Emirates Airline Analysis Assignment: Literature Review
Emirates Airline Analysis Assignment: Emirates Airline is one of the most famous and reputed Airlines those do their business in the Asian continent especially. But they also have their operations all over the world. The Company, which is in the existence and quite successfully for the past twenty three years, is owned by Government of Dubai. Dubai is one of the seven cities found within the United Arab Emirates. Emirate Airlines flies to more than ninety different destinations all across the world. These ninety destinations are spread across more than sixty countries altogether. Dubai, from where the business of Emirates Airlines started, is the capital city of the United Arab Emirates (UAE). This city is one of the fastest growing cities in not only the Middle Eastern region but also the world as a whole. (Butler & Keller, 2000)
The rapid growth of Emirates Airline is also inspired by the economic growth of Asian Pacific region and specially United Arab Emirates. The Asian Pacific region and in particular the United Arab Emirates, has been able to boost their economy at a very rapid pace. The countries which are located in this vast geographical area as well as their economies have nurtured their economies at a strong and sustained pace. These economies are also growing at a healthy rate. Subsequently the overall incomes of these countries are also increasing. This translates into high revenue per capita earning for almost all of these countries and consequently they can pay to use air transport which is generally costlier than other modes of transport. This is one of the most important reasons why Emirates Airline has been able to grow steadily over the last decade. The nature of the markets is quickly changing and more and more number of governments in the region is streamlining their economic policies in such a way so that they can add more impetus to an already growing Airline industry. (Tayeh, 2006)
Plunkett (2008) indicates that the United Emirates government is the owner of Emirates Airline which had been started in 1985 to be one of the biggest companies in airline industry in the means of its flight, primary sales and employee benefits. Also, according to Png, Lehman (2007) Emirates Airline is considered to be almost the fastest increasing in its financial situations in terms of its passenger capacity which showed significant capital budget, which gave them more control on their prices.
Emirates Airline has been pretty lucky during the last two decades. The political scenario of the country has been quite favourable to the business of the company and the aviation industry as a whole. This has happened since most of the countries in the Asian Pacific region started making agreements that encourages better inter country trades especially with respect to the airlines sector. These countries have signed agreements amongst themselves and also with other countries like: the United States and United Kingdom among some countries of the European continent. These agreements have been instrumental to bring Emirates to the world scenario and have provided new existing markets for this Airline Company.
Like all the other airlines Emirates Airlines had to tackle high fuel costs in last few years. In the year 2005, the country reported an increase in fuel expenditure of seven percent from the previous year. During the last decade Airline traffic in the rest of the world has decreased quite vigorously. But to many people’s amazement, the Middle Eastern region has improved especially for Emirates. The reason of the success story of Emirates can be directly traced back to the City’s success – Dubai. Dubai, one of the fastest growing cities in the world, represents a very lucrative market for investment in the tourism industry as well as the business world. Reasons being, numerous projects those are coming up with time. Dubai the City is currently working on a project of building a theme park which is like Disney world. It has also started a project which will be house for more than four hundred thousand residents through a waterfront project. Apart from these, there are plenty of businesses that are always coming up all the time. Real estate is amongst one of the interesting sectors since it attracts lots of capital investment. All these business ventures are encouraging more visitors to the City and the country in general; this has been reflected in the overwhelming market for Emirates.
Read about: Marketing Plan for Business Extension Assignment
As if this is not enough Emirates Airline is located at a very suitable region in Asia, it is in the middle of the Eastern and Western regions. Consequently, the Airline is capable of tapping resources from both sides. The Asian continent has a booming economy and Emirates Airline has really benefited from this.
According to Drucker society (2010) Emirates Airlines derived from the emirate of Dubai, the airline is part of the Emirates Group that is fully owned by the Government of Dubai. The airline has earned a global reputation for being a leading Middle Eastern airline providing the best services with a memorable experience. The Emirates Group is headed by Sheikh Ahmed Bin Saeed Al Maktoum, who is the Chairman and Chief Executive, Emirates Airline & Group.
It has become a world-wide brand specifically renowned for its heavy investment in sponsoring potential projects. Emirates Airline was founded on the tradition of maintaining innovation as a means to extend to shape its world in their own world. It is under the vision of Dubai’s ruler and Prime Minister Sheikh Mohammed Bin Rashed Al Maktoum that Emirates has been such a success story till date. As quoted by Sheikh Mohammed: “Aviation & transport infrastructure are the basis catalyst for the creation of international cities. The UAE’s open skies strategy is the cornerstone upon which Dubai built its dynamic air transport centre, which in turn supports the development of other industry sectors. The development of Emirates embodies the true spirit of competition and free enterprise that shall continue to guide our strategies for the advantage of the UAE and of the international community in which we operate.”
The strong bond between Dubai and the Emirates Group has led them both to flourish, whereas Dnata working within the UAE’s Open Skies strategy helped create the infrastructure that has enabled Dubai to lead the growth of the region as a hub for world aviation. A firm believer of innovation, aligned with a long-term policy and deep knowledge of its industry, the Group is reaping the advantages, indeed it is a world–winning combination.
Emirates is determined to stand by its tradition of innovation to continue to shape it’s world it’s way as it was considered as one of the key highlights of the year 2009.
According to Emirates Group (2010) this section will focus on the key events for Emirates, for instance, occasions it has celebrated, Dnata marking its 50th anniversary at the Dubai Airshow, Emirates launches its biggest ever commercial project with the sale of 10,000 2010 FIFA World Cup packages including flights, tickets and accommodation. The airline has been pro-active in participating in social campaigns, for instance, Emirates opens the Community Health Education Society home built to care for over 100 HIV positive children in India. From January to March 2010, Emirates signs a new shirt sponsorship deal with Italian football giant AC Milan. The airline managed to strength its partnership with Costa Cruises as they prepare for a boost in cruise tourism in the Middle East.
This airline has its operation in such a region where the employees and workers are quite a few in numbers. The labour cost is low since these workers very rarely ask for compensation which is high. If the United Arab Emirates is compared to other countries such as the United States, it is evident that there is a significant difference in labour costs. It can be deduced from the facts that payments to the workers accounts to thirty eight percent of its operating expenses in the United States of America. On the other hand UAE uses up only eight percent of its costs benefit to pay its workers. Consequently, these differences have added to the bottom-line of the company’s profit. (Morrison and Winston, 1997)
Moreover the airlines industry is suffering from the curse of well informed clients. Most people now a day have good idea about the reputable companies. They can know about the pros and cons of a particular firm these days using the internet. As an example, clients try not to use the airlines which have a number of stopovers with respect to those who have direct routes. Information about these issues can be gathered at a single ‘touch of a button’. Emirates Airlines has also been affected adversely by this issue since it has to make sure that it offers better services to its clients and in future also they can maintain the standard of the services provided. (Tayeh, 2006)
Historically it can be seen that, most of the countries’ governments of Asia Pacific region endorse a patriarchal government society. They always tend to feel that they need to safeguard the airlines from all the adverse external factors, but after the reforms of policy that took place recently, Airline as an industry has opened up to the externalities including its pros and cons. This is one of the most important reason why Emirates has been able to grow at an amazing speed. (Directory, 2007).
The recent global financial recession that took it’s toll on world markets also shook Emirates Airlines. Emirates did not escape it’s wrath but it managed to tackle the crisis very well and in doing so it took several measures to ensure it did not go into deficit. The airline was able to return a net profit of Dhs 3.5 billion, an increase of Dhs 2.9 billion on revenues of Dhs 43.5 billion, is a testament to the superb response to the situation made by every area of business. The global financial crisis did not really affect customer loyalty, this is due to the brand quality that is associated with Emirates and how passengers trust it’s services, they (passengers) responded by demonstrating their loyalty to the airline, this was due to the commitment they maintained and expand the network and uphold service levels even in times of severe crisis. The airline was successfully able to extensively leverage brand equity built over several years.
In the beginning of the financial year, the global crisis had a severe impact on the travel and aviation sectors with a significant decrease in traveler numbers and a marked decrease in passengers booking in the premium cabins. The IATA (International Air Transport Association) analyzed the financial losses globally for 2009 reached US$9.4billion, after the US$15.9 billion loss faced in 2008.
Emirates was founded upon pioneering and innovative deals, the challenge of the previous year has been to maintain these values in the most challenging of economic circumstances.
The primary goal in this research is to investigate the marketing operations of Emirates Airlines in the UK, the researcher found out how Emirates teamed up with Arsenal the football team in the UK by sponsoring it, there is now an Emirates Arsenal Stadium in London that has earned a world-wide reputation. According to Gibson (2005) under this deal, the airline would receive shirt sponsorship and have Arsenal’s name engraved after it until 2021.
The deal is approximately worth £100million to the club over the length of its contract with Emirates Airline. Emirates took over as being the shirt sponsor once Arsenal’s deal ended in 2006. This sponsorship deal not only upgraded the image of Arsenal but even Emirates itself, it is considered as a remarkable deal in the history of English football (Plunkett, 2008). Emirates has had a keen interest in football and wanted to make its mark not only as an international airline but also invest in international business interests.
According to Kotler (2009) innovation is the key to attracting new customers, marketing is all about gaining the attention of customers to sell them something that is not necessarily required. Arsenal considered this as a golden opportunity to renovate it’s image, this could only happen under the patronage of Sheikh Ahmed Bin Saeed AL Maktoum.
Also, one can found out that Emirates used Oglivy as it’s PR agency to deal with handling reputation management and ensuring it was well portrayed. The concept of sponsor for Emirates means it would be giving rights to the stadium in the UK which is considered as a new concept, this indicates how fearless Emirates is when it comes to taking on board risks and challenges, it wants to reach skies.
In an article published in the Independent newspaper, the article talks about Emirates Roundabout, i.e. Emirates Arsenal Stadium, it is interesting to note that seasoned travelers only know that the airline is paying to get its name to adorn the clothing of the French team, the airline likes to associate itself with rich events that add a charm and glamour to its world-wide reputation. It uses sponsorship as a modern marketing strategy that has certainly attracted a large audience. For instance, when people get into a taxi in London and when they enquire for the Emirates, they know they are going to the football stadium, this shows how well aware the general public is of Emirates.
Emirates spends around £150m a year on marketing, including advertising and public relations. In the past few years, sponsorship has taken an increasingly large slice of the pie. In the beginning the airline was spending 90 per cent advertising and 10 per cent sponsorship and now it has moved to 50-50.
Emirates realized it had to do something more lasting to really get into everyday conversation. So in 2004 it clinched an arrangement with Arsenal to sponsor the club’s new stadium in north London. The £100m deal, spread over 15 years, was the biggest in English football history. The airline suddenly realized that if it was were to promote the name of Emirates in the UK and worldwide it had to have some long term sponsorship agreements which would give the airline television as well as press exposure.
Emirates has a long term vision to improve its services as it would like to operate as managing a world-class business and pursing long term development policy in the face of the unprecedented growth policy global economic recession. Peter Drucker’s statement on entrepreneurs emphasizes that everything outlives its usefulness and that innovation and entrepreneurship can certainly operate successfully provided the right formula is used.
He points out what is most likely not going to work, in this regard, it is the planning that is incompatible with innovation and entrepreneurship and that it is important to have an economy full of innovators and entrepreneurs. Innovation and entrepreneurship by concept, he insists features an array of topics that form as one, i.e. they fall under the same umbrella and function simultaneously.
As part of our research, we firmly agree with Peter’s thinking over the success of a business is only based on it taking new risks and challenges, it needs to have a social responsibility which Emirates clearly demonstrates it does have, i.e. the way it associates itself with events by sponsoring them and contributing to charities, Emirates is not a fine airline but also believes in taking care of the society and taking care of its employees.
It is quite possible that the airline will be expanding into other non Asian countries which will open up new markets to explore for them. This will result into the company’s urgency to take up global trends and set rules and regulations. For example, if they increase their number of flights to America, they might have to adapt to the rules and approaches which airlines of United States of America use. Since creativity about the services and in flight experiences have been forte of Emirates Airlines, they might have to re-channel some of these creative efforts in the field of technology. (Doganis, 2002)
These days, some of the Airline carriers in the US, using technology, are frequently devising new paths to increase customer satisfaction like never before. For example, online booking may have to take greater precedence that it does currently. It may also be necessary to improve customer care in the luggage section through employment of better technologies in keeping customer’s luggage. Security problems also need the concentration of technological skills to do away with the in built glitches. The September eleventh attack shook up the aviation industry as well as the mindsets of the clients of airlines to a great extent. Subsequently, security became an issue of utmost importance in the US as well as other aviation industries. Passengers these days want better security through new technologies like surveillance cameras, close circuit televisions etc. These are all issues that Emirates will have to incorporate when it becomes more global.
Also Read: Strategic Management Accounting Practices
Due to the Open Skies strategy of Emirates, in coming future it may not be able to access some particular markets. This strategy requires that the Company remained independent of others and hence the reason why the company has stayed away form, alliances. Presently, the Company has met some stiff resistance from certain countries such as Australia. Consequently, Emirates has been prevented from accessing such markets. In the future, it is likely that Emirates may be forced to relax this policy of staying away from alliances. It may decide to maintain such a strategy in most markets but in the event that it meets too much resistance from certain countries, it may be necessary to bend some of its rules. (Smith, 2002)
The business activity model that is adopted by Emirates is quite unique and it has its pillars as flexibility and espousal to existing external environments. They have a very creative management at the core of the company and they always strive to make the flight experience memorable for the customers. This is the reason why the Airline has been able to tackle some of the global economic problems that have attacked the aviation industry.
Emirates have been successful to win many prestigious awards between the years 2003 and 2007 including award from the World Airline Entertainment Association. The Company was given the World Airline Entertainment Association Award for the third year running. This airline has been able to take technology into account while designing its customer in flight experience. During World Cup 2005, they had an in flight entertainment system where the passengers were able to watch the world cup matches. Those who may not have been interested in watching the entire match were give updates through their top-of the-range-screen systems. Moreover, the system where the passengers can use email on flight has given them much mileage. It also has a system where live text news for customers is provided during the flight. It was the first company to incorporate a Digital Widescreen System in 2005 on board. This was first of such instances worldwide. (Morrison and Winston, 1997)
If the company’s market penetration is seen in other parts of world apart from Middle East of Asia Pacific, then it seems to be not as good as the latter part. Some parts of the world especially Australia hasn’t been enough profitable for Emirates since people there haven’t accepted the extra frill airline nature of Emirates Airlines. Hence, in global scenario they need to improve a lot. As we know from world business history, those companies which have been able to adapt to globalization successfully has became most profitable and famous company of them all. Over – reliance on one region can bring about economic down fall in case the region is faced with a natural or man made disaster and the Airline may not have other areas to turn to. (Directory, 2007)
Moreover the conservativeness of this airline regarding the labour unions can be one of the reasons why it has constantly kept itself distant from diversifying its Airline operations. High labour costs seem to be a cause of hindrance and fear among the company and this philosophy is barring the improvements it deserves. The Company needs to disregard some of the labour cost that come with expansion because these costs will simply be offset by the higher rate of returns that will be achieved by the company after the passage of time.
Emirates Airlines which started in the year 1985 and changed itself quite a few times over last two decades, is currently the best Airline in the Asian Pacific region. They have received many prestigious awards. Especially the awards they get for innovation in their in-flight entertainment systems is of much importance. The company has also got a good bit of publicity for its Open skies strategy. The company philosophy states that the free market solutions can be the best drivers for any Airline Company and this is exactly the reason why this airline has not gone into any kind of mergers and acquisitions or restructuring activities. However, the need of the hour for this highly successful company is to get into more global market more heavily. This translates into the company’s compliance with international flight and airlines regulations. This means that the company will have to relax some of it open skies policy. It will also have to embrace online systems as a sound marketing tool in the global arena.
- Air Arabia (n.d.), available at: www.airarabia.com (accessed September 4, 2007).
- Al-Abed, I., Vine, P. and Hellyer, P. (2006), United Arab Emirates Yearbook 2006, Ministry of Information and Culture, Trident Press, London.
- Kerr, S. (2007), ‘‘The secret of Gulf carriers’’, Financial Times, GulfNews.com, available at: http://archive.gulfnews.com/articles/07/06/21/10133784.html (accessed September 1, 2007).
- Kotler, P. (2003), Marketing Management, 11th ed., Pearson Prentice-Hall, Upper Saddle River, NJ.
- McKechnie, D.S., Grant, J. and Fahmi, M. (2007b), ‘‘Carving a niche for the no-frills carrier, Air Arabia, in oil rich skies’’, Journal of Air Transportation;, Vol. 12 No. 1, Spring, pp. 53-66.