This report focuses on Emirates Airline’s strategic planning and marketing process. It intends to assist the airline’s management team in understanding both the interior and exterior factors that affect the aviation industry. In return, they can restructure the company and come up with superior strategic plans. The present changes in government regulations, social and cultural practices, and fluctuations in fuel prices, call for airline companies to acknowledge their strategic issues. The acknowledgment will help the companies to analyze their policies, to exploit their competitive advantages, and to make use of their core aptitude. In this way, the airline managers can cope with the changes and overcome the emerging challenges. Besides, understanding the aviation industry will help the managers to improve their performance.
The report outlines the macro-environment factors that affect the aviation sector. Additionally, it outlines some of the success factors that Emirates Airline can exploit to dominate the aviation industry. As the demand for air transport services increases, Emirates Airlines ought to review its strategies and to diversify its market to survive the competition. The airline needs to restructure its routes and to focus on the routes that have high returns. Emirates Airline will continue to grow if the management takes advantage of the airlines economies of scale, core competence, and the experience that it has acquired over the years.
Emirates Airline was established in 1985 by the United Arab Emirates government. The primary purpose of its establishment was to offer air transport services to customers across the globe. Presently, Emirates Airline is among the largest airline companies in the world. According to Borenstein, “Much of the Emirates Airline’s progress is rooted in the ability to understand how the world fits together” (2004, p. 46). The airline does not only focus on its consumers and the aviation industry, but it also pays attention to other external factors that play a critical role in the aviation sector. The airline operates in a competitive environment. Consequently, Emirates Airline has come up with a strategic plan to help it to overcome competition waged by rival companies. O’Connell alleges, “Emirates’ slick marketing efforts, aimed at not only business travelers but also the everyday flying public, are at the heart of its grand plans” (2006, p. 97). The airline has positioned itself as a tech-savvy airline that seeks to satisfy the needs of all consumers worldwide. What’s more, the company has upheld a number of competitive advantages in terms of service differentiation and pricing. The positioning is in line with the airline’s goal of becoming a leader in the aviation industry by offering quality air transport services. This paper will discuss the Emirates Airline’s strategic planning and marketing process.
Emirates Airline trusts that the future business depends on the ability to understand both internal and external factors that influence the airline industry. These factors include politics, global economics, dynamic populations, trade, sustainability, and diversity (O’Connell, 2006). The airline believes that its success is vested on its ability to guarantee the success of all the stakeholders. It underlines the reason the airline is continuously investing in technology, on-the-ground equipments, more planes, customized handling skills, as well as establishing new markets. The company’s strategic vision is “To manage profitable growth by creating a truly global distribution network, through adding value to our customers’ supply chain, by providing quality, innovative solutions with a relentless focus on improving service and containing costs” (O’Connell, 2006, p. 95).
Emirates Airline’s corporate mission is to deliver the best in-flight services in the world. The airline seeks to offer customized services to different customers through innovation.
Overall goals and objectives
Emirates Airline has a number of overall aims and objectives, which guide its daily operations. One of the airline’s goals is to increase its business class market share. Besides, the company seeks to raise its overall market share to over 55% from its present-day 40%. In addition, Emirates Airlines aims to get returns on its investment by targeting the carrier market.
Macro environment analysis
In the airline industry, economic factors contribute significantly to the demand for transport. Economic conditions dictate the marketing strategies that an organization adopts. Emirates Airline has established itself in the United Arab Emirates, a country that is popular for its stable economy (Borenstein, 2004). Besides, the company operates in countries that show stable and steady economic growth. Unquestionably, the success of airline companies depends on the economic status of the target market. The demand for air travel is high among high-income earners who organize for leisure and business trips. That is the reason Emirates Airline records an increase in the number of its passengers every year. The past economic crisis had a significant effect on the airline industry. The demand for air travel went down significantly, forcing some of the airline companies to reduce their international and domestic trips. Emirates Airline’s profit margin went down tremendously due to a reduction in the number of passengers.
Airline companies operate within the agreed terms between countries. The success of airline operations depends on the aviation regulations that governments impose on their countries. Many governments have strict rules that make it hard for foreign carriers to invest in their countries (Borenstein, 2004). The rules are aimed at protecting designated or domestic airlines. One of the advantages of Emirates Airline is that Dubai does not have regulations on foreign carriers. Hence, it is possible for the Emirates Airline to relate to global airlines. The airline has attained its present growth due to competition with numerous international airlines that have access to the Dubai market (Brueckner & Spiller, 2007). Emirates Airline benefits from an enormous global market share by operating in countries like Australia, the United States, and New Zealand. The airline has acquired traffic rights from the three countries. Aviation deregulation has allowed Emirates Airlines to come up with strategies to enter new markets, to enhance service frequency, and to come up with competitive fares. More liberalization is in the process, making the airline competitive.
Social and cultural factors
Social and cultural issues contribute to development plans. Emirates Airline operates in a market that exhibits diverse cultural practices. Dubai, United States, Canada, United Kingdom, and Australia are all multi-cultural states. The airline benefits from the various cultural practices since it is guaranteed, regular customers. For instance, the demand for annual holidays is high in the United Kingdom and the United States (Brueckner & Spiller, 2007). Therefore, Emirates Airline benefits from operating in these countries where the demand for air voyage is collectively enhanced.
Modern technology has facilitated the growth of the airline industry. Airline companies require technology to become first movers. Emirates Airlines has continued to invest in technology as a way to enhance its growth (O’Connell, 2006). The airline continues to invest in modern airbuses. Besides, its ambition to be the leading airline company has made it install in-flight mobile phone services to attract more customers. The airline has been accredited for embracing technology in its operations.
An increase in fuel prices and scarce natural resources have forced companies to manufacture eco-friendly cars (Hill et al., 2007). The aviation industry contributes to climate change and global warming. It underlines why environmentalists continue to exert pressure on airline companies to embrace environmental conservation measures. With some airline companies trying to manufacture biofuel for their planes, it is imperative that the airline companies liaise with aircraft manufacturers to come up with environmentally friendly aircraft.
One of the factors that have helped Emirates Airlines to enjoy its current success is cost competitiveness. The company runs its operations at minimum cost. Therefore, it maintains its profit margin high. Emirates Airlines competes in pricing. Its cost per seat-kilometer is significantly low relative to the other companies. Moreover, the carrier enjoys low labor cost per staff, which gives it a competitive edge (O’Connell, 2011). There have been allegations that the airline receives government subsidies, and that is why it offers its services at low prices. Nevertheless, the airline’s management came out to defend the company from these allegations and confirmed that Emirates Airline does not receive any help from the government. Apart from cost competitiveness, Emirates Airlines enjoys economies of scale. The airline has established strong network deals across the globe. What’s more, the airline continues to spend in its fleet, and it benefits from high returns. Thus, Emirates Airlines can raise its capacity and minimize the cost of its operations, a strategy that many airline companies cannot achieve. The airline has access to the international market with better geographical exposure.
O’Connell alleges, “Emirates Airlines has built up its brand and image significantly within the last two decades” (2011, p. 339). Consequently, the company enjoys a pool of loyal customers who are always willing to use the airline whenever they are traveling. Emirates Airlines offers quality services leading to many people preferring it to other carriers. Moreover, the company is positioned as a legacy airline where subsidiary services, employees’ skills, and superior technology are the primary drivers of success. Hence, the airline is keen to expand its innovations in employee development, fleet management, and premium services. Emirates Airlines has employed staff with varied cultural backgrounds to help it to manage its diverse customers.
Challenges to strategic planning
Emirates Airline does not enjoy its present success without difficulties. The company encounters a myriad of challenges in its endeavor to implement its strategic plan. One of the challenges is the fluctuations in fuel prices (O’Connell, 2011). As aforementioned, the airline strives to minimize the cost of its operations and to increase its profit. However, it becomes hard for the company to achieve this goal, especially when the global fuel prices go high. Another challenge is political instability. Political instability in some of the Asian countries has forced Emirates Airline to reschedule its flight program, therefore, affecting its profitability. Many airline companies are now investing in carrier sector as well as upgrading their technology. Consequently, Emirates Airlines is facing a significant challenge in depending on carrier services as one of its profitable ventures. Moreover, the company has been compelled to invest in expensive technology as the ultimate way to overcome competition (O’Connell, 2011). Increased pressure from the environmentalists is affecting the Emirates Airline’s ability to benefit from economies of scale. The airline is under immense pressure to invest in aircraft that are eco-friendly, and this has slowed down its expansion strategies.
Emirates Airlines relies on major economies like China, the United States, European Union and Japan (O’Connell, 2011). These countries are recording slow economic growth making it hard for the airline to implement its strategic plan. The company has not been getting new customers from these markets forcing it to look for new markets elsewhere. What’s more, there has been overcapacity in these countries. Alliances and deregulations in the aviation industry have allowed other airline companies to access global market. Consequently, there are many airline companies operating in the United States and other major economies, particularly those that focus on long-haul markets (O’Connell, 2011). Emirates Airlines can no longer rely on economies of scale as one of its strategic plans.
The demand for carrier services continues to decrease, while labor cost increases. Hence, Emirates Airline is encountering challenges in its bid to offer low-cost services. The airline company is losing control of the labor cost. Emirates Airline will ultimately have to review its prices to cope with the changing labor cost. Chances are high that the airline will end up raising its service costs, which will mean losing more customers.
Marketing Situational analysis
Emirates Airlines has segmented its target market into three groups, which are low-cost, budget and legacy group. The airline targets customers from all walks of life. Its legacy group comprises of high-income earners who mainly prefer using opulence services. Consequently, the airline has come up with first-class services to satisfy this group. Boosting budget airlines have led to rise of a price-sensitive group of clients. In response, Emirates Airline has focused its differentiation on this group of customers (O’Connell, 2011). The airline has a fleet that serves the price-sensitive group of clients. Dubai has become a tourism and business hub. Hence, the number of people flying to Dubai has increased tremendously, hence increasing the market base for Emirates Airlines. What’s more, the number of passengers who use Dubai as a connection point between Asia and Europe continues to rise. Emirates Airlines has access to a large number of transit passengers that come to Dubai.
Emirates Airlines runs its marketing strategy with a number of targets. One of the airline’s goals is to keep hold of and to expand its existing market share. The airline enjoys a loyal customer base across the globe. However, deregulation of the aviation industry has made it possible for many airline companies to reach the global market (Wu, 2010). Consequently, Emirates Airline has been compelled to improve its marketing strategies as a way to retain its market share and to venture into the emerging markets. Apart from maintaining the existing market, the airline aims to protect its market dominance. It has been hard for many airline companies to wage competition in the markets dominated by Emirates Airlines. However, this dominance may not last forever since other firms have started offering similar services to those of Emirates Airlines. To protect this dominance, Emirates Airline continues to invest in services differentiation (Wu, 2010). The airline seeks to remain unique in the market, thus helping it to standout from its competitors.
One of the ways to discourage competition is by restructuring the existing market. One of the Emirates Airline’s marketing objectives is to drive out competition in the current market. The airline has restructured its present market into three groups based on the level of income of the target customers (Wu, 2010). These groups are budget, low-income, and legacy group. Additionally, it has come up with differentiated services to cater for the three groups. Eventually, other airline companies have found it hard to compete with Emirates Airlines since it offers quality services at low costs.
Emirates Airline has adopted a number of marketing strategies in a bid to increase its competitiveness and to reach all groups of customers. One of the strategies is sponsorship of Formula 1 events and football clubs like Arsenal (Brueckner, 2008). Through sponsoring the Formula 1 event, Emirates Airlines manages to reach professionals and business executives who mainly frequent the events. The reason companies fund social events is to market their brand to potential customers that attend the event. Emirates Airlines uses this marketing strategy to reach its target consumers. Apart from reaching the business executives, the airline reaches price-sensitive customers by sponsoring football clubs like Arsenal. It is worth to note that Emirates Airline uses a pick n mix technique in its pricing policy. Nevertheless, the company relies heavily on value-added pricing to attract its customers. Presently, Emirates Airline has a competitive advantage in the premium airline category. The airline’s fare in this category is higher relative to that of its competitors. It offers numerous services to its customers, which justifies the high price in the premium category.
Emirates Airlines has invested in building brand equity. Brueckner alleges, “Emirates is a brand that is truly emerging as a global icon with its logo represented in Arabic script as a symbol of its origin” (2008, p. 1479). The company is developing a service system of a global provider, offering superior services and enjoying one of the airlines’ newest and sophisticated fleet that is attracting its steadfast customers globally.
Emirates Airlines understands how children are critical to the community. Consequently, the company focuses on children as one of its marketing strategies. The airline believes that it can increase its market share by targeting children. Emirates Airlines has come up with numerous promotional campaigns like “Kids Go Free” which aim at encouraging more passengers to use its air services (Merkert & Hensher, 2011). The “Kids Go Free” campaign yielded good results, especially by attracting parents who fail to fly due to their children. It helped the airline to receive more family groups thus expanding its market share. The company uses children to influence the parents’ decision to use airline services, a strategy that has proved to be viable.
|Open new routes|| ||One year|
|Introduce novel services|| ||Three years|
|Target low-cost market|| ||One year|
Emirates Airline has always recorded good financial performance despite crisis in the aviation industry. The performance has been as a result of the airline’s strong strategic and marketing plan. With the outlaid action program, the company is expected to expand its market share, thus growing its financial returns. With the procurement of modern aircraft and opening of new routes, the airline’s cash margin is projected to reach 28%. Besides, Emirates Airline’s operations cost is anticipated to reduce by 12% as the airline acquires fuel-efficient aircraft and recruits youthful and economical cabin staff.
Implementation and control
It is the Emirates Airline’s goal to position Dubai as famous aviation center, which will eventually work as a critical global long-haul hub. As a result, the airline needs to open new routes to connect Dubai to the outside world within the next one year. Emirates Airlines ought to install an information management system that will help it to track and manage its new routes without difficulties. Besides, it requires laying down strong decision-making mechanisms to help in dealing with challenges that might arise in the new markets. Apart from opening new routes, the airline needs to introduce novel services to the existing market. Emirates Airlines needs to work on “its first-class private lounges to attract business travelers” (Wu, 2010, p. 124). The procurement department should invest in aircraft, which are fitted with first-class rooms that offer personalized services. This ought to be done gradually to harness the increasing demand for executive lounges. The company ought to conduct regular customer reviews to identify the emerging needs. Besides, it needs to liaise with aircraft manufacturers to acquire customized aircraft that address diverse needs of different clients.
According to Wu (2010), the low-cost airline market looks promising. Therefore, Emirates Airlines should diversify its operations by investing in the low-cost market. The management needs to launch subsidiaries within duration of one year to cater for this lucrative market. Furthermore, the airline needs to allocate about ten airbuses to serve the low-cost markets in Pakistan, India, and Egypt. Conducting regular market analysis will go a long way towards helping Emirates Airline to cope with changes in these markets.
From the information about the macro-environment factors that affect Emirates Airlines and its marketing plan, it is important for the airline’s management to identify its competence and competitive advantages. Besides, the management needs to evaluate the airline’s performance in the industry. From the evaluation, the management can initiate changes aimed at enhancing Emirates Airline’s performance. Besides, it would be able to cope with political and technological changes, which may adversely affect the airline’s performance. The current competition in the aviation industry requires Emirates Airlines to review and restructure its routes. The airline needs to focus more on routes that give it high returns. What’s more, the carrier ought to introduce new services. Consumer needs are continuously changing. Today, there are customers who are ready to pay high and fly in aircraft that guarantee their safety and privacy. Accordingly, Emirates Airlines needs to purchase planes with customized first-class lounges to benefit from this group of customers. The low-cost market is not entirely exploited. Emirates Airlines ought to focus on this market as a way to increase its returns. The cheap market would help the airline to expand its market share and to cushion it from the competition.
Borenstein, S. (2004). The evolution of U.S airline competition. Journal of Economic Perspectives, 6(1), 45-73.
Brueckner, J. & Spiller, P. (2007). Economies of traffic density in the deregulated airline industry. Journal of Law and Economics, 19(4), 379-415.
Brueckner, J. (2008). The economics of international codesharing: an analysis of airline alliances. International Journal of Industrial Organization, 19(4), 1475-1498.
Hill, C., Jones, G., Galvin, P. & Haidar, A. (2007). Strategic Management an Integrated Approach. Milton Qld: John Wiley & Son Australia, Ltd.
Merkert, R. & Hensher, D. (2011). The impact of strategic management and fleet planning on airline efficiency- A random effects Tobit model based on DEA efficiency scores. Transportation Research Part A: Policy and Practice, 45(7), 686-695.
O’Connell, J. (2006). The changing dynamics of the Arab Gulf based airlines and an investigation into the strategies that are making Emirates into a global challenger. World Review of Intermodal Transportation Research, 1(1), 94-114.
O’Connell, J. (2011). The rise of the Arabian Gulf carriers: an insight into the business model of Emirates Airline. Journal of Air Transport Management, 17(6), 339-346.
Wu, C. (2010). Airline Operations and Delay Management: Insights from Airline Economics, Networks and Strategic Schedule Planning. Farnham: Ashgate Publishing Limited.