Given the circumstances in which Emirates began its latest financial year, it is not exactly startling to learn that the Dubai-based airline has just reported its first annual loss in 33 years.
On 1 April 2020, the first day of this annus pecuniaria horribilis, the airline that has transformed global aviation and turned its hub into the world’s leading intercontinental junction, was going nowhere. Six days earlier, the carrier had been ordered to shut down by the UAE government, which also grounded rival Etihad in neighbouring Abu Dhabi.
A few days later, rescue flights began, delivering stranded passengers to their home countries in time to embark on the painfully protracted path of lockdown.
Emirates’ owner, the government of Dubai, came to the rescue with an injection of 11.3bn dirhams (£2.2bn), which helped keep the giant airline aloft. You learn that, and much else, when reading the 198-page annual report. Happily, I have read it so that you don’t have to. And these are the highlights.
Had I been asked, I would have suggested using a different verb in an airline context when summing up the performance, but here goes: “Emirates’ financial results nose-dived this year.”
The airline lost 20.3bn dirhams (£3.9bn), compared with a modest profit in 2019-20, “caused by the diminished revenue line and high fixed costs”, we are told to nobody’s surprise. A significant slice of that was down to “hedge ineffectiveness”.
Emirates, like most other carriers, has traditionally sought to smooth its costs by committing to a certain amount of fuel at a specific price. That’s great when you are flying, and a millstone when you are not. That particular policy cost an average of £400 per minute between April 2020 and March 2021.
The shocking and unprecedented losses triggered nearly 34,000 job losses. “For the first time in the group’s history, redundancies were implemented across all parts of the business”, says the report – representing three in 10 of Emirates’ employees.
Let us hope many of them are brought back. The airline’s chairman and chief executive, Sheikh Ahmed bin Saeed Al Maktoum, says: “We aim to recover to our full operating capacity as quickly as possible to serve our customers, and to continue contributing to the rebuilding of economies and communities impacted by the pandemic.”
Emirates aims to be back to 90 per cent of pre-Covid-19 revenues by 2023-24: a heck of an ambition given the carrier’s unique fleet.
Most airlines that operate Airbus A380 “SuperJumbo” aircraft have mothballed the giant planes. For all but Emirates, the A380 is a relatively small part of the fleet. Filling all those seats during the coronavirus pandemic is the kind of headache than no airline executive needs. But the Dubai airline has almost half the A380s ever built: a fleet of 113.
These vast aircraft with great performance underpinned the Emirates strategy of uniting the world. During the good times, bringing industrial quantities of passengers to Dubai and redistributing them across the world was great business. From a traveller’s perspective: on my last Emirates trip, from Tokyo via Dubai to London Heathrow in October 2019, I enjoyed the A380 on the second sector much more than the Boeing 777 from the Japanese capital.
I would continue to pay a premium for the pleasure – but how many others will do so? The load factor, or proportion of seats filled, fell from 78 per cent to 44 per cent during the last financial year.
So while Emirates came up with a brave marketing ruse in March 2021, I don’t recommend you invest in it: “Emirates introduces a new option for customers flying in Economy Class to purchase empty adjoining seats, offering them the ability to purchase more space and privacy.” Unless you are unlucky, there should be one or two empty spaces next to you regardless.
The great unknown, of course, is: when might you or I fly on this formidable airline again? At present the UAE is on the UK red list specifically because Dubai is a global hub, and even an hour spent in the airport is enough to condemn you to 11 nights of self-isolation at a cost of £1,750.
Explaining the decision, the transport secretary, Grant Shapps, said: “We are not restricting UAE because of levels of coronavirus in the UAE. The specific issue in the UAE is one of transit. It’s because they are a major transit hub.
“The Joint Biosecurity Centre can work wonders studying all this detail, but eventually you get to the point where they are having to make too many assumptions about where people are travelling to/from. And that is a specific issue we have with the UAE as opposed to prevalence or some other reason.”
Given his words, it is difficult to see a change to the advice for the UAE any time soon. But as the UK closes down, much of the rest of the world is opening up. So Emirates will be fine. But I fear it will not wish to super-serve the UK as it did before the worst year in its history.
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