Nnounces 2017-18 results

Passenger Kilometre (RPKM).

To fund its fleet growth during the year with high ongoing new aircraft deliveries, Emirates raised AED17.9bn ($4.9bn), using a variety of financing structures, including the successful execution of a $600m sukuk in March to fund the acquisition of two A380 aircraft to be delivered in 2018.

Emirates continues to tap the Japanese structured finance market in conjunction with debt from a wide-ranging group of institutions in China, France, the United Kingdom and Japan. The company raised in excess of AED3.7bn ($1bn) during the year from this source. Emirates has also refinanced a commercial bridge facility (due to non-availability of ECA cover) of AED3.8bn ($1.0bn) via an innovative finance lease structure for five A380-800 aircraft, accessing an institutional investor and bank market base from Korea, Germany, the United Kingdom and the Middle East.

These deals align with Emirates’ financing strategy and demonstrates its ability to unlock diverse financing sources through access to global liquidity. It also underscores its sound financials and the strong investor confidence in the airline’s business model.

Emirates closed the financial year with a healthy and increased level of AED20.4bn ($5.6bn) of cash assets.

Revenue generated from across Emirates’ six regions continues to be well balanced, with no region contributing more than 30% of overall revenues. Europe was the highest revenue contributing region with AED26.7bn ($7.3bn), up 12% from 2016-17. East Asia and Australasia follows closely with AED25.4bn ($6.9bn), up 12%. The Americas region recorded revenue growth at AED13.4bn ($3.7bn), up 7%. Gulf and Middle East revenue decreased by 2% to AED8.5bn ($2.3bn) whereas revenue for Africa increased by 8% to AED9.4bn ($2.6bn). West Asia and Indian Ocean revenue increased by 5% to AED 7.8bn ($2.1bn).

Through the year, Emirates introduced product and service improvements on board and on the ground.

Key highlights include the launch of fully-enclosed suites in First Class together with refreshed Business Class and Economy Class cabins on the 777-300ER aircraft; new, wider Business Class seats arranged in a 2-2-2 layout on the 777-200LR aircraft and a refreshed version of the popular Onboard Lounge on the Emirates A380.

On the ground, Emirates added a new dedicated lounge in Boston for its premium passengers and frequent flyers; refurbished existing lounges in Singapore and Bangkok and completed a US$11m makeover of its lounges in Dubai airport Concourse B.

Emirates also invested in new channels and technology to offer even better and more personalised customer experiences online, on mobile, as well as via its retail and contact centres.

For 2018-19, Emirates has announced new routes to London Stansted in the UK, Santiago in Chile, Edinburgh in Scotland, and an additional flight between Dubai and Auckland via Bali, aside from capacity upgrades to existing destinations.

Emirates SkyCargo recorded a strong performance in a resurgent market and continues to play an integral role in the company’s expanding operations, contributing 14% of the airline’s total transport revenue.

In an airfreight market with fastchanging demand patterns, Emirates’ cargo division reported a revenue of AED12.4bn ($3.4bn), an impressive increase of 17% over last year, while tonnage carried slightly increased by 2% to reach 2.6 million tonnes.

This year, freight yield per Freight Tonne Kilometre (FTKM) increased by 14%, reflecting a very positive market environment for the industry, and the weakening of the USD against major currencies.

Emirates’ SkyCargo’s total freighter fleet stood at 13 Boeing 777Fs. In addition to belly-hold capacity to Emirates’ new passenger destinations, Emirates SkyCargo launched new freighter services to Maastricht (Netherlands), Luxembourg and Aguadilla (Puerto Rico).

Emirates SkyCargo continued to develop innovative, bespoke products tailored to key industry sectors. In November, it signed an MoU with Dubai CommerCity to develop new solutions for the e-commerce sector using Dubai as a hub.

During the year, Emirates SkyCargo launched Emirates Fresh for perishable commodities such as fresh cut flowers, fruits and vegetables. For temperature-sensitive Pharma products, Emirates SkyCargo rolled out a pharma corridors programme to offer enhanced origin-to-destination protection and it also partnered with DuPont to introduce White Cover Xtreme, a next generation thermal blanket to protect sensitive cargo.

Emirates’ hotels recorded revenue of AED746m ($203m), a moderate increase of 1% over last year in a highly competitive market mainly in the UAE.

dnata performance

In its 59 years of operation, 201718 has been dnata’s most profitable year, crossing AED1.3bn ($359m) profit for the first time. Building on its strong results in the previous year, dnata’s revenue grew to AED13.1bn ($3.6bn), up 7%. dnata’s international business now accounts for 68% of its revenue.

The strong performance was achieved through organic growth with key contract wins coupled with solid customer retention across its four business divisions, as well as the impact of acquisitions from previous year.

dnata continued to lay the foundations for future growth by investing AED600m in new facilities and equipment, acquisitions, leadingedge technologies and people development.

One of its key initiatives in 201718 was to embark on the journey to implement a new Enterprise Resource Planning solution that will transform its business support functions and provide real time information to enable better decision-making, governance, efficiency and scalability for continued growth and expansion.

In 2017-18, dnata’s operating costs increased accordingly by 8% to AED11.9bn ($3.2bn), reflecting the impact of organic growth across all lines of business coupled with integrating the newly acquired companies mainly across its international airport operations.

dnata’s cash balance reached AED4.9bn ($1.3bn), a new record high. The business delivered an AED1.9bn ($506m) cash flow from operating activities in 2017-18, which is also a new record in line with the enhanced cash balance.

Revenue from dnata’s UAE Airport Operations, including ground and cargo handling increased by 4% to reach AED3.2bn ($859m).

The number of aircraft movements handled by dnata in the UAE declined by 2% to 211,000 impacted by the geopolitical situation in the region, whereas Cargo handling increased by 2% to 731,000 tonnes, supported by the strong overall air cargo market.

In addition to the steady delivery of initiatives started in 2014 to optimise its operations, covering facility improvements, process changes, infrastructure upgrades and IT development, dnata also successfully tested the use of blockchain technology to further streamline and simplify its cargo delivery processes from origin to final destination.

dnata’s International Airport Operations division grew revenue by 14% to AED3.8bn ($1bn), on account of increasing business volumes, opening of new locations and winning new contracts.

International airport operations continue to represent the largest business segment in dnata by revenue contribution. The number of aircraft handled by the division further increased substantially by 10% to 449,000, and Cargo noted a substantial growth of 10% to 2.4 million tonnes of handled goods.

dnata continued to win over customers with its high quality standards, inking over 90 contracts with new and existing customers during the year.

During the year, dnata made sig- nificant investments which expanded its capability and global presence. In May, dnata entered the US cargo market with its acquisition of AirLogistix USA. The investment includes state-of-the-art cargo handling facilities in Houston and Dallas Fort-Worth. dnata also expanded its cargo handling capabilities at Gatwick, opened an additional cargo warehouse in Schiphol and a new airside cargo facility in Adelaide.

In the US, it received a new licence to provide ground-handling services at John F. Kennedy International Airport’s Terminal 4 and it commenced operations at JFK’s Terminal 8. In Singapore, dnata began operations at Singapore Changi Airport’s new Terminal 4 and opened a new maintenance base for ground service equipment.

dnata’s Catering business accounted for AED2.1bn ($585m) of its total revenue, up 7%. The inflight catering business uplifted more than 55 million meals to airline customers.

During the year, dnata opened a state-of-the-art catering hub at Melbourne airport, the largest such facility in the southern hemisphere and a second catering facility in Ireland at Dublin airport. It also entered the Canadian market when it was awarded a licence to provide flight catering services to airlines departing Vancouver International Airport and has commenced plans to build a dedicated catering facility there.

dnata strengthened its presence in the North American market with the acquisition of 121 in-flight catering, a New York-based in-flight and VIP caterer in March. This is pending approval from the Committee of Foreign Investments in the United States (CFIUS). In April, dnata announced the acquisition of Qantas’ catering business, subject to the approval of the Australian Competition and Consumer Commission.

Revenue from dnata’s Travel Services division has seen a turnaround after last year’s decline with an increase of 8% to AED3.4bn ($922m). The underlying total transaction value (TTV) of travel services sold increased by 6% to AED11.3bn ($3.1bn).

This solid performance was supported by dnata’s ability to tap on the upswing in both inbound and outbound tourism demand in the Middle East and a healthy increase in long-haul travel and cruise bookings in Europe and Australia.

In 2017-18, dnata completed its acquisition of a stake in Destination Asia, a leading destination management company with operations across 11 Asian countries, making its entry into South East Asia’s inbound travel market. Its UKbased Imagine Cruising business, completed a successful first year of trading in Australia and acquired Holiday Planet, a leading travel company in Perth to boost growth in this market.

During the year, dnata invested in technology to provide enhanced functionality and a better service experience for its partners and customers. This included the creation of two travel reservation systems for Emirates Holidays and dnata Travel’s B2B business, to replace existing ones. The full 2017-18 Annual Report of the Emirates Group – comprising Emirates, dnata and their subsidiaries – is available at www.theemiratesgroup.com/annualreport