Wall Street Journal
By Nicolas Parasie
May 11, 2017
DUBAI—Emirates Airline said profit plunged in its just-ended fiscal year, slammed by a series of headwinds from weak business travel to a drop in bookings to the U.S. related to recent Trump administration travel directives.
Emirates said the turbulence will force it to withhold dividend payments to its Dubai government-controlled owner for the first time in more than 20 years—a sharp turnaround for an airline that has grown in those two decades into the world’s largest international carrier by passengers.
Net profit for the fiscal year ending March 31 fell to $340 million from $1.94 billion the year before, while revenue was flat at $23.2 billion.
Emirates bookings to the U.S. slumped in January when President Donald Trump imposed a ban on immigration from several Muslim-majority countries. Bookings have been slow to recover even though U.S. courts have suspended the ban over concerns about its legality.
The airline, known for its luxury offerings in first and business class, said it won’t pay a dividend to its owner, the Investment Corporation of Dubai, for the first time since fiscal 1996. It is a major setback for one of the world’s most ambitious carriers which has stoked controversy for its rapid expansion and ability to steal traffic from U.S. and European rivals.
Emirates Chairman Sheikh Ahmed bin Saeed Al Maktoum said the airline’s investments in recent years helped it “weather the destabilizing events which have impacted travel demand during the year.”
Sheikh Ahmed cited a long list of issues for the airline, including Europe’s immigration challenges and terror attacks, Britain’s vote to leave the European Union and new U.S. travel policies. The sluggish oil-and-gas industry and its effect on business confidence in the region in addition to currency devaluations in parts of Africa were further difficulties, he said.
Emirates’ profit decline underlines how the Trump administration’s efforts to limit immigration from several Muslim-majority countries and ban laptops on some U.S.-bound flights have taken a toll on airlines in the Middle East. Emirates last month said it would cut the number of its flights to five U.S. cities in response to U.S. policies.
“One of the biggest challenges we faced, were the actions taken by the U.S. government relating to the issuance of entry visas, heightened security vetting, and restrictions on electronic devices in aircraft cabins,” according to Emirates’ annual report. “All of which had a direct impact on consumer interest and demand for air travel into the U.S., one of our biggest growth potential markets,” it said.
The Dubai-based carrier is the oldest and biggest of the three major Persian Gulf airlines that also include Etihad Airways and Qatar Airways. In the past decade, they have invested heavily in new planes and rapidly expanded their route network across the globe, using major and newly-built airports in cities such as Dubai and Doha.
The immigration and electronics limitations imposed by the U.S. have added to a string of problems already affecting the Mideast carriers. The U.S. government is considering expansion of the ban to other regions, including Europe.
The sharp drop in commodity prices since mid-2014 has hit Emirates’ premium bookings in the oil-rich region hard, as energy and related industries cut back on expensive tickets.
Rapid fleet growth at Emirates and its rivals has also led to a glut of seats for sale in the region, depressing ticket prices for economy class. Its own fleet grew by eight planes to 259 long-haul jets. Emirates is the biggest buyer of Boeing Co. 777 airliners and Airbus SE A380 superjumbos.
Amid those hurdles, Emirates and Abu Dhabi rival Etihad have slowed deliveries of some new planes. Both companies have also cut staff, an unusual move after years of aggressive expansion.
Emirates carried 56.1 million passengers during the year, 8.1% more than the year before.
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