ON COURSE ANNUAL REPORT 2017-18 THE EMIRATES GROUP ANNUAL REPORT 2017-18 Overview His Highness Sheikh Mohammed bin Rashid Al Maktoum Emirates Vice President and Prime Minister of the UAE and Ruler of Dubai dnata Group 2018 marks 100 years since the birth of the late Sheikh Zayed bin Sultan Al Nahyan, the founding father of the UAE. It is an appropriate Financial Information time to reflect on his vision and legacy which has shaped and guided Additional the journey of our nation for more than four decades. Information We are moving into a future where change will be constant and people will experience unprecedented transformation in their daily lives. More than ever, Sheikh Zayed’s values of wisdom, respect, sustainability, and human development will provide a strong compass for the UAE and Dubai’s plans to build the most advanced, inclusive and prosperous city in the world. Every year, the UAE makes great strides in its pursuit of overall excellence. In the latest edition of the World Bank’s “Doing Business” report, we moved up five positions to rank 21st in the world for Ease of Doing Business. For the fifth year in a row, we were also the highest ranked Arab nation in the list. The UAE’s global competitiveness has been the result of our forward looking and broad-based economic diversification strategy. From our modest beginnings as a trading post, Dubai has grown in importance as a regional hub for financial services, transport, construction and many other sectors. We have been able to achieve this position by harnessing the advantages of our geographical location and by embracing the principles of free market competition. 2 THE EMIRATES GROUP ANNUAL REPORT 2017-18 We have invested in building a best-in-class physical The Emirates Group is one of the UAE corporations that infrastructure to support a thriving and diverse economy, is closely linked to the UAE and Dubai’s development. and consciously worked towards building an open and Emirates and dnata’s relentless pursuit of excellence, inclusive society focused on the happiness and prosperity innovation and sustainability, reflect the values that have of our citizens, residents and visitors. underpinned the progress of our nation. Our ambition is to make Dubai a global hub for They have both grown from their base in Dubai to Overview innovation and development, through a comprehensive achieve global prominence with operations spanning transformation agenda outlined in our Dubai Plan 2021 over 84 countries and a strong reputation for quality. Emirates and Smart Dubai 2021 strategies. Expo 2020 Dubai will Embracing competition and constant change, the Group dnata offer yet another platform to connect minds across has remained successful through the years by continually Group geographical boundaries and build bridges that will investing in people, infrastructure and technology, and by Financial contribute immensely towards our ability to adapt to having an unbroken commitment to transformation Information change and transition to a knowledge-based economy. and excellence. Additional Information By placing the wellbeing of people at the heart of our The track record of the Emirates Group leaves me in no strategy and by giving top priority to sustainability, we are doubt that it will continue to make a strong and positive driving well-rounded growth, which in turn will increase impact on the success story of Dubai and the UAE in the opportunities, attract innovators, and deliver tangible years to come. progress and a better quality of life. The Ghaf tree (prosopis cineraria) is the national tree of the UAE. Indigenous to the UAE, it is sturdy, evergreen and drought tolerant 3 THE EMIRATES GROUP ANNUAL REPORT 2017-18 Overview Emirates dnata Group Financial Information Emirates is a global airline, serving 155 airports in 83 countries from its hub in Dubai, Additional Information United Arab Emirates. Operating the world’s largest fleets of Airbus A380 and Boeing 777 aircraft, its main activity is the provision of commercial air transportation services. dnata is one of the largest combined air services providers in the world, serving over 300 airlines in 35 countries. dnata’s 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 THE EMIRATES GROUP ANNUAL REPORT 2017-18 Overview Emirates dnata 6 FINANCIAL HIGHLIGHTS Group 8 CHAIRMAN’S STATEMENT Financial Information 12 LEADERSHIP Additional Information 14 EMIRATES: DELIVERING RESULTS 38 DNATA: ANOTHER OUTSTANDING YEAR 62 GROUP KEY EVENTS 20 INVESTING IN OUR STATE-OF-THE-ART FLEET 47 INDUSTRY LEADERSHIP AT WORLD’S BUSIEST 70 OUR GROWING NETWORK INTERNATIONAL HUB 22 STRENGTHENING OUR GLOBAL NETWORK 75 EMIRATES FINANCIAL COMMENTARY 51 BUILDING A QUALITY REPUTATION ACROSS OUR 24 AIR CARGO INDUSTRY LEADERSHIP 85 DNATA FINANCIAL COMMENTARY GLOBAL OPERATIONS 28 MAKING FLYING BETTER 91 EMIRATES INDEPENDENT AUDITOR’S REPORT 55 GLOBAL EXPERTS IN WORLD CUISINES 32 BUILDING OUR BRAND 96 EMIRATES CONSOLIDATED FINANCIAL STATEMENTS 59 GLOBAL PRODUCTS, SERVICES AND EXPERTISE 36 OUR PEOPLE, OUR SUCCESS 139 DNATA INDEPENDENT AUDITOR’S REPORT 142 DNATA CONSOLIDATED FINANCIAL STATEMENTS 180 ADDITIONAL INFORMATION 182 EMIRATES TEN-YEAR OVERVIEW 184 DNATA TEN-YEAR OVERVIEW 186 GROUP TEN-YEAR OVERVIEW 187 GROUP COMPANIES OF EMIRATES 188 GROUP COMPANIES OF DNATA 5 190 GLOSSARY THE EMIRATES GROUP ANNUAL REPORT 2017-18 Overview Emirates Financial Highlights dnata Emirates Group Group Financial highlights 2017-18 2016-17 % change Financial Revenue and other operating income* AED m 102,409 94,706 8.1 Information Operating profit AED m 5,282 3,659 44.4 Additional Operating margin % 5.2 3.9 1.3 pts Information Profit attributable to the Owner AED m 4,113 2,460 67.2 Profit margin % 4.0 2.6 1.4 pts Financial position Total assets** AED m 141,625 133,281 6.3 Cash assets AED m 25,365 19,066 33.0 Employee data Average employee strength number 103,363 105,746 (2.3) * After eliminating inter company income/expense of AED 2,987m in 2017-18 (2016-17: AED 2,559m). ** After eliminating inter company receivables/payables of AED 254m in 2017-18 (2016-17: AED 324m). 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 THE EMIRATES GROUP Revenue and operating income in AED m Profit attributable to the Owner in AED m Revenue and operating income in AED m Profit attributable to the Owner in AED m ANNUAL REPORT 2017-18 17-18 92,322 17-18 2,796 17-18 13,074 17-18 1,317 16-17 85,083 16-17 1,250 16-17 12,182 16-17 1,210 15-16 85,044 15-16 7,125 15-16 10,630 15-16 1,054 14-15 88,819 14-15 4,555 14-15 9,160 14-15 906 13-14 82,636 13-14 3,254 13-14 7,565 13-14 829 Overview Emirates dnata Emirates dnata Group Financial highlights 2017-18 2016-17 % change Financial highlights 2017-18 2016-17 % change Financial Revenue and results Revenue and results Information Revenue and other operating income AED m 92,322 85,083 8.5 Revenue and other operating income AED m 13,074 12,182 7.3 Additional Operating profit AED m 4,086 2,435 67.8 Operating profit AED m 1,196 1,224 (2.3) Information Operating margin % 4.4 2.9 1.5 pts Operating margin % 9.1 10.0 (0.9) pts EBITDAR AED m 24,970 21,248 17.5 Profit attributable to the Owner AED m 1,317 1,210 8.8 EBITDAR margin % 27.0 25.0 2.0 pts Profit margin % 10.1 9.9 0.2 pts Profit attributable to the Owner AED m 2,796 1,250 123.7 Return on shareholder's funds % 19.3 20.3 (1.0) pts Profit margin % 3.0 1.5 1.5 pts Return on shareholder's funds % 7.9 3.8 4.1 pts Financial position Total assets AED m 14,292 12,047 18.6 Financial position Cash assets AED m 4,945 3,398 45.5 Total assets AED m 127,587 121,558 5.0 Cash assets AED m 20,420 15,668 30.3 Key operating statistics Net debt (including aircraft operating Aircraft handled number 659,591 623,611 5.8 lease) to equity ratio % 216.4 237.9 (21.5) pts Cargo handled tonnes '000 3,083 2,844 8.4 Meals uplifted number '000 55,718 60,747 (8.3) Airline operating statistics Travel services: Passengers carried number '000 58,485 56,076 4.3 Total Transaction Value (TTV) AED bn 11.3 10.7 5.6 Cargo carried tonnes '000 2,623 2,577 1.8 Passenger seat factor % 77.5 75.1 2.4 pts Employee data Overall capacity ATKM million 61,425 60,461 1.6 Average employee strength number 41,007 40,978 0.1 Available seat kilometres ASKM million 377,060 368,102 2.4 Aircraft number 268 259 9 nos Employee data Average employee strength number 62,356 64,768 (3.7) 7 THE EMIRATES GROUP ANNUAL REPORT 2017-18 Overview Chairman’s statement Emirates dnata Ready to face challenges Group and maximise opportunities Financial Information Our core businesses of aviation and travel have always been vulnerable Additional to market dynamics and unexpected events, whether natural or Information man-made.