Etihad Airline’s Growth and Expansion in the UAE

Abstract

Etihad Airways, the official carrier of Abu Dhabi and one of the national careers of the UAE, is a rapidly growing airline company that was formed in 2003. Currently, the company is one of the most recognized airlines due to its excellent services and the enormous growth rate that it has achieved during its short existence. Among many factors, the company’s growth rate can be attributed to the high levels of customer satisfaction that promote consumer loyalty.

The company has focused its marketing strategies on positioning it as a luxury airline, yet with affordable services for every individual. Further, by rapidly expanding its destinations via its fleet, as well as through equity and codeshare partners, the airline has ensured reliability and consistency of services, which have also increased customer satisfaction levels. This paper discusses the major strategies that have promoted customer satisfaction and the company’s massive growth rate.

Introduction

Etihad Airways, which is one of the two national transporters of the UAE, is one of the fastest-growing airline companies in the world. The airline, which is based in Abu Dhabi, was established in 2003. Ever since it has grown from a small airline company with a fleet of six aircraft to a major airline with a fleet of 117 aircraft. Further, the airline serves more than 1000 flights per week to over 120 destinations. It carries more than 14.8 million passengers as per 2014 statistics (Mouawad, 2015).

During the same period, the company expanded its destinations by 10. Besides, it made important partnerships with other airlines to share roots and forwarding customers. The airline is among the few organizations that have maintained a growth trajectory in terms of passengers and finances, despite the previous economic shocks of the global recession, which slowed or reversed the growth of other major airlines in the world. However, how the airline has maintained massive growth and expansion has attracted much interest from economists, businesses, and other airlines in equal measure with reference to the strategies that the company employs to maintain such growth and prosperity, despite its recent entry into the airline sector.

Purpose of the Study

This paper seeks to discuss Etihad Airline’s massive growth and expansion while at the same time highlighting its growth strategy, which focuses on customer satisfaction, massive advertising, government subsidies, and partnerships with other airlines. Of great importance will be the company’s strategies towards customer satisfaction, which is a major factor for its success.

Literature Review

In any industry, competition is necessary and inevitable since it ensures that competitors put the best strategies to attract and maintain customers. In this process, marketing becomes a vital tool that guides the efforts of a company towards attracting customers for its products and services to guarantee profitability. According to Kotler and Keller (2012), various approaches can be used by a company to guide its marketing efforts. In this case, it is important to decide how the organization will approach the market to remain competitive. For instance, Etihad Airways is a very young company in the aviation industry, yet within the duration starting from 2003 to present, the company has managed to establish itself as a leading airline in the world. Four marketing strategies are widely used to guide an organization’s process of establishing a competitive advantage in the industry. These strategies include specialization, differentiation, segmentation, and concentration (Ferrell & Hartline, 2012).

Specialization requires an organization to focus on a factor to which it will dedicate its efforts to achieve maximum outcomes. For instance, the company can focus on superior technology or a particular market, customer, or a component of service. According to Mouawad (2015), Etihad Airways has focused its efforts on achieving excellent cabin crew in its fleet. This strategy has ensured that it has one of the best cabin crews in the world. In terms of differentiation, the strategy focuses on ensuring that the company has a competitive advantage in various areas. For example, in addition to offering the best cabin services, the company also offers good customer care, excellent onboard entertainment, and the best price bargains, among others (Grimme, 2011).

These efforts have allowed Etihad Airways to be an excellent airline that has been voted as the world’s best organization severally, despite its short history. In terms of segmentation, this strategy is very important since it guides organizations in determining specific market segments that they can serve. For example, Etihad offers three class options, which customers can choose from. Through this plan, the company ensures that it caters to different market segments at the same time (Pesek, 2015).

The company has focused on ensuring that each class segment beats the competition of other companies by offering above-class average services in the industry. In terms of concentration, the company has focused its resources on making a brand name for itself majorly through sponsorships of cultural and sports events across the world. These sponsorships have ensured that the company achieves a great presence and recognition across the world through events that receive large numbers of viewers across the world. Together with others, the above marketing strategies, such as the 4Ps, are widely used in positioning companies to take advantage of the market forces. Etihad has experienced exponential growth since its inception. This achievement can be attributed to the company’s use of different marketing strategies that cover some or all of the above-discussed strategies.

Brief Overview of the Airline’s Growth History

Etihad Airways is a very young airline company with a history spanning less than 15 years, yet it has emerged one of the most noticeable and fastest growing airlines in the aviation industry. At its inception, the airline, which was formed following a royal (presidential) decree, was allocated an initial capital of AED500million (USD$140m Million) to kick-start its operations (Sandilands, 2015). Its first fleet was made of six leased aircraft. However, since then, the company’s fleet has grown tremendously to its current number of 117 aircraft, which are among the most modern fleets in the world. The following graph represents the growth of the fleet number over the years since 2004.

Etihad Airways Fleet Growth

The above graph shows that the company has experienced exponential growth in its fleet size over the years. Overall, the airline fleet size has grown by 50% since its inception in 2003. Even during the global financial crisis, which saw many airlines across the world make massive losses or be declared bankrupt, the airline was still expanding its fleet size. For instance, in 2008, the company had a fleet size of 42. This figure increased to 52 in 2009, an indication of an extra ten aircrafts, representing a 23% increase (Maslen, 2014).

The company has also experienced sustained growth in the number of passengers over the years. This move has greatly been the main driver of revenue growth and hence the demand for a larger fleet to keep with the pace of the increasing customers. In the first year of its business, the company had only approximately 300,000 passengers. However, this number has grown enormously to reach 14.8 million passengers, a fleet that many older and experienced airlines have been unable to achieve (Maslen, 2014). The following graph represents the growth trend in passenger size from 2004 to the present.

Number of Passengers

Since its inception, the company whose majority of shareholding is the government of Abu Dhabi has revealed little information relating to its financial performance. From 2003, the company did not release its financial performance details for auditing or scrutiny. However, it began releasing its financial performance in 2012, where it announced that it had become profitable the previous year, 2011, since its inception. In 2012, the company had a turnover of approximately USD$4.8billion, with a profit of USD$170million (Sandilands, 2015). However, up to the present time, the company is still very secretive about its financial performance.

This situation has attracted criticism from other airline industries, which view such a move as promoting fair competition in the industry. Apart from such criticism, the company’s growth can be viewed and noted from its increasing passenger size, increased destinations, increasing partnerships, and buyouts, among other indicators of good performance in an airline.

Etihad’s Growth and Expansion Strategy

Achievements such as Etihad’s massive growth and expansion have not occurred by luck, but through protracted and deliberate efforts that have been focused on growth to make the airline an excellent airline in the 21st century. As it will be discussed, the company has focused on critical areas of business growth such as customer satisfaction, partnerships, brand identity, cost-cutting measures, developing exceptional fleet, offering differentiated services, and establishing the Abu Dhabi International Airport as a major global transport hub for all major world destinations among other measures. These measures have been very important in ensuring the continuous and upward growth of the company. Such a growth rate is one of the world’s highest figures for any aviation company in the world.

Etihad’s Customer Satisfaction Measures and Strategies

In 2014, Etihad Airlines recorded 14.8million passengers. This figure was a 23% increment from the previous year. However, what makes the airline continue attracting such massive growth and new customers is its focus on important marketing strategies that separate it from the rest.

The company is currently focused on placing itself as a strategic airline that links all destinations to Abu Dhabi and from Abu Dhabi to all parts of the world. In this case, the company’s focus is on placing itself as a highly reliable airline that customers from across the world can rely on. For instance, the location of Abu Dhabi and in extensions in the UAE is strategic. Airports such as the Abu Dhabi International Airport, together with the Dubai International Airport, are some of the largest bases in terms of customers who utilize them to other parts of the world (Maslen, 2014).

For instance, major airlines that serve the UK, the USA, and Far East countries such as China, Japan, Korea, and others transit through the UAE. Further, other short-route airlines from places such as Africa or India and other destinations find the UAE and its airport a strategic location where their customers can get connecting flights to other major destinations.

In line with the realization of the strategic location of Abu Dhabi in the UAE, Etihad Airline strives to turn its hub, the Abu Dhabi International Airport, a world’s leading airport where customers from across the world can prefer to use it for their transport needs. Further, the company is determined to make sure that many of the customers who flow in and out of the airport are carried by its fleet of aircraft from and to all destinations of the world. This ferrying will be done directly or through partnerships with other airlines to offer forward transportation to far or inland destinations where it does not directly serve (Pesek, 2015).

The airline’s strategic plan is anchored on ensuring that Etihad Airways grows to be a safe and profitable company that offers the highest levels of customer services. To achieve these goals, the company understands the importance of customers as the main factor of profitability. As such, it is attracting customers is the main goal. Etihad has succeeded in this process by focusing on safety, reliability, and service, which are very important in ensuring customer loyalty.

The first factor of customer satisfaction is safety. Etihad is in the forefront of guaranteeing wellbeing as one of the modern fleets in the world (Maslen, 2014). For instance, the current fleet is made of very new Airbuses and Boeing passenger jets. Most of them are less than ten years age, which is a clear indication of the company’s determination to ensure consistency due to the little cost in maintenance and few breakdowns. Hence, almost all aircraft in the fleet is operational. In 2008, during the Farnborough Airshow, Etihad Airways made an order of up to 205 Aircraft, including 1100 firm orders, 55 options, and 50 purchase rights (Maslen, 2014).

This figure was the largest aircraft order in aviation history. Such a move was in line with the company’s vision of ensuring not only a modern fleet but also its capacity to serve as many destinations as possible in its expansion plan. Among the planes on the firm order, 41 of them are Boeing 787-9 Dreamliners, while 10 of them are Airbus A380s. Such massive aircraft orders will make the airline one of the most modern companies in the world. This plan will only add more to the company’s credibility and customer perception of safety.

Another important factor that drives customer satisfaction at Etihad Airways is the company’s dedication to reliability. With a fleet of 117 aircraft in addition to the company’s continuous growth at a rate of 23% annually in terms of passenger numbers, the company is dedicated to ensuring that it is available in all major destinations across the world. Currently, the company serves approximately 120 destinations around the globe (Grimme, 2011).

These destinations, which are in all continents of the world, ensure that the company acts as a link that drives traffic towards the Abu Dhabi International Airport. For instance, for almost 20million travelers who passed via the Abu Dhabi global landing field in 2014, the airline carried more than 74% of the passengers. Further, if the airline’s other partners where the company has equity are considered, the combined total fleet rises to 82%, which effectively makes Abu Dhabi International Airport a primary hub. In 2015, the company announced an extra ten destinations to its network. This move is truly in line with the company’s desire to ensure that customers are served wherever they are in the world.

Further, to grow its network, the company not only concentrates on increasing its destinations with its aircraft but also through partnerships with other airlines (Grimme, 2011). For instance, the company has defied the traditional and well-established alliances to form its alliance that is known as the Etihad Airways Partners. The goal is to compete with the established associations such as the SkyTeam and the Star Association. Etihad Airways Partners is made up of all airlines that Etihad has stakes (Pesek, 2015).

The company’s network expansion plan is focused on what it refers to as organic network growth, codeshare partnerships, and minority equity investments. The company’s organic network has worked well. It has contributed to an increasingly significant number of passengers in the recent past. For instance, the company’s partnerships contributed approximately 3.5million passengers onto Etihad Airways flights in 2014, which was an increase of 40% from the previous year’s 2.5million passengers.

Previously, the airline had 30 codeshare partners. This number allowed the company to access over 300 destinations across the world. In the early 2015, the company announced new codeshare agreements with seven new airlines, including Hong Kong Airlines, Aerolineas Argentinas, GOL, SAS, Air Europa, JetBlue, and Philippine Airlines, thus bringing the total number of codeshare partners to 37 airlines, which have far-reaching implications for the destinations and passengers whom the company can serve in the future (Pesek, 2015).

In 2014, the company announced a USD$560million investment in New Alitalia, an Italian Airline. This move translated into a 49% shareholding in the carrier and a 75% interest in the Alitalia Loyalty. Through the investment, Etihad was also able to gain five slots at London’s Heathrow Airport, which is one of the most expensive and competitive airports in gaining landing and taking off slots. In addition to its stake at New Alitalia, the company has other equity partners, which include Airberlin, Aer Lingus, Air Serbia, Air Seychelles, Virgin Australia, and Jet Airways (Pesek, 2015). The company is also in the process of finalizing a venture into Darwin Air Shuttle, which is among Etihad local transporters. These steps are major milestones towards ensuring that Etihad Airways will serve more customers to it reach as many destinations as possible. The efforts will lead to more customer loyalty due to its reliability.

Etihad’s Marketing Strategy

Just like other businesses, operating in the aviation sector is highly competitive. It requires putting in place marketing strategies that will allow an airline to analyze a potential market through the 4Ps model, which allows the segmenting, selecting, or targeting of the most profitable market division. The model allows the positioning of services to meet the needs of the market segments (Ferrell & Hartline, 2012). Diversifying is also a major part of this marketing process since it allows customers to know and, if possible, use the services or products of the company.

The primary promotion strategy is focused on the product. Etihad has done a commendable job in ensuring that its service, which is primarily air transport, is availed to the consumers in the best way to create a tremendous involvement. In this category, the airline offers categories of highly differentiated services, including the main class and two subclasses. Through these classes, the company seeks to reach each target market by providing the value that each target deserves.

The airline offers the Diamond First Class, which is the most luxurious and expensive class in the airline. In this class, the company seeks to offer top-of-the-world services to customers who wish to maintain their lifestyle in the air just as they do on the ground (Grimme, 2011).

The class comes with the ability of the passengers to decide their enjoyment level and the way they would like to be served while on-air and/or prior to the journey. For instance, on the ground, such customers are given access to first-class lounges that have a relaxation spa, refreshing showers, cigar lounges, and champagne bars at the Abu Dhabi International Airport, as well as other international airports that offer such services.

The Diamond First Class also factors in the family. Hence, it includes family rooms with unlimited access to the internet and TV shows at the airport. Once onboard, the company employs different tactics to achieve first-class services. The onboard Diamond First Class includes a private suite with sliding Arabian styled doors, built-in power socket for all electronics, wardrobe, and own-marble bathroom. In addition, the class provides five-star foods and beverages. On some occasions, it offers meals for special occasions such as birthdays and anniversaries (Grimme, 2011).

The Diamond First Class is benchmarked on five-star hotels and restaurants and hence the reason why the company has numerous awards for having the Best First Class Seat, Best First Class Onboard Catering, and Passenger Choice Award. The company has won the world’s leading airline, first-class consecutively from 2007 to 2014.

The Pearl business class is the second category in the airline. It focuses on business travelers and leisure. However, although this class is less expensive, the airline does not compromise the quality of services. Instead, it limits some of the services that are accessible to the first-class, such as the on-the-ground services in the Diamond First-Class Lounge (Mouawad, 2015). While onboard, a slight modification is witnessed on the food menu, although the company has been awarded the world’s best business class four times in a raw prior to 2011.

The business class in one of the most competitive segments since each outline tries to ensure that it has the best customer services in the segment. Etihad’s Coral Economy Class is one of the best in the industry. It includes all the necessary amenities that affect the level of travelers’ comfort. The company’s focus on the individual and more family support ensures that travelers’ wellbeing is well catered for. For instance, the class offers 32-inch legroom and an integrated footrest, with built-in power sockets, USB ports, and a 10-inch personal entertainment screen that offers more than 600 hours of shows (Grimme, 2011). Further, the entertainment includes a kids’ activity pack, especially for family travels.

Other services that make the airline a world leader in customer services and hence customer satisfaction include air transportation for goods through Etihad crystal cargo and holiday programs via the Etihad holidays and Etihad express2D. The airline also offers ground services such as airport pickup and private chauffer with a fleet of unbranded luxurious cars for its customers on an optional basis for coral class and free for diamond and pearl class ticket holders (Grimme, 2011). In terms of providing timely travel, the airline is rated at 73% with reference to timely departure and arrival times.

The second most important focus of the company’s marketing strategy in place. In these areas, the company has focused on establishing numerous offices across the world to serve customers in its destinations. These offices are important in selling air tickets, as well as ensuring that support is within reach of every consumer. The company also offers online and cell phone bookings that are supported by a professional call center that operates throughout the day and night.

In terms of promotion, the company has put enormous resources towards advertising and promoting itself as an excellent airline that offers luxury services that are suited to all passengers, regardless of the class in which they travel (Sandilands, 2015). The company’s website is its main advertising platform through which customers can access not only information on services but also booking or canceling their booking and/or contacting customer care. The company’s website offers what is referred to as the digital gate where customers can access information on booking such as seat selection, online check-in before flights, meal selection, interactive tours on the company’s facilities, and online flight status (Maslen, 2014).

The company’s website won the ‘the best airline website award’ in 2010, a clear indication of its desire to promote itself as customer friendly. The company’s marketing strategy also considers and uses other advertising platforms such as television and social media platforms such as Facebook and Twitter, among others.

The company is also involved in major sponsorship programs in many sports and cultural activities across the world. For instance, the company is the official sponsor of the Manchester City Football Club, which plays in the UK’s top football league, namely the premier confederation. Further, the airline has sponsored other major events such as the Formula-1 grand pix in Abu Dhabi and the Ferrari F1 team (Sandilands, 2015). The airline is the major sponsor of the Australian Hall of Fame and Harlequins Rugby Football Club. These efforts are important in attracting new customers and/or creating a brand identity that customers can relate to across the world.

Conclusion

Etihad Airways has defied all odds within its short span of operational history since 2003 to become one of the leading airlines of the world. Starting with only six aircraft in 2003 to 2004, the company’s fleet has grown to reach 117 state-of-the-art airplanes that have put the company on the map as not only a leading airline but also a business that has one of the most modern fleets. To achieve these phenomenal experiences, it is evident that its focus on customer satisfaction has played a major role.

For instance, the company has focused on offering reliable and timely services to more than 120 destinations around the world. In addition, to increase its reach, the company, through its equity and codeshare partnerships, has managed to reach a combined number of more than 300 destinations around the globe. Its services to all its classes are also among the best while its low-cost strategy has allowed it to penetrate and easily establish itself on new routes. Attention to clientele is evident in the company’s opening of as many offices and agent partnerships across the world to ensure that customers’ issues and inquiries are handled promptly where the company has destinations. The result of these efforts was a growth rate of 23% in passengers in 2014. The trend is anticipated to develop even as the company expands its destinations and fleet size.

Reference List

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Kotler, P., & Keller, K. (2012). Marketing Management. Upper Saddle River, NJ: Prentice Hall. Web.

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Mouawad, J. (2015). Etihad Airways’ Rapid Growth Frustrates Rivals. Web.

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