Emirates eyes will return to profitability in 2022 when new journey corridors open
An Emirates Airbus 380-800 is about to land.
Fabrizio Gandolfo | SOPA pictures | LightRocket | Getty Images
Emirates expects to return to profitability in the next two years as new travel corridors open and the global aviation industry seeks to recover from the worst crisis in its history.
“I believe that we will return to profitability in the next 18 months, two years,” Emirates President Tim Clark told CNBC in an exclusive interview on Sunday.
“We will certainly see cash positive results over the course of the back end of next year and will return to profitability in (fiscal year) 2022-2023,” he added.
Earlier this week, the Emirates Group reported a loss of $ 3.8 billion in the first half of the year, the first loss in 30 years when coronavirus lockdowns brought global passenger traffic to a standstill. Sales plummeted 74 percent to $ 3.7 billion.
“There are a lot of things that can change that,” said Clark, highlighting a number of key concerns that still hang over the sector. “We are an international company that operates worldwide.”
His comments come after new warnings from IATA that the industry cannot cut costs enough to neutralize serious cash burns and avoid bankruptcies in 2021.
“Cash is king,” said Clark. “As long as we can keep our cash position in good shape, we believe we are ready to re-enter markets as big and big as ever.”
Emirates said it used its cash reserves to ensure it had access to sufficient funding to keep operations going. It has shed nearly 25 percent of its workforce, and the Dubai government has injected $ 2 billion through a capital investment to help the recovery.
“We believe that things will go back to themselves pretty quickly. I’m not one of those people who think it will take a long time or that it won’t go back to the way it was,” added Clark.
“I tend to believe that we will be as good as we were as an airline in the days before Covid.”
UK-UAE travel corridor
The UK added the UAE to its list of travel corridors this week, meaning travelers flying from the UAE to the UK after November 14 will no longer need to self-isolate for 14 days.
“The government has been working for five months to convince the British government that we should be put on their list,” said Clark, praising the decision as “an important boost for tourism in terms of travel between the two countries”.
The UK is a key market in the Emirates network for passenger travel demand and profitability. The route from Dubai to London Heathrow will have the highest proportion of departing seats in 2019.
“We are already seeing a significant increase in booking speed on our systems for people coming to Dubai from the UK from the UK after the lockdown ends on December 2nd,” said Clark.
“I remain optimistic that more corridors will open up once we get this thing under control,” he added. “It’s just taking a little longer than everyone thought and it’s not without its difficulties.”
Clark said travel to 104 cities has now been restored and 151 of its Boeing 777 aircraft operated and carried passengers in various capacities over the network. Emirates still has around 115 A380s on the ground.
Macro conditions are improving
Clark was more optimistic about the regional and global economic outlook, but said the recovery will not come immediately. “I think the world economy is going to take some time to get out of this particular state,” he said.
He also believes oil prices will remain subdued as oversupply and weak demand help bring down costs for major airlines like Emirates.
“As long as it is inconsistent and oil supplies remain robust, the price is likely to be somewhere between $ 40 and $ 50 through 2021,” he said. “That gives us an interplay price and enables us to be profitable both in an income statement and from a financial perspective.”
Correction: This article has been updated to take into account that around 115 of Emirates’ A380 aircraft are still on the ground.