This SWOT analysis focuses on Fly Emirates and its services in the Asia-Pacific market segment. The Emirates Group comprises two distinct entities under one management – Emirates and DNATA. These subsidiaries operate interdependently and encompass several companies providing different services. Emirates offers air transportation, consumer goods, in-flight catering programs, and integrated hotel services through its divisions, joint ventures, and associates. DNATA primarily provides airport operations for cargo and freight logistics. From its main hub in Dubai, UAE, the carrier currently operates in several destinations globally. The airline offers short- and long-haul services to various routes in the Middle East, European Union, North America, South America, and Asia-Pacific countries.
SWOT Analysis
Explanation
Strengths
Youngest Fleet
Core competency analysis revealed that Emirates operates a younger and newest fleet in the industry. With 118 A380 Airbus planes and 134 Boeing 777s fitted with private suites and spas, the airline can provide quality services to first-class travelers (Emirates Group, 2022a). Other features such as lie-flat seats, in-flight Wi-Fi, lounge bars, and private hotel rooms have revolutionized the travel experience for First Class, Business Class, and Economy Class.
Strong Government Support
PESTLE analysis showed that ownership of the Emirates Group by the government is critical to the survival of the airline in turbulent times. The airline industry is susceptible to political factors, including pandemic-related travel restrictions, which hamper long-term growth (Abate et al., 2020). As a state-owned carrier, Emirates Airlines has access to financial and diplomatic resources to weather economic crises and obtain favorable sky policy for expansion to potential destinations in the Asia-Pacific region.
Strong Market Presence
Emirates has operations in several countries, helping mitigate risks related to overreliance on a single market. As revealed by the five forces analysis, high entry barriers in the industry ensure that Emirates has a strong presence in 78 countries globally, with Asia-Pacific (East Asia and Australasia segments) contributing 28% of its earnings in 2020 (Emirates Group, 2022b). Thus, Emirates can leverage its operations to penetrate this market further.
Weaknesses
Greater Focus on High-end Clients
Emirates prioritizes luxury cabins to offer exceptional service at high fares. According to Emirates Group (2022a), its A380s and Boeing 777s have lie-flat seats, quality in-flight meals, lounge bars, and entertainment. The provision of excellent service at a premium price increases its unit costs. Emirates’ cost per available seat kilometer is ¢8, which is higher than ¢7 for low-cost operator EasyJet (CAPA, 2022).
Decline in Revenues
Poor financial performance may affect investment flows and growth strategy. Emirates’ revenue declined sharply in 2020, reporting $8.4 billion, which is a 67% drop from the 2019 earnings (MarketLine, 2022). Thus, pandemic-related slow growth may affect investor confidence and hurt its expansion goals.
Fewer Domestic Travelers
Emirates has a lower share of the domestic market than Etihad, the national carrier of UAE. Its seat capacity decreased by 83% in 2021 because of unfavorable routes and pricing (Thomas, 2021). Its focus on premium seats presents a weakness, as this strategy is not anchored in high-volume budget travel that is dominated by domestic passengers.
Opportunities
Strategic Alliances
The low-cost segment is a growing subsector in Asia-Pacific. Strategic alliances with budget carriers such as AirAsia will enable Emirates to have a foothold in the region. Globaldata Travel and Tourism (2022) report reveals that up to 57% of travelers in China, India, Australia, and Singapore are influenced by cost and availability when traveling. Thus, there is a high demand for cheaper carriers in this region.
Diversifying Operations
Asia-Pacific countries offer opportunities for intra-regional travel that Emirates Airlines can tap into by launching new destinations in the region. Domestic and international travel is underdeveloped in India and China due to low air connectivity to tourist centers (Globaldata Travel and Tourism, 2022). By expanding to these countries through the low-cost model, Emirates will increase its inbound tourism earnings.
Expansion of Supplier Diversity
Presently, Emirates operates with Airbus 380s and Boeing 777s. Though these planes give the airline competitive advantages, reliance on these two companies exposes it to supply chain risks due to high supplier power. Emirates has an opportunity to buy from other major manufacturers, including Lockheed Martin, and Commercial Aircraft Corporation (IBISWorld, 2022). Partnerships with suppliers in the design would ensure fuel efficiency to cut costs.
Threats
Intense Competition
State-owned low-cost carriers in Asia-Pacific countries present a significant threat to Emirates’ growth plans in the region. Airlines such as AirAsia and SpiceJet already have a strong foothold in China and India (Globaldata Travel and Tourism, 2022). Emirates must provide innovative and affordable products to compete in this market.
Foreign Exchange Risks
Emirates faces a threat from currency fluctuation risks during the conversion of earnings into dirham. IATA (2021) notes that fuel and ground operations costs and airplane prices are set in US dollars. Thus, uncertainty in exchange rates presents a risk to Emirates since its earnings in Asian subsidiaries are denominated in Yuan or rupee.
Predictable Pilot Shortage Globally
A predicted pilot shortage will impact fleet size operated by airlines. According to Perez (2020), the airline industry will need over 23,000 new pilots by 2029 to match growth in air travel. Thus, the shortage is likely to affect operations and profitability in the long term.
Recommendations
- Emirates should expand into the low-cost segment to operate profitably in the Asia-Pacific region, which is dominated by budget travelers.
- The airline should establish strategic alliances with partners and associates as a low-cost entry strategy in this region.
- Emirates should purchase aircraft from other manufacturers to minimize supply chain risks.
A strategic concept I hope to focus on in the final assignment is Emirates’ differentiation strategy. The airline’s branding efforts prioritize service quality at a premium price. I would like to explore the success of this differentiation strategy in the aviation industry.
References
Abate, M., Christidis, P., & Purwanto, A. J. (2020). Government support to airlines in the aftermath of the COVID-19 pandemic. Journal of Air Transport Management, 89, 1-8. Web.
CAPA. (2022). Unit cost analysis of Emirates, IAG & Virgin: About learning from a new model, not unpicking it. CAPA Center for Aviation. Web.
Emirates Group. (2022a). The Emirates experience: Our fleet. The Emirates Group. Web.
Emirates Group. (2022b). Emirates group announces 2020-21 results. The Emirates Group. Web.
Globaldata Travel and Tourism. (2022). Asia Pacific needs to improve low-cost carrier network to boost intra-regional travel. Airport Technology. Web.
IATA. (2021). Outlook for the global airline industry. IATA. Web.
IBISWorld. (2022). Global commercial aircraft manufacturing industry: Market research report. IBISWorld. Web.
MarketLine. (2022). Company profile: The Emirates group. MarketLine.
Perez, A. (2020). More pilots needed in the next 20 years. First Aviation Academy. Web.
Thomas, G. (2021). Emirates, the world’s largest international airline, posts massive loss. Airline Ratings. Web.
Appendices
PESTLE Analysis
Political
Socio-political tensions in Asia will impact Emirates Airlines. It must grapple with strained relationships and military conflicts in its important routes in Iran, Taiwan, Russia, and Ukraine, which have affected tourism. In addition, travel restrictions imposed by different countries due to the COVID-19 pandemic will affect Emirates’ operations globally. However, the airline has found stability in Asia and Africa (Emirates Group, 2022b).
Economic
Emirates experienced a sharp decline in its earnings in 2020, reporting $8.4 billion, which is 67% lower than the 2019 earnings (MarketLine, 2022). In addition, the weak demand for premium travel due to the pandemic-related economic slowdown has affected its performance in major markets in Africa and Asia.
Social
Air travel has changed significantly, with passengers increasingly looking for personalized service, including online check-ins. According to Thomas, Emirates’ seat capacity dropped by 83% due to unfavorable route choices and high fares. Thus, a quality-price tradeoff is needed to meet customer expectations.
Technological
Emirates operates two kinds of aircraft fitted with key features that improve the travel experience: A380s and Boeing 777s. These airplanes have lie-flat seats, lounge bars, and personalized entertainment systems (Emirates Group, 2022a). However, these features have increase unit the cost per available seat kilometer to ¢8, which is higher than ¢7 for low-cost operator EasyJet (CAPA, 2022).
Legal
Legal restrictions limit the number of destinations in which Emirates Airlines operates. National low-cost airlines such as AirAsia and SpiceJet dominate Indian and Chinese domestic markets because of the favorable regulatory landscape (Globaldata Travel and Tourism, 2022). Emirates will face many hurdles to gain regulatory approvals to operate in these markets.
Environmental
To contribute to environmental sustainability, Emirates Airlines must cut its carbon footprint. Using fuel-efficient engines, optimizing ground operations, using recyclable materials, and serving food farmed sustainably are some of the measures the airline employs to protect the environment (Emirates Group, 2022a).
Five Forces Analysis
Threat of New Entry
The threat of new entry is considerably low as capital requirements for starting an airline are prohibitive. Additionally, the aviation industry in the UAE, Asia-Pacific, and globally is dominated by a few airlines. New entrants may not operate profitably in these markets.
Buyer Power
Asia-Pacific countries are an ideal market for low-cost carriers. According to Globaldata Travel and Tourism (2022), up to 57% of travelers in China, India, Australia, and Singapore are influenced by cost and availability when traveling. In light of the growing price considerations in Asia-Pacific and globally, the power of buyers is high.
Threat of Substitutes
The threat of substitutes is relatively low in the airline industry. Emirates operates technologically advanced fleet with cutting-edge in-flight features designed for comfort. Thus, other substitutes, including cars, ships, and low-cost carriers may not match these qualities.
Power of Suppliers
Supplier power is considerably high because Emirates relies only on two suppliers: Boeing and Airbus. Purchasing a new fleet from other manufacturers, including Lockheed Martin and Commercial Aircraft Corporation, can ameliorate supply chain risks (IBISWorld, 2022). However, switching to new suppliers may be disruptive and costly.
Competitive Rivalry
Emirates faces stiff competition locally from Etihad, which controls a larger market share in UAE (Thomas, 2021). European airlines and low-cost carriers such as AirAsia and SpiceJet have a strong foothold in China and India (Globaldata Travel and Tourism, 2022). By diversifying into the low-cost market, Emirates will reduce its dependency on high-income clients.
Competitor Analysis
Emirates has many direct and indirect competitors in domestic and international markets. Its main competitors include Etihad Airways, Qatar Airways, Lufthansa, and Fly Dubai.
- Etihad Airways – it is the second-largest carrier in UAE founded in 2003. It operates from its Abu Dhabi airport as a government-owned airline that dominates the domestic market. It has excellent branding and operates locally and internationally in Asia and the EU.
- Qatar Airways – it is Qatar’s national carrier that was founded in 1997 by the Qatar government. It operates in several countries on six continents. It focuses on sponsorships and ads to increase brand awareness.
- Lufthansa – it is a German airline with operations globally. The carrier operates in many sectors, including hotel and catering and logistics. Its strong global presence makes Lufthansa a strong competitor of Emirates Airways.
- Fly Dubai – this low-cost carrier was founded in 2008. Its destinations are predominantly in the Middle East, Asia, and Africa. Because it provides affordable fares, the airline is a strong competitor of Emirates Airways.
Core Competency Analysis
Value Chain Analysis
The value chain model applied to Emirates will show how the airline creates customer value to drive its growth strategy.