Following the recent news that Dubai-based carrier Emirates Group asked staff to take paid and unpaid leave in response to the effect of the new coronavirus (Covid-19) on the business;
Colin Foreman, Deputy Editor at GlobalData, a leading data and analytics company, offers his view:
“Airlines are among the most affected companies by the measures to control the spread of Covid-19 and Middle East carriers are being hit hard.
“The region’s largest carrier, Dubai’s Emirates is the most at risk as it operates an extensive network from its hub in Dubai that connects Asia, Europe, Australia, Africa and the Americas.
“Unlike the UK’s Flybe and many of the world’s other airlines, Emirates comes into the crisis from a position of financial strength. For the 2018-19 financial year, the group reported its 31st consecutive year of profit as it reached AED2.3bn (4631m) for the year. For the first half of the 2019-20 financial year, the airline announced a net profit of AED1.2bn ($327m).
“As Covid-19 continues, it looks increasingly difficult for Emirates to maintain its profitability for a 32nd year. The timing of the financial year – which ends on 31 March – could be crucial, but if the group does make a loss for the first time then it could shift the balance in the airline’s relationship with its shareholder, the Investment Corporation of Dubai (ICD).
“In the past, Dubai has taken a dividend from the airline. For 2018-19, ICD took a dividend of $136m. If the outlook for 2020 declines further, Dubai may face the prospect of returning that favor with financial support.”