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Record profits for Emirates Airline

Emirates Airline has announced yet another record performance with net profit for the first six months of the current financial year 2006-07 at US$323m, up 29% from US$ 251m for the same period last year.

Emirates Airline has announced yet another record performance with net profit for the first six months of the current financial year 2006-07 at US$323m, up 29% from US$ 251m for the same period last year.

The results reflect a strong revenue performance driven by robust passenger and cargo demand, and better yields, which softened the impact of high fuel prices on operating costs.

Emirates’ operating revenue of US$3.67bn for the half-year represented a strong growth of 30% compared to revenue of US$2.84bn during the same period last year.

Passenger revenue recorded a 31% growth, with passengers carried increasing by 1.41 million or 20% to 8.39 million, compared to 6.98 million for the first half-year of 2005-06. Seat factor improved to 76.4% for the period, reflecting the robust demand in tandem with an increased passenger seat capacity in terms of available seat kilometres of 25%, versus the same period last year.

Emirates SkyCargo continued its steady revenue growth, posting an increase of 29% to US$0.73bn, with cargo tonnage up by 20% to 577,455 tonnes, compared with 482,643 tonnes for the same period last year, and maintained its contribution at about 21% of the airline’s transport revenue.

Emirates’ Chairman & CEO, H.H. Sheikh Ahmed bin Saeed Al Maktoum, said: “Emirates has been in a strong position to tap into the robust demand for air travel globally by expanding its route network with new high-capacity aircraft, and investing in passenger services such as dedicated airport lounges across Europe, the Far East and Australasia. In the coming months, we intend to continue with our growth plans while keeping a close watch on costs.”

Fuel costs for the first six months crossed US$1bn and remained the top expenditure accounting for 30.7% of total operating costs, up from 27.2% for the full period last year. Measures taken by Emirates to remain on target include stringent cost-containment and efficiency drives which as Mike Simon, Emirates’ Divisional Senior Vice President Corporate Communications explained to Arabian Business include “The increased use of Information Technology to boost efficiency of administrative and operational processes.”

Yet like other airlines, Emirates has been forced to maintain fuel surcharges on tickets, which do not fully cover the escalating costs. In fact Simon explained to Arabian Business: “Fuel surcharges offset less than half of the incremental fuel costs borne by us so high fuel costs remain a challenge. In addition to efficiency drives, we have hedging contracts for some of our fuel purchases, and also use a full time oil industry specialist based in Texas to look for the best possible jet fuel buying prices and terms, to try and reduce those costs.”

Emirates’ cash position, including held to maturity investments, on 30th September 2006 was healthy at US$3.04bn, an increase of 15% compared to US$ 2.65bn six months earlier. This was after paying dividends of US$105m to the ownership pertaining to the past financial year, and funding capital outflows of around US$398m that included aircraft pre-delivery payments and other capital items.

Emirates successfully raised a total of US$750m during the period through its debut Singapore Dollar bond issue in June 2006, and a second Dirham bond issue in July 2006. Emirates repaid its first Dirham bond issue of US$408m which matured in July 2006.

Since January 2006 Emirates has launched services to 10 new cities - Abidjan, Addis Ababa, Bangalore, Beijing, Hamburg, Kolkata, Lilongwe (cargo-only), Nagoya, Thiruvananthapuram and Tunis - bringing the network total to 87 cities including four cargo-only destinations. In addition, it added capacity with larger aircraft to many of the existing destinations and increased the frequency of passenger services, including a second daily service to Zurich and a third daily into New York via Hamburg.

With the addition to the fleet of nine new aircraft since March 2006, Emirates’ current fleet size is 100. The total value of Emirates’ current orders of more than 100 wide-bodied jets pending delivery is approximately US$30bn. These include the recently-signed contract for 10 firm Boeing 747-8Fs worth US$2.8bn at list prices and purchase rights for 10 additional 747-8Fs.

Simon reflected: “Emirates’ growth is on track. By 2012 we expect to fly over 33 million passengers annually on some 150 aircraft.”

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