Capacity Management in Emirates Airlines Report

Introduction

Background

Emirates Airlines was established in 1985 in the United Arabs Emirates (UAE) and it has become the largest airline companies in the Middle East. The firm is wholly owned by the UAE government through the Dubai Investment Corporation and it has established its presence in different markets across the world. The firm operates in over 76 countries and over 3,400 flights per week (Sambidge 2013). In a bid to satisfy the market, the firm operates both cargo and passenger carriers.

The Emirates SkyCargo division is responsible for handling cargo. In 2012, the airline ranked fourth with regard to the total number of international passengers carried. Additionally, Emirates Airlines ranks as the longest non-stop commercial carrier in the world. The airline is focused on delivering a high level of customer satisfaction.

One of the areas of emphasis relates to the provision of excellent level of service. The airline operates a mixed fleet, which is comprised of Boeings and Airbuses. Its effectiveness in delivering high quality services has not only enabled it to develop a strong brand name, but also in becoming a market leader.

Emirate Airlines is cognisant of the significance of developing a strong level of customer loyalty by providing customers with high quality services. Subsequently, the firm has adopted flight catering as one of its customer service tools in its business model. Jones (2004) contends that flight catering is a large industry. Furthermore, the industry is characterised by a high degree of complexity. Despite this aspect, airline companies are increasingly using flight catering as a marketing tool (Jones 2004).

Optimal operations management is vital in an airline’s efforts to stimulate its productivity. Therefore, operations managers should understand the link between various management aspects such as capacity management and organisational performance. Such an understanding equips managers with sufficient knowledge on how to deal with issues that emerge.

Slack, Chambers, and Johnson (2010, p.2) define capacity management as ‘the set of work processes associated with the provisioning and management of IT infrastructure resources, such as servers, printers, and telecommunication devices, used to support business processes in a cost effective manner’.

Barnhart and Fearing (2012) further postulate that capacity management in the service industries such as the airline industry is challenging due to the unique nature of the services provided. One of the challenges relates to management of demand and supply, and hence the companies’ capability to sustain their quality standards. Capacity management issues hinder firms’ ability to attain their productivity target.

Problem statement

Emirates Airlines is facing diverse challenges, which might affect its competitiveness in the Gulf and the Middle East regions. One of the main sources of challenge relates to intense competition. The airline’s competitors such as Air France/KLM, Delta Airlines, and SkyTeam are evaluating their competitive strategies in an effort to counter the Emirates’ market dominance (Mahadevan 2009). Demand for commercial aviation has grown at a high rate over the past few decades.

The growth has arisen from a number of factors such as the adoption of open-sky agreement s and increased deregulation of the airline industry by governments.

Increase in the consumers’ disposable income across the world coupled with the high rate of globalisation has also contributed to the industry’s growth as individuals explore new opportunities in other countries. In 2009, the UAE was selected to host the 2020 World Expo in Dubai. The event, which will take 6 months, is expected to attract over 25 million visitors (The Emirates Group 2014)

The level of consumer confidence towards the airline industry has grown remarkably. Most consumers consider air travel transport as a safe mode of transport. Wald (2011) asserts that demand for air travel will continue to grow. Emirates Airlines plans to fly over 70 million passengers across the six continents by 2020 (Sambidge 2013).

The transformations in the domestic and the international air travel industry present a major opportunity for Emirates Airlines to improve its competitive advantage. However, this aspect will depend on the company’s commitment to engage in capacity management and flight catering. The firm has to ensure that its catering department offers customers with high quality food and beverage products.

Scope of the study

The study will analyse all the capacity management for all Emirates flights. Furthermore, the study will also forecast the airlines future capacity with regard to seasons, years, and new flights.

Rationale of the study

The global air transport industry is facing a mixture of challenges and opportunities originating from the external business environment. One of the challenges relates to the volatility of fuel prices. Furthermore, travellers are becoming sophisticated by demanding high value for their money.

This phenomenon has arisen from the desire to gain a new and unique experience. Therefore, airline companies are not only faced by the challenge of satisfying the market demand, but also meeting the customers’ level of satisfaction. There is a high likelihood of Dubai attracting a large number of visitors during the 2020 World Expo event. Emirates Airlines should perceive this aspect as an opportunity to augment its competitive edge.

The intensity of competition in the UAE airline industry has increased remarkably. Industry players are adopting diverse business models in an effort to improve their competitive edge. An example of such model includes the low-cost model, which is designed to increase the number of passengers carried.

It is important for Emirates Airlines to develop an understanding on how it can improve the capacity of its flight catering in order to supply the existing and new flights without compromising the quality of its products or services. This move will enable the firm to exploit the business opportunity successfully.

Objective of the study

This study intends to identify the gap within capacity management of flight catering at Emirates Airlines considering the expanding capacity of aircraft and other services over the few years. The study also intends to recommend the best capacity operations to be implemented.

Limitations of the study

The study mainly relied on secondary data from reports and other publications derived from online sources. However, only credible sources such as peer reviewed journals, articles from credible databases, and books were used, thus assuring the credibility of the information collected.

The study did not utilise primary results, which limited the ability of the researcher to expound the issues under investigation. However, it is assumed that the information gathered from the literature review and the case study is sufficient to illustrate the concept of capacity management in flight catering.

Literature review

Capacity management practices in flight catering

Firms in different industries are experiencing challenges in their pursuit to attain long-term survival. The high rate at which change is occurring in the business opportunity poses a threat to the firms’ operation. Changes in the service sector are the major precursors for firms to adjust their operations.

The industry players should focus on two main aspects, which entail revenue maximisation and optimal capacity utilisation. Ingold (2005) argues that the need for capacity management in the contemporary service sector cannot be underrated.

Yield management

One of the most effective strategies that airline companies should focus on in their quest to adopt capacity management in their flight catering is yield management. Jones (2004) contends that yield management is one of the most widely used capacity management strategies in the airline industry.

According to Withiam (2014), the concept of yield management entails the different strategies used by service firms to assist them in realising their desired level of revenue from operations. Withiam (2014, p.2) defines yield management as ‘the process of allocating the right capacity or inventory unit to the right customer at the right price and at the right time to maximise revenue or yield’. Yield management strategy is mainly concerned with three main capacity management issues, which include

1. Inventory control
2. Control of availability
3. Pricing strategy

Inventory control component is concerned with ensuring that the necessary resources such as employees and aircrafts are availed. On the other hand, control of availability is concerned with managing the number of seats in the aircrafts, while pricing strategy entails setting the price of the service at an acceptable margin.

The pricing strategy in yield management also entails integrating different prices for different products. For example, airline companies may design their catering services to meet the diverse categories of classes such as economy, business, and first class travellers.

Capacity forecasting planning

The integration of an optimal capacity forecasting technique is critical in the airlines’ effort to promote their future success. Capacity forecasting entails modelling an organisation’s future capacity requirement in order to meet the prevailing market demand. The forecasting process entails assessing an organisation’s IT services, the existing facilities and infrastructures, and the quality of the workforce. Hernon and Altman (2010) assert that the level of service provided by airline firms affects the demand for air travel.

Jones (2004) further asserts that flight catering is a complex operations management aspect. The flight catering production unit may be comprised of more than 800 employees and producing over 25,000 meals every day. The catering process is further complicated by the number of flights from the main hubs especially in large airlines companies such as Emirates Airlines. In a bid to perform flight catering successfully, it is imperative for airline companies to understand the approximate number of passengers and their respective needs.

Therefore, airline companies should conduct continuous market research in order to understand the passengers’ behaviour. Understanding the passengers’ needs plays a critical role in the companies’ efforts to produce and develop products that meet the customers’ specific needs. For example, the airline company can forecast the possible type of customer within a particular route, thus giving the airline insight on the type of drinks, food, and equipments to incorporate in specific routes.

Bon and Veen (2009) contend that capacity-forecasting planning is essential in flight catering in a number of ways. First, it forms the basis through which an organisation can plan for its short-term and long-term projects in order to balance the demand and the supply sides.

According to Hellermann (2006), forecasting the demand in flight catering is important in determining whether a particular airline has the capacity to address the needs of the targeted market segment. Capacity forecasting planning in flight catering minimises the likelihood of dependency on outsourcing some services from external flight catering providers.

One of the ways through which this goal is achievable is via assisting the airline companies in identifying the prevailing business opportunities and underused capacities, hence the need to consolidate the two issues. Therefore, the airline company can minimise the cost that it would have incurred by hiring external flight catering services.

Food safety and quality system

Ensuring a high-level safety and providing high quality products is a critical element in capacity management. Safety and quality should not be ignored in the airlines’ effort to manage capacity in their flight catering processes. Klassen and Rohleder (2002) argue that food-borne diseases account for a significant proportion of the total number of mortality cases recorded in the general population. Airline companies serve a large number of travellers from different countries.

Based on the growth in demand for air travel across the UAE, which arises from the 2020 World Expo in Dubai coupled with the Emirates Airlines’ intention to establish new routes, the firm will be faced with the challenge of ensuring that the travellers are catered for adequately. Therefore, airline companies have an obligation to ensure that passengers are not exposed to food-borne diseases. Emirates Airlines’ intention to serve over 70 million customers by 2020 will require the firm to improve its food safety and quality processes.

In a bid to meet this requirement, airline companies should establish a strong relationship with a broad spectrum of stakeholders such as food suppliers, airline companies, and caterers. Airline companies should also integrate food safety experts throughout the food production process.

Furthermore, the flight catering system should adhere to the principles advocated by the Hazard Analysis Critical Control Point (HACCP). The principles advocate for a flight caterers to undertake a comprehensive hazard analysis, establish the critical control points, and the monitoring system. Airline companies should also institute a mechanism to confirm the effectiveness of the HACCP (Taneja 2004).

Theoretical and conceptual framework

The business environment is undergoing a high rate of revolution arising from different factors. For example, customer needs are changing at a remarkable rate (Graham, Papatheodorou, & Forsyth 2010). The air travel and leisure industries have been affected. Previously, the industry was relatively small and flights were mainly short-haul.

The literature review section shows that a high likelihood of Emirates Airlines achieving its growth and market leadership objectives in the global airline industry due to the prevailing market trends.

The aviation industry is experiencing a high rate of growth arising from increment in the consumers’ disposable income, high rate of globalisation, and liberalisation of the airline industry in both developed and developing countries. Matching demand and supply improves service firm’s ability to deliver the desired level of services. Subsequently, the firms can achieve their productivity targets.

Adopting the ‘coping’ strategy is one of the strategies that firms in the service sector such as airline companies can integrate to improve their capacity management practices.

Huo, Moynihan, and Ingraham (2003) assert that the ‘coping’ strategy is most appropriate in situations characterised by dynamic market changes such as ‘being slack’ or ‘being busy’. The coping strategy entails adjusting the change and the level of operational strategies. One of the ways through which organisations can integrate the coping strategy is by improving their forecasting and capacity planning capabilities.

Airline companies should establish clear resource productivity targets. Furthermore, it is also imperative for organisational leaders to integrate clear service quality targets by integrating the concepts of benchmarking. One of the areas that airline companies should focus on relates to customer satisfaction.

Subsequently, a firm can set the benchmark based on quality of services provided. Benchmarking increases the likelihood of an organisation to attain performance excellence. Hernon and Altman (2010, p.49) argue that should ‘resources decline, the approach is to look for ways to do the right things smarter, rather than to continue the routine processes that contribute little to service quality or customer satisfaction’.

In addition to the above aspects, it is critical for an organisation’s operations manager to understand the potential bottlenecks its quest to deliver optimal services. The coping strategy advocates for operations managers to identify and understand potential failure points in their organisations’ service delivery process. Currently, Emirates Airlines does not have adequate flight catering ability to address the prevailing market changes. Subsequently, it is imperative for the airline’s operations manager to adjust its flight catering capacity.

Case study analysis; Emirates Airlines

Emirates Airlines appreciates the importance of integrating effective capacity management in its flight catering processes. The firm has established a flight-catering department in its quest to improve the customers’ level of satisfaction. The firm’s commitment towards improving its competitive edge is illustrated by a number of aspects as illustrated herein.

State-of-the-art flight catering facility

Emirates Airlines has implemented a fully-fledged state-of-the-art flight catering facility. The EKFC department provides meals to passengers travelling on the airline. The food production facility is a 607,778 square foot facility, which ranks as the most sophisticated and modern catering facility globally (The Emirates Group 2014). In 2013, the facility was considered the largest in the world with regard to volume throughput.

The facility does not only serve Emirates Airlines’ passengers but also other airlines such as Air France, Virgin Atlantic, Swiss, and Singapore Airlines (Oracle 2014). The integration of the state-of-the-art facility was stimulated by the need to improve the airlines’ flight catering processes. Emirates Airline’s aircrafts have turnaround duration of less than 30 minutes. Subsequently, the flight-catering department has to ensure that the cleaning of the plane and replenishing the necessary inventories such as food and beverages.

In a bid to meet this requirement, the airline has integrated an automated system to aid in the entire process by adopting an integrated application known as The JD Edward EnterpriseOne, which is Enterprise Resource Planning (ERP) software (The Emirates Group 2014).

The software has played a critical role in improving the airline’s ability to deliver value to customers by minimising the cost of flight catering. The application is multi-dimensional as it provides customers with a wide range of database choices hence enabling the firm to meet the diverse customer needs.

The ERP software has played a remarkable role in improving the effectiveness with which Emirates Airlines serves its customers. For example, the airline serves over 125,000 meals daily to over 340 flights. The firm recently upgraded the JD Edward EnterpriseOne 8.10 to 9.0 in an effort to achieve system stability (The Emirates Group 2014). This move improved the airline’s flight catering efficiency beyond the industry average requirement.

For example, the firm ensured that the meals were ready 4 hours before the flight. Furthermore, the monthly food cost variance was reduced significantly to $100,000 from $500,000. Subsequently, the firm attained a profit of $4.8 million (Oracle 2014).

In addition to the food production facility, Emirates Airlines has also implemented a modern laundry facility known as Linencraft (The Emirates Group 2014). The facility has the capability of cleaning over 80 tons of laundry daily. The integration of these facilities has remarkably enabled the company in its quest to enhance a high level of health and safety on both its clients and employees.

Human capital

Emirates Airlines undertakes over 300 different flights daily to various parts of the world. Furthermore, the airline intends to increase its destinations by entering new and emerging markets across the world. The Dubai World Expo further increases the potential for future growth. The Emirates Group (2014) posits that the expo is expected to attract over ‘25 million visitors, which presents a high number of travellers into the UAE within the six months duration of the Expo’.

In a bid to exploit this opportunity for growth, Emirates Airlines should consider the most effective strategy to adopt in order to provide optimal flight catering services. Currently, the airline’s flight catering department employs over 6,500 employees who are charged with the responsibility of producing over 125,000 to 150,000 meals daily (The Emirates Group 2014).

This figure represents a remarkable growth from 1975 when the department was established. At its inception, the Emirates Flight Catering department produced an average of 2,000 to 2,500 means daily (The Emirates Group 2014).

In line with the firm’s commitment to deliver a unique in-flight experience to customers, the airline ensures that its flight caterers are experts coupled with customising its in-flight catering employee recruitment program. For example, caterers such as chefs are selected by taking into account their cooking techniques and the flight destination.

This selection method has played a critical role in improving the effectiveness with which the in-flight catering department meets the customers’ tastes. For example, Japanese chefs enable Emirates Airlines to meet the Japanese travellers’ needs by producing a range of sushi for the diverse Japanese routes. Similarly, chefs from other nationalities also advise caterers on how to meet their respective customer needs (The Emirates Group 2014).

Conclusion

The global airline industry faces a myriad of opportunities and challenges arising from the external and internal business environment. On the other hand, one source of opportunity that the industry players should consider relates to the rising demand for air travel. This report identifies capacity management as one of the most important elements that airline companies should consider in order to attain long-term survival.

Some of the factors that explain the prevailing market changes in the airline industry include high rate of globalisation, increased liberalisation of the airline industry, increase in the consumers’ disposable income, and growth in the level of consumer confidence towards the airline industry.

These changes are likely to increase the volume of air traffic. The Expo scheduled to happen in Dubai in 2020 is expected to attract over 25 million visitors from different parts of the world, which presents an enormous opportunity for Emirates Airlines to achieve its profit maximisation objective.

This report cites a number of elements that airline companies should consider in the quest to undertake capacity management. One of these elements includes yield management, which emphasises the significance of adopting effective revenue maximisation and ensuring optimal capacity utilisation.

Additionally, airline companies should undertake capacity-forecasting planning in order to understand the extent to which they can cope with the market changes. Ensuring a high level of food safety and quality is also cited as a major element that airline companies should integrate in their capacity management in order to improve their competitive advantage with regard to flight catering.

Considering the anticipated change in the UAE airline industry, it is imperative for industry players to adjust their capacity management techniques. The report identifies coping strategy as one of the most effective capacity management strategies that airline companies can adopt as it improves the effectiveness with which companies can better their ability to address the prevailing market changes.

Recommendation

Emirates Airlines has adopted flight catering as one of its operational aspects in the pursuit of competitive advantage. In order to improve its competitiveness, it is imperative for Emirates Airline to improve its capacity management in flight catering. The airline should consider the following issues:

1. New product and service development – this study highlights a high probability of increment in the degree of complexity amongst airline passengers. This situation may arise from the high rate of globalisation, the airline’s entry into new markets, and increase in demand for air travel. Such complexities are likely to present a challenge in the Emirates Airlines’ flight catering processes. In order to deal with this challenge, Emirates Airlines should integrate the concept of new product and service development. The products and services developed should be customised to meet the customers’ needs.
2. Integration of information technologies: Emirates Airlines should invest in continuous improvement of its flight catering facilities and technologies. One of the areas in which the airline should improve relates to Enterprise Resource Planning systems. The ERP software will improve the effectiveness with which the airline undertakes capacity-forecasting planning. Emirates Airlines should also improve the level of satisfaction amongst its customers. The airline can attain this goal by integrating Customer Relationship Management software. The software will assist in understanding the customers’ needs and the prevailing trends. Furthermore, the CRM software will enable the Emirates Airline to identify gaps in its flight catering processes by understanding the passengers’ sentiments with regard to its flight catering processes.
3. Flight catering training program- in a bid to achieve its customer satisfaction objective in its flight catering processes, Emirates Airlines should integrate a comprehensive employee-training program. The program should focus on equipping its caterers with sufficient knowledge and skills on how to deal with various aspects that affect the passengers directly and indirectly. For example, the airline should train its caterers on how to prepare meals that exceed the customers’ expectations.
4. Supply chain management- to cope with the rising demand for air travel, Emirates Airlines should focus on improving its supply chain to enhance the efficiency and effectiveness of its food production unit by integrating a high level of collaboration with suppliers.

Future research

Changing passenger needs is one of the major challenges that airline companies should take into account in their operations management. In a bid to address this challenge, it is vital for airlines to evaluate the most effective capacity management strategies. However, one of the issues that operations managers should take into account is uncertainty. Airline firms should consider how to factor in the element of uncertainty in their capacity planning processes in order to improve their flight catering ability.

Reference List

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