Introduction and History
Emirates airline’s history begins with the inception of the Gulf Air by the UAE rulers in 1974. The established Gulf Air was not in proper terms with the Dubai government as early as 1974 which intensified as Dubai government refused to agree to impose restricted skies [policy as demanded by the Gulf Air management (Nataraja & Al-Aali, 2011). The aftermath of the disagreement was the reduction of flights to Dubai by two thirds in the years 1884-1985 and this hurt the economy of Dubai. With the low flights' frequency and the inability of other airline companies to fill the gap, Dubai government under Sheik Maktoum bin Rashid Al-Maktoum devised a plan by which the government accepted to donate $10million to the initiation of a flight company to be run by the government. Emirates was then incorporated with limited liability to serve as a home carrier for Dubai with the highest services in the region through the Emir decree issued by the sheik Maktoum on June 26, 1985, and on October 25, 1985, the first Emirate flight took off (Nataraja & Al-Aali, 2011). This history provides the factor contributing to the establishment of Emirates airline and more importantly, the establishment of the airline company under the principle of best services first.
Financial reports
Available Seat Kilometers
Emirates performance, as demonstrated in the six years analysis charts and tables illustrated below, has been growing considerably. The figures below contain reports for the years 2012 through 2017. Table 1 contains analysis for available seat kilometers, table 2 geographical revenue, table 3 passenger numbers, and cargo carried in table 4.
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Figure 1 available seat kilometers: source Emirates (2018a).
Geographical revenue
The trend for available seat kilometers has been growing steadily since a 2012-2013 financial year from 236,645 million in 2012/2013 financial year, 271,133, 295,740, 33,726 and 368,102 in 2013/2014, 2014/2015, 2015/2016 and 2016/2017 respectively. Therefore, the company has been covering more distances and consequently more geographical regions.
Figure 2 : geographical revenue in %. Source Emirates (2018a).
Figure 2 contains a pie chart representing the company's geographical revenue in percentage. The chart identifies Europe, East Asia and Australia, the Americas, Africa, Gulf and the Middle East, and West Asia and the Indian Ocean as the main geographical destinations. The regions are displayed in a descending order based on their revenue generation and in a percentage ratio to reflect the contribution each region is making. Europe is generating the highest revenue with a percentage of 28.5% followed by East Asia and Australia, Americas, Africa, gulf and the middle east, and West Asia and Indian ocean with percentages of 27.0, 14.9, 10.4, 10.4 and 8.8%. Africa, Gulf, and the Middle East have an equal percentage contribution of 10%. There is a great difference, in revenue contribution, between the highest and the lowest destination of 19.7%.
Passenger Numbers
Figure 3 passenger numbers in millions: source Emirates (2018a).
Figure 3 illustrates the passenger numbers in the six financial years. The number has been growing steadily since the financial year 2012/2013 through 2016/2017. In 2012/2013 the number was at 39.4 million, followed by 44.5, 48.1, 51.9 and 56.1 million in the years 2013/2014, 2014/2015, 2015/2016 and 2016/2017 respectively. The constant growth is an indication of increased or better services and increasing revenue.
Cargo Carried In Tones
Figure 4 cargo carried in tones: source Emirates (2018a).
Figure 4 illustrates the change in cargo carried in tones between the years 2012 to 2017. The weight has been increasing steadily from 2,086 in the financial year 2012/2013 to 2,250, 2377, 2509 and 2,577 in the financial years 2013/2014, 2014/2015, 2015/2016 and 2016/2017 respectively. The progressive increase in cargo weight is also an indicator of successful business strategies, which in turn increases the company’s revenues.
Destinations
Figure 5 : destinations. Source Emirates (2018a).
Figure 5 depicts the changing patterns in the number of destinations in the six financial years. According to the graphical presentation, the number has been growing steadily form 133 in 2012/2013 to 142, 144, 153 and 156 in the years in the financial years 2013/2014, 2014/2015, 2015/2016 and 2016/2017 respectively.
Aircraft numbers
Figure 6 below contains the representation for the airline number owned by the company since 2012/2013 through 2016/2017. Similarly, the number has been increasing steadily from 197 to 259 in the years 2012 through 2017. The number is tripled by the financial year 2016/2017, which is an indication of outstanding growth. The figures 7-8 demonstrates the number of aircraft by model A380 and B777, which also depicts a steady increase in the number of planes.
Figure 6 Number of aircraft. Source Emirates (2018a).
Figure 7 A380 aircraft numbers. Source Emirates (2018a).
Figure 8 A380 aircraft numbers. Source Emirates (2018a).
Cash Profit From Operations
Figure 9 cash profit from operations. Source Emirates (2018a).
Figure 9 illustrates the cash profit from emirates operations. The graphical trend demonstrates a steady increase from 2012/2013 to 2014/2015 then a sharp rise from 2014/2015 to 2015/2016 and consequently a sharp decline through 2016/2017. Even though the profit falls in the financial year 2016/2017, the number is the second highest, after 2015/2016, ever reported by Emirates.
Operating costs
Figure 10 operating costs. Source Emirates (2018a).
Emirates operating cost has been on the rise as demonstrated in figure 9 above. Operation costs as at 2012/2013 are 5.8 billion, followed by 6.7, 8.2, 9.6 and 11.0 billion in 2013/2014, 2014/2015, 2015/2016 and 2016/2017 respectively. The cost increased steadily and can be attributed to the factors represented in figure 10 below; employee, travel services direct cost, airport operations direct cost, in-flight catering direct cost, rental and lease expenses, depreciation and amortization, sales and marketing expenses, informational technology infrastructure costs, corporate overheads, and other direct costs. In the financial year 2016/2017, these expenditures were at 42.4, 17.5, 10.4, 7.2, 5.7, 3.9, 3.4, 1.9, 6.3 and 1.3% respectively as depicted in figure 11 below. Of the total expenditures, employee expenditures cost is the highest at 42.4% while cooperate overheads cost is the least, 6.3%, among the specified costs.
Figure 11 operating costs. Source Emirates (2018a).
Strengths and weaknesses
The government of Dubai provides the main strengths that have enabled Fly emirate to grow. Some of these supports include the open sky policy, low taxations, and infrastructural development to meet the splendid standards offered by Emirates. The low taxations reduce operation costs thus the industry can expand through the investment of the profits. Besides, the government has flexible immigration laws and work permits that allow foreign workers to seek visas to Dubai thereby creating a market for the airline company (Nataraja & Al-Aali, 2011).
The economic development stimulated by the government's intuitive and the trade union of the GCC members have increased income among the citizens thereby increasing the disposable amount. Families can spend their extra cash on luxuries and affordable air transportation. The emirate is located strategically within an 8-hour flight to Dubai. This factor is advantageous for the 3.8 billion populations that are located within the 8-hour diameter thereby making it an easy destination (Nataraja & Al-Aali, 2011).
The low labor cost in the region has favored the development of the company. Workers in the Middle East region that consist of a multicultural diversity have higher potential but do not demand higher compensations. Their charges are low as compared to countries in Europe and the Americas where workers demand more rights and compensations (Nataraja & Al-Aali, 2011). This factor has enabled the company to invest more and spend less.
Finally, the emirate has harnessed the benefit of technology to localize its global operations. The airline supports a technological system that operates in 14 languages and supports payment in 42 currencies (Nataraja & Al-Aali, 2011). This ensures speed, accuracy, and customer satisfaction. Besides, the company has not invested in many types of planes, which enable it to operate within manageable costs as compared to hiring varieties of employees, such as pilots and engineers, to manage a diversified range of airlines.
Weaknesses
The political instability in the Middle East region is recognized as the immediate threat to the growth and development of Emirates (Nataraja & Al-Aali, 2011). The situation creates high levels of insecurity, which threats customer willingness to access the Middle East region thereby impacting lower returns in the flight industry. Emirate’s focus on premium flight services is proving to be a limiting factor ( The Economist, 2017 ). By focusing on premium services, the company narrows its market range which is exploited by companies that can offer cheaper flights ( The Economist, 2017 ).
Company level strategy
The Company's Internal Strategies
High-Quality Products Strategy
Emirates is focused on being the world's leading airline services provider through investment in Boeing and A380 flights. The net worth of the investment is rated at w$40billion (Nataraja & Al-Aali, 2011).
Being the First to Introduce New Things
The company always come up with new thin to surprise the competitors and its customers by providing services unique to itself. It is renowned for providing personal entertainments for each client on the seats, use of mobile phones on board and smart landing solutions among others (Nataraja & Al-Aali, 2011).
Best Customer Service Provider
The team at Emirates is deeply engaged in being the leading team in providing best customer services. Check-ins are smooth, chauffeur driven airport transfers, and conducive waiting lounges (Nataraja & Al-Aali, 2011). Other strategies include increased automation and related diversification.
Recent Major Competitive Actions
Emirates’ report (2018b) shows that it has faced innumerable challenges in the past financial year arising from competitors operating low-cost flights and targeting similar consumer segments as Emirates. Moreover, it has had challenges from economic fluctuations, which affected airline costs and pressed on operations. At the same time, Emirates have faced restraining factors from currency fluctuations majorly in Africa, and fuel prices that increased operational costs (Emirates, 2018b). Through the period, the company re-strategizes by increasing its chances of accessing the American market, working closely with partners, and compliances with restrictions imposed by the American government on plane electronics and the European Union General Data protection regulation.
Core Competencies and Sources Of Competitive Advantage
Emirates draw its core competencies and sources of competitive advantage from the government support that has been involved since its formation and the focus on providing the best quality services to its customers. These two advantages have placed the company at the helm of airline industries in the Middle East region and a strong competitor with other airlines in the European and American markets. As seen from its strengths, the company enjoys low taxations, low labor costs, and a broad multicultural employee that enables it to provide quality services and remain competitive in the market. the company's success story, from 2 airplanes to operating the largest fleets of Airbus A380 and Boeing 777 are an indication of its success (Emirates, 2018). The company has fulfilled its mission and vision of being the leading in aviation innovation, global network, environment protection, competitiveness, and high services, minimum major accidents, and being the most envied flight company (Emirates, 2018).
Emirates Is a Success
The company is successful based on the graphical data and the ability to respond to external emergencies. According to the graphical presentations, the company has been improving steadily over the past six years in profits, flight destinations and the number of airplanes. Even though it has experienced a fall in its profits, the 2016/2017 performance is still higher than its performance in the years 2012 to 2014. Besides, its response to the 2008 economic recession and pressure to provide the best services demonstrate great resilience and ability to stay focused in the future.
Recommendations
Current Issues and Future Possibility
Emirates has a solid competitive advantage as it leads other major players in the Middle East region. Its strategic plans place it at this important position. However, the company's focus on premium services while neglecting consumers that can afford lower cost flights can eventually lead to its downfall. If the other competitors capitalized on this point of neglect, they would maximize their income, expand their operations, and improve the level and quality of services. Therefore, to avoid this eminent displacement, Emirates should increase its investment in low-cost carriers. Such an investment will enable the company to improve its income. Falling income, as noted in the 2016/2017 financial record can be balanced with this investment.
Alternative to Addressing the Strategic Plan
Alternatively, the company can revise its strategic plan. While focusing on premium flights, the emirates can focus on initiatives that will lower operational costs. This can include the introduction of a wider range of products, such as clothing line, and services, like more hotels, to increase income and compensate expenditure in the airline industry. There are a few services offered by Emirates; these include only hotels and resorts (Emirates, 2018). A lowered operation cost is often reflected in low product cost or service costs (Roos, 2014). Thus, the costs of boarding a premium flight will be lowered to affordable levels and increase customer number.
Recommended Steps and Implementation for Low-Cost Couriers
To implement such an investment, the company will need to conduct a market analysis for the need of low career flights. It will be found to be the case, that there are potential customers in need of such services. After establishing the market need and determine most probable flight routes, the company should allocate some of its current flights to operate low carrier ventures as a pilot test. Once the feasibility is established, Emirates can purchase more flights to assign to low price carriers and use its brand image to market the new services.
References
Emirates (2018a). THE EMIRATES GROUP ANNUAL REPORT ǀ 2016-17. Retrieved from https://cdn.ek.aero/downloads/ek/pdfs/report/annual_report_2017.pdf
Emirates (2018b). ANNUAL REPORT 2017-18. Retrieved from https://cdn.ek.aero/downloads/ek/pdfs/report/annual_report_2018.pdf
Emirates. (2018c). Emirates. Retrieved from https://www.emirates.com/ke/english/?gclid=EAIaIQobChMIwOaK8vCA3wIVDr7tCh1gUw8iEAAYASAAEgKtovD_BwE&gclsrc=aw.ds
Nataraja, S., & Al-Aali, A. (2011). The exceptional performance strategies of Emirate Airlines. Competitiveness Review: An International Business Journal, 21(5), 471-486.
Roos, G. (Ed.). (2014). Global perspectives on achieving success in high and low cost operating environments. IGI Global.
Sky Journeys. (2018). Vision, Mission, and Values of Emirates. Retrieved from http://skyjourneys.blogspot.com/2015/11/vision-mission-and-values-of-emirates.html
The economist. (2017). The Middle East's once fast-expanding airlines are coming under pressure. Retrieved from https://www.economist.com/gulliver/2017/03/14/the-middle-easts-once-fast-expanding-airlines-are-coming-under-pressure
