Emirates 2013 — Annual Report 2010

May 12, 2010

To:	Mr Essa Abdulfattah Kazim
		Fax:	3314924
	Director General,
	Dubai Financial Market
Copy:	Ms Fahima Al Bastaki	Fax:	3315148
	Listing & Disclosures Manager,
	Dubai Financial Market
From:	Brian Jeffery	Our Ref:	SVPCT/10
	SVP-Corporate Treasury
Date:	12 May 2010	Pages:	$-$ 8 - including cover sheet
Subject	Emirates Results FYE March 31, 2010

Emirates Group marks record profit increase in 2009-10

• Group net profit of AED 4.2 billion (US\$ 1.1 billion)
• Airline net profit of AED 3.5 billion (US\$ 964 million)
• Dnata net profit of AED 613 million (US\$ 167 million)

DUBAI, U.A.E., 12th May 2010 – The Emirates Group has posted a record profit increase of 248 percent, an outstanding result in a year fraught with worldwide market instability and economic uncertainty.

The 2009-10 Annual Report of the Emirates Group - comprising Emirates Airline, Dnata and their subsidiary companies – was released in Dubai today at a news conference hosted by His Highness Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group.

Sheikh Ahmed said: "It has been an exceptional year of continued profitability against a backdrop of the worst global recession in generations. The first half of the financial year however, was extremely challenging as the world continued to grapple with the economic crisis. Our pioneering spirit and ability to adapt in adverse conditions helped us to push through this harsh economic climate with an extremely strong performance in the latter part of the year."

In a difficult year the Group's net profits increased 248 percent to AED 4.2 billion (US\$ 1.1 billion) for the financial year ended 31st March 2010. Group revenue remained stable at AED 45.4 billion (US\$ 12.4 billion) reflecting lower passenger and cargo yields offset by increased traffic. The Group profit margin improved to 9.1 percent from 2.6 percent a year earlier.

The Group's cash balance grew to AED 12.5 billion (US\$ 3.4 billion) at the end of March, a remarkable improvement of 43.3 percent or AED 3.8 billion (US\$ 1 billion) against the previous year. This excellent result is also after AED 3.4 billion (US\$ 931 million) of investments mainly in new aircraft, other aircraft related equipment and dedicated lounges.

The Group's outstanding performance this year, in some of the toughest operating conditions ever faced, reflects its success in maintaining its business as usual approach, remaining true to its strategy of product and service excellence. This is illustrated by the 27.5 million passengers who flew with Emirates in the latest financial year, 4.7 million more than in the previous year; as well as the expansion of Dnata's international ground handling operations to 20 airports in nine countries.

Sheikh Ahmed continued: "Time and time again Emirates has weathered adversity. We have operated through regional conflict, SARS, the Asian economic collapse and most recently the global recession. Our 21 percent increase in passenger numbers from last year is an incredible result and has helped to cushion us from the effects of lower yields. This increase in passenger numbers is attributable not only to our position at the centre of the new Silk Road between East and West, but also to our commitment in increasing our network and service standards, during a time where many competitors were doing the opposite."

In his opening review in the 2009-10 Annual Report, Sheikh Ahmed highlighted the Group's ability to flourish in adversity, despite the International Air Transport Authority (IATA) reporting that airlines' financial losses worldwide for 2009 reached US\$ 9.4 billion – the most difficult situation ever faced by the industry.

He also remarked on some of the many significant milestones for the Group that have helped ensure its continued growth and success which included Dnata's overseas expansion strategy through business acquisitions; Emirates' addition of 15 new aircraft; the celebration of Dnata's 50th year of operations; the opening of Wolgan Valley Resort and Spa in Australia – one of the world's leading sustainable hotels and Emirates' A380 route network expansion to several new airports including Seoul, Bangkok, Toronto, Paris and Jeddah.

Sheikh Ahmed added: "Emirates is incredibly proud of the fact that we are unsubsidized and wholly unprotected from foreign competition in our home market, thanks to Dubai's progressive open skies policy. We continue to grow, not through protectionism but through competition. It is our drive and determination to succeed that has helped us to earn our solid reputation worldwide and we have no intentions of pulling back the reigns on our expansion plans to suit the needs of our competition."

Sheikh Ahmed concluded: "In a year of global ups and downs our determination to stand by our tradition of innovation has been one of our greatest achievements. The other is our ability to retain our talented staff. We have done this through a number of carefully thought out measures incorporating, effective redeployment of staff as well as a highly successful programme of voluntary unpaid leave. With 50,000 employees worldwide our staff are our greatest asset and we are committed to retaining each and every one of them. It is their passion and dedication that has helped to shape our company and it is this passion that will see the company continue to forge ahead."

Emirates Airline's revenues remained stable at AED 43.5 billion (\$US 11.8 billion), an increase of 0.4 percent from the previous year. Airline profits of AED 3.5 billion (US\$ 964 million) marked an increase of 416 percent over 2008-09's profits of AED 686 million (US\$ 187 million).

Despite a 16.9 percent capacity increase during 2009-10 to 28,526 million ATKM (Available Tonne Kilometres), the Emirates' operating costs in total decreased by 2.7 percent compared with the previous year. This results in a significant unit cost improvement of 16.6 percent and impressive productivity gain per employee, as the average airline employee strength has only increased by 2.3 percent.

Fuel costs in 2009-10 were significantly lower than the previous year by a notable AED 2.5 billion (US\$ 691 million), accounting for 29.9 percent of total operating costs, down from 35.2 percent the previous year. The major reason for the reduction in overall fuel costs was the result of a 30.8 percent reduction in average fuel jet cost per US gallon.

In 2009-10, the airline's passenger fleet expanded with the delivery of 15 new aircraft, four Airbus A380's, 10 Boeing 777-300ERs and one Boeing 777-200LR freighter. At the end of the financial year Emirates' fleet reached 142 aircraft including four freighters. During the year Emirates became the largest Boeing 777 operator when it took delivery of its 78th B777 aircraft. The current fleet of all wide-bodied aircraft has an average age of 69 months – one of the youngest commercial fleet in the skies.

At the end of the year, the total number of aircraft on Emirates' order book, excluding options, was 146 aircraft, worth over US \$ 48 billion.

During the year, the airline launched passenger services to three new destinations – Durban, Luanda and Tokyo – and increased frequencies onto existing routes in highdemand markets.

Emirates recorded an exceptional Passenger Seat Factor, at 78.1 percent, given there was also a high seat capacity (Available Seat Kilometres - ASKMs) increase of 20.6 percent.

Yield declined by 16.9 percent to 211 fils (57.5 US cents) per RTKM (Revenue Tonne Kilometre), down from 254 fils (69.2 US cents) in 2008-09. This decline in yield was countered by the increase in passenger seat factor.

In the 2009-10 financial year, six new Emirates Lounges were opened at airports in key points across the airline's network, including the first lounge in India. The AED 266 million (US\$ 72.5 million) worldwide investment has seen the number of dedicated lounges, aimed at our premium customers and top-tier Skywards loyalty programme members, grow to 26 across the network.

Furthering the investment in our product we raised baggage allowances by ten kilograms per person across all seating classes, this stood in stark contrast to competitors, many of whom were imposing restrictions and new baggage charges.

Skywards, Emirates frequent flyer programme celebrated its tenth anniversary with a complete programme re-launch. This year also saw the five millionth Skywards member join the programme.

Emirates continued to enhance its products in the air and on the ground investing AED 286 million (US\$ 78 million) in upgrading cabin interiors and the award winning inflight entertainment system, ice in a number of aircraft.

Emirates SkyCargo carried 1.6 million tonnes of cargo, an improvement of 12.2 percent over the year's previous 1.4 million tonnes. Cargo revenue at AED 6.3 billion (US\$ 1.7

billion) is 8.1 percent lower than last year as the result of declining yields. Cargo revenue, including mail and courier, contributed 17.2 percent of the airline's total transport revenue.

The division's flexibility and ability to adapt quickly to changing market conditions led to Emirates SkyCargo rightsizing its fleet during the financial year. Emirates SkyCargo decreased its fleet from eight aircraft to seven – including five Boeing 747Fs and two Boeing 777Fs - helping to ward off the adverse effects of the economic downturn.

It was a difficult year for the Destination and Leisure Management (DLM) division of Emirates Airline, with package sales of AED 1 billion (US\$ 272 million).

Emirates Holidays managed 165,000 total room nights booked during the year, a decrease on last year's numbers, as customers opted for shorter breaks due to the tough economic conditions. Arabian Adventures, the region's leading destination management company, opened its state-of-the-art Operations Centre in Dubai, a key investment in its long-term growth strategy. Congress Solutions International continued to win major global summits, including the organisation of the World Economic Forum Summit on the Global Agenda 2009, bringing together 700 VIP delegates from 90 countries.

The financial year also marked the opening of Emirates Hotels & Resorts conservationbased Wolgan Valley Resort & Spa in Australia's Blue Mountains. It is the first hotel in the world to achieve carbon neutral certification and reflects DLM's strategy of focusing on environmental and sustainable properties.

Dnata managed to hold ground during an incredibly challenging year achieving its highest ever profit in its 50 year history. Profits increased by 20.9 percent to reach a record AED 613 million (US\$ 167 million) despite an intensely tough business climate for airport and cargo operations. Revenue remained stable with a marginal drop of 0.7 percent to AED 3.2 billion (US\$ 861 million).

Dnata's operating costs were 4.2 percent or AED 113 million (US\$ 31 million) lower compared with the previous year based on major cost saving initiatives across all business segments.

Dnata Airport Operations started the 2009-10 financial year with a complete restructure, moving from a location-based organisation to a function based organisation. This was a defining initiative and enabled Airport Operations to grow, improving both productivity and profitability.

Dnata continues to play a major role in the Group's growth by handling worldwide a record 192,120 aircraft (up 8.2 percent on last year) and 1,121 thousand tonnes of cargo, (up 11.8 percent over the previous year).

During 2009-10, Dnata International continued to expand its ground handling operations to bring its reach to 20 airports in nine countries. With the addition of London, Manchester and Erbil (Iraq) Dnata's ground handling activities have increased by 45 percent with 26.9 percent of the company's revenue from airport operations and cargo handling services coming from outside Dubai.

Dnata was the only company in the global ground handling sector to undertake a major acquisition in 2009 with the acquisition of two of the UK's leading airport operations – Plane Handling which provides ramp and cargo handling services at Heathrow Airport as well as Cargo handling services at Manchester airport and Aviance which provides passenger and ramp handling operations at Heathrow's Terminals 3 and 4. With these two new acquisitions Dnata's international operations now handle as many aircraft turns and as much cargo volume as Dubai.

It was an incredibly tough year for Dnata Travel Services (DTS) with many people across the globe simply not travelling due to the recession. One of the more positive moments for DTS during the year was being honoured as the "World's Leading Travel Management Company" at the 2009 World Travel Awards.

As of 31st March 2010, the Group and its subsidiaries employed 50,000 staff, representing 150 different nationalities. The full 2009-10 Annual Report of the Emirates Group – comprising Emirates Airline, Dnata and their subsidiary companies – is available on www.ekgroup.com/mediacentre ENDS-

Emirates - Consolidated Balance Sheet

Consolidated statement of financial position	Note	2010	2009
as at 31 March 2010		AED m	AED m
ASSETS
Non-current assets
Property, plant and equipment	11	33,753	29,086
Intangible assets	12	927	923
Investments in associated companies and joint ventur	e 13	461	441
Advance lease rentals	14	233	192
Available-for-sale financial assets	15		113
Loans and other receivables	16	1,432	1,039
Derivative financial instruments	34	64	125
		36,870	31,919
Current assets
Inventories	17	1,084	1,053
Trade and other receivables	18	7,008	7,109
Held-to-maturity financial assets	15		200
Derivative financial instruments	34	74
Short term bank deposits Cash and cash equivalents	32 32	1,176 9,335	2,619 4,549
		18,677	15,530
Total assets		55,547	47,449
EQUITY AND LIABILITIES
Capital and reserves
Capital	19	801	801
Retained earnings		16,794	14,812
Other reserves	20	(321)	(201)
Attributable to Emirates' Owner		17,274	15,412
Minority interest		201	159
Total equity		17,475	15,571
Non-current liabilities
Borrowings and lease liabilities	21	16,753	15,140
Provisions Deferred revenue	25 26	364 1,483	367 1,178
Deferred credits	27	460	492
Deferred income tax liability	28	4	13
Trade and other payables	29	21	25
Derivative financial instruments	34	467	538
		19,552	17,753
Current liabilities
Trade and other payables	29	15,475	12,530
Income tax liabilities		19	23
Borrowings and lease liabilities	21	2,852	1,372
Deferred credits	27	162	169
Derivative financial instruments	34	12	31
		18,520	14,125
Total liabilities		38,072	31,878
Total equity and liabilities		55,547	47,449

Emirates - Consolidated Income Statement

Consolidated income statement		2010	2009
for the year ended 31 March 2010		AED m	AED m
Revenue	4	42,477	42,459
Other operating income	5	978	807
Operating costs	6	(39,890)	(40,988)
Operating profit		3,565	2,278
Other gains and losses	7	48	(1,572)
Finance income	8	330	431
Finance costs	8	(355)	(535)
Share of results in associated companies and joint ventures	13	77	63
Profit before income tax		3,665	665
Income tax (expense) / credit	9	(50)	85
Profit for the year		3,615	750
Profit attributable to minority interest		77	64
Profit attributable to Emirates' Owner		3,538	686

Consolidated statement of comprehensive income Note		2010	2009
for the year ended 31 March 2010		AED m	AED m
Profit for the year		3,615	750
Currency translation differences	20	124	(44)
Available-for-sale financial assets	20	0	41
Cash flow hedges	20	(244)	745
Other comprehensive income		(120)	742
Total comprehensive income for the year		3,495	1,492
Total comprehensive income attributable to minority interest			64
Total comprehensive income attributable to Emirates' Owner		3,418	1,428