Operational Characteristics of Emirates Airlines - Essay Example

Introduction Emirates Airlines has been one of the biggest contributors to development of tourism in Dubai and the Arab Emirates (Oxford Business Groups, 2008 p169). It serves as a vital airline and cargo career and it belongs to a parent company that has consolidated a conglomerate of tourist-friendly businesses like the Emirates chain of hotels, Travel and Tour Service as well as business guide services. Emirates is a unique airline in its own right because it provides top-class services that can match any global competitor as well as low cost services which attracts another class of passengers and clients (Besanko et al, 2009 p306). Emirates is one of the fastest growing airlines in the world and it has consistently posted an average of 20% growth in annual profit since 1985 (Plunkett, 2007). This research studies some key components of Emirates Airlines and how it relates to tourism and management. It examines the operational characteristics of the airline and how it aims at expanding its scope. The second section of the paper examines the financial performance of the airline and its implications. Finally, the paper examines the competitive situation of the airline and concludes on the findings. Operational Characteristics of Emirates Airlines From the webpage of Emirates Airlines (Emirates Story, 2012), it started operating in October 1985. It aimed at providing high quality flight services to and from Dubai. The airline is mainly owned by the government of Dubai but it operates as an independent entity. Emirates has over 160 aircrafts and flies to over 100 destinations in 66 countries. A total of 40% of the flights are to or from Dubai. The growth in traffic for Emirates Airlines is characterized by the cumulative expansion of the airlines fleet. In 2001, there were just about 9 million passengers who flew on Emirates but by 2006, it had increased to 17.5 million (Graham et al, 2010). This is done through the offer of different classes of services that ensures that different people from different backgrounds are serviced by the airliner. Number of Passengers (Source, Emirates Group 2011 Report) Period Passengers (000) 2006/07 17544 2007/08 21229 2008/09 22731 2009/10 27454 2010/11 31422 Emirates flies to 111 cities and operates in five different global regions around the world (Emirates Routes, 2012). In each of these regions, Emirates Airlines provides various services that aim at meeting certain targets that are unique to the continent. In Africa, Emirates flies to 21 cities on the continent. Emirates flights to Africa was hinged on the expansion of business activities with Dubai. Since Dubai was set to become an international destination that links the developing world to Europe and North America. Due to the fact that most African business leaders are operating in Dubai, the idea of business tourism applies to them. In Asia, the Emirates flies to 29 cities. Emirates links different parts of the world to tourist destinations in South East Asia like Thailand and Indonesia. Also the idea of business tourism is strongly enhanced through the flights of Emirates Airlines. In Australasia, Emirates Airlines operates in 9 different parts of the world. Due to the strong links between Australasia and Britain, Europe and America, Emirates Airlines is able to transport families and individuals to and from the other side of the world. Dubai becomes a stopping point where most of these Australasians are encouraged to stop over and visit through Emirates flights. In Europe, there are 28 different destinations that Emirates flies to. These destinations have historical destinations that are visited by people all over the world. Also, European tourists are encouraged to move to the developing world through Emirates Airlines. The same applies to The Americas where there are numerous tourists who leave the region. Emirates announced in its 2011 report that it aims to expand its influence in China. This is because the world has developed a serious interest in China over the past few years. Due to this, business travelers and tourists are going to and from China. This gives Emirates an opportunity to connect its flights to the destinations it covers to Chinas airports. Financial Performance Emirates is one of the most profitable airlines in the world (Wilson, 2005). The company has remained profitable for the past five years and this is due to the use of a strong strategy in increasing revenue and cutting down costs. The Financial Operational Summary of Emirates 2006 – 2011 (Source Emirates Group Annual Report, 2011) Year Revenue (US$ Billion) Operating Profits (US$ million) 2006/7 7.79 909.8 2007/8 9.92 1212.8 2008/9 11.58 620.7 2009/10 11.58 971.4 2010/11 14.46 1482.6 * Figures in original document was quoted in Arab Emirates Dirham and were translated to US$ with the current exchange rate of 3.67 This shows that the company has steadily increased its financial position over the past five years. There is a clear and almost consecutive increase in the revenue of the airline over the past five years. However, it is apparent that they maintained their revenue flow in 2008/09 as well as 2009/10. This was the time the global financial crises was at its peak so it is apparent that the company had to undertake a number of adjustments to remain in production. This explains why they maintained their revenue position at that time. In terms of profit, Emirates increased greatly between 2006/7 and 2007/8 when there was a slight change in profit. However, the profitability of the business fell sharply in 2008/9 although they made a lot of profit in that year. This suggests that there were higher operation costs during that time. Again, it is worth noting that this was the era of the credit crunch. At the same level of revenue in 2009/10, Emirates made a higher profit of about $300 million. This suggest that things were picking up at that time. In 2010/11 it made a record profit of over $1 billion. The International Air Transport Association announced that the 2011 average earning for the industry of international carriers was $6.9 billion (BBC News, 2011). This shows that Emirates Airlines accounted for about 20% of the revenue made in the industry in the year 2011. There is a clear growth in the Emirates and Emirates seem to be overtaking traditional powerhouses in the Airline industry like British Airways, AirFrance, Lufthansa, and Qantas (Knorr & Eisenkof, 2010). Knorr & Eisenkof concede that Emirates is using much more superior strategies to win over more customers and increase market share and revenue (2010). However, these traditional airline carriers have accused Emirates Airlines and Singapore Airlines for using unorthodox methods to capture market share like gaining subsidy from the government of Dubai (Iran Daily, 2009). Competitive Situation of Emirates Airlines As a Global carrier, Emirates competitors include the various national airlines of the developed world that continue to ply routes around the world. The virtual examples include British Airways, AirFrance, KLM, Lufthansa, Virgin Airlines, Singapore Airlines and Air New Zealand. Emirates success in the industry is based on its business model (Knorr & Eisenkopf, 2010). Emirates maintains a lean work force and in this wise, their budget is like a low-cost airline carrier. This is because they only employ staff members necessary to carry out the job. Emirates also maintains a flat organisational structure. This ensures that there is autonomy and workers can take independent decisions without bureaucracy elsewhere, particularly amongst the European airlines. Due to this, Emirates has very low overhead costs. Emirates is not a member of any global airline alliance. It utilises elements in its group and due to this, they are free to expand into areas and ventures that an international alliance might prevent them from pursuing. In its operations, Emirates bypasses traditional hubs like Heathrow, Schipol, JFK and Charles De Gaulle as its main point of landing. Rather, Emirates focuses on smaller less busy airports. This enables them to serve passengers in a convenient manner. For instance, one might expect a lot of traffic on roads leading to major airports. Thus, to save time, passengers might prefer to go to airports closer to them and with lesser congestion. Emirates operates in such airports to capture such consumers. Emirates centralises its operations in Dubai. It maintains a strong position and due to the geostrategic position of the Emirate, Emirates Airlines is able to connect the different parts of the world in a more propitious manner. Emirates gets fuel subsidies from the government of Dubai which controls a lot of oil wealth. Due to this, Emirates is protected from high fuel pricing during times where the world market price of fuel goes up. This means that Dubai has a firm control on one of the main components of the industry – fuel prices. Also, Emirates does not pay taxes on its Dubai operations. The Emirate operates a tax free system for indigenous businesses. Due to this Emirates is spared huge taxes which can potentially cripple its competitors in the industry. Emirates Airlines is a key component of Dubais governments expansion drive. Since the government seeks to make Dubai a major centre for business tourism and other forms of travel, Emirates is a key partner that moves with the government. So whenever the government establishes a diplomatic or bilateral relationship, the airline enters that nation by default. This has helped it to continue expanding into areas that other competitors might not normally expand into. Conclusion Emirates is a fast growing airline company and this is due to the strong management, good strategy, geostrategic positioning of Dubai and support by the government of Dubai. With all these advantages, Emirates has been able to expand its scope and influence throughout the world and keeps on expanding to meet its growth targets. The main strengths of Emirates include an effective organisational structure which cuts out bureaucracy and reduces costs of operations. Secondly, Emirates geostrategic location in Dubai as well as the low charges and benefits it enjoys in its headquarters at Dubai. Thirdly, the generous immigration laws and foreign policy system of Dubai allows more customers to come in and go. The award-winning services in all classes adds up to the popularity of the airline carrier. Finally, the clever marketing drive that it maintains in the most important places on earth References BBC News (2011) Airline Profits to Drop by 29% in 2012 Available online at: Accessed: 5th January, 2012. Besanko David, Dranove David, Shanley Mark & Schaefer Scott (2009) “Emirates Air Case Example” in Economics of Strategy Hoboken, NJ: John Wiley & Sons. Emirates Group Annual Report (2011) Complete Annual Report Available online at: Accessed: January 5, 2011 Emirates Route (2012) Emirates Route Map Available online at: Accessed: January 5, 2012. Graham Anne, Papatheodorou Andreas & Forsyth Peter (2010) Aviation & Tourism: Implication for Leisure Travel Ashgate Publishing Iran Daily (2009) “Accusation of Unfair Practices in Emirates” Available online at: Accessed: January 5, 2012 Knorr Andreas & Eisenkopf Alexander (2010) “How Sustainable is Emirates Business Model” Aerlines E-Zine Edition Issue 38 Oxford Business Group (2008) The Report: Dubai 2008 Oxford Business Group Plunkett Jack W. (2007) Plunketts Biotech & Genetics Industry Alamanac 2006 Plunkett Research Ltd. The Emirates Story (2012) Emirates Airline – Building A Global Network Available online at: Accessed: January 5, 2012. Wilson, G. (2005) Emirates Airline of the Future London & Dubai London: SAGE Publication. Read More