Introduction
Emirates is one of the largest legacy airlines in the world and dominates many of the markets in the Middle-East and Asia due to its hubs and partnerships with various international and regional carriers. One of the future existing strategies of Emirates consists of appealing to the family segment of the airline industry consumer base (Hornblass 2016). This is accomplished through travel packages that offer discounts and other freebies to families (for example reduced pricing for children and preferred seating arrangement).
The sustainability of this strategy is based on the number of families that ride together on Emirates Airlines. On average, nearly 15 to 20 percent of an average airline flight consists of families. By appealing to this particular market segment, Emirates positions itself as the possible “go-to” carrier for families that want to take regional or international flights (Chen, Albuquerque and Grewal 2016).
The acceptability of this strategy is based on the ability of Emirates as a legacy carrier to leverage its larger operational capabilities to offer discounts to families (see Table 2). In comparison, low-cost regional carriers are unable to offer the same deals since their profit margins are more restrictive (Aguinaldo 2015). This makes such a strategy more feasible for Emirates since it can approach a particular market segment that other carriers cannot use in the same way (see Table 2).
In light of this future strategy by Emirates, another potential opportunity that the airline could pursue is to create a subsidiary company that specifically caters to low-cost flights (Flottau 2013). The sustainability of this approach is based on rising regional and global demand for affordable short-range trips. India, which is the largest passenger market for Emirates, is continuously expanding with many new cities developing due to the prevalence of the local IT industry (see Table 3).
This makes the idea of creating a low-cost subsidiary company more acceptable since the main company could deal with the main regional and international hubs via its A380s while the branch company could handle smaller regional flights using smaller A320s (Aydemir and Haytural 2016). The feasibility of this strategy is based on the current financial capability of Emirates as well as its extensive experience when it comes to developing regional hubs (see Table 2).
Main Body/Findings
Current Situation
Presently, Emirates has concentrated its efforts on maximizing the number of passengers it has per flight via the use of the Airbus A380. The problem with utilizing this type of aircraft as the future of its fleet is that smaller regional airports in Asia and the Middle East simply cannot handle them due to their size (Kwoka, Hearle, and Alepin 2016). As a result, if Emirates continues on its path of replacing most of its fleet with A380s, it will be locked out of short-distance regional flights, even in markets where it has a dominant position (see Table 1).
Another factor to consider is that legacy airlines are unsuited to compete with their low-cost counterparts when it comes to regional flights (Raut, Kamble, and Jha 2014). The study of Chen and Hu (2013) clearly showed that consumer preference when it comes to regional flights is often influenced by price and not the amount of comfort that a flight has (see Table 3). Low-cost airlines also have the advantage of having newer fleets which are more fuel-efficient compared to the aging fleet of Emirates (Chen and Hu 2013).
Aside from this, Emirates has been establishing partnerships with airlines such as Qantas and Malaysian Airlines so that it could utilize its hubs and facilities for its expansion into new international markets (Voight 2014). While this strategy is effective, Emirates needs a way to differentiate itself from its partner airlines in such a way that people would choose Emirates over a more well-known local carrier.
Addressing the Issue
Based on the factors that were mentioned involving smaller regional terminals, Emirates has a choice of either giving up on short-distance regional flights or diversifying its current business model to account for the competition from low-cost airlines. One potential solution is to create a subsidiary airline that operates under the low-cost carrier business model (Chen and Solak 2015). This can be accomplished by diversifying its fleet by purchasing smaller planes such as the twin-engine A320, which is well suited for smaller regional airports.
Evidence of the effectiveness of this type of strategy can be seen in the operations of Qatar Airways, one of the main rivals of Emirates, which utilizes a combination of large-bodied and small-bodied aircraft for regional and international flights (Vilkaite-Vaitone and Papsiene 2016). Emirates can implement a similar strategy; however, instead of placing it all under a single legacy carrier model; it can use legacy flights for its international and central regional hub flights while a low-cost option will be utilized for its short distance flights within specific territories (Thomas and Kummer 2015).
When it comes to the company’s international expansion strategy, the focus on family ticket packages does have a considerable amount of potential. However, there is nothing to prevent other legacy carriers within the same region from implementing a similar strategy. Emirates would need to determine if it can handle a price war in markets that it is just expanding into or if such an approach should only be used in its home markets where it is more established. This type of marketing plan could be the boost Emirates needs to compete in multiple international markets that have their own entrenched airline companies; however, there is no guarantee of its success given the amount of competition the company is likely to face (see Table 1).
Evaluation
The potential effectiveness of the regional flight strategy is based on the brand recognition that Emirates already experiences in its Middle Eastern and Asian markets. For example, Emirates is the most utilized carrier in India which gives it a substantial amount of brand recognition (Ball 2015). By creating a low-cost subsidiary under the Emirates brand, the carrier would be able to compete with entrenched low-cost carriers that are already present in the Asian and Middle Eastern markets (Vinod 2015).
Another factor that should be considered is the presence of multiple regional hubs that Emirates has already developed within various countries. These regional centers can act as the drop off point for short-distance regional flights which passengers could utilize as means of affordably connecting to international flights heading out of the country.
The current marketing strategy of Emirates involving the targeting of families has potential due to the percentage of family passengers (15 to 20 percent) that make up an average flight (Flottau 2015). However, unlike the previous regional flight strategy that has a barrier to entry (i.e. the financial and operational capacity of Emirates as a legacy carrier), this marketing approach can be entered into by other legacy carriers in the markets Emirates wants to expand in (Mules 2013).
As such, the best way to maximize this plan would be to offer prices that are substantially lower than their rivals who utilize a similar approach so that sufficient brand awareness can be developed in these new markets (Flottau 2014). Prices can be slowly increased one it has been determined that sufficient consumer patronage has been developed (Squalli 2014).
Conclusion
Emirates needs to carefully consider its current approach when it comes to the A380s as well as its marketing strategy focusing on family ticket packages in new and traditional markets. The company cannot limit itself primarily to legacy-based operations when low-cost carriers are on the rise. It needs to diversify what it is capable of surviving. Not only that, but it also needs to consider what other strategies it could implement in its market approach involving families to make it unique enough that other airline companies cannot easily replicate it.
Recommendations
The first action that Emirates should undertake is to hold a trial period for its marketing promotion that focuses on family tickets. A promotional period would allow the company to determine if any issues need to be addressed or if improvements can be implemented to make the program better. The second action that Emirates should undertake is to conduct a feasibility study regarding the recommended shift of operations into a mixture of legacy and low-cost airline company methods.
Similar attempts were made in the past to combine the two methods by other carriers. Emirates needs to examine what steps these companies took to understand what would be essential for the airline company. Emirates airlines have to examine what operational processes work, what procedures result in failure, and what business procedures would be the most effective for it in the long run.
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