiting the Gulf’s position at a natural global crossroads, something that Etihad had sought to replicate.
Emirates’s profit has returned to the levels of fiscal year 2013-2014. Business conditions “remain tough,” with a gradual recovery in key markets feeding initially into airfreight activity and only to “a lesser extent” into air travel and tourism, Sheikh Ahmed said.
The chairman played down the impact of a staffing shortage that Tim Clark, the airline’s president, said last month had led to the idling of planes and paring back of flights. Emirates is short of “small numbers” of cabin crew and doesn’t lack pilots as it seeks to better match recruitment to the arrival of new aircraft, Sheikh Ahmed said. The overall headcount fell 2 percent during the year to just above 103,000.
Rising crude prices represent a double-edged sword. “Surging oil prices in the second half of our financial year increased our operating costs,” Sheikh Ahmed said. “It also stoked the embers of economic recovery which contributed to better seat load factors and a modest climb in yields.”
Jet-fuel costs rose 18 percent during the year, the carrier said. At the same time its aircraft flew with 77.5 percent of seats occupied, an improvement of 2.4 percentage points. Yields, a measure of fares, increased 2.3 percent. The recovery was also supported by the Dnata ground-handling unit, which posted a record profit after expanding through acquisitions.
Emirates is still evaluating its engine choice for the latest batch of Airbus SE A380 superjumbos as an alliance of General Electric Co. and Pratt Whitney seeks to snag the contract from current supplier Rolls-Royce Holdings Plc. A decision will be made “soon,” Sheikh Ahmed said.
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