1. Business and Financial Analysis
Of Emirates over three year
Period
Gul Nawaz Khan
ACCA reg No. 2320336

2. Introduction
 Emirates originated in 1985 with support from Dubai’s royal
family.
 Emirates is based in Dubai and is a subsidiary of The
Emirates Group.
 It operates nearly 3400 flights per week to 150 cities in 74
countries across 6 continents.
 In 2012 it was the fourth largest airline in the world in terms of
international passengers carried and scheduled passenger-
kilometers flown and it became the third largest airline in the
world in terms of scheduled freight ton-kilometers flown.
 Emirates has received over 400 international awards over the
years which shows their commitment to quality.
 Emirates is currently extending its fleet with one new aircraft
per month on average.

3. S W
T
Strengths
•Emirates Existence in oil rich UAE
•Strong Financial Position(retained
earnings)
•Experienced managers who have
been with them from the beginning
Opportunities
•There's still room for more
expansion.
•World Expo 2020 being held in
Dubai will attract millions of people
to Dubai and Emirates would be
looking to exploit that opportunity.
Threats
•Establishment of low cost airlines
and global financial crisis has
dampened the demand for luxury
airlines.
•Political unrest in middle east if
continues or increases creates a
threat for airlines as these places
become unattractive to costumers.
O
Weaknesses
•Inability to control cost
•Operating under high gearing levels.
•Not part of any global alliance.

4. Rivalry among Existing
Competitors
•Competition is very tough as
market is mature and
competitors fight for
costumers.
•The recent consolidation in
industry has created few big
Airlines which increases their
competitiveness.
Threat of new Entrants
•Big barriers to entry exist in the form
of capital expenditure which is
required at start up.
•Also mature market makes it hard to
gain costumers in earlier years.
Bargaining Power of Suppliers
•Major supplier for Airlines are Aircraft
manufacturers. There are only few aircraft
manufacturers. Still they don’t have much
bargaining power as Airlines are the only
source of income for manufacturers.
•The second major supply is oil but its price
is determined by market conditions.
•Staff such as pilots, air hostesses are
unionized and do carry some bargaining
Bargaining Power of
Costumers
•Individual travelers who travel for
business or tourism cannot
influence much an Airline.
•The use of internet has made the
costumer aware and has somewhat
increased bargaining power of the
costumer.
Threat of Substitute Products
•Substitutes for travelling are trains,
sea, bus etc.
•This threat exists for national carriers.
•There is no substitute for international
travel when time and cost is taken into
account.

5. Financial Analysis Of Emirates against Air Arabia
•Emirates has shown impressive growth over the years with continuous
expansion.
•But fuel cost continue to eat profits of Emirates
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2011 2012 2013 2014
AEDMillion
Year
Analys of Emirates Revenue And Cost
Revenue
Operating Cost
Fuel Cost

6. •Same is the case with Air Arabia but Air Arabia has hedged some of its
fuel and so is safeguarded somewhat from increasing prices.
2080.313
2434.66
2942.428
3183.823
1768.637
2112.004
2418.412
2681.269
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2011 2012 2013 2014
AEDMillion
Year
Analysis Of Air Arabia Revenue and Direct cost
Revenue
Direct Cost

7. •Emirates is doing quite well in respect of asset turnover and assets are used
more efficiently by Emirates to generate revenue.
1.19 1.19
1.09
0.46
0.48
0.43
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2012 2013 2014
Year
Comparison of Asset Turnover
Emirates
Air Arabia

8. •In the year 2012 Emirates increased its total assets by 18% and profits fell
by 61% resulting in drop in ROCE.
•Air Arabia on the other hand was not that much effected by rising fuel cost
due to its hedging strategy.
4%
5%
7%
5%
7%
6%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2012 2013 2014
Year
Comparison of Return on Capital Employed
Emirates
Air Arabia

9. •Emirates refusal to increase prices or use forward hedge has resulted in
reduced profit margins over the years.
•This reduction is mainly due to increasing costs and fuel cost is main
constituent of cost approximating to 40% of operating cost in 2012.
•Air Arabia is able to maintain margins due to forward hedge, absence of
taxes, and finance income being more than finance cost.
0%
2%
4%
6%
8%
10%
12%
14%
16%
2012 2013 2014
Operating And Net Profit Margin
Air Arabia Net Profit Margin
Air Arabia Operating Profit Margin
Emirates Operating Profit MArgin
Emirates Net Profit Margin

10. •Both Companies feature healthy current ratio
•Air Arabia’s current ratio however is on decline and could be worrying in the
future if trend is continued.
0.00 0.50 1.00 1.50 2.00 2.50
2012
2013
2014
1.01
1.12
0.84
2.11
1.50
1.16
Current Ratio
Air Arabia
Emirates

11. •Both feature similar quick and current ratio due to inventory being an
insignificant part of current assets.
•Emirates features a very stable quick ratio
•A worrying sign for Air Arabia if its quick and current ratio continue the
same trend.
0.00
0.50
1.00
1.50
2.00
2.50
2012
2013
2014
0.95
1.07
0.79
2.10
1.49
1.15
Year
Comparison of Quick Ratio
Air Arabia
Emirates

12. •Emirates gearing is at an alarming level but seems to be acceptable
to owners
•Air Arabia operating completely equity has low level of gearing.
56%
61%
60%
14%
19%
26%
0%
10%
20%
30%
40%
50%
60%
70%
2012 2013 2014
Year
Comparison Of Gearing
Emirates
Air Arabia

13. •Interest cover of both companies is well above normal levels.
•However the level of interest cover of Air Arabia begs the question as to why
the money is not being used to generate higher returns.
3.55 3.75 3.9
14
13
11
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2012 2013 2014
Comparison of Interest Cover
Emirates
Air Arabia

14. •Emirates has stable seat factor which is supported by flex tracks which is used
to plan and optimized load factor.
80% 80%
80%
83%
82% 82%
0.78
0.785
0.79
0.795
0.8
0.805
0.81
0.815
0.82
0.825
0.83
2012 2013 2014
Percentage
Passenger Seat Factor
Emirates
Air Arabia

15. Conclusion
•Emirates has done quite well with increasing destinations and
gaining market share.
•Emirates has lost control over its cost and margins have
severely eroded as compared to figure from year ended 31
March 2011.
•Two great opportunities lie in World Expo 2020 and Qatar
World Cup 2022 which Emirates should be looking to exploit.