Emirates unit dnata eager to expand after record profit

Emirates Group’s ground handling and travel services unit, dnata, is eyeing acquisitions in Asia after it reported a 9 per cent rise in net profit.

“We are looking at travel management companies across Asia, and this comes back to the end-to-end product. We are selling packages, and why not get involved in ground services business?” said Gary Chapman, the president of group services and dnata. The company’s ground services include its City Sightseeing bus tours in Dubai.

“In this business you have to have scale, because if you don’t have the scale no one takes you seriously, and it gives you the ability to bring business to the hotels, airlines and ground services providers.”

He also confirmed the company’s interests in buying the UK unit of the Swiss travel agent Kuoni, which sells holidays to more than 80 destinations worldwide.

“We have a large cash balance and we continue to generate cash, and for really significant transactions, I wouldn’t want to use my own cash, just part of it, and get bank financing due to the low rates,” Mr Chapman said.

Sheikh Ahmed bin Saeed Al Maktoum, the chairman and chief executive at Emirates Group, said that dnata’s Dh906 million profit, its highest in its 56 years of operation, was driven largely by Gold Medal, the UK-based distributor of long-haul scheduled flights, hotels and car hire.

Revenue rose 36 per cent to Dh10.3 billion from a year earlier, with about 60 per cent coming from outside the UAE. Its cash balance stood at Dh3.1bn.

Dnata’s travel services revenue grew to Dh2.7bn in the financial year through March from Dh705m in the previous financial year.

Dnata’s acquisitions so far have been concentrated in the UK, making it one of the largest travel agents there. Last month it acquired a majority stake in Imagine Cruising, giving it an entry into the cruise travel segment. Last year it bought Thomas Cook’s Gold Medal for £45m (Dh251.5m) as well as Stella Travel Services. It acquired UK-based Travel Republic in 2012.

Acquisitions outside the UK would “diversify dnata’s international portfolio and also de-risk their business and service activities”, said Saj Ahmad, an analyst at London-based StrategicAero Research.

Dnata provides cargo, catering and ground handling services to 78 airports across the world. That includes a catering service at Orlando Sanford International Airport in Florida, its sole airport operations in the US.

“For us to go into the US, we have to go in with a certain scale, because it’s a big and mature market,” Mr Chapman said. “There are a lot of challenges in wages, such as a person working in a McDonald’s or a barista in a coffee shop earns more than a lot of people working on the ramp. I am quite happy to sit back and see how these things evolve.”

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