Dubai comes to Emirates aid after crushing annual loss
- Emirates Airline reports an annual loss of AED 22.1 billion due to COVID
- Sheikh Ahmed bin Saeed Al Maktoum, the Chairman of Emirates Airline and Group is keen to recreate jobs and return to full capacity by 2023/24
- Emirates receives USD 1.1BN financial relief package from the Dubai government
- When will Brits be allowed to travel to the UAE?
Today, the Emirates Group reported their first non-profitable year in three decades, with the significant slump in revenue triggered by the impact of coronavirus travel restrictions and bans with the capacity crunch forcing the airline to reduce flights drastically.
According to the 2020/21 report released by the Emirates Group, the United Arab Emirates flag carrier airline suffered a loss of AED 22.1BN (GBP 4.26BN) for the financial year ending March 31st after generating AED 1.7BN (GBP 330M) profit the previous fiscal year.
Emirates confirmed that the annual loss was the worst in its history and only the third-ever decline recorded since they began operating in 1985.
The airline’s revenue of AED 35.6BN (GBP 6.87BN) was affected by global travel restrictions and border closures introduced by most countries to curb the spreading of Coronavirus.
Emirates financial performance was also weighed down by one-time impairment charges worth AED 1.5BN, relating to specific aircraft which the Group does not expect to return to service before their leases expire.
His Highness Sheikh Ahmed bin Saeed Al Maktoum, the Chairman and Chief Executive of Emirates Airline and Group said: “The coronavirus continues to plague lives, communities, economies and the travel industry.
“Emirates and the Dubai National Air Travel Agency (dnata) were devastated by reduced demand stemming from international travel restrictions and border restrictions in the 2020/21 financial year as evidenced in our latest report.”
Emirates Group Annual Report for 2021/21 showed that:
- The airline group ended the year with a cash balance of AED 19.8BN (GBP 3.82BN)
- Emirates posted a loss of AED 20.3BN (GBP 3.92BN) year-on-year after generating AED 1.1BN (GBP 210M) in profit the previous fiscal year.
- Annual revenue slumped by 66% to AED 30.9BN (GBP 5.96BN), with ongoing border closures and global travel restrictions cited as the reason for losses.
- The airline’s total passenger and cargo capacity suffered billions in losses after declining by 58% in the 2020/21 financial year.
- Emirates reduced its aircraft fleet size by eleven planes.
- Dnata suffered a loss of AED 1.8BN (GBP 350M) in the same financial year.
- Total revenue slumped by 62% to AED 5.5BN (GBP 1BN) as the coronavirus damage impacted all business divisions in the United Arab Emirates and worldwide.
Following the report’s publication, Emirates announced that the Dubai government had stepped in to rescue the airline with a cash injection of AED 4BN (GBP 770M).
Dubai gives Emirates AED 4BN in financial aid
The government of Dubai has delivered an AED 4BN cash injection to the Emirates Group after the UAE flag carrier airline revealed that they had suffered extensive losses at the hands of coronavirus.
It comes on top of an AED 11.3BN rescue package delivered during the 2020/21 financial year, which helped keep the Dubai-based airline aloft.
Dnata also tapped into various industry support programmes to support the airline, acquiring financial aid worth approximately AED 800 million during the previous financial year.
The chairman of the Emirates Group praised the Dubai government for their financial aid package, stating that it allowed the business to sustain operations and retain much of its talent pool.
However, the challenges brought about by COVID-19 have forced Emirates to make some difficult decisions, including reducing its workforce.
Thousands of employees were laid off over the past year despite efforts to reduce outgoings by committing to a certain amount of fuel at a specific price. However, the economic strain created by COVID-19 was far more challenging than expected.
Without regular flights, the cost of the fuel policy at an average of GBP 400 per minute was unsustainable. As a result, the airline decided to axe nearly 34,000 jobs across the business.
It was the first time in Emirates history that the airline made redundancies across all aspects of the business. According to the latest statistics, Emirates workforce is now 31% smaller than pre-pandemic levels, reduced from 105,000-strong to 75,145 employees.
Meanwhile, many employees that Emirates retained have seen their contracts renegotiated to reduce costs to the company further.
The Emirates Group introduced a range of other initiatives to reduce costs, including restructuring financial obligations, consolidating operations, and re-examining business procedures, resulting in an estimated saving of AED 7.7BN last year.
Sheikh Ahmed bin Saeed Al Maktoum hopes to recreate jobs and return to total operating capacity as quickly as possible but recognises that recovery will be uneven due to varied COVID-19 vaccine rollouts.
Still, Sheikh Ahmed bin Saeed Al Maktoum vowed to “continue contributing to the rebuilding of economies and communities impacted by the pandemic.”
Emirates hopes to claw back 90% of its pre-pandemic revenues by the next fiscal period through various initiatives.
Emirates has an ambitious growth plan
The Group invested AED 4.7BN (GBP 910M) in new aeroplanes, facilities, company assets, and new technologies to better position itself for robust recovery and future growth in the previous fiscal year.
The airline has also invested in initiatives concerning sustainability such as technology to create more fuel-efficient aircraft, responsible consumption strategies and wildlife preservation.
Before the crushing 2020/21 annual loss, the Group and dnata had posted record growth and profitability, testimony to the airline’s comprehensive business models, steady investments, the process of innovating and a stable leadership team.
Sheikh Ahmed explained that these elements have been crucial to Emirates’ success as an airline and a business.
He added: “Combined with Dubai’s ambitions for economic growth and infrastructure, I remain confident that Emirates and dnata will undergo a solid recovery and return stronger than before.”
Emirates isn’t the only airline to receive billions in financial support, as UK airline British Airways received a GBP 2BN cash injection in the new year. At the same time, America’s crippled aviation industry was offered a USD 25BN bailout by the US government.
As the Dubai government is Emirates sole shareholder, most of the airline’s financial relief is provided by the state.
Fellow state-owned carrier Qatar Airways also receives the most of its financial relief from the government, which delivered a USD 3BN cash injection to the airline in the 2020/21 fiscal year.
Emirates and Qatar Airways are also at a disadvantage compared to other international airlines as they don’t have access to domestic markets and rely solely on global aviation.
As COVID-19 essentially wiped out international travel, these airlines could not cushion the blow against border closures with domestic flights.
However, Emirates SkyCargo responded swiftly to reduced passenger numbers by meeting the growing demand for cargo, which contributed to 60% of the airline’s total transport revenue.
Speaking about Emirates recovery, Sheikh Ahmed said: “No one knows when the pandemic will be over, but we know recovery will be patchy. Economies and companies that entered pandemic times in a strong position will be better placed to bounce back.”
However, it remains unknown when Brits will be able to travel to the United Arab Emirates again, given that the UAE is on Britain’s red list.
UK red travel list: When will I be able to travel to the UAE?
Given that the UAE is on the UK’s red list for travel and the British government has pushed back the date for when the final COVID-19 unlocking will occur in Britain, quarantine-free holidays to the United Arab Emirates look to be out of the question for the time being.
Currently, arrivals returning from red list destinations must self-isolate in government-designated hotels for 11 nights at the cost of GBP 1,750 per person.
Although the UAE has a relatively low infection rate, UK Transport Secretary Grant Shapps said that the Global Travel Taskforce (GTT) decided to impose stringent travel measures due to it being a global transit hub.
The GTT is concerned that loosening travel restrictions against the UAE will cause the infection rate in Britain to spike. UK health authorities have also warned that they could not be sure about travellers’ origins visiting the country.
It comes to much dismay for British airlines, which have urged the UK government to reopen travel urgently to save the industry and allow customers to reunite with loved ones.