It is vital to review the progress of business, particularly in a circumstance of rapidly changing contexts. In this regard, there are core attempts that International management needs to do in reviewing business performance. In order to respond to change effectively, the company must access its efficiency in current development direction. They need to identify their competitive advantages, position themselves and find out how competitive they are in the marketplace. As a result, management must redefine their business goals and set new strategic objectives to sustain as a Global leader in a dynamic environment.
This report uses, The Emergence & Rise and Rise of Emirates Airline As a Global airline using the Emirates Airline case study.
1.3 Company Background
Emirates started in 1980s as a small corporation but with big dream. In the start they reduced their services to Dubai. Emirate’s is a government own company and started off with the capital of $10 million; they started off with two planes both of them were leased from Pakistan international Airlines.
It was established after Gulf Air, a regional airline then owned by Bahrain, Qatar, Oman and the United Arab Emirates. Tim Clark, the president of emirates, says that his airline represents the future of mass air travel. In the time economic downfall when all companies were struggling to sustain themselves, even at that time Emirates was well enough to attract customer, raised fares and consistently turned a profits. Emirates earned $925 million his last six months, which was raised up from $205 million in the previous year.
To attract and sustain their customer they have put glamour in their planes, notable innovations included the introduction of in-flight personal video systems for passengers in all classes, telecommunications in all three classes and an in-flight fax facility. Emirates also acquired an exclusive-use terminal In Dubai airport. From its humblest startup, Emirates flew its first routes out of Dubai with just two aircraft—a leased Boeing 737 and Airbus 300 B4 in 1985 (Stanik, Smith, Erakovic, 2007).
Emirates pursues its focused differentiation in a legacy airline of luxury, hi-tech, excellent quality. It has been successful and is now the Gulf’s largest carrier, one of the world’s five best airlines, and expects to become the world’s largest airline by 2015 (Hugh, 2007). Emirates one of the leading airline of the world having 15 A380s alone and expecting to add 75 more is the most successful airline. Has grown into the world’s largest airline by passenger miles flown. The reasons for its success are the competitive advantage of low cost and high quality enabled Emirates to become the leader. According to the competitors the success of Emirates is because of the support of the rulers of Dubai but Emirates do not accept this claim and they believe Emirates is a separate business unit. Until 2009 Dubai was the largest and most prosperous emirate under the UAE. However the financial crunch that led to Dubai’s bankruptcy and heavy debt has affected all nationally owned companies. The Emirates airline is no exception.
However, the global economic recession has enormous impact on business. Obviously such an economic downturn affects business sustainability in several aspects such as market demand, customers’ changing preferences and behavior, financial deficits, internal resources etc. Economic recovery is uncertain. It is important that management is aware of the short-term effect and its potential medium impact on the business. Emirates must take its core competences, competitive advantages to overcome such a situation and map out strategic objectives to sustain as worlds best Global airline in the future. It has been affected nominally and a lot of extra strategic implications were called for and like rest of Dubai, Emirates is riding this crunch. Emirates is still one of the most popular airlines in the world and it has bounced back strongly displaying strong profits The success story of Emirates Airline is a phenomenon in terms of stable growth, continuous innovation and significant global expansion. Emirates have drawn out worthy lessons to establish as a Global airline. This report will attempt to look at the competitive environment of Emirates and the macro-environmental factors affecting the airline industry.
2.1 Research Methodology
A macro environment dissection has been spotted to audit different outside impacts on business and shed lights on future patterns that may influence the business. Dissection of Porter’s five powers will help comprehend industry rivalry and blueprint impacts on improvement of business sectors and business. Utilizing this model helps the organization manufacture a method to keep in front of these impacts. Further, the spotlight is on dissecting the earth. In inspecting the business execution and organization’s methods set up, key assets, a SWOT is fundamental. This is carried out in an exertion to assist vital administration survey how to gain by business qualities, minimize the impacts of shortcomings, benefit as much as possible from any open doors and lesson the effect of any dangers. Emirates are most likely not an ease aerial shuttle.
Throughout its starting development stage, throughout the mid to late 1990’s, Emirates figured out how to secure an administration separation that was profoundly prevalent and is currently an industry standard. It was Emirates that began the utilization of an individual TV set fit behind the seat. This was popular to the point that it helped their deals massively and even gave them a solid brand picture of being individuals benevolent. Along these lines their methodology throughout that stage was to be buyer neighborly and to produce a decent brand picture.
As Emirates developed, once their brand picture was secured and there was a solid Emirates vicinity in the business sector, the center of the system was to acquire piece of the overall industry at the cost of contenders. This was to be fulfilled with most extreme scaling conceivable. This method was in fit with the necessities of the business as expressed above in the report.
With the decrease in the premium travelers fragment and the proceeding with decrease circulating everywhere freight part in the current financial year, Emirates is currently starting to concentrate on the economy class travelers. This vital movement is sure and is in accordance with the current achievement considers in the business. A speedy take a gander at the movement volume of carriers is justified.
As it can be inferred from the figures above, which are of 2009 travel statistics, low cost airlines like Ryan Air and EasyJet have managed to take a great chunk of passenger volume. Emirates is good compared to carriers in the Asia-Pacific and Middle Eastern region but its volume is still less than some of the Anglo-European carriers.
2.2 External Environment
2.2.1 Macro Environment Analysis
126.96.36.199 Economic forces
For air transport industry, interest for travel depends gigantically on financial conditions. Pride, Elliot, Rundle-Thiele, Waller, Paladino & Ferrell, (2006, p. 61) battle that “current monetary conditions and changes in the economy have a wide effect on accomplishment of associations’ promoting methodologies”. Emirates developed and created its business in The United Arab Emirates, which has a solid economy (World Fact Book, 2009). The businesses where it chose to work in are additionally influential economies of stable development (Appendix 1 shows nation GDP). Unquestionably, stable monetary development is a springboard to accomplishment of a carrier’s improvement because of expanding request in air goes by high-pay individuals for business and relaxation. Emirates recorded an expand in traveller amounts of more than 15 for every penny yearly (Stanik, et al, 2007).
Late financial downturn has critical effect on the business. Air travel request has fallen significantly. A few real aerial shuttles will cut household and global limit further in 2009 because of a falloff of about 25 – 30% throughout the last quarter of 2008 (New York News, 2009). Bisignani (2009) contends that the state of the aerial shuttle industry today is troubling. Request has weakened considerably all the more quickly in the monetary lull. IATA, which speaks to 230 aerial shuttles including British Airways, Cathay Pacific, Emirates and United Airlines, likewise raised its gauge of universal air transport misfortunes in 2008 to $8.5 billion, from its past $8 billion evaluation, as indicated by Bisignani (2009). The business is in serious consideration (Roy Morgan, 2009). The test is the way to survive past the current emergence.
188.8.131.52 Political forces
Air go between nations is by arranged understandings (Dervaes, 1998). Flying regulations between governments affect incredibly on the accomplishment of an aerial shuttle’s operations. Weismen (1990) concurs most governments have strict regulations on outside transporters to work certain courses in their nations of origin to ensure the national or assigned aerial shuttle. On account of Emirates Airlines, nonetheless, Dubai is an unprotected business. Its open skies approach helped Emirates to turn into a bearer that can contend with the world’s biggest aerial transports (Stanik et al, 2007). Emirates have developed in scale and stature not through protectionism yet through rivalry – rivalry with the continually developing number of global transporters that exploit Dubai’s open-skies approach (Stanik et al, 2007).
Emirates has delighted in the profits of worldwide pieces of the pie from entering global ends, for example, America, New Zealand and Australia because of late concessions to full movement rights from the two legislatures (Stanik et al, 2007). Flying deregulation has helped carriers to create for open course entrance, passageway of air transporters, focused admissions, administration recurrence (Goetz and Sutton, 1997). Further liberalization in the business is unstoppably expanding. Thus, the playfield rivalry gets to be more exceptional.
184.108.40.206 Social and cultural
Social and Cultural factors have impacts on improvement procedures. Both residential and global markets where Emirates works have society differences. Dubai, Australia, Canada, U.s.a and U.k are multi-social nations. Profits originate from a mixed bag of buyers’ patterns in agreement to their qualities, mentality, training, religion and lifestyles. As a truth, stable incomers make occasions every year. An alternate sample shows, in U.s.a, seventy five percent of high-pay individuals take an air excursion every year (Hanlon, 1999). It is genuine in European nations where most individuals have a solid interest to go on yearly occasions. Emirates has focal points working in ends of the line where the pattern of air travel is socially enhanced.(stanik et al, 2007).
Emirates has delighted in the profits of worldwide pieces of the overall industry from entering global goals, for example, America, New Zealand and Australia because of late concessions to full movement rights from the two administrations (Stanik et al, 2007). Avionics deregulation has supported aerial transports to produce for open course section, passageway of air bearers, focused tolls, administration recurrence (Goetz and Sutton, 1997). Further liberalization in the business is unstoppably expanding. Subsequently, the playfield rivalry gets to be more extreme.
220.127.116.11 Technological forces
Most recent engineering is a win driver in air transport industry. The requirement for innovative advances to turn into the first mover in the business will make the focal point of picking up a greater amount of the lucrative business market (Oum, Park and Zhang, 1999). Emirates is completely mindful of this rule in maintained speculations in most recent engineering seeking after its separation in the 5-star standard carrier. Emirates’ present request book remains at 244 flying machines of the most up to date Boeing and Airbus, with an aggregate estimation of pretty nearly Us$60 billion. It is now the most youthful and will be a standout amongst the most present day armadas in overall business avionics (Emirates, n.d.).
It means to be a pioneer in innovative advances, Emirates marked in-flight cell telephone scope concurrence with Aero Mobile, creating the utilization of cellular telephones locally available (M2 Communications Ltd., 2006). For a long time, Emirates has been honored various grants, for example, the world’s aerial shuttle of mechanical advances, Best Global Airline Website, Best in-flight Entertainment, Best IT designer in-flight excitement and so on. (Emirates, n.d).
Emirates states that high fuel costs and expanding lack of regular assets are confronting makers to make more diminutive, more eco-accommodating vehicles. Further, an unnatural weather change and environmental change have debased nature’s turf and the carrier business has been a component to a more quickly developing wellspring of nursery gas outflows (Emirates, 2008). For a long time, aerial shuttles have countered weight from tree huggers with disavowals and advertising about their green certifications (Emirates 2008). Lately, aerial transports are striving to create biofuel for their planes. It is high time that aerial shuttles need to enter a natural association with airplane developers for eco-accommodating airplanes, quieter takeoffs and landings, considerably lessening ecological effects.
1. Minimal Differentiation in both administration and in operations 2. Positive connections and relationship managent with suppliers. 3. Very thoroughly out scale and Extent of operations. 4. Ensure marketing through word –of –mouth through excellent service 5. Utilise the best techniques to get a slight edge.
2.2.2 Industry Environment Analysis
Porter’s Five Forces
This will give a snapshot of the industry competition level (Thompson et al, 2007).
18.104.22.168Threat of new entrants:
Emirates is most likely not a minimal effort carrier. Throughout its introductory development stage, throughout the mid to late 1990’s, Emirates figured out how to get an administration separation that was exceptionally prominent and is presently an industry standard. It was Emirates that began the utilization of an individual TV set fit behind the seat. This was popular to the point that it helped their deals immensely and even gave them a solid brand picture of being individuals well disposed. In this way their procedure throughout that stage was to be buyer well disposed and to produce a decent brand picture.
As Emirates developed, once their brand picture was secured and there was a solid Emirates vicinity in the business, the center of the methodology was to get piece of the overall industry at the cost of contenders. This was to be finished with greatest scaling conceivable. This methodology was in fit with the prerequisites of the business as expressed above in the report.
With the decrease in the premium travellers fragment and the proceeding with decrease circulating everywhere freight division in the current financial year, Emirates is currently starting to concentrate on the economy class travellers. This key movement is certain and is in accordance with the current achievement considers in the business. A fast take a gander at the activity volume of aerial shuttles is justified.
22.214.171.124 Rivalry among established companies:
Emirates rival Air France-KLM and Lufthansa, the two biggest transporters in Europe; with Cathay Pacific in Asia Pacific locale; and with United Airlines in the Americas (Hoovers, 2008). These entrenched system transporters work inside the same objectives, for example, NZ, UK, Hong Kong and America. The opposition is forceful as the worldwide business is seeing boosting development of ease carriers (Hofmann, 2007).
126.96.36.199 Bargaining power of buyers:
Rivalry between organizations is powerful. Emirates may confront a risk now and in future when clients these days have a capability to make requests on their items, in term of lower costs, higher administration or item quality. In this manner, Emirates is unrealistic to display high rates of turnover about whether because of value diminishing, and putting all the more in item development (Hill et al., 2007). Bargaining power of suppliers:
Boeing and Airbus are the two overwhelming flying machine makers for the world’s carriers. Requests by all aerial shuttles for the most recent airplanes are put to both of them. As a vast purchaser, Emirates still need to face the risk of paying higher costs or even conveyance delays. In addition, Emirates depends such a great amount of on these suppliers as obliged items are separated while the suppliers have high mastery.
188.8.131.52 Substitute products:
Most carriers offer results of comparative peculiarities: low value, great quality and fantastic administration. In the locale, for instance, other immediate substitute items to Emirates are Qantas, Cathay Pacific, and Singapore Airlines. In this manner, Emirates will encounter challenges when most players get aggressive enough to dispatch new items internationally. A case is Virgin Blue, which propelled V-Australia for Trans-Pacific administrations in 2008 (Virgin Blue, n.d). Clients profit from a more extensive decision at their results of less expensive cost yet higher quality.
2.2.2. 5 Strategic Groups
There are obviously strategic groups existing in the industry in similar markets. Examples are named: Cathay Pacific, Qantas, Air France-KLM and Lufthansa. These major players offer similar products in terms of luxury passenger package, young flyers, in-flight entertainment etc. This signifies that Emirates is aggressively competing with others.
184.108.40.206 Key Success Factors
This is crucial for a capital-serious industry, for example, aerial transports (Oum, Yu, 1999). It is basic that great directors can run operation costs at least level to build most elevated benefits. To adjust absolute operation costs, the administration must take care of the issue on expense slicing in methodology to keep gainfulness (ANZ, 1990). Economies of Scale:
Emirates is entrenched with solid system unions over worldwide ends. Then again, Emirates has persistently put resources into its armada and reveled in high productivity (allude to Appendix 3). This implies the organization can expand limit while still equipped to keep up altered expenses contrasted and different players. Emirates can have admittance to worldwide markets with more noteworthy topographical scope. Therefore, this makes a high obstruction to different contestants because of high expenses and extent of business. Brand loyalty and product quality:
Emirates has built up its brand and image significantly within the last two decades. More customers have become loyal and chosen Emirates when travelling from the Middle East and Europe or NZ (Stanik et al, 2007) because of high quality, product innovation and excellent service.
Emirates are differentiated as a legacy airline where advanced technology, staff skills and ancillary services are the main drivers for success. Therefore, Emirates is aware of the need for continuous innovations, not only in fleet and staff expansion but also in premium services. Emirates has been renowned for technology development and skilled staff of multi-culture backgrounds (Stanik et al, 2007).
220.127.116.11Nature of customers and market segments
Market segmentation has been obviously defined: legacy airlines, low-cost and budget airlines. As a luxury and legacy airline, Emirates has determined its focused differentiation, targeting at sophisticated customers and business travelers. As its logo says: “Step aboard an interactive tour of all the elements that make up the Emirates difference, on and off the ground… excellent service, outstanding comfort and superior technology” (Emirates, n d.).
Industry markets have become apparently segmented. Boosting budget airlines have attracted passengers and created higher competition when customers become more price-sensitive. This requires Emirates to re-consider strategic development direction.
2.3 Internal Analysis
This section will explore Emirates’ key resources in an effort to identify its SWOT and outlines how the business’s value chain is structured; what strategies it has pursued and how competitive it is, compared to competitors. Strengths
Advanced engineering and consistent development
Developed base restrictive terminal, nearby air terminal ground administrations, lounges Large and young fleet
Stable fund ability;
Competence of strategic management, know-how
Skilled staff of diverse cultures
Brand loyalty and good will
Absolute cost advantages: low home-base work expense fuel subsidies, free neighborhood taxes Economies of scale
Scope of business, in term of established value chain
Lack of nearby gifted work, just about depended on expats
Finance intensely depended on oil send out, potentially bringing about budgetary deficiency when oil value drops. Cost-concentrated business due to highly diversified value chain Home government subsidies Local economy dependence.
Higher global market expansion and entrance due to expanding deregulation and liberalization Gaining promoting profits of large size and network spread when being of consolidation Reducing competition on duopolistic routes
Possible entry into low cost market penetration due to absolute cost advantages and economies of scale
Low-cost revolution: more intense competition
Unstoppable deregulation and liberalization
Consolidation and concentration within alliances
Fuel price fluctuation,
Uncertain recovery of economic crisis
Environmental constraints: climate change, global warming, shortage of resources, air pollution
2.3.1 Tangible resources
In light of latest technology and excellent service strategies, Emirates is in the forefront of the industry, owning the most modern fleet of 113 aircrafts, global markets of 100 destinations in 62 countries, over 12,800 highly-skilled staff of more than 100 nationalities and significant market share (see Appendix 3). It is undeniable that these resources are vital to Emirates’ success. Emirates has highly developed infrastructure such as home-base airport, exclusive terminal, supporting services. Further, the company’s finance is highly stable. All of these contribute to competitive advantages over competitors.
2.3.2 Intangible values:
Staff’s skills and know-how together with strong dedication are crucial to success (Stanik et al, 2007). These can be proved through how they survived and made profits after the 9/11 event which was a crisis in the industry while other airlines announced bankruptcy or losses. Emirates was cautious about not creating over-capacity and appropriate launch of new products when and where demand and profitability are high (Stanik et al, 2007). Emirates succeeded in expanding into NZ in 2003 when this new destination saw 29 international airlines offering services to the country. This know-how and core competences can not be copied. Thus, Emirates owns a great value of its goodwill, established throughout its life.
Absolute cost advantages
Emirates actually obtained advantages from Dubai’s ultra-efficient airport, tax-free environment and especially low-labor costs, less than 20 per cent of its total costs while competitors struggled with that up to 35 to 40 per cent (Stanik et al, 2007).
By establishing brand associations with high- profile international events through sponsorships. Currently, some prominent sponsorships are: FIFA World Cup, Rugby Union World Cup 2011, ICC World Cup 2011, Cricket Australia, Emirates Team New Zealand, 15 international golf tournaments, horse- racing events such as the Melbourne Cup, the Singapore Derby and the Dubai World Cup, car racing, tennis, arts, culture and AFL (Collingwood)
Emirates has built up its brand significantly within the last two decades. More customers have become loyal and chosen Emirates when travelling from the Middle East and Europe to New Zealand and Australia (Stanik et al, 2007) in terms of high product quality, product innovation and excellent service.
Economies of Scale
As outlined in ‘Key Success Factors’
2.3.3 Established Value Chain
Emirates is renowned for a huge range of properties, diversified business, contributing to its full operations. Most operations are owned and run by Emirates. Dubai International Airport has exclusive Emirates Terminal 3 (Emirates, n d.). Emirates adopts vertical integration into its core business structure, incorporating diversified properties. This resembles itself through manufacturing, marketing and technology. Emirates directly operates check-in, service desks, boarding and lounge services, baggage and handling and airport push-backs (Emirates, n d.). In addition, Emirates hotels & resorts; Emirates sky cargo; Emirates aviation college for pilot and staff training;
Emirates engineering centre for repair, maintenance and training; Emirates catering, incorporate business support (Emirates, n d.). These activities make up smooth operations for the airline’s success. Obviously, Emirates has a great potential to create added value through vertical integration in the value chain, defined by Hill et al (2007). As stated, there are many Emirates-branded subsidiaries and partner companies that operate in conjunction with the business. On the basis of this assessment, Emirates outweighs competitive advantages over competitors, in terms of productivity, cost efficiency and entrepreneurial management.
2.3.4 Key strategies employed
Reviewing the company’s business-level strategies, its focused differentiation as a 5-star standard airline, underlines product development in terms of luxury, excellent quality and service. Emirates has proven to be a successful company exploiting this market segment with high profitability.
Considering its capabilities, competences, competitive advantages and economies of scale, Emirates has decided to expand global markets on its own. Explaining to the direction of not joining a major alliance, Maurice Flanagan, Vice-Chairman, answered the company had examined and could not see any business case for it (Stanik et al, 2007). Explicitly, this indicates how strategic the management are as they consider possible impact of entering major alliances with strong competitors of similar-level economies of scale, operating within the markets and channels. Taking into consideration that it is well-established and can compete with other major players with its own competitive advantages and core competences. Emirates avoids giving away its know-how, technology and other resource values to potential competitors (Hill, et al., 2007). This becomes an example of excellent strategic management.
Emirates is in stable growth stage of the industry lifecycle. The company’s strategies have been appropriate. Thus, Emirates grew at an average annual rate of 25% – one of the 20 biggest and the five most profitable airlines in the world in 2004 (Stanik et al, 2007). Appendix 3 shows revenues and profitability.
2.4 Organizational Culture at Emirates
Culture is very important for emirates because emirates have employees with 32 different nationalities. It is a challenge for emirates as a company to manage this and it is a need to create a same and collaborative organizational culture. Emirates efforts for management to align and create a unified vision let alone culture, there was no unified identity and individuals were acting and reacting as individuals and hot as a cohesive force. Emirates needed a cohesive force that provided an exclusive type of service in line with the emirates philosophy, to complete their task to open its flagship property of hotels and resorts within a deadline.
3 Force Field Analysis
Force Field Analysis
1. Different cultures
2. Different nationalities
3. Different backgrounds
4. Different experience and want to work
5. Work in a comfortable in which they are used to
6. Loss of status
7. Personal beliefs
8. People and Feelings
1. Desire to work well
2. Clear communications
3. Managers want a fully operational hotel in 4 weeks and will need to encourage 4. Persuade staff to change and develop new culture
6. Team work
8. Team work
9. Change management
4 Success of Emirates managing culture change
Emirates use different methods and techniques for change are as follows: Culture Change Process
By changing and keeping a culture use the DCP (Directive Communication Psychology) change in the organization
1. Top management committed to result without their egos. In that case management should show their commitment towards productivity
2. Try to discover different factors that are difficulty of the people, in addition to earn more money. Real issues noticeable for example impression the lack of respect between the managers and the subordinates. In addition many of them believed that their contribution was important but no body pay attention to their work. There was previously open policy from the senior management to resolve that type of problems but nobody used it. Top management discussed that they can accepted and for immediate implementation of new programs.
3. Discover who has the positive and negative influence. In this case identified total number of positive and negative influencer.
4. Apply the DC Revolution strategy by separating the total into 2 groups. This method includes five 1 day experiential guidance, every by 1 day on spot apply and spreading of skill gained at the workshop. The process included the psychological tools on how individuals could attain their own personal emotional and life goals through their work and related their own victory as a purpose of successfully cooperating with others. In an experiential atmosphere, key influencers become alert of the effects they have had on their environment and how that has affected their lives and success. They take responsibility for their world and no longer charge others for their problems.
5. Tackle the emotional issues found in the innovation procedure this is done through creating Guiding principles that they take out from their communications with others in the organization. They expand into the delegates for the group.
6. Contain trainers on site to support in the distribution of information and put into practice into the work processes. Every key influencer works with 5 others to implement what they have find out and those 5 then work with 3 to 5 others. In core, the key influencers become the consultants and the trainers simply assist these “internal consultants” to be effective
7. Include a half-day show and appearance where the entire organization attends. The key influencers perform scenes from their work environment that all can relate to and how the difficulties are overcome with the new knowledge that everyone has attained through the program. Key influencers also present amend proposed by them and the other staff to senior management
8. Top management accepts the initiatives proposed, Because they have fallen within the guidelines that were preset by the top management in the discovery process step 2. To set this commitment, the revolutionaries prepare their Revolutionary statement of belief on a large board where everyone signs it including top management in the acceptance of the new culture they have created
9. Grip revolutionary elections where the corporate revolutionaries choose a leader from their peers. The elections also include general and 2 reserves for each general. The purpose, to keep the revolt going by having a representative that actions the revolution initiatives and organizes the revolutionaries to implementation. They also are accountable to make sure that top management doesn’t get too “busy” in the short term to apply the guiding principles that will make the big difference in the long term. The revolution leaders are elected era and part of their accountable to maintain the honesty of the guiding principles across the organization.
27 years after its start, Emirates has established itself as a pioneer in the airline industry and has set a benchmark for other airlines to follow.Connecting100 Destinations across 6 continents, it has emerged as one of the leading airlines in terms of fleet size, income, international passengers carried and quality of service in a relatively short span of time. With a fleet of 144 aircraft and 204 aircraft on order which include 90 Airbus A380 aircraft, Emirates has been one of the few bright spots for the sluggish aviation industry and seems well on course to achieve its aim of connecting any two destinations in the world with one stop at its hub in Dubai. When dubai`s flag carieer is born, the major airline serving Middle East cities, Dubai and other was Gulf Air, an airline which owns by the governments of Bahrain, Qutar,Abu Dhabi and Oman.
However, In October 1985, Gulf Air reduced its flights to Dubai owing to the government’s Open Skies policy. Gulf Air feared that its flights to Dubai merely served as a regional feeder for bigger international airlines and the Government of Dubai refused to grant it protection from foreign competition. This step prompted the Dubai government to consider launching its own airline. Six months after a feasibility study was conducted, Emirates was officially launched. The airline started off with a fleet of 2 leased aircraft and an fledging capital of $10 million, which was not considered a significant capital to run an airline even back in 1985. The government also announced that the airline would not receive any further government funding. Few would have given the airline a chance back in 1985. However, by 1988, Emirates had already added 12 destinations and was well on target to add many more. By the early 1990s, Emirates had established itself as one of the fastest growing airlines and was carrying over 2 million passengers annually, a figure that grew to 27.5 million in 2009. It had become increasingly evident that Emirates was a tremendous success story of the aviation industry.
One factor that distinguishes Emirates from other airlines is its strong financial performance. It has registered a loss only once in its 27 year history. Despite significant expansion and investment in infrastructure, Emirates’ bottom line has been largely robust. Within 8 years of its launch, Emirates’ revenue stood at $500 million and by 1998, operating revenues had crossed the $1 billion mark. The airline announced a net profit of around AED 3.5 billion ($951.6 million) for the fiscal year 2009-2010. Despite significant economic hardships faced by the aviation industry at large, Emirates has proved to be highly profitable. Over the years, the airline has been able to build a strong brand and has developed a loyal customer base. A sizable chunk of its success can be attributed to the emergence of its hub city, Dubai as a global tourist and financial hub. As the number of tourists to the city has increased significantly over the past decade, a large number of them have preferred to travel by Emirates. The airline also offers attractive holiday packages and hotel stays at the Burj Khalifa to lure passengers.
Emirates is often seen as a symbol of Dubai’s progress and this has also been acknowledged by Sheikh Ahmad bin Saeed Al Makhtoum, Chairman and Chief Executive of The Emirates Group, the parent company of the airline. In an interview with Gulf News, a Dubai newspaper, Sheikh Ahmad said, “Together with Dubai, Emirates has grown and prospered. Working in tandem, the city and the airline have defied expectations, building an international business and leisure destination, alongside a highly successful and profitable airline.” Emirates has also raised the bar for its competitors as far as quality of service is concerned. The airline is credited to be the first airline to introduce personal in-flight entertainment systems after it installed video systems for all seats in all classes in 1992. Emirates is also one of the few airlines that allows passengers to use cell phones to make in-flight calls. Emirates’ success also stems from its ability to offer a wide range of non-stop flights from its hub in Dubai to destinations such as New York, Los Angeles, Sydney and Sao Paulo. Currently, it operates the most number of ultra-long-haul flights with seven flights. It also offers more seats on intercontinental routes than Air France and British Airways combined.
This is a rather staggering statistic given that Emirates does not have a large home market compared to other European airlines. Another key feature of Emirates’ global presence is its continuous zeal to expand operations as adds more destinations to its already vast global network. The Airbus A380, the world’s largest passenger airplane, has been a focal point of this expansion strategy. Emirates has been the largest buyer of the A380. Its $11.5 billion order for 32 A380 aircraft at the 2010 Berlin Air Show which raised its total order for the aircraft to 90 is ample testimony of its expansion plans. In addition, it also placed a $9.1 billion order for 30 Boeing 777 aircraft, which can seat over 300 passengers, at the 2010 Farnborough Air Show. The airline sees international aviation being dominated by large aircraft in the future as passengers’ preferences become more inclined towards non-stop commercial flights. It thus aims to be equipped with the capacity to handle this demand well in advance. However, the path ahead for Emirates is not entirely turbulent-free.
Competitors have become increasingly wary of the airline’s progress and have often accused it of benefitting from government subsidies, a claim that Emirates has constantly denied. This accusation has prompted the airline to publish audited financial statements on its website. International carriers argue that they are unable to compete with Emirates on a level playing field. European carriers, in particular, fear that Emirates’ penchant to connect cities with long-haul flights may reduce the importance of European hubs. Lufthansa has been lobbying the German government to restrict landing rights offered to Emirates. Similarly, Canada has also restricted the carrier’s landing rights in Toronto and has refused to approve flights to Vancouver.
Meanwhile, Emirates has said that international fears are unfounded and considers these recent developments to be a ploy to hinder its growth and expansion. Given, the large number of orders placed with Airbus and Boeing, Emirates will not want to be left with excess capacity when the orders are fulfilled. It can ill afford to underutilize its fleet of large aircraft and its future success will be partially dependent on the effective utilization of its capacity. Though geo-political and economic challenges remain, Emirates seems well poised to take further leaps in the industry and consolidate its position as a leading airline.
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