Emirates, the Middle East’s largest airline, reported a drop in annual profit on Thursday for the first time in five years as it added more seats than it could fill and stiff competition put pressure on ticket prices.
The Dubai-based company said net profit at its airline business plunged 82% to 1.3 billion dirhams ($354 million) in the year to March 31. That is the first time since its 2011-12 fiscal year that annual airline profit has fallen.
Airlines around the world have reported pressure on fares over the last couple of years due to volatile demand and cut-throat competition, though Europe’s major carriers have recently noted signs of the pressure easing.
Emirates also added more seats than it could fill, leading to a drop in the average yield per passenger.
The Middle Eastern carrier said a series of “destabilizing events,” including Britain’s vote to leave the European Union and restrictions on travel to the United States from the Middle East, affected demand for travel during the year.
Last month, Emirates signaled its U.S. expansion plans were on hold after announcing flights to five U.S. cites would be cut due to weakened demand that it blamed on travel restrictions by President Donald Trump’s administration.
Emirates Chairman Sheikh Ahmed bin Saeed al-Maktoum said the company expected “the year ahead to remain challenging.”
Middle East carriers have seen slower growth over the past two years as regional travel budgets tightened due to lower oil prices and a wave of militant attacks in Europe and Turkey weakened east to west traffic flows.
The airline’s revenue was flat at 85.1 billion dirhams. Emirates said the “relentless rise” of the dollar in key markets cost the airline 2.1 billion dirhams in revenue.
Its fuel bill increased 6% on the year to 21 billion dirhams and made up 25% of its operating costs compared with 26% last year.
Emirates carried 56.1 million passengers, up 8% on the year, though its load factor—or number of seats filled—declined 1.4 percentage points to 75.1%. Capacity increased 10%.
UK-based aviation consultant John Strickland said he expected Emirates “to keep a tighter rein on its capacity growth in the short to medium term.”
Last December, Emirates deferred deliveries of 12 Airbus A380 superjumbos.
The world’s biggest A380 customer said profit for the wider Emirates Group, which includes airport and travel services arm Dnata, fell 70% to 2.5 billion dirhams.
Emirates said it would not pay a dividend to Investment Corporation of Dubai, the state investment vehicle which owns the airline and stakes in other Dubai companies. It paid 2.6 billion dirhams for the previous year.