Higher fuel costs to hit Emirates profit as flydubai is also tested
A rebound in oil prices from a three-year low will squeeze Emirates’ half-year profit and present a “tough” year for sister airline flydubai.
The oil price recovery has inflated Emirates’ fuel bill by 40 per cent in the first half of the financial year while a stronger dollar, geopolitical instability and uncertainty in the global economy added to the woes weighing down on profit margins, Thierry Antinori, Emirates’ chief commercial officer, said yesterday at an aviation conference in Dubai.
Brent oil rose by more than 20 per cent in the first half of 2018. In the meantime the US dollar has reached a 16-month high against most currencies on the back of uncertainty related to Brexit and a clash between Italy and Brussels over Rome’s budget. Emirates’ warning comes days before announcing its first-half earnings tomorrow.
“It has not been a walk in the park,” Mr Antinori said.
Despite the challenges, the airline carried more passengers and its cargo business was “excelling” in the first six months of the fiscal year to September 30, Mr Antinori said.
To mitigate the effect of a strong greenback and higher fuel costs, the airline will continue seeking opportunities to increase its ancillary revenue.
The recovery of both oil prices and the energy sector’s rehave presented commercial opportunities to the Gulf airline, prompting it to resume its Airbus A380 service to Houston, Texas from June 1 on rising demand and restore its double daily flights to Lagos, Nigeria.
“Like other airlines, Emirates has been battered by rising fuel prices, however it has remained flexible in modifying its capacity and using aircraft in new market opportunities,” said John Strickland, director of UK aviation advisory JLS Consultancy.
“The airline is also investing in products improvements across cabins and in digital technology to improve customer experience and business efficiency.”
Separately, flydubai, the budget carrier that has teamed up with Emirates, is also facing a “tough” year as higher oil prices increase its fuel bill, its chief executive Ghaith Al Ghaith said.
“It’s going to be a tough year this year with the fuel price,” Mr Ghaith said.
With Britain set to leave the European Union by March 2019, and with just five months to reach a withdrawal deal, Emirates said it expects little impact on its business in the UK, where the airline serves eight airports.
“We are just waiting for the outcome but for us, it’s business as usual,” he said. “We’ll adjust, we’ll always have UK customers.”
Emirates “can and probably will do more” flights in Stansted airport, Europe’s biggest discount hub, Mr Antinori said. “We’re not pessimistic, the glass is half-full.”