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’ 2021-22 financial year, 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.”