Introduction
Emirates Airlines is a company based in Dubai. The corporation is owned by the government of Dubai. Since its founding in 1985, Emirates has grown to become the leading airliner in the Middle East (Taneja 2014). The reason why it tops other carriers is that it generates more revenues per annum than its competition. In addition, it has the largest fleet of airplanes and carries more customers than other airlines in the region. The corporation operates over 3,500 flights each week from its base, which is the Dubai International Airport. The destinations of the aircraft cover more than 142 cities in 78 countries. In addition, the Group is the largest international carrier in the globe (Lohia 2013).
Emirates operates a wide variety of airplane models. One of its fleets is the Airbus A380. The deal to acquire the passenger aircraft was initiated in April 2000. At the time, the planes were known as Airbus A3XX. Over the years, the company has continued to increase the size of the fleet. By November 2013, Emirates has increased its order of the A380 model to 140 aircraft (Taneja 2014). At the time, many analysts regarded the move as suicidal to the company’s future business. The reason behind this is because the fleet was facing a number of challenges.
In this paper, the author will analyze Emirates from different perspectives. To begin with, the author will examine the factors that led to the success of Dubai’s aviation sector. In addition, the Airline’ airline’s competitive environment in relation to Michael Porter’s five forces model will be analyzed. The author will also examine how the company can sustain itself in the industry. The final segment of the paper will entail a review of A380’s network growth plans, which are aimed at generating profits and maintaining a competitive advantage.
Factors behind the Success of Dubai’s Aviation Sector
The aviation sector has numerous benefits to the entire Dubai nation. Due to this, most people tend to be curious about the factors behind this success. The great accomplishment of Dubai’s aviation sector is facilitated by a wide variety of aspects. However, the major players are six primary strengths, which are the product of strategic decisions adopted by the government and the aviation sector in the past (Ripley 2010). Transparency, efficiency, and awareness of the significance of the sector to the economy are some of the strong points. Others include sustenance of growth and serving neglected. Additional factors include a consensus-based plan for investment and strategic location.
Competition in the Aviation Industry
Since the invention of air travel, peoples’ lives and experience of the world has changed. The industry plays an important role in the globalization of other sectors (Kanafani 2005). Some areas which are boasted by the business include tourism, foreign investment, and world trade. When such sectors are improved, a nation registers significant economic growth. Despite the great benefits, the industry is highly competitive. However, the prime airline segment remains an attractive place to compete. Competition is a feature that faces all forms of business (Hanlon, 2007). It acts as an aspect that determines a venture’s success or failure. Through proper strategies, a nation can get extensive gains by investing in the industry. Competition should be considered to be a boost and driving force.
Each business has its own form of competition. However, the intensity is influenced by three key factors. They include a number of competing companies, forces behind the competition, and strategies employed. At the current moment, the aircraft industry comprises over 2000 airlines. In addition, there are over 23,000 airplanes operating from more than 3700 airports all across the globe (Taneja 2014).
The key players include African/middle East, Asian/Pacific, and European carriers. Others are Latin America/Caribbean and North America airliners. Due to this intense competition, the industry acts as a major economic force.
In this section, the main focus is Emirates airlines. The author will use Michael Porter’s five forces model to examine the competitive environment of Dubai based company. Porter’s five forces model is employed to analyze competition level in business. The approach utilizes industrial organization economics to come up with the five forces (Holloway 2008). They entail the influence of consumers and competition. Others are issues to do with substitutes, new businesses, and distributors.
The threat of New Entrants
New entrants to an industry bring new elements to the business. The aspects include capacity and desire to make an impact and gain shares in the market. In addition, new players can offer their services at lower prices to attract more customers. The cost of entry in business is influenced by the reaction of the current competitors (Nhuta 2012). Today, the airline industry is packed with different companies from all continents. Due to this, there is minimal space for new players in the sector. In addition, the venture has grown to become the most expensive business. Factors that result in the price include the high cost of purchasing and chartering airplanes and customer service and manpower. Other aspects include the high safety and security measures involved.
Ever since Emirates entry into the industry in 1985, the company has posed a threat to all other players in the business. The firm has grown to become the largest international carrier in the globe (Taneja 2014). Looking at their current performance, Emirates will survive the intense competition and serve planned markets. One major strategy maintained by the Group since the entry into the business is providing affordable services for all the clients (Fedorco & Hospodka 2013). In addition, Emirates and other Gulf airlines operate on a flat organizational structure.
Power of Suppliers
The power of suppliers is influenced by substitute supplies, buyer information, and switching costs (O’Connell, 2006). At the current moment, the key suppliers in the airline industry are Boeing and Airbus. The two dealers have a great influence on the business competition. They can impact rivalry by hiking prices or producing low-quality goods. Other stakeholders include Jet A 1 fuel providers, spare parts suppliers, and caterers. The skilled task force is also a supplier in the business. Labour force, which comprises engineers and pilots, tends to be unionized. Due to this, employees in such categories can bargain and acquire a big portion of an airliner’s profits. In the airline industry, companies strive to ensure they maintain stable relationships with the suppliers (Lohia 2013). Through this, they are able to negotiate better deals and keep up with the competition.
For decades, Emirates and other Gulf airlines have maintained productive relations with both Boeing and Airbus (Ripley 2010). Through this correlation, the Groups have been able to operate on a mix of fleets meeting different customers’ needs and preferences. In addition, strong relations enable companies to operate on the same level as European competitors. In addition, Emirates and other Gulf airliners ensure they meet the demands of labor suppliers and provide lucrative benefits.
Power of Buyers
Buyers are an organization’s immediate clients. The faction tends to create a competitive force in the industry. The reason behind this is because they can demand discounted prices and the provision of higher quality services. In addition, buyers have the power to play rivals against each other (Nhuta 2012). All these aspects are demanded at the expense of the airliners’ profitability. The pressure placed upon airline companies’ impacts flight prices, size of carriers purchased, and profits. To meet the demands of buyers, airliners’ all across the world strive to offer frequent and low priced fares.
Emirates and other Gulf-based airlines are in a good position of surviving the competition and serving planned markets. Emirates airlines being the leading company in the Middle East, is always at the forefront to purchase new, bigger, and more comfortable planes to provide better services to its big client population. In 2013, for example, Emirates startled its competitors by ordering 150 Boeing 777X and 50 Airbus A380 (Taneja 2014). Boeing 777X fleet is are expected to be delivered in the year 2020.
Threat of Substitutes
The threat of substitutes is a major source of competition in the airline industry. The factor refers to the probability of clients shifting to another organization, which provides similar services (Yeoman 2010). Due to the advancement in technology, there are various substitutes for air travel. One threat is electric trains. In addition, there are fast vehicles that can be used to arrive at the desired destinations. The level of threat is influenced by various factors. They include time, finances, personal preferences, and convenience. All airliners’ across the globe strive to ensure they do not lose their customer base to substitutes. A switch results in a decrease in profits on one company and an increase in the other (O’Connell 2006).
Over the years, Emirates and Other Gulf airlines have developed strategic plans to survive substitute threats and serve planned markets. Emirates, as the leading company, has partnered with different substitutes, such as car rental service providers and tour agencies. The correlation facilitates growth and increases and popularity (Wilson 2007). The move enables the airline companies to maintain a competitive advantage against rivals in the industry.
Competitive Rivalry
In the airline industry, all the companies develop different tactics to keep up with the competition. Competition ranges from ticket prices, advertising, customer service, and the invention of new products (Nhuta 2012). Despite changes in prices to attract customers, airliners’ are always keen not to incur losses. Unstable fare charges can result in a decrease in profits. However, some well-established companies such as European and United States carriers tend to make the competition more intense. They do so by sacrificing profitability with the aim of expansion. Failure to provide better services and to market products results in customers switching between the carriers. Forsyth (2010) stresses the fact that competition is also intensified by high exit barriers. To keep up with industry competition, airline companies must invest a lot.
An analysis of Emirates and Gulf Airlines’ mode of operations reveal the carriers can survive and continue to serve the markets. Over the years, Middle East airlines have been able to create strong brand names and rival competitors. At the current moment, Emirates tops the aviation industry in terms of profitability and service provision (Taneja 2014). In addition, the carrier is ranked fourth in the world in terms of the international customer base.
Emirates Airlines and Industry Pressures
Emirates Airlines has been one of the fasted growing carriers in the industry (Holloway, 2008). The carrier has earned profits for twenty consecutive years. Due to this, other companies from the United States are working hard to ensure they hinder Emirate’s progress. In the middle of these threats, the airliner has managed to put a mark in the business and remain competitive. Despite the success, the Dubai based carrier needs to do more to survive and continue delivering its services.
At the current moment, Emirates tops the list of carriers that offer the best services. Due to this, the company has bagged numerous awards. In 2012, the company was ranked eighth in the Airline of the Year listings (Fedorco & Hospodka 2013). Factors used to make the catalog included safety, financial state, and client service. In 2013, customers voted for the carrier as the Airline of the year. To continue surviving and putting more pressure on European and United States airliners, Emirates should ensure their excellent service provision does not decline. More and better strategies aimed at meeting buyer demands and preferences should be devised. The company has already created a strong brand for itself. Due to this, it has gained more popularity all across the globe. The aspect has resulted in carriers such as those from North America and Canada striving to ensure Emirates does not take over their region and customer base.
Emirates Value Addition and European Carriers’ Response
Emirates Airlines continues to achieve more success due to the value it adds to employees, Dubai nation, and customers all around the world (Wilson 2007). For the customers, the Middle East airliner adds value through loyalty and training programs (Ripley 2010). Allegiance plans include Emirates’ loyalty services and skywards. The Emirates Loyalty service a wide variety of solutions to the customers. They include conception, management and support, and design to delivery services. Emirates Skywards is another policy. It involves four levels of conventional flier arrangements. At the current moment, more than 8.4 million clients are registered for this plan (Taneja 2014). The three primary levels are blue, silver, and gold. The fourth rank is platinum. All the levels provide clients with different benefits after a period of time, which is marked by tier miles.
Emirates Airlines continues to add value by offering training services to Dubai citizens. The carrier accomplishes this through the Emirates Aviation College and CAE Flight Training. Emirates Aviation is a learning institution that provides graduates with an opportunity to be coached in the airline industry (Wilson 2007). Since its opening in 1991, over 1700 qualified airplane technicians and engineers have graduated from the facility. In addition, more than 2000 traffic controllers received training from the college. Due to the high level of tutoring offered, the number of students enrolled in the institution continues to increase. From the year 2004 to 2009, the population of full-time scholars grew from 300 to 1100 (Ripley 2010).
Emirates CAE Flight Training offers aviation programs for different commercial airliners. The carriers include those based in Asia, the Middle East, Africa, and Europe. The primary courses offered focus on training maintenance personnel and flight deck crew. The initiative is a partnership with Canada’s CAE. In addition, Emirates Airlines has a broad network of learning resource centers based in Dubai (Yeoman, 2010). The company also has a functional portal referred to as My Learning Zone. The threshold allows interested parties to access information on training and development (Nhuta 2012). The portal also facilitates employees’ online tutoring. All these programs are aimed at ensuring workers keep up with the industry changes.
Emirates Airlines continues to add value not only to its customers and employees but also to the sporting world. The Middle East carrier has partnered with numerous teams from all around the globe to offer sponsorship deals. Teams funded by Emirates include those in football such as Arsenal, Cricket, and Rugby (Forsyth 2010). In addition, the carrier subsidizes the US Open Series and Formula One.
All the initiatives adopted by the Emirates airline pose intense threats to European carriers. The reason behind this is because the Dubai based company continues to gain popularity and building a strong brand name. To keep up with the pressure, European airlines will strive to develop more plans aimed at providing services that help them connect with the customers (Lohia 2013). To make the competition more intense, European carriers can opt to venture in similar sponsorship deals to rival Emirates. In addition, they can develop more lucrative customer benefits plans. Other measures include imposing strict international laws and policies and providing Emirates with fewer landing rights.
The Current and Future Strategies of European Airlines
The European airline industry tends to be competitive and dynamic. In addition, it has experienced numerous changes within the past decade. The transformations have been influenced by intense competition from other carriers such as those from the Gulf region (Holloway 2008). To keep with the pressure and rivalry, European airliners have developed numerous current and future strategies. The plans include low fares, customer service, frequent flights on short overhaul routes, and low operating costs.
The approach of low fare rates is designed to attract more clients. Targeted customers include fare-conscious people who travel for pleasure and businesses (Fedorco & Hospodka 2013). Such people are considered to favor substitute forms of transport. To ensure the industry does not incur losses, ticket charges are set according to flight demands. In addition, the players consider the remaining time before a particular departure. Some European carriers such as Ryanair have fare promotion offers meant to stimulate demand.
Customer service strategy entails the provision of quality performance. European Airlines focus on ensuring flight punctuality, reducing luggage loss, and cancellations (Forsyth 2010). To achieve this goal, the carriers opt to operate from uncongested airports. Such airports have faster turnaround durations, fewer terminal delays, and on-time departures.
To transport more passengers and keep up with the intense competition, European airliners such as an easy Jet focus on providing regular point-to-point flights on short-haul routes. To provide this service, airliners under European Association operate within secondary and regional airports (Nhuta 2012). Point-to-point flights tend to have various advantages. They help carriers to minimize the cost of baggage transfer and transit passenger assistance.
To compete with Gulf Airlines, European carriers aim to reduce operating costs to the lowest level possible. Factors which demand a lot of finances include personal productivity and airplane equipment (Yeoman 2010). Others are airport access and handling and customer services.
Emirates’ Response to European Pressures
Since venturing into the airplane industry, Emirates and other Gulf carriers have been considered to pose serious threats. Due to the rapid growth and ability to garner more revenue, some airliners such as North America and Canada work to ensure they counter Emirates competition. Canada, for example, allows Emirates to fly into the country three times per week. In addition, carriers such as Lufthansa have gone ahead to accuse Emirates of being favored by the suppliers (Lohia 2013). The reason behind this is because they do not seem to be affected by factors that impact other airliners. Established airliners such as Air France and Qantas accuse Emirates of not paying taxes and receiving hidden state grants.
To ease the pressure and survive the turmoil caused by competitors, Emirates airlines should continue to focus on providing unique and appealing products to its customers. In addition, the carrier should develop strategies that will enable it to select more attractive markets and stimulate new passenger demand (Taneja 2014).
Emirates’ Fleet and Future Network Growth Plans
Investment in the aviation sector is a long-term project (Kanafani 2005). In the early years, the process of expansion and growth utilizes a lot of finances. Due to this, substantial profits are gained in the future. To keep up with competition and put more pressure on rivals, Emirates continues to invest more in infrastructure, its fleet, and employees (Fedorco & Hospodka 2013). At the current moment, the leading Middle East Carrier has a large order deal for new airplanes. The aircraft include 150 Boeing 777X, 80 A380s, and 70 A350s. All these fleet is a future project aimed at generating economic benefits starting from 2020.
To operate the 140 A380s by 2024, Emirates Airlines will need to develop efficient strategic plans. One way in which the carrier will manage the large fleet is by replacing some of the existing planes with the new ones. Even without replacing some of the old aircraft, the company can still manage the fleet size and gain the desired profit. A380s will be fitted with new features not found in other planes. Due to this, the Dubai carrier will attract more customers who need value for their money. Over the past decade, the client population has been increasing by big margins (Holloway 2008). By analyzing the current growth rate, Emirates’ customer size will have increased by about 86%. At the current moment, the average growth is 6.6% per year. The airliner will also strive to acquire more landing rights in different countries to expand its operations.
Conclusion
Competition is crucial to the growth and success of a business. Since 1985, Emirates has survived intense rivalry and pressure from well-established carriers such as Europe and the United States to become one of the leading airlines in the world. To achieve this great success, the company has been operating on sound strategies different from those of competitors. The plans have resulted in the level of passenger size and financial benefits increasing consistently over the past decade. At the current moment, the Middle East Airliner is ranked seventh in terms of revenue generation. To maintain its mark in the aviation industry, the company has future plans already in operation. In addition, the company focuses on the continuous provision of better and unique services.
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