Fuel costs, currency moves hit Emirates Airlines’ profit

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High fuel costs and weak currencies in some key markets held back first-half profit growth at Dubai’s flagship airline Emirates, signaling the Gulf’s fast-growing carriers are not immune from a slowdown in the global aviation industry.

Emirates, ranked No.1 globally in terms of international passengers carried per kilometer flown according to IATA, reported a net profit of 1.7 billion dirhams ($463 million) for the six months ended Sept. 30, up 2 percent from the corresponding period in 2012, it said on Tuesday.

The company did not provide figures for the year-ago period but in the first-half of 2012, Emirates’ net profit had more than doubled.

Emirates and its home base Dubai are betting that its location - a third of the world’s population is within a 4-hour flight radius - will continue to attract passenger traffic away from other global hubs such as London, New York and Singapore.

“High fuel prices, accounting for 39 percent of our expenditures, and the unfavorable currency exchange environment continue to eat into our profits,” Sheikh Ahmed bin Saeed al-Maktoum, the chairman and chief executive of Emirates said in an emailed statement.

Last month, German flag carrier Lufthansa warned that weakness in Asian currencies would weigh on revenue growth at its passenger airline business this year and a grindingly slow market recovery was set to dent profit at its cargo unit.

Other European airlines such as Ryanair and Finnair have trimmed profit expectations, citing lower demand and the impact of volatile exchange rates, while Air France-KLM said the sharp rise in the euro against the dollar had
weighed on quarterly revenue.

Emirates, the world’s largest customer of the Airbus A380 superjumbo, said revenue for the period was 39.8 billion dirhams ($10.8 billion), up 12 percent from the prior-year period.

It carried 21.5 million passengers, up 15 percent, and flies to 137 destinations in 77 countries.

Net profits for the wider Emirates Group, which includes its airline services arm, Dnata, rose 4 percent to 2.2 billion ($599 million) dirhams.

The airline is set to increase its fleet further with a much-anticipated mega-order for the Boeing’s revamped 777X jets at the Dubai Air Show next week.