Emirates Airlines Strategic AnalysisReport

4/27/2016

Emirates Airlines Strategic Analysis.

Contents Executive Summary....................................................................................................................................... 3 Introduction: ................................................................................................................................................. 4 Company Profile:........................................................................................................................................... 4 Current Strategies: ........................................................................................................................................ 5 Expansion via strategic partnerships .................................................................................................... 5 Contributing by FDI in the countries in which the company is operating ............................................ 5 Investing in our efficient fleet and route network................................................................................ 5 Building strong brand equity................................................................................................................. 6 Hiring professional multinational employees ....................................................................................... 6 Developing sustainable business through corporate social responsibility. .......................................... 7 PESTEL Analysis: ............................................................................................................................................ 7 Political Aspect .......................................................................................................................................... 7 Economic Aspect: ...................................................................................................................................... 8 Social Aspect: ............................................................................................................................................ 8 Technological Aspect: ............................................................................................................................... 8 Environmental Aspects: ............................................................................................................................ 8 Legal Aspects:............................................................................................................................................ 8 Porter’s five Forces: ...................................................................................................................................... 9 1. The threat of the entry of new competitors ......................................................................................... 9 2. The intensity of competitive rivalry ...................................................................................................... 9 3. The bargaining power of customers ..................................................................................................... 9 4. The bargaining power of suppliers ..................................................................................................... 10 5. The threat of substitute products ....................................................................................................... 10 Value Chain Analysis: .................................................................................................................................. 10 In-bound logistics: ................................................................................................................................... 10 Inbound Logistics .................................................................................................................................... 10 Operations .............................................................................................................................................. 11 Out bound Logistics ................................................................................................................................ 11 Marketing and sales ................................................................................................................................ 11

Emirates Airlines Strategic Analysis

Page 1

Services ................................................................................................................................................... 11 Human resource management ............................................................................................................... 11 Technology development ....................................................................................................................... 12 Procurement ........................................................................................................................................... 12 VRIO Analysis: ............................................................................................................................................. 13 SWOT Analysis: ........................................................................................................................................... 15 Strengths: ................................................................................................................................................ 15 Weakness: ............................................................................................................................................... 16 Opportunities: ......................................................................................................................................... 16 Threats: ................................................................................................................................................... 16 SWOT analysis summary: ............................................................................................................................ 17 TOWS Analysis: ........................................................................................................................................... 18 Stakeholders Analysis- Needs and Expectations......................................................................................... 19 Stakeholders Mapping ................................................................................................................................ 20 Benchmarking ............................................................................................................................................. 21 Financial Analysis ........................................................................................................................................ 22 Conclusion and Recommendations: ........................................................................................................... 23 Referneces: ................................................................................................................................................. 24

Emirates Airlines Strategic Analysis

Page 2

Executive Summary

This report presents strategic analysis for Emirates Airlines. Starting from external analysis : which is benchmarking , PESTEL analysis and VRIO analysis to internal analysis of the company by SWOT and TOWS analysis and finally Stakeholders Analysis and Mapping. The company is a major company in the region and worldwide; and it is the official carrier of Dubai. It was started by an Amiri Decree by the late Sheikh Rashid Bin Maktoum, who ordered that the Carrier of Dubai should provide excellent services with the highest available standards. Emirates Airlines is a born global company aiming to compete with international airlines. This can explain its marketing strategy of sports sponsorships and it noticed that the company has chosen the best in the world like Real Madrid and Barcelona. The huge advertising campaigns like Keep Discovering and Hello Tomorrow which were spread worldwide resulted in producing a valuable brand image as well as its own philanthropic organization which is Emirates Airlines Foundation. The company has specific advantages like onboard entertainment system and single stop flights to many destinations. The company has to be more competitive especially to low cost companies which are the main rivals in UAE right now. Air Arabia and Fly Dubai are providing lower charges flights which cause losses to Emirates Airlines. The company has to face many threats and try harder to keep its status.

Emirates Airlines Strategic Analysis

Page 3

Introduction: The airline companies contribute mainly in the country’s economy. Emirates Airlines is the official carrier of Dubai which aims to become Hong Kong of the Gulf. Dubai economy is heavily relying on Tourism and tries to depend on it more than oil. So Dubai is depending on Emirates Airlines to be its own representative internationally. Emirates Airlines spends heavily on marketing and advertising as one of its main strategies for expansion and sustainability. The company is wholly owned by Dubai government and it is paying dividends to the government annually. In the same time in case of crisis Dubai Government is not providing any help to Emirates Airlines. Although Emirates Airlines is not publicly listed; it is providing its financial results annually on its annual report; while other airlines like Etihad airways is not doing so. The company is trying to follow the new international trends and strategies like corporate social responsibility. Emirates Airlines Foundation is established to help children in poor countries. The foundation aims to provide food, cloth, medications and shelter to disadvantaged kids. Emirates Airlines cares about environment; it maintains gases emissions below the international standards and cares about wild life as well. The company high operating expenses and the high rival market are the main threats of Emirates Airlines. Low cost airlines in the country like Air Arabia and Fly Dubai are strong threat. (Nataraja,S and Al-Aali,A. -2011).

Company Profile: Based in Dubai in the United Arab Emirates (UAE), Emirates Airlines is the fastest growing and largest airline in the Middle East. It is the most moneymaking airline company worldwide. The company also runs three of the longest non-stop trips from Dubai to Los Angeles, San Francisco, and Houston. With more than 400 prizes for distinction internationally, Emirates is one of two major components in the Emirates Group. The other is Dnata, one of the major travel establishments in the Middle East with over 8,000 employees managing travelers, cargo, and ramp and technical services for several airlines at Dubai International Airport. Emirates Airlines is wholly owned by the Government of Dubai, but the airline is working on a profit-making basis and obtains no financial funding or shelter from the government. This report is mainly on Emirates Airlines. (Nataraja,S and Al-Aali,A. -2011). In the year 1974, Gulf Air was started as a combined carrier of some countries in Gulf Cooperation Council. Nevertheless; a dispute arises between Dubai government and Gulf Air; Gulf Air has reduced the flights to and from Dubai between 1984 and 1985; which lead Dubai to think of starting its own carrier. The late Sheik Maktoum bin Rashid Al-Maktoum; the ruler of Dubai at that time order the establishment of Dubai Carrier on two conditions: the new airlines should provide the highest standards and there would not be any funds for Dubai government other than the capital of $ 10 million. Emirates Airlines was established on 26 June 1985 and wholly owned by The Investment Corporation of Dubai.

Emirates Airlines Strategic Analysis

Page 4

Today Emirates Airlines runs a fleet of more than 230 airplanes flying to more than 150 destinations in more than 80 countries worldwide with continuous efforts for expansion; every week more than 1500 flights leaves Dubai; with exceptional onboard entertainment and cuisine. (Emirates.com). Current Strategies: The Emirates Airline annual report in the year 2015; explains the major strategies of the company; which are: 1. 2. 3. 4. 5. 6.

Expansion through strategic alliances. Contributing by FDI in the countries in which the company is operating. Investing in purchasing large aircrafts and in expanding to new destinations. Building strong brand equity. Hiring professional multinational employees. Developing sustainable business through corporate social responsibility.

Expansion via strategic partnerships  Qantas: The alliance between two leading airlines in the world allowed them to expand their flights and destination choices to serve more than two million customers.  Jetstar: the alliance with Jetstar has added 30 more destinations across Asia Pacific region.  Arik Air: Emirates Airlines has signed an agreement with Arik Air, leading aviation company in West Africa.  TAAG Linhas Aereas De Angola: Emirates Airlines has strategic association with TAAG Linhas Aereas De Angola for 10-year agreement.  Air Mauritius: Emirates has extended the routes with Air Mauritius to contain Jeddah, Riyadh, Dammam, Karachi, Cairo and Colombo.( Emirates annual report 2015) Contributing by FDI in the countries in which the company is operating  The compnay provide work opportunities and FDI follow to the countries in which Emirates Airlines operate. For example in Europe more than 85000 jobs were created and FDI follow was about € 6.8 billion to the total GDP of Europe in 2014. The company also provided 21 exclusive destinations from Europe to Dubai and 199 nonstop voyages; which is a specific advantage of Emirates Airlines.  $ 2.8 billion were added to the economic profit. Just like in Europe, nonstop voyages were offered to more than 50 destinations. Investing in our efficient fleet and route network  In the year 2014, Emirates added 24 new aircraft to its fleet, including Airbus A380 and Boeing 777- 300ER. The company also retired 10 older airplanes, maintaining the average age of the company’s aircrafts at 75 months, about half other rivals ‘average of 140 months. Emirates Airlines Strategic Analysis

Page 5





Emirates is considered to be the world’s major operator of broad-bodied airplanes, flying the largest fleets of both the Airbus A380 and Boeing 777. Investing in modern wide-bodied aircraft has always been the cornerstone of our strategy, because these are more fuel efficient to operate and also allow us to provide our customers with a better onboard experience. Emirates’ strong seat load factor of 79.6%, even as when the company extended their capacity, which explains the strong demand for Emirates services.( Emirates annual report 2015).

Building strong brand equity  Emirates Airlines has most valuable airline brand worldwide, with valued worth of US$ 6.6 billion according to the 2015 Brand Finance Global 500 report. The brand has been upgraded by 38 spots last year to be included within top 200 of the world’s major brands.  Emirates Aviation Experience is allowing the public to use A380 flight simulator to feel the taking off and landing in 12 different airports. This experience is available at Dubai Mall and was offered in London last year; allowing more than 6680 customers to try it. page 20  In November, Emirates launched a new global marketing campaign in cooperation with Dubai’s Department of Tourism and Commerce Marketing. The US$ 20 million “See you in Dubai” campaign is one of Emirates’ largest to date.  The Emirates’ official Twitter account was launched, the total number of followers is around 8.6 million through Facebook, Twitter, Instagram, LinkedIn, and Google+.  Sponsorships: Through the sponsorships of the world’s biggest international events and most famous teams, Emirates today is one of the most recognizable brands. The airlines sponsors: football, Formula 1, rugby, cricket, tennis, golf, and horse racing.  Emirates Airlines assigned Pelé and superstar Cristiano Ronaldo as ambassadors during the 2014 FIFA World Cup TM with over 300 million viewers around the globe.  Emirates sponsored the 20th Dubai World Cup for horse racing.  At the ICC Cricket World Cup 2015, Emirates was the Official Partner of the International Cricket Council (ICC), sponsor of the ICC Cricket World Cup 2015, and also sponsor of the event’s match officials.  In arts and culture, Emirates sponsored the popular Arab Idol Season Three reality talent show which enabled the company brand to be seen by large Arab Audience. The company also sponsored RedFest DXB and ChoirFest Middle East in Dubai for the first time, in addition to Dubai Jazz Festival, the Australian symphony orchestras in Sydney and Melbourne, and in San Francisco, in the United States.(Emirates annual report 2015) Hiring professional multinational employees  The divers and talented employees from more than 160 countries; are considered as a valuable asset to the company; the workforce of the company is around 84000.  In 2014-15, Emirates airlines invested over AED 100 million to support the learning and improvement needs of teams and individuals across Emirates.

Emirates Airlines Strategic Analysis

Page 6





The Group Learning & Development (GL&D) group has trained more than 41,000 employees last year at the Aviation College, the major training center in Dubai. For the international employees, the company conducted courses at Melbourne hub for staff based in Australia and New Zealand, and another training center in Houston, USA. The company got the first place in the Lead 2015 (USA) international awards for leadership programmes. Pages 22& 23

Developing sustainable business through corporate social responsibility. 



Emirates Airlines Foundation: Social Responsibility is applied through its own philanthropic organization: The Emirates Airlines Foundation. It is a non-profit philanthropic organization aims to develop the quality of life for children, irrespective of geographical, political, or religious limits, and to help them keep or advance their human dignity. The foundation’s aim is to help needy children by giving them with the basic human requirements like food, medicine, shelter and education. Most of these projects are located at Emirates’ destinations where local Emirates employee’s volunteers can contribute and oversee their management. The donation can be made by credit card online; cash on broad or even by the skyward miles which is the loyalty program of Emirates Airlines. Environment: Emirates Airlines is concerned with the pollution resulting from its operations; engine emissions; noise produced by airplanes and by the ground operations and waste management. The company is average fleet margin of the gases emissions are below the standards of International Civil Aviation Organization(ICAO).The airlines is working on reducing the noise production. The company is concerned about waste management through recycling programs to collect waste as much as possible. Emirates has supported efforts to protect natural heritage by making large contributions to key conservation projects in Dubai and Australia. (Environment report)

PESTEL Analysis: Political Aspect United Arab Emirates and many countries in Asia have signed inclusive business agreements in addition to other countries in Europe, and the USA. Such agreements strengthen the political association and trade exchange between countries, including the improvement of the aviation industry. These agreements have enabled Emirates Airlines to widen its network. Emirates Airlines is supported by the Government of Dubai; which is its sole owner by providing infrastructure developments to increase the growth of Dubai and Emirates Airlines. Emirates Airlines have exclusive Terminal 3 in Dubai Airport as well as having low fees and charges at Dubai Airport; same opportunities for all the air carriers provided by the open skies policy; the no taxation policy; and the easy to issue visit visa and work permits for foreign workers to fulfill the labor requirements of Dubai governments. In contrary, a possible issue for Emirates Airlines Emirates Airlines Strategic Analysis

Page 7

is the current political instability in the Middle East region which has the possibility to reduce for the additional growth of Emirates. (Nataraja & Al-Aali 2011, p482). Emirates Airline has been sheltered by the rules and policies created by the Dubai government and other countries where they are operating. Since Dubai government is the only owner of the industry the company has been able to follow to the policies given by government to run its operations productively and efficiently. Economic Aspect: Emirates airlines is one of leading aviation companies in the world, which enables it to maintain stability and growth. Because the Dubai government holds controlling stake of Emirates Airlines, the company’s fortunes are forever intertwined with that of Dubai economy. This can be a blessing as well as a curse. Sustainability of Emirates will lie in their managing to ride the Dubai credit crunch of 2009. They seem to have done this successfully. The main target of Emirates should be to diversify its operations Social Aspect: The company adheres to having good status and connections in the society that they belong to. UAE is an 80% of its population is expats according to the World Bank which makes it sensitive to different socio-cultural characteristics. The growth in middle class will force aviation industry to reduce its expenses and therefore the prices which will increase the low-cost airlines market (PWC, Oct 2013). Technological Aspect: Technology is the most effective component in the airline industry; as it’s the fundamental to success in the competitive market. It helps the airline industry to provide higher quality at lower cost, by reducing the fuel usage, reducing the engine sound; E-ticketing system decreases the customer service expense and time and enables Emirates airlines to provide the best entertainments features. Environmental Aspects: Emirates Airlines aim to be sustainable and eco-friendly company in its operations. The company goal is to reduce emissions and carbon print; and that is mentioned in Emirates Group’s Environmental Policy; (Emirates environment policy, 2013). Being friendly to the environment is also reducing cost and expenses and reducing pollution. Legal Aspects: The rules and regulations given by the government, both locally and internationally allow the airlines to be more careful in its activities. To prevent difficulties with their practices, the company ensures that of its operations are legal and following the best practices.

Emirates Airlines Strategic Analysis

Page 8

Porter’s five Forces: 1. The threat of the entry of new competitors - The existed barriers of entry: Emirates Airlines is the national carrier of Dubai; so this will hinder the entry of rivals in Dubai and provide the Airlines with many benefits. - Brand equity: Emirates is well-known and reputed market player, with very high brand value. - Switching costs or sunk costs: It is easy to change the suppliers expect for airplanes suppliers. - Capital necessities: Emirates Airlines is part of emirates group, so gaining capital is easy. - Access to distribution: easy to get because the airlines has its own terminal in Dubai Airport and direct metro station and busses. - Customer loyalty to established brands: has a loyalty program which is called skywards which counts the frequent flyer miles. - Absolute cost advantages: in regards to energy and airplane caterings - Government policies: very elastic due to national carriers and monopoly of Emirates Airlines in Dubai. 2. The intensity of competitive rivalry - Number of competitors: airlines fly from and to Dubai - Rate of aviation growth: Middle East showed the largest growth in the last ten years. - exit barriers :fuel and capital costs - Diversity of competitors: international rivals like Lufthansa, local flyers like Etihad Airways and regional rivals like Gulf Air and Qatar Airways. - fixed cost share per value added: additional cost for services like meal choices for first class passengers - Level of advertising and marketing cost: It is very expensive high ; the company considers marketing through sponsorship is a part of its sustainability. - Sustainable competitive advantage through invention: new and expensive services like onboard Spas and fully lie down seats which are unique services that are not offered by any other airlines. 3. The bargaining power of customers - Bargaining power: between low cost airlines and the luxurious flights of Emirates Airlines. - Buyer volume: number of passengers going to a destination. - Buyer switching costs relative to company switching costs: easier to change between airlines as customer may find lower cost tickets. - Ability to backward integrate: Emirates airlines prepare the food for its flights. - Availability of alternatives: number of flights to a particular destination with single stop. for example only Emirates provides direct flights to San Francisco from Dubai. - Buyer price sensitivity: it is hard to win with lower prices of budget airlines, but Emirates balance the situation by providing high quality food, services, comfort on-board entertainment.

Emirates Airlines Strategic Analysis

Page 9

-

Differential advantage products: Having A380 airplanes, quality service, menu selection for first class, having its private terminal, one stop direct flights to various routes are some products that differentiate Emirates airlines from its rivals.

4. The bargaining power of suppliers - Supplier replacement costs: it is very expensive to change the suppliers; since they are only two . - Existence of substitute inputs: a lot of substitutes are present for suppliers as there are over a hundred airlines currently operating and most of them are planning for expansions. - Vendors concentration to company concentration ratio: -very high (since they are only two suppliers) but many other airlines. - Employee solidarity (e.g. labor unions): UAE does not permit the formation of any kind of labor unions so there are no such issues. 5. The threat of substitute products - Buyer tendency to substitute: very high as there are two types of companies in market, low cost and luxury. This causes large price variation. So a lot of customers choose to buy low cost tickets for short distance flights.

Value Chain Analysis: In-bound logistics: Porter (1985) specified the main value-making processes of a company when providing any product or service as inbound logistics, operations, outbound logistics, marketing and sales, and service. His main concept of the value chain is that in every action the company should add value or think about outsourcing it to another company which can do it either in the same or probably can add more value. Porter’s value chain analysis is mainly consisting of analyzing the following:     

Inbound logistics. Operations. Outbound logistics. Marketing and sales. Services.

Inbound Logistics: Reasonable benefit is gained in inbound logistics period of the business by Emirates Airline by creating strong relations with suppliers, advance systems for stock control and specialized training (BA Press Office, 2008). Emirates has expert engineers, flight deck crew, cabin crew, airline maintenance, personnel, air craft controllers, etc, it has sufficient airlines and pilots. So it can maintain the flight time properly.

Emirates Airlines Strategic Analysis

Page 10

Operations: Emirates Airline is giving excellent services by using a variety of airline types. Dubai International Airport has private Emirates Terminal 3. Emirates Airline operates a varied fleet of air bus and Boeing airplanes and is one of the rare airlines to use an all-wide-body aircraft fleet. Emirates Airline offers long haul flight services at cheaper charges. Emirates Airline plans to increase its long haul flight services into different destinations. Out bound Logistics: Emirates Airline gathers its aircraft and other required equipment in fastest possible time. It provides emergency client service. Emirates Airline keeps business supervision by reporting, EDI, settlement, audit. It picks the customer appropriately and keeps the flight schedule. Marketing and sales: Emirates Airline implements vertical integration into its main business arrangement. This happens through production, marketing and technology Emirates Airline has diversified its investment range into ranges of airport services as well as infrastructure improvements within its operating routes. Day by day it is growing its services by fulfilling the customers’ needs and desires. The emirates brand name and image is handled by skilled professionals experienced in brand management (Emirates group careers,). Services: There are 3 types of first class chairs; the full suite with doors, horizontal bed 'Sky cruiser' seat (without doors) and 'Sleeper' seats. Emirates Airline directly functions check- in services, service desks, lodging and lounge services, and luggage and. Moreover, Emirates hotels and resorts, Emirates sky cargo, Emirates aviation college for pilot and staff training, Emirates engineering centre for repair, maintenance and training, Emirates catering, incorporate business support are its special services. These activities make up smooth operations for the airline’s success. Emirates became the pioneer airline to provide a personal entertainment system on a commercial aircraft after providing the world’s initial seatback commercial monitors in 1992. All three classes provide a personal in-flight entertainment (IFE) system on Emirates airplane. Self-service cabins are also provided. Human resource management – The Company is one of the chief companies in the region with over 62,000 employees presently. The employment procedure happens through site assignments from their own Emirates Aviation College, where students are studying subjects of aviation industry , possibly modeling them to become a future staffs of Emirates. Emirates believes that their staffs is its main values and provides them countless of benefits for example cash and non-cash benefits. Further, they also provide a reward package to improve employees’ performance (Emirates group).

Emirates Airlines Strategic Analysis

Page 11

Technology development : Emirates has its own expertise research Centre to guarantee that the company gains the modern technology available. Providing usage of mobile phones and wifi onboard is one of its recent achievements in this regard. Procurement : Emirates airlines obtains its properties from multiple origins from inside and outside the emirates group. The fleet of airlines is obtained from either Airbus or Boeing. ‘emirates engineering’ is providing required technical support ; while the in-flight catering services are provided by Emirates flight catering

Emirates Airlines Strategic Analysis

Page 12

VRIO Analysis:

Resource or Capability

Valuable

Rare

Imitable

Non-Substitutable

(exploit opportunities (Possessed by one or (Difficult to imitate) and neutralizes few firms in the threats) industry).

(there is no similar resource that can be used by a competitor)

Exceptional level of customer Service

Yes; Emirates Airlines implement this practice to attract many of customers and fill many routes.

of for the be

Occasionally, But can possible by providing newer unique service techniques.

Not that easy to be replaced, though few low cost airlines can attract some of Emirates customers.

Advanced Technology used

Yes, has the most Yes, No other airline advanced technology is providing the same for in airports; air level of technology. planes and for entertainment.

Maybe, that is why many of the other airline giants have not yet adopted this.

It’s hard to replace this aspect; because it maintains maximum safety feature.

Trained personnel and Operating Strategy

Yes, trained staff from 95 different nationalities to provide best level of service.

Yes, have the biggest number of cabin crew staff in contrast to other rivals.

Yes, hard for low-cost airlines like Air Arabia to employ and run large number of staff.

Sometimes yes if the competitor airline can reach more destinations than Emirates.

Large and innovative Fleet

Yes, has the biggest fleet of large aircrafts related to any other company therefore reaches many countries around the world.

Yes, it has a large Very hard as the fleet and has kept operational expenses this for a long time related is large. now.

Yes, possible if any rival like Lufthansa, go in an alliance with other airline; they will have low operational expenses and therefore more services.

Yes, because adapted services customers enable company to exceptional.

Emirates Airlines Strategic Analysis

Page 13

Resource or Capability

Valuable

Rare

Imitable

(exploit opportunities (Possessed by one or (Difficult to imitate) and neutralizes threats) few firms in the industry).

Non-Substitutable (there is no similar resource that can be used by a competitor)

Advertisements Yes, It is improving the , especially brand awareness and Sports image. Sponsorships

Yes, it is the only Very hard as the cost is No, because the airlines that are doing very high. company is targeting huge sponsorships the huge fans of various programs and massive sports like football, advertisement cricket, tennis…etc. campaigns.

Advance infrastructure.

Yes, The highly advance infrastructure of Dubai , the exclusive Terminal 3 for emirates airlines in Dubai Airport and the advanced technologies and capabilities of the airlines.

Yes, it is rare to have these resources in another rival. Maybe only in Etihad airlines.

No, difficult to have No, there are similar financial substitutes for it. resources to UAE, in other countries.

Special Aviation The Emirates training college has played a Training vital role in educating airline's business which is part of fundamental strategy for company's success

to ascertain the correct people in employment by ensuring knowledge are applied with Industry’s best practices

No, very difficult to No. imitate, it is expensive to start a training college.

Widespread Network

Yes, Emirates international route map has been growing continuously.

No, very difficult to No. imitate the direct flights to far destinations.

Yes, It provides customer with an extensive travel destination network which is inimitable fundamental level strategies

Emirates Airlines Strategic Analysis

Page 14

no

SWOT Analysis: Strengths: - One of the leading airlines worldwide: Emirates is one of the leading airlines worldwide in revenue, fleet size, and number of passengers. As well as being one of the fastest growing; with growth rate has never been lower than 20% annually. - Emirates Airlines is excellent in operating during crises: Emirates Airline was one of very few airlines that survived from many major crises and managed to make profit, such as, 11 September attack, and the recession in 2008/2009. - High service quality: Emirates is advanced in quality of service given to customer and was awarded the "Airline of the Year". - The official carrier of modern Dubai: The enormous development of Dubai infrastructure and facilities is considered as strength to its carrier, Emirates Airlines. The Dubai Airport and the new airport in Jebel Ali are measured from largest airports around the world. Also, Dubai considered as an important commercial center in the area. Dubai is very attractive for tourisms, international sport events and international forums. - The company is good in developing the staff: the company communicates its vision, value, and strategic plan to first line staff and stresses cost control with them. Also, it is providing a frequent training and improvement of the employees. - Variation of the executive management approach and the multi-origin staff: Managements come from different nationalities and backgrounds which enhances the experience; with a combination of different cultures. Emirates consist of more than 80 nationalities, and they are working together as a team. - Youngest fleet in the industry: Emirates Airline operates one of the youngest airplanes in the market with an average age of 65.89 months, compared with an industry average of 156 months. - High operations efficiency measured by trip length: Analysts estimated that Emirates’ longer trip length of nearly 4,000 kilometers per average trip in 2003— provided operating efficiency relative to flag carriers such as British airways. Air France and Lufthansa with average trip lengths in the range of 2,000 to 3,000 kilometers. - Strategic location: located in the Middle East, Emirates is placed at the middle of world and being near to countries with high population like: China, India, the Russian Federation, and Europe. - Desired working environment: Emirates is reputed airlines, which offers salaries and benefits with no taxes and no unions. - Strong branding strategy: Emirates spends lots of money on its marketing and branding strategies and consider it the only way to global expansion. The airline spent approximately $300 million annually on sponsorships, promotions, events and public relations.

Emirates Airlines Strategic Analysis

Page 15

Weakness: - No available succession plan: Emirates Airline does not have a succession plan for its top managers. This h can be considered as a risk and lack of applying sound corporate governance practices. - Lack of Emirati Staff: hiring Emirati is very difficult due to the low percentage of Emiratis in the country’s population. - Diseconomy of scale: Emirates could reach a point where the airline would face diseconomies of scale. Emirates getting complex and costs are high. Opportunities: - Development of more advanced airline services: To develop incessantly new generations of more advanced airline and aviation services, and in result tap into more markets. - Leveraging Emirates Airline’s infrastructure business to get first choice. - Opportunity to tap budget travelers' market: Emirates Airlines is part of Emirates Group; so the parent company can establish low cost airlines to attract the customers who cannot afford to pay expensive tickets on Emirates. Threats: - High rival market, locally and internationally. The entrance of new rivals like low cost airline such as Air Arabia in Sharjah; fly Dubai and Etihad Airways in Abu Dhabi as well as Qatar Airlines and Gulf Air in GCC and globally Lufthansa and British Airways - Airlines business is disturb by the economic crises: Airlines business is very responsive to economic crises and other changes like the variation in currencies exchange rates, many airline companies had great losses or bankruptcy. Emirates profits became less during 2008 recession. - Oil prices and fluctuation in exchange rates: changes in oil prices are highly affecting the cost of operations, because oil cost is the second main portion of operations cost. - Variation in demand and failure to forecast: Fluctuation in consumers demand disturbs the capability of predicting demand. - Natural disasters and acute diseases: like earthquakes; floods and corona flu affect tourism and travelling in general. - Security reasons: hijacking airplanes or any other terrorist actions can increase the operations cost and cause a decrease in number of travelers. - Instability in the political status in the region: the political situation in Yemen, Syria and other MENA countries can affect the flights routes and travelers to these destinations and to neighboring countries. For the aviation industry, 2014-15 was

Emirates Airlines Strategic Analysis

Page 16

SWOT analysis summary:

One of the leading airlines worldwide. Emirates Airlines is excellent in operating during crises. High service quality and using advanced technology.

The company is good in developing the staff.

No available succession plan.

Variation of the executive management approach and the multi-origin staff.

Lack of Emirati Staff.

Youngest fleet in the industry.

Diseconomy of scale.

The official carrier of modern Dubai and the strong support of its government.

High operations efficiency measured by trip length. Strategic location. Desired working environment. Strong branding strategy.

Development of more advanced airline services. Leveraging Emirates Airline’s infrastructure business to get first choice. Opportunity to tap budget travelers' market.

Emirates Airlines Strategic Analysis

High rival market, locally, regionally and internationally.

Airlines business is disturb by the economic crises. Oil prices and fluctuation in exchange rates. Variation in demand and failure to forecast. Natural disasters and acute diseases. Security reasons. Instability in the political status in the region.

Page 17

TOWS Analysis: 

 

Strength/ opportunities Being one of the leading airlines companies with high service quality allow Emirates airlines to develop more advanced aviation services through R&D and following new trends in the industry. Emirates airlines should take an advantage of being the official carrier of Dubai to leverage the company’s infrastructure. Emirates Airlines use being in strategic location; its strong brand image and having attractive working environment to expand through opening a low-cost carrier company.















Weaknesses/ opportunities The diseconomies in scale can be overcome by expansion through new lowcost airlines and reaching budget travelers.





Emirates Airlines Strategic Analysis

Strengths/ Threats High quality in service; desired working environment and strong brand image; all these advantages should be maintained and empathized in order for Emirates Airlines to keep its leading position in the aviation industry among the strong rivals. Emirates Airlines operates well during crises like the economic crises of 2008; exchange rates fluctuations and the oil prices instabilities. The variation in demand and failure to forecast can be overcome by the variation in the top management approaches and the powerful capability to work within crises. Natural disasters; acute diseases; security reasons and the instability in the political status in the region can be faced by the strong support from Dubai government to the Emirates airlines and its strong ability to operate during crises. Being the main customer of Airbus and Boeing, this can be an advantage to bargain the price and after sale service terms which will lower the operational cost. Start a Strategic acquisition of the Airline operating in other region will make a barrier for the new entrants who will not enjoy the leverage with the economies of scale in other regions. Weakness/Threats Investing more in the E-commerce with higher security so as to strengthen the IT infrastructure, lessen cyber threats ; reduce the operation cost and reaching more customers Work to have fuel supplies at a fixed price for a certain period of time to reduce the threat of rising oil prices.

Page 18

Stakeholders Analysis- Needs and Expectations. Stakeholder Needs and expectations Owners

Requirement

Sustainable growth and increasing profits. Greater market share

Good strategic plans, freedom in decision making Legal and ethical competitiveness

Company growth, competitive remuneration Financial institution Stable business, low risk financing, higher returns B2B customers More discounts

Sincerity , commitment, strategic vision Good relations, high risk funding

Competitors Senior executives

Higher sales, better promotions

Government/ regulator

Legal compliance

Politically stable, better policies, higher business support.

Potential Customer

Brand awareness

Product in put

Long agreements, constant supply, better relations and more financial benefits. Excellent service, lower prices, more destinations, more long haul flights , and loyalty programs. Corporate social responsibility; through Emirates Foundation. Job satisfaction, job security , atmosphere for innovation; high salaries and good benefits.

Higher quality, lesser price, accurate delivery, strong relations.

Suppliers

Customers

Community groups Employees

Emirates Airlines Strategic Analysis

loyalty, higher sales, positive word of mouth (e-word of mouth and higher interactions. Good public relations. Higher innovations, higher productivity, higher integrity and loyalty to the company..

Page 19

Stakeholders Mapping

High

High

Low

Owners Suppliers Senior Executives Competitors Financial institutions B2B customers Media Gov. regulators

Emirates Airlines Strategic Analysis

Low Employees. Customers

Community Groups Potential Customers Public

Page 20

Benchmarking Benchmarking is an exercise to understand an organization’s strategic capability, in regards to internal procedures, comparing the same business product with other companies in similar business line (Johnson et. al, 2008). Various approaches are used for benchmarking depending on the business nature. For this specific case Industry/sector bench marking has been used. Benchmarking allows organizations to compare their business processes and performance metrics with the industry’s finest. In case of Emirates, it can be said unequivocally that no other carrier companies has a similar profile to that of Emirates. In 2010, an inclusive survey was done between some recurrent passengers of seven main airlines providing longer haul flights out of the UAE, which are: Air France, British Airways, Emirates Airlines, Etihad Airways, Qatar Airways, Swiss Air, and Virgin Atlantic Airways to determine the level of service quality in relations to the customer point of view: from flight booking all the way through to check-in, baggage drop, boarding, plane conditions, inflight services such as food and beverage, entertainment and shopping, all through to arrival and final baggage receiving. The survey results indicated that Emirates has outperformed its rivals and was on the top in the list as the best service provider (Ethos Consultancy, 2010). Major competitors of Emirates are: Etihad airways, Qatar Airways, Lufthansa, and few others are termed as major competitors for Emirates Airlines and. Most of them have realized the importance of having a similar kind of product like Emirates and are set to initialize on the same business model which Emirates has. Etihad Airways Etihad airways is the national carrier of Abu Dhabi and one of the fastest growing airlines in the world and one of the main rivals of Emirates Airlines having the same advantages of UAE attractive strategic location between the continents and the support of the UAE government. Etihad Airways was established in 2007 by the ruling family of Abu Dhabi. And it is wholly owned by the Abu Dhabi government. Etihad currently runs around 116 destinations, and over 25,200 flights per week with 120 aircrafts. Etihad Airways experienced a milestone year In 201 Etihad Airways gained net profit, up 48 per cent to US$62 million. Etihad does not reveal its financial performance, nor does it provide specifics regarding its operations other than those published in its “Facts and Figures” reports. in its “Facts and Figures” reports. So it is difficult to compare the financial performance of Etihad with Emirates. But it is very obvious that Etihad Airways is trying hard to imitate the strategies of Emirates Airlines. It is trying to reach many destinations by having alliances in different countries to expand. Etihad even is sponsoring football teams like Manchester City Football Club; cricket teams and golf teams( Etihad website). Emirates Airlines Strategic Analysis

Page 21

Though there pricing is competitive advantage of Etihad airways and their services and fleets are well-matched, the competitive advantage still lies with Emirates as they are more experienced, have more destinations then Etihad Airways ; have a bigger market share, and higher global recognition due to their marketing efforts. Emirates being the older in business have certainly an advantage over Etihad airways. (Squalli, J.-2014) Qatar Airways Another major rival of Emirates airline is Qatar Airways. Qatar Airways is offering the same variety of products and services as Emirates does. Since its establishment in 1994, Qatar Airways developed 150 destinations internationally and having 180 air crafts in its fleet, presenting good service which helped it to gain market share. While Qatar Airways enjoys loyalty in Middle East and North African (MENA) region, Emirates Airlines is famous internationally and enjoys wider network. Source: Qatar Airways. Air Arabia Arabia Air Arabia was established in 2003 by decree by the ruler of Sharjah, Dr. Sultan Bin Mohamed Al-Qasimi. It is a public joint stock company with 45 percent of the shares owned by the government of Sharjah and the remaining shares owned by individual and institutional investors. The airline was started as low-cost airlines and was gaining profits from its second year of operations. Air Arabia has made a substantial increase in profits in 2005, reaching over $138 million in 2008 before the financial crisis. Air Arabia runs of Sharjah and has extended its operation to reach Casablanca, Morocco and Alexandria, Egypt. Its fleet has grown since the 2003 and is expected to grow even more with the company’s expansion in to other countries. Air Arabia provides service to a total of 101 destinations. Air Arabia does not have any codeshare with any other carriers. (Squalli, J.-2014) Financial Analysis

Profit margin: 5.1% compared to 3.9 % on 2014; return on shareholders’ funds : 17.2% compared to 13.6 % on 2014 Total assets: 111.4; total liabilities = total assets- total equity= 111.4-28.3= 83.1 Debt ratio = = ratio EBITDAR

2015-2014 20259

2014-2013 17229

2012-2013 13891

2011-2012 10735

EBITDAR margin

22.8

20.8

19.0

17.2

Emirates Airlines Strategic Analysis

Page 22

(Source: Emirates airlines annual report 2014)

EBITDAR ratio: stands for Operating profit before depreciation, amortization and airplanes operating rent charges. Below is table of Operating profit before depreciation, amortization and airplanes operating rents charges for ten years; from 2005 till 2015. ratio 2015- 2014- 2013- 2012- 2011- 2010- 2009- 2008- 2007- 20062014 2013 2012 2011 2010 2009 2008 2007 2006 2005 EBITDAR 20259 17229 13891 10735 13437 10638 8286 9730 7600 5970 (Source: Emirates airlines annual report 2012)

The continuous and steady growth can be noticed; which reflects the profitability of the company despite the high cost which comes from buying expensive aircrafts and providing exceptional on board services. Conclusion and Recommendations: The company should continue in expansion through providing new and unique destinations. The important geographic location of Dubai which is close to Europe, Asia, Africa and Pacific is an advantage to Emirates Airlines. The one stop flights are the firm specific advantage and I think that Emirates Airlines should focus more on it. The company also should keep on investing on its R&D to offer more luxurious services and experience on board. The unique entertainment system of Emirates Airlines is hard to imitate. The huge operational cost is major concern to the company; and diversifying is one solution. Another is to start low cost division to gain more market share. Figures:

Emirates Airlines Strategic Analysis

Page 23

Source: ethos counsultancy.

Referneces: 

Emirates Group. (2014). the Emirates Environmental Report 2013-2014. Available: http://content.emirates.com/downloads/ek/pdfs/environment/Environmental_report_ 2013-14.pdf. Last accessed 7th May 2016.



Ethos Consultancy (2010), International Airline Benchmarking Study – Summary of Findings,available at: www.ethos.ae/media/documents/Airline-BenchmarkingReport.pdf Nataraja,S &Al-Aali,A. (2011). The exceptional performance strategies of Emirate Airlines. International Business Journal. 21 (5), 471-486. N/A. (2016). Our Company. Available: http://www.emirates.com/ae/english/about/. Last accessed 1st May 2016. N/A. (2016). about us. Available: http://www.airarabia.com/en/about-us. Last accessed 1st May 2016. N/A. (2016). THE QATAR AIRWAYS STORY. Available: https://www.qatarairways.com/iwov-resources/temp-docs/presskit/The%20Story%20of%20Qatar%20Airways%20-%20English.pdf. Last accessed 1st May 2016. PwC, (2014). Airline performance depends on flyer-focused retail customer service, according to PwC. [online] Available at: http://www.pwc.com/us/en/pressreleases/2013/airline-performance-depends-on-flyer-focused-retail.jhtml [Accessed 11 May. 2016]. Squalli,J. (2014). Airline passenger traffic openness and the performanceof Emirates Airline. The Quarterly Review of Economics and Finance. 54 (N/A), 139.

   





Emirates Airlines Strategic Analysis

Page 24