Introduction
Etihad Airways is an international airline business whose operations base is Abu Dhabi International Airport. The airline was established through the royal decree in 2003. The company is a state-owned entity, which is under the management of the Government of Abu Dhabi. Etihad was established with the sole mission of becoming the leader in the global airline industry. It endeavors to mirror the principles of Arabian affection and kindness and improve the image of Abu Dhabi as a global tourism and business hub. The company owns a number of Boeing airplanes and narrow and wide-body airbus.
It offers a myriad of services in Asia, North America, the Middle East, and Europe. Apart from passenger transportation, the company also provides cargo services. Etihad Airways has entered into a partnership with numerous airline companies as a strategy to overcome competition in the aviation industry. The corporation works with airlines such as Air Serbia, Jet Airways, Air Berlin, Alitalia, and Virgin Australia through code-share agreements (Gulf News). It has also taken multiple initiatives to restructure its operations and boost the value chain to improve competitiveness (Gulf News). This paper will discuss the strategies that Etihad Airways uses to boost the value chain and overcome competition in the airline business.
Analysis of the Industry and Competition
Legacy airlines control the aviation industry. Moreover, Gulf News states that increased barriers to market entry make it difficult for potential investors to venture into this sector. Despite the restrictions to entry, numerous challenges characterize the industry, making it hard for renowned airlines to compete effectively. Gulf News alleges that infrastructure requirements and limitations to market access prevent most airlines from competing with mega-carriers. Gulf News cites network as a major challenge that hinders the performance of many airlines. A company cannot establish a stable network within a short duration.
The process of building an international network takes decades and requires a lot of money, which many airline businesses cannot afford. It underscores the reason many airline companies opt to work together under code-share agreements to boost their influence in the industry (Gulf News). Code-share agreements and equity investments in major airline companies have enabled Etihad to assert its influence in the global airline business.
Today, Etihad competes with two major airline companies. They are Qatar Airways and Emirates. As Dudley puts it, Emirates is the leading airline in the Middle East. The company manages a fleet of 268 airplanes and operates in 155 destinations (Dudley). In contrast, Qatar Airways has 213 aircraft and serves 150 destinations (Dudley). Etihad Airline, which is the youngest company of the three, has 115 airplanes and serves 100 cities (Dudley). Emirates Airline is managed by the government of Dubai, which explains the reason the company has sufficient resources to compete on a global platform.
The company records huge profits compared to Qatar and Etihad Airways. Dudley claims that Emirates makes an annual profit that exceeds one billion dollars. Qatar Airways also makes a significant profit and the company has been doing well for the past few years. The major challenge facing the airline is the recent economic embargo initiated by most Gulf States. Nevertheless, Dudley claims that the company’s losses are yet to surpass those posted by Etihad. In 2016 and 2017, Etihad reported a net loss, which amounted to $1.9bn and $1.5bn respectively (Dudley). There had been speculations that Etihad was planning to merge with Emirates to enable it to overcome financial challenges.
The recent economic boycott led to Qatar Airways being denied an opportunity to operate in Abu Dhabi, Bahrain, Dubai, Egypt, and Saudi Arabia. The move prevented the airline from competing with Etihad and Emirates in these countries. Nevertheless, the action by the governments of these countries opened a new dimension of competition between Etihad and Emirates. In 2017, Emirates announced that it aimed at increasing its fleet of Boeing airplanes to boost competitiveness (Calder). During the Dubai Air Show, the company also revealed that it intended to introduce a new first-class package to attract more customers.
Despite the huge projects that the airline aspired to implement, the 2017 financial report showed that Emirates was not doing well. Calder claimed that the company’s annual profit declined by 70%. Nonetheless, the airline was still doing well compared to Etihad and Qatar Airways.
The collapse of Alitalia and Air Berlin offered Emirates and Qatar Airways an opportunity to wage stiff competition against Etihad. Ali posits that Etihad had an intention to dominate the global airline industry by buying stakes in major airline companies. However, the firm’s plan did not succeed following the insolvency of Alitalia and Air Berlin in 2017 (Ali). In the last two years, Etihad has incurred losses amounting to over $3.52bn (Ali). It underscores the reason the business restructured its leadership and global strategy to help it recover from the losses. Despite the economic sanctions imposed on Qatar, the country’s major airline company has found alternative measures to improve competition in the aviation sector.
Ali alleges that the airline has purchased equity in Cathay Pacific, which is a Hong Kong-based aviation business. The move has enabled Qatar Airways to improve its influence in the Chinese aviation market. For many years, Emirates has avoided establishing partnerships with other international airlines. This strategy has worked well for the airline, enabling it to improve services across its cabins. Ali alleges that Emirates is contemplating investing in small airplanes to enable it to target different clients and increase destinations. Although Emirates and Qatar Airways have taken advantage of Etihad’s failures, the two companies are encountering new threats. Rival firms like Turkish Airlines have replicated the strategies that the two airlines use and are in the process of asserting their influence in the Asian and European markets.
Value Chain
Competition in the aviation industry has compelled airline companies to work on their value chains to improve customer experience. Etihad has modified its cabins to boost the consumer experience. The company does not view its clients as passengers. Instead, it treats them as guests (Landor). The determination to provide outstanding services has resulted in Etihad dividing its travel packages into four distinct classes that suit varied categories of guests. The company has a “simply smarter economy class” (Landor), which seeks to reinvent minor experiences that most airline companies underrate. Landor claims that this class arouses a sense of impulsiveness, surprise, and pleasure in guests. The company has an intelligent business class, which targets a novel group of customers who defy the conventional beliefs of business class. Etihad offers a first-class package that serves clients who wish to travel in luxurious cabins. The company provides personalized services to boost customer experience. In addition to being first-class, Etihad has a VVIP travel suite. The package targets a small group of affluent customers who fancy exclusive services.
The aim of Etihad’s management is to make the company the principal airline. Consequently, Etihad has invested in employee development, digital innovation, and technology to advance service delivery (Etihad Airways). In 2017, the company purchased additional airplanes, which included an Airbus A330F, nine Boeing 787-9 Dreamliners, and two Airbus A380s (Etihad Airways). The introduction of new airplanes enabled the company to enhance network punctuality (Etihad Airways). Indeed, the company is regarded as one of the most efficient and steadfast airlines globally. Etihad has worked hard to build the capacity of its employees through training. The company’s chief executive officer (CEO) admitted that investment in employee development has enabled Etihad to increase passenger yields by 9% (Etihad Airways). Moreover, it has helped the company to reduce operations costs without affecting quality and safety in all spheres of the business.
Etihad has invested in technology to enhance its connection with travelers. The company has partnered with Travelport Digital to create a smartphone application that allows guests to make travel arrangements without having to visit agencies or contact Etihad’s customer care staff (Travelport Digital). The company offers incentives to guests to encourage them to use the application. Travelport Digital maintains that the application is easy to use, hence preferred by most customers. It enables guests to purchase tickets using their credit cards. Moreover, travelers do not require to visit Etihad’s offices to confirm their flight. They can scan their passports using smartphones to sign up for air travel.
Emirates Airline has invested in product innovation and fleet improvement to bolster its influence in the airline industry. According to Tadros, the company purchased 21 additional airplanes in 2017 (“Emirates Ends 2017”). The airline “made global headlines at the Dubai Air Show when it placed a US $15.1 billion for 40 Boeing 787 Dreamliners” (Tadros, “Emirates Ends 2017”). The purchase of new aircraft has allowed the company to operate an efficient fleet, which offers flexibility, enabling Emirates to target new destinations. Just like Etihad, Emirates values employee development. The company runs a flight training academy that has helped the firm to equip its pilots with next-generation flight skills. The investment in training academy underscores the company’s commitment to improving service delivery in the aviation industry.
Emirates endeavors to provide customer-centered services. The company offers “complimentary tablet and laptop handling services on the ground, and provides a tablet loan service to its premium passengers onboard” (Tadros, “Emirates Ends 2017”). The airline has improved its A380 Onboard Lounge to enhance customer experience. Currently, the company’s A380 is equipped with modern lighting and sound systems. Moreover, they feature exquisite yacht-inspired furnishings and unique seating arrangements to guarantee comfort (Tadros, “Emirates Ends 2017”). In 2017, the airline launched an innovative first-class private package, and also improved all its cabin classes. The private suite features climate control and tailor-made lighting functionalities (Tadros, “Emirates Ends 2017”). The passengers traveling in the first class also have the privilege of interacting with cabin crew via private video call.
Qatar Airways is renowned for tailoring its products and services to the needs of the target clients. It was the first airline to design an airport in line with passengers’ needs (Garcia). The company aimed at guaranteeing flawless changeover from one point of the journey to another. Hamad International Airport was designed to provide one-stop-shop services to all customers (Garcia). Qatar Airways worked in collaboration with numerous brands to establish stores and restaurants at the airport (Garcia). Furthermore, it has hired employees who assist premium passengers in the check-in processes to guarantee seamless operations.
Qatar Airways has invested in technology to improve service delivery and minimize operations costs. Moleshead argues that a need to enhance service provision and improve performance led to the airline investing in Sita’s Intranet Connection. The company is undertaking an information technology project that will be of great value to customers. The airline’s CEO alleges, “The new IT applications linked via an IP network will be used to streamline business processes and provide our customers with a seamless service” (Moleshead). Fleet management is critical to the success of any airline business. Just like Etihad and Emirates, Qatar Airways has upgraded its fleet of aircraft. It has purchased modern airplanes in line with its intent of providing excellent services (Moleshead). Moreover, it has equipped them with advanced technology to allow customers to connect with friends even when traveling.
Business-Level and Corporate-Level Strategies
The ultimate goal of Etihad Airways is to dominate the airline industry. Consequently, the company has initiated business-level and corporate-level strategies aimed at helping it to achieve this dream. At the business level, Etihad has invested in technology meant to assist the firm in developing its value chain. The airline has signed a deal with Cognizant, which will help it to “define its digital strategy and reimagine the guest experience along a guest’s travel journey across the group” (Vateta).
Vateta says that Cognizant will transform Etihad’s technology, enabling the airline to offer customized marketing services and manage multiple distribution channels. Investment in technology will allow the airline to gather client information and insights, which will be vital in assisting the company to meet the individual needs of its guests. Etihad appreciates that it serves diverse guests with unique preferences. Thus, the company hopes to use Cognizant’s acquaintance in technology to introduce customized travel solutions into its business. The airline is in the process of restructuring the seating arrangements of its airplanes and serving different varieties of meals to meet the demands of the target guests. Moreover, Etihad continues to develop its global network by targeting extra destinations.
At the corporate level, Etihad has liaised with Accenture to help it to improve its human resource capabilities and supply chain management. The airline’s chief information and technology officer argued that for the company to achieve sustainable growth, it requires improving business processes (Kassem). Therefore, the business is determined to come up with a scalable, universal technology platform that will enable it to unite all its operations. Etihad has bought shares in major airlines and formed partnerships through code-share (Kassem). The goal is to enable the company to diversify its investment and operations. Nevertheless, the partnership with Alitalia and Air Berlin was affected after the two companies collapsed. For the airline to profit from equity investment, it should collaborate with firms that do not operate in competitive environments.
Qatar Airways has embarked on a business-level strategy aimed at mitigating the impacts of an economic boycott by most Gulf countries. The company is expanding its global network by targeting additional destinations (Topham). The tactic will enable the business to realize its goal of connecting passengers worldwide. The firm’s management reiterated the airline’s commitment to offering exceptional services to customers. Qatar Airways has modified its airplanes to meet the needs of varied groups of travelers. It offers in-flight entertainment to ensure that passengers enjoy their journey.
The airline appreciates the importance of maintaining a close relationship with customers. Consequently, it has social media platforms that allow it to gather feedback from customers. The information obtained from travelers is vital in helping the company to improve service delivery (Saharudin). Apart from using social media to gather consumer feedback, the company leverages the networks’ power to promote its brand image.
At the corporate level, Qatar Airways is in the process of forming alliances with other airlines to improve service delivery and minimize competition. The airline dedicates itself to ensuring that customers reach destinations of their choice without difficulties. In line with this value chain objective, the company has bought stakes in British Airways. Topham cites employment policies as one of the factors that prevent Qatar Airways from realizing its corporate goals. The airline does not allow female workers to marry.
Additionally, female employees are terminated if they are found to be pregnant. Such policies violate international labor standards. Moreover, they may lead to Qatar Airways being denied the opportunity to form alliances with major airlines. In fact, the British Airways’ trade union has expressed its dissatisfaction with Qatar Airways’ employment culture.
Emirates Airline focuses on the fleet strategy to boost operational efficiency. The company has modern aircraft that are customized to provide exceptional onboard experiences. Through Dubai Airport, the airline provides expedient one-stop or non-stop connectivity internationally. At the business level, the company has embarked on a strategy to diversify its global network to connect travelers to different destinations. Today, Emirates has airplanes that fly to Cebu, Zhengzhou, Clark, and YinChuan (Tadros, “Emirates Recognized for Network”). The airline has improved its products and services so as to offer an exceptional experience to consumers. Emirates continues to renovate its lounges to guarantee that travelers enjoy the company’s accommodation services.
For decades, Emirates Airline has concentrated on improving services to enable it to compete in the global market. Today, the company has expressed its interest in forming alliances with other airlines. As one of the airline’s corporate strategies, Emirates has formed partnerships with Malaysia Airlines and Qantas (CAPA). The alliances will help the airline to overcome competition and improve service delivery. The major challenge with Emirates’ corporate strategy is that it has focused on establishing big partnerships. The airline requires creating room for flexibility. Emirates requires forming small partnerships that will enable it to grow its global network.
Conclusion
Etihad Airways is one of the airline companies with operations in major destinations across the globe. The company was established with the goal of becoming a leader in the airline business. Today, Etihad faces stiff competition from Emirates and Qatar Airways. The three airline companies come from the same region. Moreover, they use almost similar strategies in their operations. Equity investment and code-share have enabled Etihad to establish alliances with other airline companies, thus minimizing competition and expanding its global network.
Emirates, Etihad, and Qatar Airways have invested in fleet management to improve service delivery and customer experience. The three airline companies have fleets of modern aircraft that are equipped with advanced technology. Qatar Airways endeavors to improve customer experience and guarantee seamless service delivery. The airline designed Hamad International Airport in a way that guaranteed flawless operations. Etihad acknowledges the role of employees in its success. Thus, the company values employee development.
Etihad and Emirates have benefited from the economic sanctions imposed by the many Gulf States against Qatar. Qatar Airways no longer operates in these countries, leaving Etihad and Emirates to compete for clients that were initially served by the airline.
Etihad, Emirates, and Qatar Airways have initiated corporate and business-level strategies aimed at helping them to increase revenue and improve the value chain. Etihad has worked in collaboration with Cognizant to create a technology that will enable it to gather feedback from guests, thus using the information to improve its services. At the corporate level, Etihad has purchased stakes in numerous airlines and signed agreements through code-share to enable it to grow its network. On the other hand, Qatar Airways is looking for alternative destinations to moderate the impacts of the economic embargo imposed by the Gulf nations. Moreover, it has created social media platforms that allow it to maintain close ties with customers.
Social networks are also useful in promoting the airline’s brand. The company is devoted to ensuring that it assists travelers to reach as many destinations as possible. Consequently, one of its corporate strategies entails establishing partnerships with other airlines to expand its network. Qatar Airways has already bought shares in British Airways. Emirates has directed its effort to fleet management to guarantee quality services. The airline owns one of the youngest fleets in the world. The company’s base of operations is in Dubai Airport. Through this terminal, Emirates provides one-stop or non-stop connectivity to different destinations worldwide. The airline is contemplating forming alliances with major airways across the globe. The move will enable Emirates to improve service provision and raise its revenue.
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