Published on : Monday, June 28, 2021
The deep impact of the COVID-19 pandemic on aviation has been reiterated by Dubai flag carrier Emirates’ performance during the 2020-21 financial year, which included a net loss of AED20.3bn ($5.5bn) and a 66% revenue drop to AED30.1bn ($8.4bn). While the airline may still retain its market dominance given the scale of its legacy operations, the evolution of its financial position over the past decade exacerbated by the impact of COVID-19 suggests a more cost-conscious version of Emirates could emerge in the aftermath of the pandemic, says GlobalData’s MEED.
The first signs that Emirates (like all global airlines) was headed towards a financial downturn emerged in March 2020, when its ultimate owner, the Government of Dubai, pledged an equity injection for the carrier. The AED11.3bn ($3.1bn) injection was unprecedented in the history of Emirates and served as a reminder of how critical, both commercially and socially, the airline’s continuity is to Dubai’s economy. Its recovery will hinge on its ability to efficiently manage its operating costs, which dropped to AED46bn last year, from AED85.5bn in 2019-20.
Neha Bhatia, Construction and Infrastructure Editor at GlobalData’s MEED, comments: “After having largely weathered the global financial crisis of 2008-10 and the oil price crash of 2014-16, around 30,585 Emirates staff were laid off in 2020-21 for the first time in the airline’s history. The move consequently drove down employee costs by 35%, to AED7.8bn, but this reduction is not a new trend.”
Employee costs at the airline fell by 3.45% and 4.4% in 2018-19 and 2019-20, respectively, and had been in somewhat steady decline since swelling to a ten-year growth peak of 20% in 2010-11. Amid the grounding of flights and oil market fluctuations, jet fuel costs also shrank 75.6%, to reach AED6.4bn in 2020-21 from AED26.2bn in the previous year. Brent crude oil prices averaged $41 a barrel and largely stayed low last year, which benefited Emirates’ bottom line.
However, prices are expected to average $63 a barrel this year and could raise jet fuel costs during Emirates’ for financial year 2021-22, especially if post-pandemic travel demand recovery estimates are realised. Bhatia adds: “Across the Emirates group, cost reduction measures resulted in savings of AED7.7bn in 2020-21. It is possible that further such measures will be rolled out, given the sustained impact of COVID-19, including on Emirates’ travel corridors with India and the UK.”