Emirates to raise debt as it braces for worst months ever

Emirates, one of the world’s biggest long-haul airlines, said on Sunday it would raise debt to help it through the coronavirus pandemic and might have to take tougher measures while facing the most difficult months in its history.

International connectivity is crucial for Emirates’s Gulf hub model, which transformed Dubai six years ago into the world’s busiest international airport. It does not operate domestic flights and most of its passengers transit through its hub.

The state-owned airline, which suspended regular passenger flights in March due to the Covid-19 outbreak that has shattered global travel demand, said a recovery in travel was at least 18 months away.

It reported a 21% rise in profit for its financial year that ended on March 31, but said the pandemic had hit its fourth quarter performance and it would tap banks to raise debt in its first quarter to lessen the impact on cash flows by the virus.

The airline, which has been promised financial aid from its Dubai state owner, did not say how much it expected to raise.

“The Covid-19 pandemic will have a huge impact on our 2020/2021 performance,” chair Sheikh Ahmed bin Saeed said.

“We continue to take aggressive cost management measures, and other necessary steps to safeguard our business, while planning for business resumption.”

In an internal e-mail sent to staff on Sunday, Ahmed said the months ahead would be the most difficult in the airline’s 35-year history.

“At some point, if our business situation doesn’t improve, we will have to take harder measures,” he said.

Emirates did not immediately respond to an e-mailed request for comment on the internal e-mail.

Emirates Group, which counts the airline among its assets, said it would  not pay an annual dividend to its shareholder, Dubai’s state fund. Its cash assets stood at 25.6bn dirham (R128.4bn), it said.

Dubai Ruler Sheikh Muhammad bin Rashid al-Maktoum said in the group’s annual report released on Sunday that he was confident Emirates would emerge from the crisis strong and a global leader in aviation.

There was no apparent mention of the state aid which had been promised by Dubai’s crown prince.

The airline said it made a profit of 1.1bn dirham (R5.4bn) in the year to March 31, up from 871m dirham (R4.3bn) a year earlier.

However, it cautioned that the virus outbreak had hit its final quarter. Revenue contracted 6.1% to 92bn dirham (R459.6bn) as the number of passengers carried fell 4.2% to 56.2 million.

In March, Emirates also temporarily cut staff pay due to the pandemic.

It is not clear when Emirates will resume normal flights. Rival Qatar Airways has said it would begin rebuilding its network from May, while Abu Dhabi's Etihad Airways plans to resume regular flights from June.

Emirates’ sister company dnata saw profit drop by 57% in the year through March 31, which the company attributed to investments in its catering and airport services divisions and weak demand in its travel business.

Profit at the Emirates Group fell 28% to 1.7bn dirham (R8.4bn). Revenue was down 4.8%.

Unfavourable currency exchange rates cost the group 1bn dirham (R4.9bn) in profit, it said, while it saw some respite from cheaper oil prices. — Reuters