Introduction
The aerospace industry grows continuously, as this segment becomes more and more attractive to different service providers. Emirates Airlines could be considered as one of the companies that were able to take advantage of the external environment and became one of the industrial leaders. Today, Emirates is an international airline with constant flights to 82 countries across the globe (The Emirates Group 2017).
It gives priority to quality, exceptional service, and its recognition worldwide (The Emirates Group 2017). Thus, even industry giants face difficulties in economic crisis and recession. Consequently, the primary goal of this paper is to evaluate its external environment, marketing strategies and tactics, and finances. Finally, recommendations are proposed to discover the ways to survive in the market within the next 20 years.
Factors on Airline Business
General Overview
To establish a foundation for discussion, it is essential to describe methods and techniques that Emirates used since its first years of operation to overcome financial difficulties such as crises. Utilizing the PESTE framework is the most suitable approach because it covers external factors from different spheres such as political, economic, social, technological, and environmental ones (Grunig & Kuhn 2015).
This analysis assists in gaining a multifaceted overview of the topic by depicting the impact of each external force. Nevertheless, before conducting the PESTE analysis, it is essential to review Emirates’ performance over the past three years. For example, it experienced a substantial increase in its revenues from AED 82,636 million in 2013-2014 to AED 88,819 million in 2014-2015 (The Emirates Group 2017).
In 2015-2016, sales slightly dropped (from AED 88,819 million in 2014-2015 to AED 85,044 million in 2015-2016) while at the beginning of the fiscal year 2016-2017 (AED 85,061 million), it was able to prevent this rapid decrease in revenues (The Emirates Group 2017). To summarize, Emirates experienced problems with its finances and demands since the beginning of 2015 while continuing to be one of the market leaders.
PESTE Model
According to the PESTE model, political factors have a critical impact on the financial performance of the company. For example, operations of the enterprise are highly dependent on the political stability of the country and its neighbors. In this instance, wars in Yemen and Iraq create negative perceptions of the country while making the United Arab Emirates less attractive to foreign investors and visitors (Dudley 2016).
The blockade of Qatar’s airspace is also a vital political aspect, as it requires changing the existent travel routs and leads to increases maintenance costs (Kamel 2017). Another possible factor is a threat of terrorism since the country actively takes part in fighting it, it and its geographical location increases its vulnerability.
Furthermore, scholars and the management of The Emirates Group link a continuous drop in revenues to an unfavorable economic environment. During these years (2015-2017), the dollar was highly unstable, and changes in its values affected the revenues of Emirates due to its dependence on currency exchange (Dudley 2016). This aspect is of high importance since the company serves customers worldwide. Consequently, a decrease in revenues can be linked to slow economic growth and recession in other countries, as the profitability of Emirates is reliant on demands in the foreign markets (Dudley 2016).
Due to the dependence of the UAE’s GDP on oil sales, their low value not only affects the country’s growth but also slows the development of the companies (Dudley 2016). In this case, a combination of economic factors can cause a downward shift in sales solely, but the overall economic condition of the UAE is favorable due to its active investments in transport infrastructure. Consequently, Emirates has possibilities to recover.
Social aspects are highly linked to previous sections, and people’s attitudes towards neighboring countries of the UAE, a threat of terrorism, high prices, and low demands may affect the recognition of Emirates. However, the enterprise can maintain its image of one of the best companies in the industry that constantly aims at expansion to different international locations such as Orlando (Mouawad 2015).
As for changes in technology, it is essential to take into account this aspect since it has a direct impact on consumer behavior. For example, a new generation of Millennials tends to use mobile applications while video conferencing affects the demand in real-life meetings and, as a consequence, in traveling (Anderson 2016). Consequently, attracting new customers becomes a challenge. Speaking of environmental factors, climate changes in different countries where Emirates operates have an essential impact on its functioning, as dealing with these issues may require additional investment.
In turn, people tend to change attitudes and become more concerned about the environment and the effects of different technologies on it, and it is the primary trigger for the development of eco-friendly gadgets while revolutionizing the aerospace industry. Nevertheless, prioritizing excellence helps Emirates remain one of the market leaders while showing customers its social sustainability strategy.
Future Trends and Conclusions
Based on the analysis of the factors conducted above, potential future trends may include rising operating costs due to currency fluctuations, intensifying rivalry, and decreases in demand due to terrorism and differences in economic growth (Dudley 2016). To overcome these challenges, the company may consider establishing a new low-cost airline to regain its market shares in the countries with insufficient economic growth. At the same time, Emirates has to create collaboration with local authorities to maintain security at high levels and redesign travel routs. Currently, Emirates attracts customers with the help of the Emirates Skywards program that allows flyers to earn miles (Emirates 2017a).
Relying on its current strategy does not seem to be effective due to a constant decrease in sales since 2015 (The Emirates Group 2017). Other future trends may include the continuous rise of technology and environmental concerns, and Emirates can focus on developing interactive websites and applications. However, the company already employs these action plans and should continue using them while making adjustments that can be discovered as a priority. To conclude, Emirates has to review its current corporate strategy and take into account different environmental factors and possible threats such as terrorism and wars.
Airline Product and Marketing Strategy
Emirates’ Marketing Strategy and Its Comparison
In turn, it is vital to understand a connection between Emirates’ marketing activities and its superior financial performance, as only relying on these concepts will help understand the microeconomic environment. Emirates used a consistent marketing strategy from 2015 to 2017. The company positions itself as an excellent service provider, who cherishes quality and respects the needs of the customers (Tadros 2016).
At the same time, it promotes “technology-driven customer initiatives” by delivering this message via partnerships, press releases, newspapers, official websites, and social media (Tadros 2016 para. 3). Apart from representing a luxury segment, Emirates still has competitors with similar features. For example, Etihad and Qatar provide comparable quality and evoke analogous feelings among consumers while attracting customers with similar needs (Zhang 2015).
Thus, the company attempts to differentiate itself from the competitors not only by the brand equity but also by its frequent flyer program. For example, Emirates Skywards allows loyal customers to gain miles and use them to explore the world (Emirates 2017a). Overall, only with the help of these features of the marketing strategy Emirates was able to have stable revenues while experiencing only a slight decrease in sales.
Nevertheless, it is essential to review the marketing strategies of Emirates each year. For example, apart from having a well-developed social media marketing campaign, in 2015, Emirates took part in Dubai Airshow and demonstrated its aircraft and the high attention paid to the training of its pilots and flight attendants (Tadros 2015). Meanwhile, in 2015, the company also focused on improving its social media services by making them available 24/7 (Emirates 2015).
This activity showed the international focus of the company since it was available in English and Arabic at the same time. As for 2016-2017, Emirates continued sponsoring different activities such as football, tennis, horse riding, rugby, and motorsports (Emirates 2017b). A combination of these factors states that the company continued upholding its brand equity, and it helped Emirates maintain its financial performance and avoid a subsequent drop in sales.
Evaluation of Success
Nevertheless, a profound assessment of the marketing strategy has to be conducted. Emirates attracted new customers by its high quality, superior performance, prestige, safety, and international brand recognition, and customers chose this airline due to a combination of these reasons. In turn, its unique selling point pertains to its slogan “Hello Tomorrow” and the desire to create a special culture for its customers and employees (Goodson 2016, para. 4).
It gives people not only an opportunity to travel and expand their horizons with Emirates but also develops a positive attitude toward the future. These campaigns had a direct impact on the number of passengers carried.
For example, it increased by 8.1% from 2015-2016 to 2016-2017 while the overall capacity rose by 7.2% (The Emirates Group 2017). A combination of these factors led to the ability of the company to reach the maturation stage of the product lifecycle and have high satisfaction rates among customers. To conclude, with the help of the evaluation of the company’s marketing strategy, it is possible to discover that Emirate continues to attract customers, and its changes in revenue are majorly affected by different external factors indicated above, but it should revise the existent marketing strategies by emphasizing social media to avoid a greater drop in sales.
Financial Assessment
As was mentioned earlier finding a connection between corporate strategy, marketing activities, and financial performance is important due to the interdependence between these components. Emirates’ current strategy implies that customers are provided with full services for the price of the fare while there are different options available. Competitors such as Qatar and Etihad use a similar framework, but Emirates can face a constantly intensifying rivalry due to its well-developed brand equity and differentiation strategy. Using this approach could be considered as the most effective in this industry, as, otherwise, the enterprise would not be viewed as one of the leaders of this market with outstanding financial performance.
When referring to its revenues, they accounted for AED 82,636 million in 2013-2014 (The Emirates Group 2017). Meanwhile, the previous sections identify that the peak in sales was recorded in 2014-2015 (AED 88,819 million), and in the subsequent years, they experienced a slight decrease (AED 85,044 million in 2015-2016; AED 85,061 million in 2016-2017) (The Emirates Group 2017). Consequently, apart from these differences, the company made profits in the last five years and tended to be stable.
As for operating expenses, they experienced a vast increase from AED 70,274 million in 2012-2013 to AED 82,926 million in 2014-2015 due to high investments of the company in its expansion (The Emirates Group 2017). It is evident that in addition to cargo and passenger transportation, the company heavily relied on acquisitions and transactions in the stock market. When comparing Emirates’ performance with Qatar and Etihad, the position of the company was relatively stable since Etihad had a $1.87 billion annual loss while depicting the pressure of competition faced by Gulf airlines due to terrorism, oil prices, and blockade of Qatar’s airspace (Kamel 2017).
Meanwhile, Qatar reported a 20% increase in its sales and earnings (Kamel 2017). Consequently, currently, only Qatar could be discovered as the major competitor of the Emirates due to its rapidly growing profit margins.
When referring to yield management, its values continued to decrease from 249 fils per RTKM in 2012-2013 (250 – 2013-2014; 245 – 2014-2015; 218 – 2015-2016) to 204 fils per RTKM in 2016-2017 with the total drop of 8% (The Emirates Group 2017). Similarly to Emirates, Etihad’s yields were reduced by 7% (Kamel 2017). This decrease was linked to fluctuations in the dollar and unfavorable socio-economic conditions that affect all companies in the Gulf region.
Additionally, Emirates’ operating margin was low in 2016-2017 with a value of 2.9% while in previous years it was relatively higher (3.9% in 2012-2013; 5.2% in 2013-2014; 6.6% in 2014-2015; and 9.8% in 2015-2016) (The Emirates Group 2017). Profitability ratios were also unfavorable for the company with a 6.9% drop from 2015-2016. As for liquidity, its current ratio is only 0.5%, and it implies that Emirates started to face similar issues as Etihad.
As for aircraft utilization, the total fleet used increased from 217 in 2013-2014 to 259 in 2016-2017 while the average fleet age decreased to 63 in 2016-2017 (The Emirates Group 2017). The passenger seat factor continued its drop from 79.6% in 2014-2015 to 75% in 2016-2017 while implying the problems with capacity, and a decrease in load factor from 67.3% in 2014-2015 to 65% in 2016-2017 inferred the same conclusion (The Emirates Group 2017).
Overall, Emirates is in a similar condition as Qatar and Etihad, and it should consider revising its strategy, as otherwise, it will be impossible to survive intense competition. To regain its losses in revenues, the company should consider setting performance indicators of 2014-2015 as financial benchmarks and aim at their achievement. However, it is critical to note that in 2014-2015, the economic environment was more favorable while the Gulf region was highly attractive to tourists and businessmen due to its prosperous opportunities. Now, it is important to take into account arising trends in maintenance costs and fleet newness factors while carefully planning a budget when these investments are necessary.
Conclusion and Recommendations
Conclusion
In the end, apart from being one of the well-known and popular corporations in the world, Emirates has to adapt to external changes. It is currently affected by fluctuations of currency exchange, a threat of terrorism, wars in neighboring countries, and unfavorable economic environment, a drop in oil prices, and changes in consumer buying behavior. It could be said that using a unique blend of marketing channels including social media, newspapers, sponsorships, and official websites helped the company stabilize its revenues and maintain them at a sufficient level during the economic crisis. Nevertheless, similarly to its competitors like Qatar and Etihad, the external factors mentioned above hurt its performance while causing a substantial decrease in all critical financial ratios.
Recommendations
Thus, with the assistance of the analysis of micro and macro factors, it is essential to define the action plan and propose relevant strategies to stay competitive within the next 20 years. Based on the analysis of external forces, Emirates should consider partnerships with authorities to ensure security. Meanwhile, to comply with social trends, it may be rational to establish a low-cost option of Emirates by acquiring another company, as, otherwise, it will ruin its brand equity.
As for marketing, it should continue working on its marketing scheme by proposing interactive solutions to social media and its website while constantly conducting market research. However, it should not be its central focus since the demands can be viewed as favorable, and a major decrease in revenues is caused by the external environment (see PESTLE). When suggesting recommendations to enhance financial performance, Emirates should view acquisitions as its additional sources of revenue but carefully evaluate every option before making a decision. The enterprise should review its performance in 2014-2015 and consider the aspects that can be used as benchmarks (yield, profit margin, revenues growth, sales volumes, and operational costs (have to be decreased)).
Nevertheless, adjustments including changes in maintenance costs due to technological advancement and issues with oil prices and fleet newness (purchasing new aircraft and equipment) have to be taken into account when shaping a budget and developing new travel routes to minimize costs. In the end, only taking advantage of these recommendations can help the company remain a market leader, take rising opportunities in the airline industry, and stay highly profitable even during the times of economic crisis.
Reference List
Anderson, K 2016, Technology and social trends: a biblical point of view, Christian Publishing House & Probe Ministers, Cambridge.
Dudley, D 2016, ‘Is the Emirates growth story at the end?’, Forbes. Web.
Emirates 2015, Emirates’ social media customer service provides 24-hour support in English and Arabic. Web.
Emirates 2017a, Emirates Skywards: change the way you see the world. Web.
Emirates 2017b, Emirates sponsorships. Web.
Goodson, S 2016, ‘Emirates’ Hello Tomorrow – why it helped build the world’s favorite airline’, Huffington Post. Web.
Grunig, R & Kuhn, R 2015, The strategic planning process: Analyses, options, projects, Springer, New York.
Kamel, D 2017, ‘Etihad has $1.87 billion loss in worst blow to Gulf carriers’, Bloomberg. Web.
Mouawad, J 2015, ‘Emirates has plans to make Orlando its 10th destination’, The New York Times. Web.
Tadros, R 2015, Emirates set to showcase the world’s first two-class A380 at the Dubai Airshow. Web.
Tadros, R 2016, Emirates brand value grows 17% to reach US$7.7 billion. Web.
The Emirates Group 2017, The Emirates Group annual report 2016-2017. Web.
Zhang, B 2015, ‘Emirates is attacking its competitors by evoking the Golden Age of air travel’, Business Insider. Web.