Air Arabia: Institutional Void and Business Strategy Report

This report provides a comprehensive analysis of Air Arabia, an Emirati low-cost airline. It begins with an executive summary and an introduction to the airline, highlighting its operations and destinations. The core of the report includes a PESTLE analysis to examine the external political, economic, social, technological, legal, and environmental factors influencing Air Arabia. It then addresses the institutional voids faced by the company, such as the lack of a customer retention policy and limited business class offerings. The report further delves into Air Arabia's business model, emphasizing its low-cost approach, operational efficiencies, and point-to-point service. A business model canvas is provided to visualize the key elements. The value proposition of Air Arabia, focusing on its commitment to socially responsible projects and budget-friendly services, is also discussed. The report concludes with insights gained from the analysis and highlights the airline's strengths and areas for improvement.

Running head: BUSINESS OF AIR ARABIA
Business of Air Arabia
Name of the student
Name of the University
Author note

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BUSINESS OF AIR ARABIA
Executive Summary
The primary purpose of this report is to discuss about the external environment of Air Arabia
and the institutional void that are being faced by the company. The report also discusses
about business model along with the value proposition of company within the emerging
market.

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BUSINESS OF AIR ARABIA
Table of Contents
Introduction................................................................................................................................3
External environment of Air Arabia..........................................................................................3
Institutional void of Air Arabia..................................................................................................4
Business Model and Value Proposition of Air Arabia...............................................................5
Learning from analysis...............................................................................................................8
Conclusion..................................................................................................................................8
References................................................................................................................................10

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BUSINESS OF AIR ARABIA
Introduction
Emerging market refers to country that possess characteristics in relation to the
developed market but it does not satisfy standards pertaining to the developed market. This
includes the countries that will become the developed markets in future. Air Arabia is the
name of an Emirati low-cost airline that has its headquarters in Sharjah. Air Arabia operates
with the help of 53 Airbus A320. The aircraft has world class comfortable seating
arrangement that has helped it in becoming popular in the world. Air Arabia flies to 150
destinations across the world that spreads across North Africa, Middle East along with
Europe (Airarabia.com 2019). This report talks about the environment of Air Arabia and
institutional void that is faced by the company. The report also discusses about the business
model of the company and the value proposition of the company. The report also throws light
on the lessons that can be learnt with the help of the analysis.
External environment of Air Arabia
PESTLE Analysis
Political Economic
 Government does not support the
business activities of the airlines by
the allocation of budget to the
airlines
 Government of United Arab
Emirates (UAE) does not regulate
aviation industry or impose the hefty
taxes that has helped the business in
conducting the business in a free
 Inflation pertaining to the fuel prices
has reduced the operational cost of
the airlines that has helped the
airlines in increasing the
profitability.
 Purchasing power of customers have
undergone improvement owing to
the increased per capita income that
has made it convenient for the

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BUSINESS OF AIR ARABIA
manner (Thenational.ae 2019). consumers to use the services of the
airlines.
Social Technological
 The tight work schedules of the
people can act as a concern as the
people do not get sufficient amount
of time that can help them in
travelling to the other countries
 There are many people who want to
travel so that they can see the world
 The internet technologies have
helped in improving the business of
the airlines.
 The airline makes use of the
technology so that it can save the
cost on that of the human labour
(Airarabia.com 2019)
Legal Environmental
 Consumer laws along with the
labour laws in UAE can help in
favouring the business of Air
Arabia.
 The condition of employment within
UAE can be said to be favourable as
there does not exist any kind of law
that can give the nationality to the
expatriates
 Environmental concern pertaining to
the air pollution is a concern for Air
Arabia as the international laws have
been passed that can help in the
reduction of the carbon dioxide
emission
Figure: PESTLE Analysis of Air Arabia
Source: Created by the author

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BUSINESS OF AIR ARABIA
Institutional void of Air Arabia
Air Arabia faces institutional void that causes the business to suffer the losses. The
airlines company does not have a customer retention policy that hampers the business of the
airlines company. The company is also not instrumental in offering the business class flights
that has negative effect on the profits that is made by the company. There are many
customers who travel for the purpose of carrying out the business. Business class flights can
help the customers in getting various kinds of opportunities like the priority check-in along
with the additional baggage allowance that can prove to be useful for the customers. The
customers do not get these opportunities that acts like a drawback for the airlines company.
The staff of the company are not so knowledgeable that has an effect on the functioning of
Air Arabia. The employees of the company are less experienced that has effect on the quality
of the performance that is delivered by the employees (Holloway 2017). The institutional
void that is being faced by the airlines pertains to the fact that it cannot live up to the
expectations of the modern day consumers that looks for flights of low fare that can help it in
being competitive within the emerging market. The number of the budget conscious travellers
has increased in the present age and the airlines should implement low cost model that can
ensure its survival in the competitive market of UAE. It cannot satisfy the demands of the
people of the present age that causes the company to incur the losses. Air Arabia does not fly
to certain specific destinations that has negative effect on the future of the company.
Institutional void in the face of Air Arabia arises on account of the fact that it does not fly to
some restricted regions of the world that hampers the functioning of the business (Pearson,
Pitfield and Ryley 2015). The consumers want some accessories like the amenity kits, air
sickness bags along with the in-flight socks that adversely affects the business of the
company.

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BUSINESS OF AIR ARABIA
Business Model and Value Proposition of Air Arabia
Business model of Air Arabia
Air Arabia has implemented the low cost model by offering lowest fares within the
region of the Middle East that helps the business in the maintenance of a profitable structure.
Air Arabia has introduced the operational efficiencies that has helped the company in staying
profitable among the competitive environment. The airlines offers point to the point service
that helps in maximising that of the aircraft utilization model (Taneja 2017). The low cost
model helps the company in maintaining leader position that helps the company in staying
profitable in the present age. The wages of the employees are based on the industry standards
and the fees of the airport are similar to that of the traditional airlines. Air Arabia has
homogeneous fleet as it uses the same pilots, crew along with the spare parts (Lawton 2017).
Air Arabia has the low operating cost as the airlines carries out 70 % of the sales with the
help of the offline channels. The business model of Air Arabia differs from the other airlines
as it has various kinds of facilities like the Air Rewards and the Holiday Packages that serves
the needs of the modern day travellers. They have the low pricing strategy that keeps them
apart from other airlines of UAE.
Key Partners Key activities
Value
proposition
Customer
relationship
Customer
segments
Emirates,
Etihad Airways,
National Bank
of Abu Dhabi
Frequent Flyer
Program, Air
Rewards, Holiday
Packages
Low
pricing
strategy
The convenient
booking facility and
the use of the
superior technology
builds the
Urgent
travellers,
Budget
Conscious
Traveller

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BUSINESS OF AIR ARABIA
relationship with
customer
Key Resources Channels
Airplanes, hangars
and the superior
computer networks
Online travel
agencies, direct
connect portal that
can help in
showcasing the
tailored products to
the customer
Cost structure Revenue structure
Direct costs pertaining to cost of the
crew and the fuel, maintenance and the
depreciation cost (Holloway 2017).
Indirect cost in relation to the input
costs and the airline financial policy
Air Arabia pursues the schedule strategy as they
focus on certain particular markets that sets
them apart from competitors
Figure: Business Model Canvas of Air Arabia
Source: Created by the author
Value Proposition of Air Arabia

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BUSINESS OF AIR ARABIA
The vale proposition of the company is built as it has committed itself in socially
responsible projects that can improve the lives of the people across the world. The company
has succeeded in meeting the needs of the people who look for the budget friendly airlines.
The company has value owing to the fact that it is low-cost airline that caters to all kinds of
customers. The airlines takes recourse to the corporate responsibility programs that provides
them a privileged position among the airlines market of UAE. They provide the facility of
online booking that helps them in setting them apart from other airlines of UAE.
Gain Creator Pain Reliever
The value proposition of the company is
built on account of the fact that it has
uplifted lives of the people who are less
fortunate. The corporate social
responsibility programs of the company
takes care of the aspect of education along
with the healthcare facilities in relation to
the underprivileged communities (Taneja
2017).
The company has been able to create a
position in the market as it has succeeded in
meeting the needs of the executive travellers
like the ease of the booking, on time
performance along with the in-flight
comfort (Stott, Stone and Fae 2016). It is
the low-cost airlines that caters to the needs
of the business travellers and the budget
conscious traveller.
Figure: Value Proposition of Air Arabia
Source: Created by the author
Learning from analysis
I have learnt that low-cost airline can succeed in the market as it can cater to the needs
of the people. I have understood that the high standard of service along with the customisable
travelling facility has helped the company in rising above the competitors. The additional

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BUSINESS OF AIR ARABIA
facilities that are offered by an airlines like the tour packages along with the car rentals can
ensure the sustainability of the company. I have been able to learn that the operational
efficiencies of the company have helped the company in serving the customers at that of a
low cost. I have been able to learn that the convenient booking facility helps in increasing the
consumer base of the airlines.
Conclusion
Emerging market is a characteristics of the developed market that can serve the needs
of the modern day consumers. The government of UAE is not instrumental in regulation of
aviation industry that facilitates the conducting of the business. Air Arabia carries out the
business in a free manner owing to the non-interference of the company in the activities of
the company. The per capita income of the people of UAE have improved that makes the
people take recourse to the airline services of the company. Air Arabia makes use of low cost
model which helps the business in making profits. Operational efficiencies of the company
has helped it in surviving in the competitive environment of UAE. The company has been
able to improve the lives of many people who are underprivileged in UAE. The company has
been able to create a distinct position in the market as it has provided various kinds of
facilities like on time performance along with that of in-flight comfort.

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References
Airarabia.com (2019). Air Arabia. [online] Airarabia.com. Available at:
https://www.airarabia.com/en [Accessed 23 Apr. 2019].
Holloway, S., 2017. Airlines: Managing to make money. Routledge.
Lawton, T.C., 2017. Cleared for take-off: Structure and strategy in the low fare airline
business. Routledge.
Pearson, J., Pitfield, D. and Ryley, T., 2015. Intangible resources of competitive advantage:
Analysis of 49 Asian airlines across three business models. Journal of Air Transport
Management, 47, pp.179-189.
Stott, R.N., Stone, M. and Fae, J., 2016. Business models in the business-to-business and
business-to-consumer worlds–what can each world learn from the other?. Journal of Business
& Industrial Marketing, 31(8), pp.943-954.
Taneja, N.K., 2017. Driving airline business strategies through emerging technology.
Routledge.
Taneja, N.K., 2017. Simpli-Flying: optimizing the airline business model. Routledge.
Thenational.ae (2019). Low-cost carrier Air Arabia to grow fleet to 100 planes by 2025.
[online] The National. Available at: https://www.thenational.ae/business/aviation/low-cost-
carrier-air-arabia-to-grow-fleet-to-100-planes-by-2025-1.785048 [Accessed 23 Apr. 2019].