Etihad Airways: Operations, Supply Chain, and Quality Analysis

This report analyzes the operations strategy and supply chain management of Etihad Airways, a leading global airline. It identifies challenges such as an inadequate supply chain and lack of technological advancements. The report emphasizes the implementation of a lean management approach and the integration of Artificial Intelligence (AI) to improve operations. The analysis covers the company's mission, vision, corporate strategies, and history, along with an overview of its operations strategy, including customer-driven strategies, product and service development, corporate strategy, and competitive priorities. It also examines supply chain management challenges, such as ineffective supplier relationships and issues with new-generation aircraft. Furthermore, the report discusses lean management, quality management approaches, and the potential of AI to enhance Etihad's operations, concluding with recommendations for improvement.

Running head: ETIHAD AIRWAYS
Assignment Task 1A: Project Format
[Etihad Airways]
Name of the student:
Name of the university:
Author note:

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Executive summary
The main purpose of this report is to analyse operations strategy and supply chain
management in Etihad Airways. The company is one of the leading airlines service provides
across the globe. However, the study finds a few of issues at its operations level. The
company does not have a capable supply chain to be able to handle its global operations
effectively. Additionally, technological advancements is also missing. The paper gives
emphasis on implementing lean management approach in Etihad Airways. Additionally, it
also recommends to implement the most relevant Artificial Intelligence (AI) system in the
operations.

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Table of Contents
1. Introduction of the Chosen Organization...............................................................................4
A detailed overview of the firm.............................................................................................4
A short brief of the operations strategy..................................................................................6
Quality issues related to the supplier.....................................................................................8
2. A review of the operations strategy of the organization......................................................10
The present operations strategy............................................................................................10
Current (short term) and long-term solutions (internal considerations) to address any
operations related challenges the firm is facing...................................................................11
Impact of SWOT factors......................................................................................................13
Impact of PESTEL factors...................................................................................................15
3. Supply chain management...................................................................................................17
Definition of supply chain management and organizational level objectives......................17
How these objectives support the operations and overall strategy of the firm....................17
Highlight the challenges.......................................................................................................19
Real world and best in class solutions to resolve the problems...........................................21
4. A discussion on lean management and quality management approaches............................22
Lean management (Define, benefits, and the types of waste)..............................................22
A discussion on quality management (Offline and online approaches to quality and TQM)
..............................................................................................................................................23
Several methods of addressing quality (FMEA etc) and linking objectives with the
operations strategy of the firm and also lean approaches....................................................24

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5. Artificial Intelligence...........................................................................................................25
AI (Definition, history of the technology and examples)....................................................25
AI as adding value to the firm’s operations objectives and the overall objective of the
organisation..........................................................................................................................26
Challenges of AI..................................................................................................................26
Conclusion................................................................................................................................27
References................................................................................................................................28

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1. Introduction of the Chosen Organization
A detailed overview of the firm
Sector
The section covers a brief introduction of the chosen company “Etihad Airways”. The
company was founded 15 years ago in 2003. The company belongs to the airlines industry.
Etihad Aviation Group is its parent company. The company has its hubs based in Abu Dhabi
International Airport. It operates in alliance with the Etihad Airways Partners. It has its
headquarters based in Abu Dhabi, Khalifa City, and United Arab Emirates. It is one of the
most reputed air companies in the world (Etihad.com 2019).
Mission
The mission of Etihad Airline is to maintain an utmost degree of adherence to ethical
policies, and offer innovative products and services to travellers. With regards to the mission
statement, Etihad has introduced quite a many signature travel experiences such as innovative
service offerings and world-class products. Innovative services include but are not limited to
like Flying Nannies, Inflight Chef and Food & Beverage Managers (Etihad.com 2019).
Vision
The vision of Etihad Airways is to become the best airline company in the world. It is
intended to establish a close connectivity between the globe and Abu Dhabi. This means the
company wish to become the busiest and most preferred option for airline services at the
global level. To ensure that the vision is attained, Etihad is constantly focused on portraying
Arabian hospitality and appraising the image of Abu Dhabi as the world class leisure and
business destination. It follows a combination of Emirati values and sets itself against the
world’s best hospitality services (Etihad.com 2019).

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Corporate strategies
Corporate strategies generally consist of a continued process, which is attained and
maintained to benefit the business. Corporate strategies can be broadly classified into three
types like stability, growth and renewal. ‘Stability’ is a process to maintain a stable market
position. It is about making strategic decisions to retain the market image, counter increasing
market competition, and adopt innovative strategies to stay competitive. ‘Renewal’ is to
produce and offer renewed products and services. A company that generally does not perform
or is facing declining sales and market shares is bought or acquired by another corporation.
The new corporation thus make changes to the product portfolio to give it a new life.
‘Growth’ is a strategy to expand and enter new markets. This is one of the toughest of
corporate strategies and requires a real expertise in different aspects of operations. These are
marketing practices, an understanding of external business environment, the nature of
competition in the target market, and continuously deploying innovative strategies.
In context to Etihad Airways, ‘Growth’ strategy is being followed. The company
does it by collaborating with strategic partners. In collaboration with partners, Etihad tries to
be competitive in the worldwide air transport sector. Etihad utilises its organic growth to
remain competitive in the airline industry. Apart from its organic growth, the growth factor in
Etihad Airways also consists of codeshare agreements with different and recognised airlines,
strategically making investments in various airline services. These services include like
offering signature services to travellers. Etihad Airways is constantly into identifying and
implementing innovative practices such as the introduction of inflight chef (Etihad.com
2019). This is one of very few airline companies, which is able to explore and introduce its
local culture at the global platform. Nonetheless, it has the success in expanding to new
markets, which is also why its services are well enjoyed at the global level.

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History
Etihad Airways was started and established as the secondary flight carrier of the UAE
in 2003. The person responsible for the establishment was Sheikh Khalifa bin Zayed Al
Nahyan who wanted to have a flight to Abu Dhabi. The airline was established by Darwish
Alkhoory who was the chief personal pilot for Sheikh Zayed. One of the milestones that
Etihad has ever achieved was the announcement for the largest aircraft order in the
commercial aviation history. It all happened in the year 2008 at Farnborough Airshow. The
order was for 205 aircraft that includes 55 options, 100 firm orders, and 50 purchase rights
(Etihad.com 2019). The year 2011 did bring some more happiness to the company when it
announced its full-year net profit, which was US$14 million (Etihadaviationgroup.com
2019). The same year did see some more achievements for the company as it announced to
have taken a 29.21% stake in the Europe’s sixth-largest airline, Air Berlin. It was followed by
some more number of minority stakes in other airlines like Virgin Australia, Air Seychelles,
and Aer Lingus. In the year 2013, Jet Airways sold its 24% stake to Etihad. It happened after
when the Indian government had announced that foreign airlines could head to take up to
49% stake in Indian carriers (Gulfnews.com 2019). In the same year, Etihad acquired 33.3%
stake in Darwin Airline, the Swiss carrier (Gulfnews.com 2019). In 2014, Etihad took 49%
stake in Alitalia, the Italian flag carrier. The deal cost around an estimated €560 million to the
Etihad (Equitystory.com 2019). In May 2016, the management structure in Etihad Airways
did undergo a reshuffle. With this James Hogan became the new CEO of the company. Peter
Baumgartner who previously was the Chief Commercial Officer in Etihad became the Chief
Executive Officer for the company (Statista 2019).
A short brief of the operations strategy

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Operational strategies are those that firms identify and utilise to reach their vision by
accomplishing both short-term and long-term goals. By developing a suitable operation
strategy or a set of strategies, a company can actually utilise its resources appropriately and
produce potential resilience to its competency. On a broader aspect, operations strategy can
be classified into four distinguished types. These are (Koch and Friis 2015):
Customer-driven Strategies: Strategies those are used to produce relevant products and
offer services to customers are termed as customer-driven strategies. Any firm will be said to
have executed and is following the customer-driven strategies when the business constantly
monitors the market. The monitoring includes identifying the changing perception of
consumers of the target market or the market of operation. An execution of these strategies
will require a robust understanding of the market behaviour and the firm’s ability to adjust
with it.
Product and Service Development: A company can be termed as following the products
and service development strategy when it adopts a distinguished set of strategies to offer
products and services. The set of strategies thus adopted depend on the market and planning
strategy of the concerned firm. A firm may try to implement and explore its innovation
capabilities to become the market leader and by offering a new product or a service never
being made before. For example, the “Nano Cars” is one of the examples of such innovation
from the Tata Company (Weyrauch and Herstatt 2017). In addition to this, a few firms wait
for an innovation to happen, so that, they could follow it and utilise the opportunities thus
created.
Corporate Strategy: Corporate strategy is the highest and one of the most complicated
strategic plan of an organization hierarchically. It defines the corporate goals, and the
resources and ways to attain these goals. An organization strive to achieve these goals within

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the strategic management. A vision and mission are also the parts of a corporate-level
strategy. The development process for this strategy involves the identification and application
of numerous analytical techniques like SWOT, PESTLE, and VRIO etc.
Competitive Priorities: Competitive priorities depend on a lot of factors like a market
analysis, corporate strategy, conducting a needs assessment, and defining core processes. To
create competitive priorities, an organization gets involved in numerous processes like
evaluating operational costs, and analysing the quality of a service or product. Competitive
priorities should include offering a quality product or service more efficiently than the
competitors. The level of efficiency will be measured as the follows:
 Selling best quality products or offering services but at premium rates
 Offering cheapest products or services but at a quality, which is acceptable
 Maintaining quality in flagship products or services
Developing Core Competencies: Core competencies can be referred to areas of competency,
which is exclusive only to the company. The list of core competencies can include a number
of thing like financial and marketing expertise, having well-trained staff, and optimal
business locations. By identifying and nurturing core competencies, a company will try to
enhance its customer satisfaction rate, build up effective relationships with stakeholders, and
encourage product development.
Quality issues related to the supplier
The supply chain management at Etihad Airways faces some challenges. These are
(O’Connell and Bueno 2018):
Ineffective maintenance of employer-supplier relationship:

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Due to an ineffective cash-flow management at Etihad Airways, it has faced
difficulties offering perks and benefits to suppliers. It does not at all mean that the company
does not offer benefits to its suppliers. Indeed, the company does so; however, there are still
some areas of improvement. One of those areas is offering benefits and incentivising
suppliers on their performance. These things are necessary and help to keep up an effective
bonding with suppliers. An effective bonding with suppliers is essential to receive high-
quality materials in quick time and at the most competitive price (Onyango et al. 2015). The
good thing is that the company has realised the importance to reward its suppliers with extra
benefits. To do so, it has appointed the National Bank of Abu Dhabi (NBAD) to facilitate and
establish a fully automated and an innovative programme “Supply Chain Finance (SCF)”
(Gulfnews.com 2019). The initiative will help Etihad to enhance its capability in regards to
establishing a deeper bonding with its strategic suppliers. This will also help to strengthen its
supply chain management process.
New Generation Aircraft:
Etihad has faced challenges in regards to dealing with the production of new
generation aircrafts. The fact that has kept the company troubled with, is a lack of effective
integration between Etihad and manufacturers for its new generation aircrafts. It appears as if
Etihad has failed to understand the level of attachment it needs to have with its
manufacturers. Indeed, there is a need for a collaborative approach towards the production of
new generation aircrafts. A collaborative approach with manufacturers will help to reach to a
range of trusted suppliers belonging to different tiers. The approach may create problems in
areas such as performance, financial risks, and reliability. However, the suggested way out of
the issue must be implemented to yield the best production capability in Etihad.
Battery Issue:

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Boeing’s 787 Dreamliner, which is the series of new generation aircrafts for Etihad
seems to be facing troubles from the malfunctioning battery. It has produced series of
incidents of a fuel and a fire leak causing two back-to-back incidents at two separate runway
(YouTube 2019). The fact, which mostly contributed to this incident was the use of the
battery that looks incompetent on a broader aspect. Considering the advanced technologies
being used in Boeing’s 787 Dreamliner, there was a need to use batteries, which is less faulty.
Indeed, battery issues have remained a common problem across a range of airlines. However,
the performance was never that bad as in the case of Boeing’s 787 Dreamliner. Battery
provides an alternative option to airlines for the power generation. Generally, Airlines
sometimes meet with power generation issues. In all such cases battery generates the much-
needed power to airlines. The incident indicates an ineffective management of supply chain
at the Etihad Airways. The manufacturing of Boeing’s 787 Dreamliner was outsourced.
There are speculations that these airplanes are not manufactured in Boeing. In fact, these are
just assembled there. Hence, the engineering technology in the Boeing’s 787 Dreamliner
according to a few speculations belongs to a company other than the Boeing.
2. A review of the operations strategy of the organization
The present operations strategy
Operations strategy broadly can be categorised into five different types. These are
product and service development, developing core competencies, corporate strategy,
competitive priorities, and customer-driven strategies. This section investigates the current
operations strategy deployed at the Etihad Airways. The company may be using one strategy
or even more than this.
Etihad seems like boasting to a significant extent on a “Product and Service
Development” operations strategy. The evidence for the cited fact can be traced in the

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expansion of operations of the Boeing 787-9 Dreamliner Service to new routes. Etihad is
planning to introduce the Boeing 787-9 Dreamliner to Hong Kong and Barcelona. The new
service such as that mentioned in this section would follow a new aircraft model comprising
of added services to both business and economy class passengers. The loading capacity in
belly-hold cargo will also increase. Such flights will have an improved in-flight connectivity
as compared to other airplanes (The National 2019). An introduction of the Boeing 787-9
Dreamliner Service in different routes indicates that Etihad is aiming at touching new heights
with innovative features being included in its new generation airplanes. It also shows that the
company is driving innovation to produce new products and services.
“Competitive Priorities” is the other operation strategy, which the Etihad is
concerned with now. Etihad Airways will now give priority to point-to-point operations of
flights. It means the carrier will put it focus back over the super-hub model, which helped the
carrier previously to attract customers those who make flights between Asia, Africa, Europe
and the Americas. With this in the plan Etihad aims to attain and maintain a long-term
sustainability. The carrier wants to be able to see through the challenges the aviation industry
is set to face. The carrier will introduce a divisional revamp influencing its seven different
operational divisions like commercial activities, maintenance, operations, finance, support
services and human resources. In addition, Etihad will also focus on a new “transformation”
function. Route networks will also be reanalysed to see which one to continue with and the
one to abandon (ArabianBusiness.com 2019).
Current (short term) and long-term solutions (internal considerations) to address any
operations related challenges the firm is facing
Short-term and long-term solutions for challenges with “Product and Service
Development” strategy: