Strategic Study on the Global Airline Industry
Added on 2022-06-08
26 Pages5682 Words16 Views
1 Abstract
This conducted report discusses a strategic study about the global airline
industry, particularly Emirates Airlines. The first part of the report provides a brief
overview about Emirates Airlines Company followed by a situation analysis that
includes the internal and external analysis. The last section will be concluded
with the current situation along with suggesting major issues that Emirates
Airlines should address.
This conducted report discusses a strategic study about the global airline
industry, particularly Emirates Airlines. The first part of the report provides a brief
overview about Emirates Airlines Company followed by a situation analysis that
includes the internal and external analysis. The last section will be concluded
with the current situation along with suggesting major issues that Emirates
Airlines should address.
2 Table of Content
3 INTRODUCTION ........................................................................................... 4
4 EXTERNAL ENVIRONMENT........................................................................ 5
4.1 INDUSTRY ANALYSIS .......................................................................... 5
4.1.1 Airline industry General Profile........................................................ 5
4.1.2 Life Cycle ........................................................................................ 6
4.1.3 Porter’s 5 Forces............................................................................. 7
4.1.4 Key Competitors.............................................................................. 9
4.1.5 Key Success Factors .................................................................... 10
4.1.6 PEST Analysis .............................................................................. 12
4.1.7 Summary of External Environment................................................ 13
5 INTERNAL ENVIRONMENT ....................................................................... 14
5.1 SWOT ANALYSIS ................................................................................ 14
5.2 SUMMARY OF INTERNAL ENVIRONMENT ....................................... 17
6 CONCLUSION AND RECOMMENDATION................................................ 17
7 REFERENCES............................................................................................ 21
3 INTRODUCTION ........................................................................................... 4
4 EXTERNAL ENVIRONMENT........................................................................ 5
4.1 INDUSTRY ANALYSIS .......................................................................... 5
4.1.1 Airline industry General Profile........................................................ 5
4.1.2 Life Cycle ........................................................................................ 6
4.1.3 Porter’s 5 Forces............................................................................. 7
4.1.4 Key Competitors.............................................................................. 9
4.1.5 Key Success Factors .................................................................... 10
4.1.6 PEST Analysis .............................................................................. 12
4.1.7 Summary of External Environment................................................ 13
5 INTERNAL ENVIRONMENT ....................................................................... 14
5.1 SWOT ANALYSIS ................................................................................ 14
5.2 SUMMARY OF INTERNAL ENVIRONMENT ....................................... 17
6 CONCLUSION AND RECOMMENDATION................................................ 17
7 REFERENCES............................................................................................ 21
3 Introduction
“Emirates Airlines goals for the immediate future and long term are,
to be the best in every venture it undertakes; to meet its customers'
expectations profitably, to contribute to the success of Dubai Inc.,
and to make the city the new global aviation hub for the 21st
century.”
Emirates Chairman, Sheikh Ahmed Al
Maktoom
In 1985 Emirates Airlines was established by Dubai Government with just two
aircrafts. Today Emirates has 83 aircrafts files to 78 destinations in 55 countries
worldwide. It has a large number of cabin crews from 95 nationalities. It recently
made an aircraft orders worth more than $ 26 billion for 45 Airbus A380, which
makes the company the world’s largest purchaser of Airbus’s super-jumbo.
(About Emirates)
Emirates Airlines recently becomes one of the fastest growing airlines and the
fifth-most-profitable airline in the world. It has been growing by more than 20% a
year since the last 17 years making a profit of $637 million in 2004-05. (BBC
News)
Emirates Airlines is committed to achieve its mission, namely “offering
consistently high-quality value-for-money service and to be the best airline on all
of its routes”. Accordingly, it is known as an innovative and customer-oriented
provider of advanced services, such as offering personal entertainment system in
all classes, 18 TV channels, 22 audio channels and online booking service which
enables customers to book, search for flights and choose seats. (About
Emirates)
“Emirates Airlines goals for the immediate future and long term are,
to be the best in every venture it undertakes; to meet its customers'
expectations profitably, to contribute to the success of Dubai Inc.,
and to make the city the new global aviation hub for the 21st
century.”
Emirates Chairman, Sheikh Ahmed Al
Maktoom
In 1985 Emirates Airlines was established by Dubai Government with just two
aircrafts. Today Emirates has 83 aircrafts files to 78 destinations in 55 countries
worldwide. It has a large number of cabin crews from 95 nationalities. It recently
made an aircraft orders worth more than $ 26 billion for 45 Airbus A380, which
makes the company the world’s largest purchaser of Airbus’s super-jumbo.
(About Emirates)
Emirates Airlines recently becomes one of the fastest growing airlines and the
fifth-most-profitable airline in the world. It has been growing by more than 20% a
year since the last 17 years making a profit of $637 million in 2004-05. (BBC
News)
Emirates Airlines is committed to achieve its mission, namely “offering
consistently high-quality value-for-money service and to be the best airline on all
of its routes”. Accordingly, it is known as an innovative and customer-oriented
provider of advanced services, such as offering personal entertainment system in
all classes, 18 TV channels, 22 audio channels and online booking service which
enables customers to book, search for flights and choose seats. (About
Emirates)
Because of that excellence, it gained over 280 international awards, such as the
prestigious CAPA airline of the year award 2005 by the Centre for Asia Pacific
Aviation.
(Internet travel news)
4 External Environment
4.1 Industry Analysis
The aim of the industry analysis is to identify the external environment that
affects the airline industry. The first part gives an idea about the airline industry
profile.
4.1.1 Airline industry General Profile
Airline industry is one of the most competitive and growing industries in the world
as it leads to economic growth, world trade, international investment and tourism.
In the last decade, it has grown strongly by 7% per year for both business and
leisure purposes. (Airline Industry)
Airline industry is considered as one of the fastest expanding sectors of the world
with growth rates 2.4 times above the GDP rates on average. It is also predicted
to grow by an average of 5 % a year from 2000 to 2010 (IATA).
Airline industry is affected by the economical growth, trade and political factors.
As an example of the political factors, the 11th September attacks dropped the
number of passengers, because people were afraid and tend to avoid studying
and visiting countries that have been attacked by terrorism. As an economical
factor, the increase in oil prices destroyed the profitability of the global airline
industry, accordingly it losses around $6 billion in 2005 (IATA).
prestigious CAPA airline of the year award 2005 by the Centre for Asia Pacific
Aviation.
(Internet travel news)
4 External Environment
4.1 Industry Analysis
The aim of the industry analysis is to identify the external environment that
affects the airline industry. The first part gives an idea about the airline industry
profile.
4.1.1 Airline industry General Profile
Airline industry is one of the most competitive and growing industries in the world
as it leads to economic growth, world trade, international investment and tourism.
In the last decade, it has grown strongly by 7% per year for both business and
leisure purposes. (Airline Industry)
Airline industry is considered as one of the fastest expanding sectors of the world
with growth rates 2.4 times above the GDP rates on average. It is also predicted
to grow by an average of 5 % a year from 2000 to 2010 (IATA).
Airline industry is affected by the economical growth, trade and political factors.
As an example of the political factors, the 11th September attacks dropped the
number of passengers, because people were afraid and tend to avoid studying
and visiting countries that have been attacked by terrorism. As an economical
factor, the increase in oil prices destroyed the profitability of the global airline
industry, accordingly it losses around $6 billion in 2005 (IATA).
Due to the unstable political and economical situation, many airlines companies
started to modify their strategies and services to survive and succeed in the
airline industry. For example, many companies invested heavily in the quality of
services they provide by offering, e-booking system, new interactive
entertainment systems, more comfortable seats, low cost carriers and many
technological techniques. All of that was introduced to attract, return customers
and gain a competitive advantage.
As being in such a competitive market, many companies started setting
agreements among each other to reduce costs and share resource which is
called as alliance.
Overall, the airline industry will recover as the number of passengers seems to
be doubled by 2010 to exceed 2.3 billion due to the tourism, trade and economic
development (IATA).Thus, Successful airlines will be those that continue
reducing their costs and improving their services by differentiating from
competitors to secure a strong position in the aviation market.
4.1.2 Life Cycle
The airline industry is in the maturity stage, therefore there is a strong
competition in the market and the sales' rate grows fast and then begins to
stabilize gradually. As the competition is more aggressive in this stage, the
advertising and sales promotion can be obvious. Moreover many competitors
increased their research and development (R&D) budgets to find best services to
gain customers’ attention. (Product Life Cycle, 2005)
Accordingly, many companies started to focus in differentiating their services and
products from their competitors by increasing their customers’ brand loyalty. For
instance many companies starts to concentrate on cutting the operating cost,
thus in this stage the profit margin decreases and the least efficient companies
leaves the market and only well-established companies are the ones that remain.
Accordingly, many companies’ use offensive strategies rather than defensive
started to modify their strategies and services to survive and succeed in the
airline industry. For example, many companies invested heavily in the quality of
services they provide by offering, e-booking system, new interactive
entertainment systems, more comfortable seats, low cost carriers and many
technological techniques. All of that was introduced to attract, return customers
and gain a competitive advantage.
As being in such a competitive market, many companies started setting
agreements among each other to reduce costs and share resource which is
called as alliance.
Overall, the airline industry will recover as the number of passengers seems to
be doubled by 2010 to exceed 2.3 billion due to the tourism, trade and economic
development (IATA).Thus, Successful airlines will be those that continue
reducing their costs and improving their services by differentiating from
competitors to secure a strong position in the aviation market.
4.1.2 Life Cycle
The airline industry is in the maturity stage, therefore there is a strong
competition in the market and the sales' rate grows fast and then begins to
stabilize gradually. As the competition is more aggressive in this stage, the
advertising and sales promotion can be obvious. Moreover many competitors
increased their research and development (R&D) budgets to find best services to
gain customers’ attention. (Product Life Cycle, 2005)
Accordingly, many companies started to focus in differentiating their services and
products from their competitors by increasing their customers’ brand loyalty. For
instance many companies starts to concentrate on cutting the operating cost,
thus in this stage the profit margin decreases and the least efficient companies
leaves the market and only well-established companies are the ones that remain.
Accordingly, many companies’ use offensive strategies rather than defensive
strategies through modifying their market, product and marketing mix to survive
and compete during this stage. (New product development)
For example, Kuwait airways implements the strategy of modifying the marketing
mix by launching a low cost carriers in order to increase its customer base and
loyalty and increase sales, which is considered as a competitive advantage
amongst its competitors (Kuwait Airways).
Following section explains the porter’s 5 forces that impact airlines industry.
4.1.3 Porter’s 5 Forces
Threat of New Entrants
The new entrants cause a threat to the existing company in any industry,
because they might offer better services, products or costs. In the airline industry
the threat is low as the level of entry barriers is high. There are many challenges
that should be considered by the new entrants as follows:
Capital Requirements. Huge budget is required for starting a new airline
company to buy aircrafts and provide services to customers. Ex. Boeing costs
around $ 2 billion. (Ashraf, Emirates Airline)
Brand name & Customer loyalty: Airlines companies have built an excellent
position in the market which helps them to compete against the threats of new
entrants. The experience curve of the existing companies is high according to
their long experiences in the market, Ex. American Airlines. Generally, alliances
between key airlines companies make the entry on the industry hard for any new
airline company.
Bargaining Power of Suppliers
and compete during this stage. (New product development)
For example, Kuwait airways implements the strategy of modifying the marketing
mix by launching a low cost carriers in order to increase its customer base and
loyalty and increase sales, which is considered as a competitive advantage
amongst its competitors (Kuwait Airways).
Following section explains the porter’s 5 forces that impact airlines industry.
4.1.3 Porter’s 5 Forces
Threat of New Entrants
The new entrants cause a threat to the existing company in any industry,
because they might offer better services, products or costs. In the airline industry
the threat is low as the level of entry barriers is high. There are many challenges
that should be considered by the new entrants as follows:
Capital Requirements. Huge budget is required for starting a new airline
company to buy aircrafts and provide services to customers. Ex. Boeing costs
around $ 2 billion. (Ashraf, Emirates Airline)
Brand name & Customer loyalty: Airlines companies have built an excellent
position in the market which helps them to compete against the threats of new
entrants. The experience curve of the existing companies is high according to
their long experiences in the market, Ex. American Airlines. Generally, alliances
between key airlines companies make the entry on the industry hard for any new
airline company.
Bargaining Power of Suppliers
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