THE EMIRATES GROUP ANNUAL REPORT ǀ 2016-17 Overview Emirates dnata Group Financial His Highness Sheikh Mohammed bin Rashid Al Maktoum Information Vice President and Prime Minister of the UAE and Ruler of Dubai Additional Information We live in a time of rapid change that has seen extraordinary new achievements, knowledge, and discoveries. Countries, cities, businesses, and individuals have to constantly evolve, adapt and learn at the same pace at which global transformations are occurring. In the 45 years since the birth of the United Arab Emirates, our country has taken great leaps forward in terms of developing our social, economic and political infrastructure. As we continue this journey with big hopes and ambitions, we have identified, through the UAE Vision 2021 and Dubai Plan 2021, the goals that will contribute to building a world-class modern civilization that will enable us to become the best country and city in the world. 2 Overview Emirates dnata Group Financial Information Additional Information This year, the UAE considerably enhanced its standing in the World Bank’s annual enabled us to weather a myriad of external challenges over the years. We have “Doing Business” report, moving up from 34th to 26th in the rankings for ease of also invested, based on our capabilities and potential, in shaping a future that meets doing business, the highest among Arab countries. We were also recognised by the our aspirations. World Bank as one of the top 10 most improved business environments. In the Global Optimism, and the relentless pursuit of excellence and sustainable success, are part of Entrepreneurship Index Report 2016, the UAE was ranked 19th in the world, ahead the ethos embedded in our national institutions and companies, both at an individual of many countries that have a strong history and reputation such as Norway, South and collective level. These organisations play a vital role in translating our aspirations Korea, Turkey and Japan. for the future into positive outcomes for the various sectors of our country. The foundations laid by our nation’s founding fathers decades ago, created a solid The Emirates Group is one of our national companies that exemplify balanced growth, base to build our civilization and invest in a future full of opportunities. They inspired innovation, and resilience. Both Emirates and dnata have a track record of investing us to shape a vision that focuses on developing the UAE into one of world’s the most in its people, in its business, in new technologies, and working with partners on advanced and prosperous nations. innovative solutions. For us, real and sustainable growth has always been multi-dimensional. Building Aviation and travel are today one of the main engines and enablers of the UAE physical infrastructure, using smart technologies, and diversifying the economy are economy, connecting us to global trade, commerce, and tourism opportunities. vital for us. Equally essential is putting in place a caring and efficient government that is able to facilitate and enable development; build inclusive and cohesive The Emirates Group has grown with Dubai and the UAE, taking our nation’s communities; and ensure that our citizens and residents are safe, happy, empowered, capabilities and reputation for excellence onto the international stage as Emirates and and have access to good education, healthcare, and amenities. These are the elements dnata grow their global footprint. that combine to create a quality life for everyone. With its commitment to encouraging innovation and investing in the future, we are Our national strategy of diversifying our economy, investing in infrastructure, and confident that the Emirates Group will achieve even greater successes and contribute nurturing an inclusive society has earned us success on the international stage, and further to Dubai and the UAE’s economic growth. 3 Overview Emirates dnata Group Emirates is a global airline, serving 154 airports in 82 countries from its hub Financial in Dubai, United Arab Emirates. Operating the world’s largest fleets of Airbus Information A380 and Boeing 777 aircraft, its main activity is the provision of commercial air Additional Information transportation services. dnata is one of the largest combined air services providers in the world and the largest travel management services company in the UAE. Its main activities are the provision of cargo and ground handling, catering and travel services. Emirates and dnata are independent entities and do not form a group as defined by International Financial Reporting Standards. However, these entities are under common management. Therefore, in the Management Review section of this document, they are together referred to as the Emirates Group. 4 Overview Emirates dnata Group Financial Information Additional Information 6 FINANCIAL HIGHLIGHTS 16 EMIRATES: RESPONDING TO A TURBULENT YEAR 52 dnata: STRONGEST PERFORMANCE TO DATE 78 GROUP KEY EVENTS 8 CHAIRMAN’S STATEMENT 20 OUR MODERN FLEET: WORLD CLASS OPERATIONS 56 dnata4good: GROWING OUR IMPACT 86 OUR GROWING NETWORK AND CUSTOMER EXPERIENCE 12 LEADERSHIP TEAM 58 SAFETY AND STANDARDS 91 EMIRATES FINANCIAL COMMENTARY 24 OUR GLOBAL NETWORK: CONNECTIVITY AND 60 UAE AIRPORT OPERATIONS: 101 dnata FINANCIAL COMMENTARY CONSUMER CHOICE GROWING WITH DUBAI 107 EMIRATES INDEPENDENT AUDITOR’S REPORT 28 EMIRATES SKYCARGO: STRENGTHENING OUR 64 INTERNATIONAL AIRPORT OPERATIONS: PROPOSITION AND INDUSTRY LEADERSHIP 112 EMIRATES CONSOLIDATED FINANCIAL STATEMENTS NEW MARKETS, NEW HORIZONS 32 THE EMIRATES EXPERIENCE: WINNING 156 dnata INDEPENDENT AUDITOR’S REPORT 70 TRAVEL: A GLOBAL PLAYER WITH AGILITY CUSTOMERS AND EARNING THEIR LOYALTY AND ABILITY 160 dnata CONSOLIDATED FINANCIAL STATEMENTS 36 OUR PEOPLE: DRIVERS OF OUR SUCCESS 74 CATERING: CREATING A RECEIPE FOR SUCCESS 199 ADDITIONAL INFORMATION 40 OUR BRAND STRENGTH: A BUSINESS ASSET 200 EMIRATES TEN-YEAR OVERVIEW 44 CONTRIBUTING TO THE ENVIRONMENT 202 dnata TEN-YEAR OVERVIEW AND COMMUNITY 204 GROUP TEN-YEAR OVERVIEW 48 OUR FINANCIAL STRENGTH: A DIVERSE AND BALANCED LONG-TERM FUNDING STRATEGY 205 GROUP COMPANIES OF EMIRATES 206 GROUP COMPANIES OF dnata 208 GLOSSARY 5 FINANCIAL Overview Emirates dnata HIGHLIGHTS Group Financial Information Additional Information Emirates Group Financial highlights 2016-17 2015-16 % change Revenue and other operating income* AED m 94,684 92,896 1.9 Operating profit AED m 3,659 9,391 (61.0) Operating margin % 3.9 10.1 (6.2) pts Profit attributable to the Owner AED m 2,460 8,179 (69.9) Profit margin % 2.6 8.8 (6.2) pts Financial position Total assets** AED m 133,281 129,989 2.5 Cash assets AED m 19,066 23,453 (18.7) Employee data Average employee strength number 105,746 95,322 10.9 * After eliminating inter company income/expense of AED 2,559m in 2016-17 (2015-16: AED 2,778m). ** After eliminating inter company receivables/payables of AED 324m in 2016-17 (2015- 16: AED 168m). Percentages and ratios are derived based on the full figure before rounding. The financial year of the Emirates Group is from 1 April to 31 March. Throughout this report all figures are in UAE Dirhams (AED) unless otherwise stated. The exchange rate of the Dirham to the US Dollar is fixed at 3.67. 6 Overview Emirates dnata Group Financial Information Additional Information Emirates dnata Financial highlights 2016-17 2015-16 % change Financial highlights 2016-17 2015-16 % change Revenue and results Revenue and results Revenue and other operating income AED m 85,061 85,044 0.0 Revenue and other operating income AED m 12,182 10,630 14.6 Operating profit AED m 2,435 8,330 (70.8) Operating profit AED m 1,224 1,061 15.4 Operating margin % 2.9 9.8 (6.9) pts Operating margin % 10.0 10.0 0.0 pts EBITDAR AED m 21,248 24,415 (13.0) Profit attributable to the Owner AED m 1,210 1,054 14.8 EBITDAR margin % 25.0 28.7 (3.7) pts Profit margin % 9.9 9.9 0.0 pts Profit attributable to the Owner AED m 1,250 7,125 (82.5) Return on shareholder's funds % 20.3 20.7 (0.4) pts Profit margin % 1.5 8.4 (6.9) pts Return on shareholder's funds % 3.8 23.8 (20.0) pts Financial position Total assets AED m 12,047 10,978 9.7 Financial position Cash assets AED m 3,398 3,465 (1.9) Total assets AED m 121,558 119,179 2.0 Cash assets AED m 15,668 19,988 (21.6) Key operating statistics Net debt (including aircraft operating Aircraft handled number 623,611 389,412 60.1 lease) to equity ratio % 237.9 215.9 22.0 pts Cargo handled tonnes '000 2,844 2,056 38.3 Meals uplifted number '000 60,747 57,062 6.5 Airline operating statistics Travel services: Passengers carried number '000 56,076 51,853 8.1 Total Transaction Value (TTV) AED bn 10.7 11.7 (9.0) Cargo carried tonnes '000 2,577 2,509 2.7 Passenger seat factor % 75.1 76.5 (1.4) pts Employee data Overall capacity ATKM million 60,461 56,383 7.2 Average employee strength number 40,978 34,117 20.1 Available seat kilometres ASKM million 368,102 333,726 10.3 Aircraft number 259 251 8 nos Employee data Average employee strength number 64,768 61,205 5.8 7 AED 13.7 BILLION INVESTED In 2016-17, the Group collectively invested Overview AED 13.7 billion in new aircraft and equipment, the acquisition of companies, Emirates modern facilities, the latest technologies dnata and staff initiatives Group Financial Information Additional Information Chairman’s statement RESILIENCE AND PERFORMANCE Aviation and travel are notoriously vulnerable to social, economic, and political events, The developments in Europe and the US have influenced travel demand patterns, as well as the ever-changing expectations of consumers.