Emirates's half-year profit plunges 88 per cent

[Naim 6]

If the UAE bubble bursts, many ppl will be packing their bags.

 

===

 

Emirates's half-year profit plunges 88 per cent

 

Geoff Easdown

November 12, 2008 12:00am

 

EMIRATES Airlines has become a major casualty of the fuel crisis with its half-year profit diving 88 per cent.

 

The carrier, which sources jet fuel from suppliers in Singapore and India, announced yesterday half-year profit had fallen to $US77 million ($A114.96 million).

 

The figure contrasts markedly with the $US643 million net profit Emirates reported for the same period last year.

 

The Dubai-based airline, with the world's newest fleet of aircraft, has built an enviable reputation promoting high profile sports clubs and sporting events worldwide.

 

Its head office and workshops in Dubai adjoin fellow Emirate, oil-rich Abu Dhabi, which lacks the refining capacity to produce jet kerosene, forcing the airline to import fuel.

 

Figures released by the airline showed the fuel budget had blown out by $US469 million.

 

The profit drop reflects a 40 per cent increase in airline unit costs, with its fuel spend more than doubling from $US1.1 billion last year to $US2.5 billion.

 

In all, 26 airlines have nosedived into insolvency this year because they were no longer able to pay for fuel.

 

British Airways, Qantas, Korean Airlines and Cathay Pacific have each reported fuel-affected profits.

 

Yesterday jet kerosene was costing $US81.05 a barrel in Singapore, down from the July 3 record of $US181.85.

 

Emirates chairman and chief executive Sheikh Ahmed bin Saeed Al-Maktoum said yesterday the first six months of 2008 had been "very tough."

 

Sheikh Ahmed said the airline had worked hard to manage the impact that fuel costs had on unit costs.

 

"We've made massive investments in our eco-efficient aircraft fleet," he said, noting that the airline recently had taken delivery of eight new wide-body aircraft, including two Airbus A380 superjumbos.

 

"Recent events show that only the most efficient businesses will survive and prosper."

 

 

http://www.news.com.au/heraldsun/story/0,2...077-664,00.html

 

[Edwin P K 0]

Still got profits...not bad...I can't wait to see MAS's reports

[Azreen 0]

True Edwin, still got profits. But sometimes P&L account can be 'tailored' to give a more reasonable picture while the cashflow paints a totally opposite picture.

 

If I'm not mistaken, the revenue booked in during that period does not mean an immediate cashflow of same amount.

 

Perhaps Azizul can give a better explanation on this.

[Mohd Azizul Ramli 2]

I just saw that my name was quoted to provide some explanations on 'income recognition'. Briefly, certain industries like aviation have very specific treatment on certain industry-related transactions, so only after perusing the financial statements then probably I could figure out something.

 

But usually, during a 'bad' time like the last quarter, a business entity the size of Emirates will try to optimise their revenues by using whatever available accounting standards applicable - categorised certain expenses as assets or recognizing certain form of revenues, which do not involve actual/physical operational cash inflow, during the mentioned accounting period (these are all put in general). This probably to maintain shareholders' confidence in the company as showing a negative financial performance may effect the entity's share price (I am not sure at which bourse Emirates is listed at, or it is an unlisted entity).

 

Comments/input from fellow accountants like Sing Yew or from legal point of view, Mushrif are most welcome.