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Emirates profit to be hit despite drop in oil prices
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Even though oil prices have started slipping down, Dubai government-owned airline Emirates is likely to take a hit in its profits this year, according to the airline's President, Tim Clark.
"We have to be realistic. We have taken a real pasting these past six-odd months. And the task now is to try and get ourselves back into some kind of equilibrium. I don't think any airline, or very few, have managed to really go ahead on the profits that they were making last year or the previous. And I don't think Emirates is any exception," Clark told Emirates Business.
"But that is something you just have to live with. And this is not a disaster for us. It only just means that we are not making so much money, but we will in the future get back to that. But just in the short term, it is a little bit difficult," he said. According to a report published in yesterday's edition of Italian newspaper La Repubblica, the rise in oil prices is costing Emirates about $500 million (Dh1,836m) in profits this year, quoting Clark as saying. "This year we expected profits to grow by about $500m to nearly $2bn but the rise in crude (oil prices) already costs us more or less that amount. We too are enacting a cost-reduction plan," the daily quoted him as saying. He said he expects oil prices to stabilise at between $65 and $85 a barrel around the mid-2009.
Meanwhile, Emirates will review its pricing strategy, which will be ready by the month-end as the oil price drops, according to Clark.
"Needless to say we have been caught off site by the rate of which the oil increases came through during the course of the year. We were so far behind in trying to adjust our prices to catch up. So there was a big gap, which compromised the income streams," Clark said.
"That is because you apply a price increase and it doesn't come through for three or four months, while the oil was hitting us every week," he said.
Revisiting routes
Emirates would also be putting back Durban on its route map, according to Clark. The carrier had recently suspended launch to Durban owing to soaring fuel prices.
"We will definitely out back Durban on our route map as soon as the trading conditions allow us to do that. Durban was only deferment and we would definitely be going back again into our plans. As soon as things get right, we will restart the programme that we had planned for many years, and Durban is just one of them," Clark said.
With regards to Alexandria services, he said Emirates is reviewing if it wants to stay in that market or not. "That is one of the things I would be looking into," he said.
"We have to be realistic. We have taken a real pasting these past six-odd months. And the task now is to try and get ourselves back into some kind of equilibrium. I don't think any airline, or very few, have managed to really go ahead on the profits that they were making last year or the previous. And I don't think Emirates is any exception," Clark told Emirates Business.
"But that is something you just have to live with. And this is not a disaster for us. It only just means that we are not making so much money, but we will in the future get back to that. But just in the short term, it is a little bit difficult," he said. According to a report published in yesterday's edition of Italian newspaper La Repubblica, the rise in oil prices is costing Emirates about $500 million (Dh1,836m) in profits this year, quoting Clark as saying. "This year we expected profits to grow by about $500m to nearly $2bn but the rise in crude (oil prices) already costs us more or less that amount. We too are enacting a cost-reduction plan," the daily quoted him as saying. He said he expects oil prices to stabilise at between $65 and $85 a barrel around the mid-2009.
Meanwhile, Emirates will review its pricing strategy, which will be ready by the month-end as the oil price drops, according to Clark.
"Needless to say we have been caught off site by the rate of which the oil increases came through during the course of the year. We were so far behind in trying to adjust our prices to catch up. So there was a big gap, which compromised the income streams," Clark said.
"That is because you apply a price increase and it doesn't come through for three or four months, while the oil was hitting us every week," he said.
Revisiting routes
Emirates would also be putting back Durban on its route map, according to Clark. The carrier had recently suspended launch to Durban owing to soaring fuel prices.
"We will definitely out back Durban on our route map as soon as the trading conditions allow us to do that. Durban was only deferment and we would definitely be going back again into our plans. As soon as things get right, we will restart the programme that we had planned for many years, and Durban is just one of them," Clark said.
With regards to Alexandria services, he said Emirates is reviewing if it wants to stay in that market or not. "That is one of the things I would be looking into," he said.