Emirates Airlines Company Strategy - Case Study Example

1.0 Introduction As the suggests, Emirates Airline is located in the United Arab Emirates (UAE) and specifically based in Dubai (a in the UAE). The company was founded in the year 1985 and has grown to become one of the most well known carriers in that region and the world over. Its international destinations span across sixty countries. These travels are achieved through its collection of one hundred fleets; the fleets are composed of both airbus jests and also Boeing airplanes. The company belongs to the Emirates group which is a unification of airport services, travel services and airport management services.1 SECTION 1: Industry Analysis 2.0 Political The events of eleventh September 2001 affected all countries of the world. This is because Airline Companies were now seen as vulnerable to terrorist attacks. Many believed that the bombings that occurred in 9-11 could only have been achieved if there was a security breach at the Pentagon and also in some Airports. This event discouraged some passengers from flying and it also affected customer expectations. Clients now expected airlines to increase their security in all airports. This has now become a determinant factor when clients are choosing an Airline. 2.1 Economic Many Airline Companies ; especially those ones found in Western countries made the choice of expand their operations using the hub and spoke model where flights cater for clients going from an origin market to a specific destination. These expansions saw creation of about seven hundred and fifty mainline jets. This was a huge overestimation because market share is quite low in the origin-destination market. Consequently, many Airline Companies lost a lot of revenue because there was hardly any return on their investments. Supply definitely exceeded demand and it therefore became uneconomical to use this model. Most Companies within the Airline industry have been focusing on short term rather than long term profit margins. Most of them have been trying to improve their performances within the stock exchange over an abnormally short period of time. Since it is almost impossible to increase profitability overnight, companies decided to increase Airline tickets and the pressure was then transferred to the consumer. The major problem with this is that companies were harming the same people who were the main source of revenue and this has resulted in long term loses as consumers dashed off to other low cost Airlines. 2 There is a looming economic crisis in the Airline industry if conventional carriers do not up-their -game; low cost airlines. In the past, low cost airlines had only one unique product offerings for their customers that is low ticket charges. However, with the passage of time, these companies have become very competitive. Most of them now have the ability to attract a hoard of clients through good customer service, top of the class aircrafts and efficient employees. Their emergence has led to the decline in corporate fights and shift to mainstream offerings. 2.2 Social Most Airline companies may opt to host a range of aircrafts within their hubs or ports. As much as these aircrafts offer unique services to a host of clientele, they can become a source of concern when considering the kind of staff one needs to recruit. For example, is an Airline Company owns Regional jets Twin engines Four engine Turboprops Wide-body Narrow body All these various types of aircrafts will require their own pilots and engineers. They may have different qualifications and may also require different pay. Such ideas are quite sustainable if the economy is stable, but most countries have been experiences upsurges; it has therefore become difficult to maintain the payment schedules of al their employees given the fact that most of them belong to different labour unions. 3 2.3 Technology During the mid and late nineties, there was a huge demand for technology. Most airlines throughout the world were also overtaken by this technological boom. They incorporated it into their operations, their customer services and other spheres. However, there was a technology bust shortly after and this caught most Airline companies by surprise; Emirates was no exception. Initially, there were many Airline companies that used the aspect of technology as a source of competitive advantage or a tool to increase their market share, however after the technology burst, this was no longer the case. The internet has made many clients more informed than they were before. They now have the ability to analyse all the options vaialable to them at the touch of a button. Customers now know which companies offer which prices. They are also well informed about the kind of routes that companies take. A client would normally ask themselves why there is a need to use an Airline with numerous stopovers when there is one that has a direct route. All this information has been obtained through the internet. SECTION 2 3.0 Company's current position within the competitive marketplace The Company has worked its way to the top. It has linked its growth to its hub; Dubai. Estimates show that the City of Dubai is respected as a major tourist destination in the world and that it grows at a level of seventeen percent annually. Similarly, Emirates Airline is now listed as one of the top five respectable Airlines in the world. Such a title did not come easily; Emirates Airline has consistently provided quality services yet at the same time maintained its profitability in the competitive Airline Industry. 4 While other carriers in the rest of the world may be facing stiff competition form their counterparts, Emirates Airline is doing relatively well. A country like the US is plagued with low carrier Airlines and government allowances to continue service provision until a company runs out of its last amount of cash. However, the United Arab Emirates receives substantial support from the government. The government has made business very conducive for the Airline Company and this is backed up by the growing economy of the country. Even the entire region is experiencing certain levels of growth as specific countries in Asia have been identified as emerging economies. This is definitely a plus for the company. SECTION 3 4.0 Company strategy Many Airlines has been involved in a number of alliances through -joint ventures -sharing airport lounges -joining European Networks -joint handling etc5 Despite this interest in alliances among major industry players, Emirates Airline believes that joint ventures are a traditional way of doing business. They signify persons who seem more interested in increasing profits rather than customer satisfaction. Therefore, the company has stayed away from this business approach. However, they have cooperated with other Airlines in order to expand or diversify. Their Emirates Airline has been working on some sort of cooperation with Air New Zealand in order to enter the trans-Tasman market. The Airline realised that not many carriers from the Asian continent have focused on this region. It therefore decided to enter that market and establish a good name through efficient service. The Company has been in the news for its interest in the Australian market. This company has a range of aircrafts in Melbourne and Sydney and they plan on conducting more expansion in that region. It should however be noted that emirates is not a large airline company. It is in the process of transition from a small airline to a medium sized one. This development has been achieved through establishment of excellent services. The company is associated with use of new aircrafts and this serves to enhance the company's name. Additionally, the company has a good brand position. Most of its customers identify with it and they usually stick to Emirates once they have sampled their in flight service. This is probably the reason behind the company's rapid growth and development. 6 In the year 2004, the company recorded an increase in profit by forty nine percent. It made over 600 million dollars in profit. Additionally, the company increased its passenger numbers by a whooping ten million. The Company's overall yield has been increasing for four years on end. Emirates business model is based upon the belief that the client comes first. The company believes in fair competition since the UAE government has allowed free market forces between players in the industry rather than protection of certain carriers. The company's success has also been facilitated by the growth of Dubai as an internationally recognized tourist, business and industrial destination. This is why it has survived all the economic downturns of the 2000s, the issue of SARS and rising fuel prices in the aviation industry. SECTION 4 5.0 Evaluation of strategic options 5.1 Air ticket prices It should be noted that the Emirates Airline Company operates under a different docket compared to other low operating airline companies. The latter airline operator's activities are quite intense in the US market where eighty percent of the air traffic market is targeted by the low cost operators. Such companies usually enter the market with the main of making profit. Some of them may not look at the big picture. Their low prices may not be sustainable enough for the fragile global economy which is subject to ups and downs. Low cost operators are faced with the danger of having an inability to meet their overall costs and this may eventually deter their growth in the future. 7 Emirates has established a name for itself in the aviation industry and will therefore be justified if maintains its current prices as it is possible to make price irrelevant to clients once a business has established an excellent product. 5.2 Service provision This is an area that Emirates has already started implementing but there is still room for improvement. The company could adopt better luggage handling policies. Surveys indicate that over thirty five percent of all fight passengers in the world are dissatisfied with the way most airports handle their luggage. The company could also employ state of the art technology in entertainment facilities although it has already started this through live football match recordings within its flights. However, the company could embrace provision of laptop allowances for business clients. Additionally, it could improve services for the younger clientele though a selection of games where individuals can get a chance to choose whichever program they desire. It Service provision can be improved through the internet. The company should make online transactions a priority as this can save customers valuable time. In order to improve customer comfort, the company can add some sort of seat back videos for clients in its aircrafts. This will improve entertainment facilities and keep the company above the rest. 5.3 Expansion of routes Airline Companies re constantly, expanding their routes because there is a need to tap resources in certain markets. Emirates have the option of expanding within the Middle Eastern region or into the rest of the world. There are certain markets that are more profitable than others and much care needs to be taken before the selection of one market over the other. 8 5.4 Operating expenses It is possible to cut down on operating expenses and hence improve one's market performance. Airlines have the option of maintaining their aircrafts in peak condition. If they do this, then they will not have to spend extra finances on costly repairs or replacements. Aircrafts are quite costly and before an airline can purchase new supplies, they need to be prepared for extra expenses. If the company establishes a reputation for reliability in operations, then this will go along way in increasing competitive advantage. SECTION 5 6.0 Recommendations for the organisation Given the fact that Emirates has shown an interest in expansion then this strategic option should be adopted. However, regional expansion may not be the way to go because Emirates already has the largest market share in the Middle Eastern aviation industry. It should try tapping the western markets a little more. The US is quite competitive and would be a suitable market to start with. This is because their airline traffic is still growing. It should not emphasise too much of its efforts in Europe as some airports there tend to be monopolized by one Airline company. 9 Emirates should stay away from low ticket offerings and instead shift attention to operations and service improvement. This is because the latter two measures make the 'product' offering so concrete that customers can consider price irrelevant. Short term ticket prices might affect the profits temporarily but this may not be sustainable in the future. SECTION 6 7.0 Conclusion All in all, Emirates is a successful growing Airline with potential to become even bigger. It got to its current position through solid product offerings and good customer service. This is the reason why it is the most well recognized Airline in the Middle East. However, it can improve in the international arena through route expansion especially to the US which is quite competitive and it can also incorporate more technology in service provision. Reference: Butler, G.F., Keller, M.R. (2000): Handbook of Airline Operations. Aviation Week; McGraw-Hill Companies Directory: (2007): World Airlines", Flight International, 2007-04-03, p. 77. Doganis, R. (2002): Flying off Course: The Economics of International Airlines, 3rd edition. Routledge, New York. Doganis, R. (2001): The Airline Business in the 21st Century. Routledge, New York, Morrison S. and Winston C. (1997): The fare skies: air transportation and Middle America, Brookings Fall Smith, M. J. (2002): The airline encyclopaedia, 1909-2000. Scarecrow Press Tayeh, T. (2006): The View from Dubai: a speech by Senior Vice President Planning, international and Industry Affairs Emirates Airline; Euro control report (May 20th) Read More