Iran war, doubling fuel prices knock 66% off Emirates' first-half profit

Dubai-based Emirates Group reported a 66% decline in first-half net profit on Thursday as the Iran war disrupted aviation operations across the Middle East and soaring jet fuel prices weighed on its biggest airline.

The state-owned group, which operates the region's largest airline, posted a net profit of $1 billion for the six months, down from $2.9 billion in the corresponding period last year. It blamed "unprecedented" regional disruption and higher fuel costs for the sharp fall, according to AFP.

Dubai International Airport was repeatedly targeted during the early stages of the conflict, as the United Arab Emirates faced Iranian drone and missile attacks. The strikes disrupted flight operations and dampened tourist arrivals, dealing a blow to a Gulf aviation hub that relies heavily on international transit traffic.


"It has been a demanding six months," Sheikh Ahmed bin Saeed Al Maktoum, Emirates chairman and chief executive, said in a statement, citing "unprecedented regional challenges and high fuel prices".

"Customer demand held firm and our cargo operations made a strong contribution, keeping revenue and cash levels healthy even as global jet fuel prices doubled against the same period last year," he added.

The group's workforce shrank 2% during the six-month period ending September to 128,237 employees.

Passenger traffic takes a hit as fuel bills soar

Emirates airline's half-year profit after tax fell 66% to $903 million, while its revenue declined 13%. The carrier transported 21.8 million passengers between April and September, 22% fewer than in the same period a year earlier.

The aviation sector has faced mounting pressure since the conflict began in late February. Iran's blockade of shipping through the strategically important Strait of Hormuz disrupted energy supplies and sent fuel prices soaring.

The Gulf's aviation model, built around connecting passengers travelling between the Americas, Europe, Asia and Oceania, has been particularly exposed to the disruption. Nearly one in six transit passengers worldwide passed through the Middle East last year, AFP reported.

Despite the decline in passenger traffic, Emirates' cargo business offered some relief. Cargo revenue rose 52%, even as the volume of goods transported recorded a marginal decline.

"Emirates staying profitable, despite the backdrop of a war that has no conclusion is pretty remarkable," said Saj Ahmad, chief analyst at StrategicAero Research.

"Add in the fact that the airline is slowly re-establishing its full network too, the decline in passenger numbers due to the US-Iran war is not a surprise."

Emirates banks on cash reserves as conflict clouds outlook

Sheikh Ahmed said the group was entering the second half of its financial year with "measured optimism", while keeping a close watch on expenses and geopolitical developments.

Strong cash reserves have helped Emirates meet operational requirements, including advance payments for aircraft deliveries and debt obligations.

The airline has also introduced measures to rebuild customer confidence following the outbreak of the war. These include comprehensive travel insurance without restrictions linked to government travel advisories, free changes to booked travel dates and more flexible refund policies.

Separately, Emirates broke ground in May on a $5.1 billion engineering and maintenance facility at Dubai's Al Maktoum International Airport. The project is expected to be completed in the mid-2030s.

Despite the near-term turbulence, Ahmad said the underlying prospects for Gulf aviation remained strong, AFP reported.

"The fundamentals for the GCC aviation industry remain robust," he said.

"But the longer the conflict drags on, the impact is more likely to be felt across all GCC states," he said, pointing particularly to Saudi Arabia, where airports have also become regular targets of Houthi attacks.

(With input from AFP)