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Emirates Airlines of Dubai
Emirates Airlines is part of the Emirates Group which has built a global reputation for aviation, travel and tourism. The Emirates Hub is located at theDubaiInternationalAirport. The group is owned by the Dubai Government. The Emirates is connected to all continents in the world with one hundred and three destinations in sixty five countries. The Airlines is spreading its wings to new destinations with more destinations with its brand new fleet. The cargo business of Emirates Airlines is carried out by Emirates Sky Cargo Division. With more than 50 business units and associated firms, Emirates group is one of the largest employers in theMiddle East.
The Emirates Airlines started its business in 1985 with two leased aircraft with start up capital of $10 million. The company was formed in response to the cut back of operatiosn by Gulf Air during that time. In addition to the first two leased aircraft, a third was leased from Pakistan International Airlines. The maiden flight was to Karachion 25th Octorber 1985. Emirates created history by becoming profitable within nine months of operations. It added new destinations such asBombay,Colombo, Dhaka andCairo. Within two years it added European destinations beginning withLondon. Several new destinations have been added in quick succession.
Size Growth and Diversification
The growth of Emirates is phenomenal. Revenues increased by $100 million each year during the early 1990s. There was all round growth in business. It could achieve growth in passenger traffic and cargo business alike. Gulf war shook the business in the entire region. Many international airlines either stopped or reduced operations to Gulf region. This has become a blessing in disguise to Emirates Airlines. It could increase the passenger and cargo traffic taking advantage of situation. Emirates continued its growth even after the end of Gulf War and normalization of competition. Emirates paid more attention to long distance flights since 2000. New destinations and more non-stop flights have been added to destinations in US,AustraliaandArgentina. Emirates gradually added south Asian destinations by 2005. At present Emirates is the largest international airline operating inIndia. By expanding its operations in Europe,North Americaand Asia Emirates offers wider travel options to passengers.
The company size of Emirates is far beyond any other airline in the region. The wide bodied aircraft fleet of Emirates belongs to three aircraft families which are Aribus A330/340; Airbus A 380 and Boeing 777. It is the world largest operator of Boeing 777. It is also the second customer for the state of the art Airbus A380 with its purchase of the aircraft in August 2008. Today it owns 137 aircraft and expects to add another 140 aircraft which are awaiting delivery.
Diversification is an integral part of the growth of the airlines. It has added cargo service as the first phase of development. Today Emirates Sky Cargo generates twenty percent of the company’s revenue. Hospitality and tour operations have been integrated successfully to the Emirates business. The staff strength of Emirates Group in March 2009 stood at 48,000 out of which 28,000 have been employed by Emirates Airlines alone. The staff strength of Emirates included 10,324 cabin crew, 1850 engineering staff, and 2,100 flight deck crew. Emirates Group has set up 50 subsidiary and associate businesses out of which Emirates Airlines directly controls six subsidiary companies in engineering, catering and tour operations.
Vision and Mission*
Emirate’s vision is to build and maintain the market leadership that looks beyond conventional track. The leadership always strives to make calculated decisions with innovative ideas. The business always maintains it high standards of business ethics. It takes pride in fulfilling its obligations to towards the society and environment. The brand name and reputation is built over long period of consistent, stable policies and excellent results.
The mission of Emirates is to maintain its steady growth rate of 20% in the years to come. It could maintain this growth rate in spite of all the adverse situations that plagued airline business all over the world. Though the business is owned by the Government it never resorted to Government protection. Emirates airline has achieved its market leadership through sound market competition. It aims to continue its leadership as an award winning airline business. It also aims to maintain its reputation for operating the youngest fleet of aircraft.
TheDubaicity is the home Emirates Airlines. The City gives unique advantage in terms of ever increasing demand for passenger and cargo service.Dubaiis the ideal connecting point between Asia, Europe andAfrica.
· Management Style
Unique decision making ability is another strength. There is a unique way of decision making in Emirates Airlines. The airline established its market while most of the airlines reduced their gulf operations. This unique approach to decision making is the key strength of the Emirates Airlines. When Airbus A 380 was launched Emirates airlines was the second customer in the world. Today, Emirates has the largest fleet of Airbus A380 in the world.
· Brand Reputation
Emirates Airlines has generated a strong brand reputation in the world. It provides premium service even in the economy class. The strict standards of passenger comfort, entertainment and flight schedules are unmatched in the industry.
· Profitability and Resource Strength
Emirates airlines is the fastest growing airline. It consistently achieved 20% growth rate right from the first year. Emirates maintained its growth rate while the airline industry all over the world has been facing serious challenges and negative growth.
· Government Ownership
Government ownership is generally considered a limitation due to excessive bureaucratic control. In case of Emirates Airlines, ownership by Dubai Government comes with freedom and managerial flexibility.
· Tax Advantage
Tax free climate of Duabi gives unique competitive advantage to Emirates airlines. Employees of the company also receive generous benefits. Emirates has one of the best reward structure in the airline industry.
· Negative Reports
There are some negative reporting in electronic media regarding inconsistent service quality of Emirates Airlines. Emirates has the history of winning maximum quality awards. But number of awards achieved has reduced in recent years.
· Effect of Global Crisis
Global economic crisis of 2008 had strong negative effect in every industry. Being a business city,Dubaiwas the worst affected. Emirates airlines is very much under stress due toDubaifinancial crisis.
· Large Fleet
Emirates is the largest customer of Airbus A380. It has 58 orders. The cash flow position and poor business in recent two years could further aggravate the financial pressure on the airline. Emirates has to utilize additional fleet strength. Unless there is faster economic recovery, there could be less demand for airline service. A fleet expansion could weaken the airlines further.
· City Expansion
The ever changing, ever expandingDubaicity provides opportunity for unlimited expansion of the airline industry. The scope for passenger, cargo and travel and hospitality industries are ever increasing.
· Tourism Development
Development of UAE as a tourist destination opens up new business opportunities. Duabi was the only Emirate in UAE seriously developed any international business. The situation has changed now.Abu Dhabithe capital city is expanding rapidly. This opens up new opportunities for the cooperation and expansion.
Economic liberalization in is taking place in UAE much faster in recent years.Dubaistarted the trend by opening up the real estate sector. This has gradually spread to other Emirates as well. The growth in any part of the region is a growth opportunity for an airline business.
· Domestic Competition
Increasing competition in the domestic market threatens the business base of Emirates Airlines.Abu Dhabibased Etihad airline is expanding rapidly. It is the most serious threat to future expansion of Emirates Airlines. Etihad maintains good quality and offers competitive price to customers.
· Budget Airlines
Budget airlines threaten the business of quality airlines. Due to economic situation people are more price conscious. People are gradually shifting from standard airlines to budget airlines. Sharjah based Arabian Airlines, for example, charges less than half of Emirates’ rate. Other regional airlines are also expanding and fighting for greater market share. There could be problems in getting traffic rights in several countries due to competition between UAE based airlines.
Problems and Solutions
The Problem – Main Issue
Sharp fall in demand due to global economic crisis is the most serious problem facing Emirates Airline today. First time in its 25 years history the profits of the airline has fallen sharply.
Emirates airline had undergone several difficult times in the past. In fact the company took advantage of bad situations to build its business. Emirates airline has the skill to turn any problem into opportunity. It could turn this situation also into opportunity.
The present problem in Emirates occurred due to global economic crisis. It had affected almost every nation in the world. Being a business cityDubaiis the worst affected in UAE. Any international problem would affect airline industry because of the nature of business.
Global economic crisis was beyond the control of Emirates airlines. The market situation suddenly turned bad because the customers simply could not afford to spend. Emirates built its business mainly for the higher end travelers. During the economic crisis the customers suddenly reduced their travel or downgraded their class of travel. In short this issue became a serious problem for Emirates due to lack of attention to passengers with lower budget.
The lack of business has compelled Emirates to rethink its class structure. The prices have been reduced to meet the problem of vacant seats.
The Emirates has taken effective steps to solve this problem, because this is the most serious challenge it ever faced during the past 25 years of its history. Unless the problem is efficiently sorted out the airline could lose its market share and reputation. The management cannot take such a risk. The restructuring measures are already in place and the airline is in the path of recovery.
· Local Competition
Competition from local airline could harm all the competitors. It could create price war and intensify competition for traffic rights in other countries.
Expansion of Etihad and other airlines in the country should not harm mutual interests. It should in no way weaken domestic airlines in international markets. All UAE based airlines should form an alliance to prevent mutual competition and price war.
· Fuel Price Changes
Fluctuating fuel prices have badly affected financial planning of Emirates Airlines in the past. Fuel prices are somewhat stable in recent months. But they could fluctuate any time. There should be long term solutions to this problem.
It is possible to reach long term agreement with oil companies regarding fuel supply. This will give financial stability in spite of fluctuating price situation.
· Budget Airlines
Threat from budget airlines is a serious problem. Emirates cannot win a price war. Budget airlines give a poor service. The passengers do not expect a great service because the price is low. But Emirates cannot compete at this level. Passengers of Emirates expect high quality service. They are paying higher price. The number of such passengers is reducing each day because of economic crisis.
Expansion and diversification is the main solution to this problem. Emirates airlines has already in the hospitality business. By combining hotel tourism package Emirates could attract larger number of passengers.
Emirates Airlines is the most successful airline in theMiddle East. It grew consistently for the past 25 years. During this growth stage the airline had successfully overcome several problems. Competition is a global fact. Economic crisis happened at a global level. Large number of businesses collapsed world-wide. Emirates survived the crisis due to its resource strength and management style. Emirates Airlines made net profit of 1.49 billion Dirhams while many airlines reported heavy losses due to global crisis. Sales are actually increasing in Emirates Group. Worldwide recession is something no one could predict. Another positive trend is the decrease in fuel prices. Economic diversification and development will continue in UAE as usual. Emirates Airline will continue its award winning progress record.