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Emirates Declares Record-breaking 2004-05 Results

28 April 2005

Emirates Declares Record-breaking 2004-05 Results

Group and Airline Profits Both Up 49 Per Cent
Outlook for 2005-06 Clouded by Risk of Sustained High Fuel Prices
Destination New Zealand Produces Sharp Growth

The Emirates Group, which includes Emirates Airline, has announced record-breaking net profits of US$708 million for the financial year ended March 31, 2005 - an impressive US$232 million, or 49 per cent, above the previous year.

Group revenue increased by US$1.4 billion or 36 per cent, to US$5.2 billion, against US$3.8 billion last year. The Group's cash balance totalled a robust US$2.2 billion at the end of March, an improvement of 12 per cent against US$2.0 billion a year earlier.

For 2004-05 Emirates will pay an increased dividend of US$100 million to its owner, the Government of Dubai, compared with US$90 million last year. In total, the ownership will have received US$291 million from Emirates since dividends started being paid six years ago.

Once again, the Group's sharp sales growth and record returns rode on customers' increasing preference for its products, as illustrated by the 2.1 million more passengers who flew Emirates Airline in the latest financial year, for a new record total of 12.5 million.

The 2004-05 annual report of the Emirates Group - comprising Emirates Airline, Dnata and subsidiary companies - was released here today at a news conference hosted by its Chairman, His Highness Sheikh Ahmed bin Saeed Al-Maktoum.

The report noted, among other aspects, that New Zealand was among a group of six destinations which produced sharp growth for the Group's destination and leisure management division. Also noted was the opening of the Emirates Lounge in Auckland, one of the first of a series of new dedicated lounges at airports around the carrier's network of 78 destinations.

Sheikh Ahmed said: "We've had yet another successful year for the company, and the 17(superscript: th) consecutive profitable one for the airline. Our customers are the pillar of Emirates' good fortune. Their continued custom is a vote of confidence in the high-value product that we constantly strive to give them."

He added: "We are gratified by the strong financial results of the Group. The rapid-growth Emirates business model requires a high rate of return to sustain our enormous investments in people, advanced equipment and facilities, as well as in IT and other support services.

"As before, after paying a fair dividend to the Group's ownership and rewarding our employees with a well-deserved bonus, we will plough our healthy profits right back into the business to keep our airline and travel-related group of companies competitive, and to keep treating our customers in the manner they've come to expect from Emirates."

The Chairman continued: "These results prove once again what has always been clear to us: we can count on our customers to support Emirates, as long as we deliver on our side of the equation - the best aircraft that money can buy, the best ground- and inflight service in commercial aviation, and the best overall flying experience at a competitive price."

In his opening review in the 2004-05 annual report, Sheikh Ahmed commented on how the industry, already struggling with continually changing global economic conditions, had been further impacted by a dramatic rise in jet fuel prices. At Emirates, fuel costs rose from 14 per cent of total operating expenditure to 21 per cent and became the airline's top expenditure, from a distant second in 2003-04.

Measures taken by the Group to remain on target included severe cost-cutting steps such as a recruitment freeze - except for flight deck, cabin crew and engineering staff. In addition Emirates, like other airlines, also was forced to increase fuel surcharges on tickets, which did not fully cover the escalating costs. The airline's jet fuel risk management programme helped to bring its fuel costs down by US$126 million in 2004-05, but the price outlook remains sombre.

Going forward, Sheikh Ahmed described the dramatic and sustained run-up on jet fuel prices as the most formidable challenge faced by Emirates, and the single largest threat to the achievement of the Group's financial goals in the current financial year.

Sheikh Ahmed also commented on how Emirates' robust results were achieved without any government assistance or subsidies, and added: "Since we started the airline in 1985, our competitors seem to find it incomprehensible that we can make profits by having a skilful team which works hard, is a market leader and invests heavily in new equipment - surely the criteria for any successful company?"

In a tribute to the strong leadership of Dubai that has created the conditions under which Emirates has thrived since its inception, Sheikh Ahmed said: "We are indeed fortunate to be based in Dubai, where a visionary government is investing billions of dollars to develop the city into a major commercial, residential and tourist hub, and the Emirates Group is playing a pivotal role."

Emirates Airline's revenues totalled US$4.9 billion for the year, US$1.3 billion or 36 per cent above income of US$3.6 billion in 2003-04. Airline profits of US$637 million were US$208 million or 49 per cent better than last year's profits of US$429 million.

With the addition of nine new aircraft during the financial year, Emirates's fleet count reached 75 at the end of March. Presently it stands at 76, including 70 passenger aircraft and six freighters, with a median age of 4? years - more than eight years younger than the industry's average of 13.

The first two of 30 Boeing 777-300ERs ordered by Emirates arrived in late March and heralded the start of a new expansion cycle in the airline's huge order programme, which will see another 97 wide-body aircraft being delivered at an average rate of one per month for the next eight years. The new 777-300 ER type will be seen in New Zealand from Monday, when it begins operating the new Auckland-Sydney-Bangkok-Dubai route.

Daily passenger operations between Dubai and New York's Kennedy Airport began on 1(superscript: st) June with the long-range Airbus A340-500, following successful freighter operations initiated in September 2003. The airline launched five other destinations in 2004-05 - Shanghai, Glasgow, Vienna, Christchurch and Seychelles - bringing the network total to 76 destinations, five of them cargo-only.

In addition, Emirates increased the frequency of passenger services and/or capacity - with bigger aircraft - to more than a dozen existing destinations, and introduced freighter services to another four. In the process, 75 extra flights per week were added.

Passenger seat factor increased to 74.6 per cent, from 73.4 the year before, while the breakeven load factor decreased once more from an already low 59 per cent in 2003-04, to 58.2. Yield also improved again, for the fourth consecutive year, to 192 fils ($0.52 cents) per RTKM (revenue tonne kilometres) from 181 ($0.49 cents) the previous year.

As part of a vast ongoing expansion programme, new Emirates Lounges opened at Brisbane and Auckland airports, with more in construction or planned at another 13 major airports worldwide, including three in Australia, five in Europe and three in Asia, as well as New York and Nairobi.

In 2004-05 Emirates Airline kept its place among the world's five most profitable carriers and ranked 15(superscript: th) in the world in terms of RPKMs (revenue passenger kilometres). The airline forecasts that its fleet will exceed 150 aircraft by 2012 - including 12 freighters - and anticipates carrying some 33 million passengers by then.

Emirates SkyCargo set a new record with nearly 840,000 tonnes of tonnage carried, up almost 180,000 tonnes or 27 per cent from last year's 660,000. The airline's cargo division's revenue of US$940 million was US$282 million or 43 per cent higher than the year before, and raised its contribution to the carrier's transport revenue from 20- to 21 per cent. Destination and Leisure Management - another division of Emirates Airline - enjoyed strong revenue improvement of 37 per cent to US$219 million, supported by more than 300,000 customers, and six of its destinations experienced especially sharp growth: Singapore, Australia, Switzerland, Austria, Hong Kong and New Zealand. Besides the 100,000 travellers who used Emirates Holidays services, an impressive 200,000 tourists visited the Dubai Desert Conservation Reserve (DDCR) over the latest financial year.

Dnata, 46 years in business and thriving, enjoyed healthy growth throughout the year and record turnovers within its three divisions. Its revenues reached US$385 million, or 29 per cent above last year's US$298 million. Dnatas' profits of US$71 million represented an increase of 50 per cent.

As of March 31, 2005, the Group employed 25,000 people, up from 22,500 a year before, and had received 240,000 job applications in the preceding 12 months. Employees came from 124 countries. More than 100 nationalities were represented among 5,600 cabin crew, and 60 among the airline's 1,135 captains and first officers - nearly 100 of them UAE nationals.

The Group's Facilities Management Department, whose property portfolio includes 175,000m2 of commercial space in Dubai, presently supervises US$681 million worth of projects underway such as the new Emirates Engineering Centre, the new Group Headquarters building, Crew Training College, Security building, warehousing and several building extensions. It also manages 6,200 villas and apartments mostly dedicated to housing company staff.

For the full report and accounts, visit the Group's website: www.ekgroup.com

ENDS

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