Air Transport World

Emirates feels the heat

Leonard Hill

DUBAI - After years of impressive expansion and profits, state-owned Emirates still is making money and reaping accolades for superior airline service. That's the good news emanating from senior executives.

At the same time, the bosses admit that the international carrier of the United Arab Emirates feels the pain of cost controls, rising fuel charges and keenly competitive market forces, as yield continues to suffer and profits dwindle.

In the fiscal year ended March 31, 1996, the latest for which statistics are available, yields fell 3.4% from 8.46 cents to 8.17 cents per RPK, driving break-even load factor up to 66.2%, uncomfortably near the actual load factor of 68.6%. That result largely was offset by a 13.9% growth in passengers to 2.6 million and a 20.1% rise in cargo volume to 130,118 tons. The bottom line was a modest $39 million group profit. Of that, the airline contributed $22.1 million (down from $26 million the year before), while Dnata - the group's broadly based ground-services provider - earned $17 million (see box, page 00).

As Corporate Communications Chief Mike Simon says, 'granted, those weren't huge profits. But they were reasonable, considering the highly charged competitive environment in which we operate.' Under Dubai's open-skies policy, 92 airlines serve the sheikdom.

European services accounted for 27% of Emirates' earnings in 1995-96, with three daily flights to London making that the most profitable route even in the face of competition from British Airways. The Pacific Rim generated 25%, western Asia 22%, the Middle East 23%. Off-line, the U.S. added 3% with a through-flight code-share accord with United Airlines via London. …

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