Introduction
The concept of sustainability has gained massive popularity over the recent past as companies seek to achieve growth and development in their respective companies. It has become necessary for these firms to find ways of protecting their current and future operations. As Veiga et al. (2018) explain, sustainability refers to the ability to exist or maintain something at a certain rate or level. The concept has gained massive popularity in the aviation sector where competition has increasingly become stiff over the recent past. According to Sarrah et al. (2020), the aviation industry is one of the most volatile sectors of the economy not only because of the high competition but also various other factors such as volatility of the price of fuel and vulnerability to various socio-economic forces. Emirates Airlines and Etihad Airways are leading airlines in the region. Their sustainability depends on their ability to understand and effectively address issues that may compromise their continuous existence. In this paper, the goal is to analyze and discuss sustainability of the global aviation industry, specifically focusing on Emirates Airlines and Etihad Airways.
Background
Emirates Airlines and Etihad Airways are the dominant players in the UAE’s aviation industry. However, these firms are facing stiff competition from regional and international players offering similar products. Besides the stiff competition in this industry, there are also many challenges that may threaten their existence as airline firms. Fluctuating international oil prices, increasing activities of extremists both regionally and at a global label, cybercrime and cyber-terrorism, evolving demands and tastes of customers, and new regulations are some of the major challenges that these firms have had to address. As Nadkarni (2019) warns, the ability of a firm to achieve sustainable growth depends on its capacity to address such challenges while at the same time taking advantage of the emerging opportunities.
The government has been keen on supporting these two airlines to ensure that they remain sustainable because of their significance in promoting diversification of the economy. However, each of these firms have a critical role of ensuring that they protect their sustainability. According to Xiaomei et al. (2019), achieving sustainability goes beyond maintaining healthy profits every year. The management must understand other steps that have to be taken to achieve sustainability in the market. This paper will focus on sustainability for these two companies, explaining how they can manage stiff market competition and numerous other challenges that exists in this industry. The paper will integrate both statistical and theoretical concepts to explain sustainability issues in these two firms. The information in this report can be used by executives of the airline to redefine their operations in a way that will enable them achieve their sustainable goals.
Findings
The researcher collected statistical data and reviewed various theoretical concepts to explain the current state of these two companies and how they can achieve sustainability in the aviation industry. As these firms continue to expand their operations to new markets around the world, they are faced with new challenges which may threaten their sustainability in the aviation industry. Before reviewing the sustainability theories and statistics relating to the two companies’ operations, it is necessary to start by explaining the concept of sustainability and its three primary pillars.
Pillars of Sustainability
The concept of sustainability has attracted the attention of many scholars who have proposed many ways of assessing and ascertaining that a firm can survive in the market for a while despite the existence of many challenges. According to Amankwah-Amoah (2020), many large multinational corporations that were in operation soon after the Second World War did not have to worry about competition. As such, their only concern that defined their sustainability was profitability. Environmental concerns were also less worrying at that time than it is in the modern society. However, the business environment has changed over the years and firms have been forced to look at the issue of sustainability from three different angles. Figure 1 below identifies three main pillars of sustainability.
One of the primary pillars of sustainability is the environment. A firm can only achieve sustainability in its operations if its activities are ecologically friendly. It must maintain levels of pollution to as low as possible. The aviation sector has generally been blamed for its role in the emission of greenhouse gases (Arayssi & Jizi, 2019). Individual firm like Emirates Airlines or Etihad Airways may not have the capacity to control the amount of carbon emission from their planes. However, they can act as a unit and influence changes in design by the manufacturer to ensure that more fuel efficient planes are made available to them. These firms also have a responsibility of ensuring that their wastes are managed effectively to minimize environmental pollution. Engaging in corporate social responsibilities, with special focus on environmental protection, as discussed in the next section, is another way of enhancing sustainability.
Social factors also define sustainability of a firm in a given industry. People form an important pillar to any business as they are the customers, employees, and suppliers of the firm. Kılıç et al. (2019) believe that it is necessary for the management to put into consideration measures meant to manage concerns of people. Employees should be properly compensated in a way that reflect the effort that they put in the company. They should remain motivated to ensure that they can deliver effective results in their assignments. On the other hand, customers need a deep understanding and appreciation from employees of the firm. Every time they purchase products from the company, they should feel respected and valued by the staff. Their concerns should be addressed as fast as possible. Suppliers and members of the general public also need respect and attention from the firm whenever it is necessary (Farooque & Ahulu, 2017). Protecting the interest of these people will earn the firm their loyalty, which enhances its sustainability.
The third but not least pillar of sustainability is profitability, which is sometimes referred to as the economics. When a firm is operating in the market, its ability to achieve sustainability depends on how profitable it is (Sallan & Lordan, 2020). A firm relies on its profits to pay all the bills and to support expansion plans and other major developmental activities such as market research. Traditionally, profitability is often achieved by lowering cost of production while at the same time increasing the price (Sabnis, 2018). In a market where competition is stiff, such as that in the aviation sector, a firm cannot afford to increase prices because customers may shift their loyalty to the competitor. As such, the most effective way of achieving high profits in such a market is to use emerging technologies to lower the cost of production and to create new products.
Theories of Sustainability
It is necessary to review some of the theories of sustainability that can help explain the ability of these two airlines to achieve success in the market despite the stiff competition and other challenges that they have to face.
Corporate Social Responsibility
Corporate social responsibility has for a long time been considered a self-regulatory and voluntary activity that a firm undertakes to give back to the society. However, that perception is changing as firms are expected to be increasingly responsible for their actions, especially when they affect the environment. During the period of COVID-19, firms have come under increasingly high pressure to ensure that they help the society to fight the pandemic. Corporate social responsibility has been seen as a means through which firms can achieve sustainability in their operations. Firms are using CSR to help compensate for the negative impact that their activities have on the environment. CSR has also become a strong tool that helps in strengthening the brand of a firm in the market.
Advertising is becoming increasingly irritating to many people, especially when their entertainment has to be interrupted (Sabnis, 2018). Many people often ignore such adverts or find ways of avoiding them. It endears the brand to members of the public, especially those who benefit from such initiatives. Corporate social responsibility offers firms a unique opportunity to popularize their brands without using the annoying strategy of television and radio commercials. Rogers (2020) argues that CSR offers a firm an opportunity to engage members of the public to understand their concerns. Although it is a non-commercial activity, a firm’s representatives may have the opportunity to interact with potential customers and understand what they feel needs to be changed to enhance customer’s satisfaction. Emirates Airline and Etihad Airways can use this theory to help strengthen their brand in the market.
Stakeholder Theory
Stakeholder theory holds that an organization should take into consideration concerns and interests of all stakeholders for it to achieve sustainable growth. The stakeholders in these theory are classified as internal and external stakeholders. Internal stakeholders include employees, managers, and owner. Employees need good remuneration, enough time out of work, and a good working environment where diversity is respected. Managers need the support of the owner to ensure there is growth of the business. Owners expect good returns from their investment. Rogers (2020) explains that it is common to find cases where the interest of owners are in conflict with those of the employees and managers. Addressing such conflicts is critical in enhancing the success of the firm.
External stakeholders include customers, suppliers, creditors, the government, and the society. Customers expect quality products offered at competitive prices for them to become loyal clients. Suppliers expect the company to pay for products delivered in time based on the agreement made. Creditors also expect the management to ensure that the firm repays all its debt at the right time to maintain the relationship. The government requires the firm to pay taxes and to operate within the sat laws and regulations. The society expects the firm to act responsibly and to ensure that its activities do not affect the environment negatively (Arayssi & Jizi, 2019). Figure 2 below identifies these stakeholders. Etihad Airways and Emirates Airlines should use this theory to ensure that needs and expectations of their customers are met effectively.
Emirates Airline and Etihad Airways Sustainability Statistics
The sustainability of a firm also depends on its financial performance, as was explained in the three pillars of sustainability. Emirates Airlines has been keen on ensuring that its operations are sustainable by maintaining profitability in its operations. The company has been assessing its profitability in different ways. One such strategy is determining its revenue per employee as shown in figure 3 below. The statistics show that the company’s revenue per employee has been on the rise consistently from 2006 to 2015. There was a small drop in revenue per employee in 2008 and 2010 because of the impact of global economic recession. However, the company recovered in 2011 and the upward trend continued till 2015. It is important to note that the firm’s revenue in 2020 was significantly affected in 2020 because of the novel coronavirus pandemic (Rogers, 2020). The aviation industry was one of the sectors that were worst hit by the pandemic. However, this firm is likely to recover from the impact as the global community continue to find effective ways of managing the virus.
Etihad Airways has equally enjoyed an impressive economic success over the last decade as it seeks to become one of the leading airlines in the global aviation market. Table 1 below shows revenues generated from passengers for the financial years of 2012 and 2013. The table also shows the growth in number of passengers, aircrafts that the firm is using, core airline employees, and net profit within the same period. It is evident that within that period, the firm enjoyed a 16% increase in passenger revenue, a 12% increase in the number of passengers carried, 27% in the number of core airline employees, and a 48% profit increase. The statistics show that the operational performance of this firm is sustainable because of the consistent growth. Like Emirates Airlines and many other companies in the aviation sector, Etihad Airways’ financial performance was negatively affected by the COVID-19 pandemic. However, reports given by the management strongly suggests that the company will recover from these losses.
Discussion
The analysis above has demonstrated the challenges that these two airlines face in their effort to achieve sustainability and the effort they have made to overcome them. Emirates Airlines has remained a successful firm in the aviation sector because of its unique strategies in attracting and retaining customers. It has mastered the strategy of attracting both high-end and normal customers in both domestic and international travels. Etihad Airways has also been using revolutionary strategies to achieve growth in the market. They have both embraced diversification as a way of enhancing their profitability in the market. The management of these two firms understand the significance of embracing specific practices that can enhance sustainability.
Corporate social responsibility has emerged as one of the ways of achieving sustainability in this market that is highly competitive. CSR can help in protecting both the ecological and social pillars of the economy. As shown in the analysis above, environmental pollution is a major concern that all airlines have to deal with as they try to expand their operations (Sallan & Lordan, 2020). As they wait for the manufacturers to design more environmentally friendly aircrafts, these firms have been engaging in various environmental protection initiatives as part of their CSR. Tree planting initiatives have gained massive popularity in the recent past because of the need to reduce the amount of carbon in air. Some companies are involved in the collection and recycling or responsibly disposing of plastic materials known to be dangerous to the environment. Protecting river sources from various forms of pollution is also becoming a common practice around the world. Emirates Airline and Etihad Airways should remain consistent in these CSR initiatives as a way of enhancing sustainability of the entire aviation sector.
Corporate social responsibility also involves protection of the interest and concerns of people. Employees are critical in the survival and success of any company. As such, they need to be treated with respect and their concerns protected as a way of enhancing their productivity. The two airlines have been keen on recruiting and retaining some of the top talents in the industry. They offer these employees attractive remunerations and other financial benefits. However, there has been complaints about long working hours for employees at Emirates Airways (Arayssi & Jizi, 2019). The same complaints have also been common at Etihad Airways. It is important to address such concerns to ensure that workers remain motivated.
Customers’ concern should not be ignored for these firms to ensure that they create and maintain a pool of loyal clients. Issues about comfort, safety, and security should be taken seriously. Currently, there is the problem of COVID-19 that has significantly affected the aviation sector. It is necessary to find ways of managing the spread among travelers without making anyone feel that they have been discriminated against. Concerns of members of the public should be taken into consideration. There should be a crisis management unit capable of responding to emergencies that may arise with the potential of affecting the image of the firm (Sallan & Lordan, 2020). It is also advisable for the firm to maintain a cordial relationship with suppliers, the government, and other stakeholders in the industry. Stakeholder theory, corporate sustainability, and green economics are the other theories that have been identified as being relevant in enabling a firm to achieve sustainable success in a volatile industry.
Financial statistics from the two companies strongly suggests that their operations are sustainable. The global aviation industry has remained vulnerable to various external forces. The current COVID-19 pandemic has significantly affected the financial performance of all airline companies around the world, including Emirates Airline and Etihad Airways (Arayssi & Jizi, 2019). However, these two firms have proven resilient enough to overcome such challenges. They were able to overcome the 2008-2009 global economic recession that affected numerous aviation companies around the world. They have proven that they can also overcome the current pandemic and maintain their profitability in the market. However, their financial performance will depend on the strategies that the managements embrace as they seek to achieve sustainability in the market. These two firms must streamline their operations to cut unnecessary costs and embrace various sustainability practices to ensure that they protect their brand in the market.
Conclusion
Sustainability has become an important concept in the global aviation sector. In this report, the goal of the researcher was to analyze and discuss sustainability of the global aviation industry, specifically focusing on Emirates Airlines and Etihad Airways. The report shows that the global aviation industry is highly volatile and susceptible to external forces. Firms must understand how to adapt to these forces and redefine their operations in a way that aligns them to the forces in the market. Emirates Airlines is currently one of the leading airlines in the global aviation market. Etihad Airways is also a dominant player within the region. The operational strategies of these firms are sustainable. The report shows that they will be able to overcome the current pandemic and emerge as successful firms in this industry.
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