Impact of CoronaVirus on the Aviation Sector: Emirates Airline

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Introduction

Emirates Airline is one of the most successful and largest airlines in the aviation sector. The company has realised a consistent growth in the size of its fleet and revenues for over a decade. However, the recent outbreak of COVID-19, popularly known as the coronavirus, has had an unprecedented impact on the aviation sector. The number of people using air transport has been dropping consistently as health experts continue to discourage non-essential travels. In countries such as Italy and China, some provinces are in lockdown, a move that has put a further strain on the aviation sector.

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Many firms in this industry did not expect such an event and many are now struggling to ensure that they remain sustainable. The study focused on how Emirates Airline can overcome this problem. The study is based on secondary data, especially books, articles and reliable online sources. The findings show that this firm must embrace a unique strategy of overcoming the problem. It is not possible to predict when the virus will be properly contained, but stakeholders in the healthcare sector have made impressive steps to deal with the spread. In the meantime, it is the responsibility of the management of Emirates Airline to find ways of overcoming the challenge.

The study suggests that this firm should identify a specific segment of the market that still uses air transport and then develop unique products specifically for them. The management should consider slashing air ticket prices to attract more customers.

The aviation industry has experienced a massive growth over the years because of the need to move people from one part of the world to another within a short period and in a safe and comfortable way. However, Wheelen, Hunger and Hoffman (2015) explain that the industry has remained highly volatile and sensitive to various socio-economic and political changes both nationally and internationally. Competition is also stiff in this industry and firms have to find unique ways of achieving sustained growth. It is important to appreciate that the growing size of the middle class and the need to travel from one continent to another has been a major boost to players in the industry.

Many airlines around the world have registered impressive growth over the years because of the growing market opportunities. In the United Arab Emirates, Emirates Airline and Etihad Airways are the main local market leaders. The industry has other smaller players and major foreign airlines competing for the same market with the local industry leaders. The recent outbreak of Corona Virus (COVID-19) has had an unprecedented impact on the aviation sector. Some airlines have already been forced out of business because of a massive lockdown in some of the major destinations while many others are struggling to deal with the problem. The study seeks to investigate how Emirates Airline can deal with the impact of the corona virus to ensure that it remains sustainable. The following are the objectives of the study:

  • To determine the overall impact of corona virus on the aviation sector
  • To develop strategies that can enable Emirates Airline to overcome challenges posed by the corona virus.

Theoretical Framework and Topic Statement

Emirates Airline has been one of the most successful and rapidly expanding airlines in the global aviation market. It is currently ranked as one of the top five largest airlines globally in terms of the passengers they carry and the revenue they generate (Hitt, Ireland, & Hoskisson, 2017). Regionally, it is the dominant player within the Middle East and North Africa region. The management of this company has embraced various strategies meant to attract and retain more customers as a way of achieving sustainable growth.

However, the recent outbreak of coronavirus is a major threat to its growth. Many governments around the world have now banned direct flights to China, the epicentre of the virus, but also the most important market for aviation firms because of its huge population of 1.3 billion people. Italy is another major destination that is in lockdown as the government struggles to manage the spread of the virus. Individual travellers have opted to avoid making non-essential travels because of the fear of contracting the virus. Many airlines are feeling the pressure of reduced sales.

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Emirates Airline faces the dilemma of whether to stop flying some routes that have become non-profitable as a way of managing cost or to continue with its normal operations. Stopping some of the flights will help lower the cost, but it may lead to customer dissatisfaction.

On the other hand, continuing with its operations normally would help boost customers’ loyalty, but it may have devastating consequences, especially if most of the flights have to be made with few passengers on board. This is a strategic management issue that requires a deep analysis of the current problem before the management can decide on the way forward. It has to answer the question of whether to adjust its normal operations or not, taking into consideration the need to maintain its customers but at the same time avoid making losses in its operations.

Methodology

It is crucial to discuss methods that were used to collect data from the relevant sources and how they were interpreted to inform the study. The outbreak of the corona virus is a relatively recent phenomenon and it has affected almost every sector of the economy around the world. As such, it was important to obtain recent data that focus on the issue. Newspapers and government reports were the most reliable and effective sources of information in this project.

It was easy to get information about how different countries such as China and the United States are responding to the outbreak. Most of these current sources are available on the online platform. The study relied on books and journal articles. Although the books and articles do not inform about the corona virus outbreak, they offer insightful information about models that firms can use to respond to emergencies that may arise. These books also helped in understanding the volatility of the aviation industry and how firms can overcome it.

Once the data is collected from various sources, Kivunja and Kuyini (2017) explain that the next important phase is to process it in a way that addresses the research questions and objective. The goal of the study was to discuss the impact of coronavirus on the aviation sector, specifically focusing on how Emirates Airline has been affected and how its management can take the right steps to deal with the problem. The study used various models to help realise the objectives.

The analysis started by understanding the external forces in the aviation industry, both locally in the United Arab Emirates and internationally. The analysis then narrowed to the aviation industry to understand issues that all the airlines have to address. The study then focused on Emirates Airline specifically and how it can deal with the outbreak of corona virus to ensure that its operations remain sustainable.

Analysis

The aviation sector has been dealing with various forces in the market, from the volatile prices of oil to terrorism and cyber attacks. However, the recent outbreak of COVID-19 has had an unprecedented impact on the industry. The outbreak started in Wuhan Province, in China in late December 2019 (Newey & Gulland, 2020). The authorities in China and the World Health Organisation did not expect that it will become an international disaster. The rate at which the disease was spreading and the number of lives subsequently lost became alarming. Figure 1 below shows fatalities resulting from the disease in China within the first month of the outbreak. It became apparent that the contagious disease is spread through air and contact with someone infected (Yeung, 2020).

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The parties involved in the prevention and management of this disease, such as the World Health Organisation, Centre for Disease Control and Prevention (CDC), and various governments have suggested that the best way of dealing with the disaster is to ensure that those who are affected are quarantined so that they do not interact with those who are free of the virus. It became apparent that people should avoid major gatherings and at this point, many people started avoiding non-essential travels. It was at this point that the aviation sector started feeling the full effect of the pandemic as the number of their clients fell drastically.

Corona virus fatalities in China
Figure 1. Corona virus fatalities in China (Gelles & Chokshi, 2020, p. 4).

STEEP Analysis

When analysing the external environment, it is important to use STEEP Model to understand the forces that Emirates Airline has to deal with in the market. From a social angle, many people often embrace the culture of preventing disease instead of curing it (Taylor, 2020). It explains why many people have opted to avoid non-essential travels because of the outbreak of the disease. From the technological angle, it is important to note that COVID-19 is a relatively less researched virus and as such, it has no cure or vaccine.

Medical experts have advised that the best way of addressing the problem is to avoid contact with an affected person. The limited technical knowledge about the virus means that the aviation sector lacks proper ways of assuring its customers and employees of their safety. In fact, some airlines have opted to advise their workers to take unpaid leave.

The economic consequences of the corona virus outbreak are massive. Many companies are now advising their employees to work from home as a way of ensuring that they are safe from the virus. It means that the number of those travelling by air is expected to drop even further. The outbreak has affected the most important global markets of East and SouthEast Asia, Europe and North America (Yeung, 2020). Ecologically, the outbreak has had a minimal impact with respect to the aviation sector.

However, the trend of the disease is putting political pressure on some leaders around the world. In North America, the United States’ president has suggested restriction of direct flights to some parts of the world. In Italy, about half of the population is on lockdown. These actions have direct negative consequences on the aviation sector. Some of the companies are already making losses, but they are forced to continue with their operations and others are even considering lowering their prices as a way of remaining attractive to the few customers in the market.

Porter Five Forces Analysis

Porter’s five forces model can also be used to analyse the industry to determine how Emirates Airlie can overcome the challenges it is facing in the market. In this industry, there is a high level of rivalry among existing competitors (Lasserre, 2018). It means that with the dwindling number of customers, many firms will use strategies such as price reduction to attract customers. The threat of new entrants is relatively low at this time of crisis, which means that the management of the company should not worry much about it. However, the bargaining power of buyers (travellers) has gone up as those making essential travels have several options when choosing the airline that they should use.

The bargaining power of suppliers has been reduced slightly because of the outbreak of corona virus and as such, the management of this company should not be alarmed. The threat of substitute products remains low because the cruise ships, which may be an alternative to tourists travelling from one part of the world to the other, are worst affected by the outbreak (Taylor, 2020). Figure 2 below summarises the five forces that the management can use to understand the current state of the market.

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Porter’s Five Forces.
Figure 2, Porter’s Five Forces (Ocvirk, 2018).

SWOT Analysis

This analysis tool helps in understanding the internal forces within the company that can help or hinder it from dealing with the external forces in the market. The biggest strength of this company is its financial success over the years. Financial analysis of this airline shows that it gas registered impressive growth since 2006, as shown in figure 3 below. From 2010 to 2016, Emirates registered a 99% growth in its revenues (Bolland, 2017). It means that this company can still be sustainable for the next several months as it monitors the trend of the outbreak.

Emirates’ revenue growth.
Figure 3. Emirates’ revenue growth (Lynch, 2018, p. 45).

The biggest weakness of this company is its limited flexibility because of its massive size. It may take a while for this firm to redesign its operations in case the outbreak of the corona virus demands so. The market presents new opportunities as it is evident that the global health community is working on ways of dealing with the virus. In China, it is evident that the rate of new infections is dropping significantly, which is a sign that the approach that the government is using is working (Lasserre, 2018). However, the management of Emirates should be ready for a threat of a similar outbreak in the future. It should put in place measures that can help deal with the problem.

Strategy Formation

The management of Emirates Airline must find a way of overcoming the current pandemic of corona outbreak. The problem may soon be resolved, but as long as it lasts, it is necessary to find an effective way of dealing with it. It is necessary to embrace various short to mid-term strategies that will help in protective revenue flow for the next several months before normalcy is restored in the aviation sector. In this section of the paper, the focus is to discuss how these strategies can be employed to achieve the desired goals.

Comparing Strategies

It is necessary to compare strategies that the company can use to achieve specific goals in the market. As discussed above, the issue that the firm has to deal with currently is the drastic drop in the number of travellers as a result of the corona virus outbreak. Strategies proposed should enable this firm to weather the current storm and remain operational when the pandemic is finally addressed. Marketing mix strategy, segmentation, targeting and positioning model, and Porter’s generic strategies are some of the strategies that the firm can use to address the short-term challenges. Marketing mix strategy focuses on the four Ps of product, price, place and promotion (Dhir & Sushil, 2019).

The current challenges that this firm is going through requires that it focuses on price and promotion as a way of increasing its sales. Given its dominance in the market, it can afford to drop its ticket price to attract more customers. At this time of crisis, Özman (2017) advises that a firm should consider promoting its products and brand to ensure that it remains relevant in the market. The other two alternative strategies are discussed in the sections below. These other strategies have the potential of ensuring that operations of Emirates Airline are not significantly disrupted.

General Strategy Proposed

The external and internal analysis conducted above has clearly outlined the challenge that this company faces and at this stage, the focus is to identify ways of dealing with it. Segmentation, targeting and positioning model (STP) is the general strategy proposed that the management of Emirates Airline can use to overcome the current problem. The simple strategy starts by segmenting the market (Ocvirk, 2018). In the context of the corona virus outbreak, market segmentation should focus on those who cannot afford to travel because of the nature of their work or other commitments versus those who are likely to cancel or postpone their travels.

The next step is to target a specific market. The team should focus on those who have to make essential travels because of the nature of their work. Once the targeted market is identified, the last stage is to position the brand and products appropriately in a way that is attractive to the selected market. In this case, the firm can develop short-term products suitable for these travellers (Lynch, 2018). It may include having smaller planes for the few travellers and focusing on specific routes in the market.

The Functional Strategies: Emirates Airlines’ Generic Level Strategy

The findings made in the analysis above show that the management of Emirates Airline will need to formulate an effective strategy of managing the problem brought about by the corona outbreak. Porter’s generic strategies, shown in figure 4 below, identifies four potential strategies, cost leadership, cost focus, differentiation focus and differentiation leadership, that a firm can use to achieve competitive advantage in the market.

The airline should embrace cost leadership because of its strong source of competitive advantage and broad markets where the business operates. Choosing this functional strategy means that this company will lower the price of air tickets for its customers. Özman (2017) warns that pricing is a dangerous tool to use in a highly competitive market, especially when rival firms can embrace the same strategy. However, this will be a short-term approach to dealing with emerging problems. It is expected that the company will revert to its normal strategies once the pandemic is addressed.

Porter’s generic strategies
Figure 4. Porter’s generic strategies (Dhir & Sushil, 2019, p. 78).

Monitoring and Evaluation

The primary goal of the management of this company is to ensure that it will overcome the current drop in the number of customers caused by the global outbreak of corona virus. The effort that the international community has placed towards addressing the problem shows that the problem will be under control soon. However, it is not easy to predict when the problem will be resolved and when operations in the aviation sector will get back to normalcy. In the meantime, the suggested strategies will help this firm to remain afloat and avoid cases where it is pushed out of the market. In the previous section, it was suggested that the appropriate strategy that this firm should embrace is a temporary reduction in the price of its air tickets.

The strategy is meant to attract more passengers to ensure that operations of this firm remain sustainable during the current period where the aviation industry is struggling with a major drop in the number of travellers. In this case, it is necessary to develop appropriate tools that will be used to monitor and evaluate the selected strategies to determine if it is delivering the expected results. The management must use two strategies of monitoring and evaluating the performance of the strategy, which are getting regular feedback from customers and monitoring the company’s revenues. It is necessary to discuss each of these strategies in detail.

Customer Feedback

The management should develop an effective feedback mechanism to determine if the targeted customers feel that the incentive is adequate to attract them to the company. When using pricing as a short-term strategy, Dhir & Sushil (2019) advise that it is critical to inform customers that the change is temporary to ensure that when normal pricing is restored, clients will not feel cheated. In this case, the international community, especially those who use air transport regularly, is aware of the corona virus pandemic. They also understand the consequences of the outbreak to the aviation sector. As such, this company should inform its customers that this temporary change in price is caused by the pandemic.

It is also necessary for the firm to ask its clients whether they consider the pricing approach appropriate in attracting them to the firm. Given the fact that the majority of people often purchase their air tickets in online platforms, the firm can have short online surveys for customers upon making their purchases (Ocvirk, 2018). The survey should be brief and focused on determining the perception of travellers towards the reaction of this firm to corona outbreak. When the majority of respondents feel satisfied with the chosen strategy, the management of the airline will be convinced that the chosen strategy is effective. During the customer-based evaluation process, the management should be ready to adjust its operations in line with the suggestions provided by customers.

Monitoring Company’s Revenues and Expenses

The marketing department of the Emirates Airline, working closely with the finance department, should develop mechanisms of monitoring the revenues of the company to determine if it is making the right progress towards the set objectives. As explained above, the goal during the challenging period of corona virus outbreak is to ensure that revenues of the firm can sustain normal operations even if the overall profitability of the firm drops.

Lasserre (2018) believes that cutting down operations during a period of crisis may not be the best approach to take for a firm that seeks to make a successful entry into new markets in a highly competitive industry. Instead of cutting down on operations, such a firm should consider scaling them up. However, the firm cannot venture into an expansion program at a time when the industry is plagued by the outbreak of the corona virus.

Monitoring closely the company’s revenue will help to determine if the strategy that has been embraced is working. There should be regular comparative analysis of the firm’s revenues, preferably every weekly because this is a short-term strategy. The firm should monitor weekly changes in the revenues to determine if the proposed strategy is working. Under this strategy, it is often advisable to go beyond just monitoring the revenues of the firm. The expenditure of the firm within that period should also be evaluated. The primary goal is to ensure that revenue generated from the normal operations of the company is capable of paying for all the expenses.

Conclusion

Emirates Airline has registered impressive growth over the past decade because of its effective management and investments in growth and development projects. It is currently one of the leading global airlines. However, the recent global outbreak of COVID-19 has had a major impact on the normal operations of the company and the aviation sector in general. China, which is one of the major destinations for this outline, is the epicentre of this pandemic.

Italy, the United States, Japan, Spain and many other European countries have been affected by the outbreak. As shown in the discussion above, governments all over the world have advised their citizens to avoid non-essential travels, a move that has significantly reduced the number of customers for airlines. In this report, various measures have been identified that can help this company to overcome the challenge to ensure that it remains sustainable.

Using the STP model, as shown in the findings above, it is suggested that the management of Emirates Airline should identify specific customers who still have to use air transport despite the current outbreak of the corona virus. The firm should then develop unique products that meet their expectations in the best way possible. The firm should also consider slashing its prices just to ensure that it increases the number of its customers. Future research should focus on how airlines can respond to similar emergencies that do not arise from the aviation sector. They should find models that firms in the aviation sector can use to respond to unpredictable events such as natural disasters that may have a prolonged impact on the industry.

References

Bolland, E. J. (2017). Comprehensive strategic management: A guide for students, insight for managers. London, UK: Emerald Publishing.

Dhir, S., & Sushil, P. (2019). Cases in strategic management: A flexibility perspective. London, UK: Springer.

Gelles, D., & Chokshi, N. (2020). Almost without precedent: Airlines hit hard by corona virus. The New York Times. Web.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic management: Competitiveness & globalization. Boston, MA: Cengage Learning.

Kivunja, C., & Kuyini, A. B. (2017). Understanding and applying research paradigms in educational contexts. International Journal of Higher Education, 6(5), 26-39.

Lasserre, P. (2018). Global strategic management. London, UK: Palgrave.

Lynch, R. L. (2018). Strategic management. New York, NY: Pearson.

Newey, S., & Gulland, A. (2020). What is corona virus, how did it start and could the outbreak grow bigger? The Telegraph. Web.

Ocvirk, G. (2018). Strategic management of market niches: A model framework. Wiesbaden, Germany: Springer.

Özman, M. (2017). Strategic management of innovation networks. New York, NY: Cambridge University Press.

Taylor, C. (2020). Corona virus impact on airlines ‘has a 9/11 feel,’ analyst says. CNBC. Web.

Wheelen, T. L., Hunger, J. D., & Hoffman, A. N. (2015). Strategic management and business policy: Globalization, innovation and sustainability (15th ed). Harlow, UK: Pearson.

Yeung, J. (2020). Corona virus sparks total lockdown in Italy and alarm in the US as cases rise globally. CNN. Web.

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BusinessEssay. (2022, January 15). Impact of CoronaVirus on the Aviation Sector: Emirates Airline. Retrieved from https://business-essay.com/impact-of-coronavirus-on-the-aviation-sector-emirates-airline/

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BusinessEssay. (2022) 'Impact of CoronaVirus on the Aviation Sector: Emirates Airline'. 15 January.

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BusinessEssay. 2022. "Impact of CoronaVirus on the Aviation Sector: Emirates Airline." January 15, 2022. https://business-essay.com/impact-of-coronavirus-on-the-aviation-sector-emirates-airline/.

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BusinessEssay. "Impact of CoronaVirus on the Aviation Sector: Emirates Airline." January 15, 2022. https://business-essay.com/impact-of-coronavirus-on-the-aviation-sector-emirates-airline/.