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Factors Influencing Airline Success

Pestel Analysis

The airline industry is faced several factors that affect the success of the industry. For the part of the aviation sector in Dubai, there are several factors that have led to the success of the industry. First, Dubai is drastically becoming one of the major destination for businessmen and entrepreneurs. This means that there are people coming into the city all year round for tourism and trade. The government has provided the airline industry with adequate freedom and ease of operation. Politically, although there is a difficulty for foreign airlines to profit from these incentives, the government has adequately allowed space for local airlines to work and profit. The cultural and religious orientation of the people and businesses in the country discourage unfair competition among businesses. This means that all businesses whether large or small are governed by a strict moral conduct which ensures that there is an economically safe environment for all (O’Connell 2011).

Dubai has a liberal policy which has two distinct but supporting aspects. Dubai favours open competition among carriers.  Today there are over 150 airlines that operate out of Dubai International, benefiting from its infrastructure and competitive landing charges. Besides, Dubai’s Civil Aviation Authority, working with its UAE equivalent (the General Civil Aviation Authority) has pushed for more freedoms for airlines to enable them to operate without much restrictions on their financial decisions. The biggest obstacle to this is restricted air access rights elsewhere, and Dubai through its civil aviation authorities has sought to improve this situation through negotiation with several other governments (Namaki 2007).

SWOT Analysis

The internal environment of Emirates is characterised by several important strengths. First it boasts of being the first airline in the Arab world and the most successful over the years. With an e-booking system, the airline is able to provide up-to date services for the growing population and hence able to serve a large population in the Arab world and all over the world. However, one major weakness facing the company is the high operational cost related to the escalating prices of goods and equipment for airline operations.

Even with these weaknesses, the airline has an opportunity to increase its competitive position. First, the emerging economies provide new destinations for business that the airline may consider investing in. Secondly, the growing population and challenges affecting the industry provides an opportunity as many people are considering using the experienced airlines which are deemed to be much safer. The only threat is that there is an ever-increasing number of new airlines entering into the market with new incentives to attract customers. This toughens the competition in the airline industry (Flight Global 2016).

Porters 5- Forces Analysis

Threat of new entrants

Today, the airline industry is so concentrated that there is no more space for the newcomer to enter the market. The threat of new entrants for airline industry is high. The airline industry is among the most valuable industries, due to the cost of buying and leasing aircraft, safety and security measures, customer service and labour.

Threat of substitutes

Substitutes for air travels can include travelling by train, bus or car to the desired destination. The magnitude of this threat depends on various factors such as money, convenience, time and personal preference of travellers. The competition from substitutes is based on the ease of which buyers can change over to a replacement. This threat is rather low for Emirates.

Bargaining power of buyers

Firms can take ways to reduce buyer authority, such as implementing a reliability program. Emirates also sponsors an amount of major events and sports teams around Europe in so as to attract more clients. The bargaining influence of buyers is high and is another strength that can affect the conservative position of a company.

Bargaining power of supplier

Emirates enjoys a huge advantage when competing with other airlines in Europe due to its lower relative cost of labour. The bargaining power of suppliers is therefore low.

Industry rivalry

In the aviation sector, advertising battles, price competition, productions and increased client service are very critical.The aviation sector competition becomes even more unpredictable if some airlines are elevated in achieving victory. Such may be eager to sacrifice productivity for the sake of development.

 

The government of Dubai owns the Emirate’s major airports and airlines which are usually is publicly owned. Awareness by the government of Dubai on how important its aviation sector is to the emirate’s economic development is very unusual.  This knowledge manifests itself ineffective decision making that is results-focused. Another advantage flows from the ability of a small number of senior individuals in government and in the aviation sector to maintain close contact and reach decisions quickly(O’Connell 2011).

Airlines Competitive Strategy

Emirates Airline has been able to secure and create a stable client base through the employment of several strategic moves. Through the use of technology in bookings and communicating with the consumers, the company has been able to move with speed to increase its reputation in the market. This is the same platform that the airline has used to successfully market its products and services. On the product life-cycle, emirates airline is t its maturity stage owing to large and perfect competition in the market(Pels 2009).

The Business Model Network and Growth Plans

The business model for Emirates airline involves three important strategies. These are the quality control strategies, extensive training strategy, international airline ICT development strategy, and the hospitality strategy. The growth plans for emirates are to make the services more efficient, facilitate expansion of the existing services and long-term minimisation of cost.

Over the last ten years, Emirates has expanded its fleet from 32 to 142 passenger planes. Measured regarding available seat kilometres (ASKM), the expansion has been even greater.   Due to this growth, Emirates has accounted for a larger share of Dubai international passenger traffic. At the beginning of the decade, Emirates accounted one-third of passengers handled at Dubai International and increased by the end of the decade to two-thirds.

Dubai Airports has lived up to the Emirates’ rapid expansion by expanding its own capacity. For instance, in 2000, Dubai International could handle 22 million per year, but through substantial investment in upgrading its facilities, the airport could handle 60 million passengers in 2010(O’Connell 2011).

Through this investment, Dubai Airports offers airlines and their passengers some of the best and modern facilities in the industry. Moreover, Emirates has demonstrated that Dubai‘s strategic location within the eight hours flight of most major destinations, and its attraction as a centre of tourism, trade, and commerce, is turned into a rapid competitive advantage. These strengths have attracted other airlines as well, with over 150 airlines currently operating in and out of Dubai(Pels 2009).

Market Uncertainties and Future Plans

With the growing rivalry in the industry, emirates is faced with uncertainties especially with the already concentrated markets in America and Europe. Over these airline markets, Emirates has very little competitive edge (Pels 2009). This leaves the airline with some future alliance plans which also increase the level of uncertainty. The alliance, with already established airlines in the established markets will probably increase the penetration of the airline in the markets and increase revenue and profits without the establishment costs.

Recommendations

With the current trend and the A380 business operating plans, Emirates Airline must ensure that it maintains its own customer base before seeking to expand. The airline must look into the emerging market where the cost of establishment is low and where customers can be wooed into trusting the airline.

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