The Emirates airline has experienced a lot of challenges in its operations, which has resulted in company’s poor financial performance. Several issues in the aviation industry have had a negative impact on the company’s financial results. The difficult economic environment in global aviation market has reduced the amount of revenues earned by airlines.
The global aviation industry has experienced a slump in performance, and many airlines are currently struggling to stay afloat. This paper will discuss the macro- environmental economic trends which affect the demand for airline services in the global market (Bundhun, 2011).
High fuel costs have had a severe impact on the performance of Emirates Airline. These increased costs resulted in the losses in the company’s profitability in 2011 which made its revenues reduce. The company spent more than 1 billion dollars on fuel expenses; the amount is higher as compared to that spent on the same in the same period of the previous year. The global aviation industry has become more vulnerable to instability in fuel prices than it was before.
This situation has made many airlines around the world experience significant financial losses in their operations. (Bundhun, 2012). The International Air Travel Association has projected the global aviation industry profitability levels to reduce because of high fuel costs. The IATA has stated that profits in the industry would dip from 16 billion dollars in 2011 to 6.9 billion dollars in 2012.
Emirates has had to contend with reduced traveller numbers as a result of the recession in Europe and other parts of the globe. The occupancy rates of passengers in the carrier have reduced, and this has had an effect on the airline’s revenues in the short term. The airline has managed to become elastic to the changes in the market in a difficult period (Black, 2012).
However, despite all these challenges, the company has managed to register good financial results in 2012. The group’s fiscal results for the financial year ending September 30, 2012, were 575 million dollars. This performance is positive as compared to the revenue of 343 million dollars the group gained during the same period in 2011.
The Middle East has seen an increase in the number of airlines. These airlines seek to benefit from the increase in the number of travellers in the region. Airlines in the area registered profits amounting to 900 million dollars in 2011, which shows the region’s aviation industry has experienced rapid growth.
Emirates’ financial performance is beyond expectations because there are several airlines in the Middle East with good financial results. Etihad and Qatar airlines are Emirates’ main competitors. These airlines have made their operations more efficient in order to take advantage of high passenger traffic in the gulf (Black, 2012). The Emirates Group has changed its market strategy to meet the existing market realities.
Emirates airline has acquired new fleet which is in line with the carrier’s ambitions to stay ahead in the global market. The new aircraft will be used for long haul destinations with high passenger numbers to help the firm take advantage of new market opportunities. The airline has acquired Airbus A380 aircraft to enable it to transport more passengers on long distance routes.
This shift in market strategy is intended to connect the airlines’ passengers with other major global hubs (Black, 2012). However, its competitors have also placed orders for new airbus and Boeing aircraft. They are competing with Emirates to dominate the global aviation industry. Qatar and Etihad airlines are giving Emirates a run for its money. Emirates will continue to experience more competition in the aviation industry from the two airlines.
Emirates Airline has acquired fuel efficient Boeing 777-300ER aircraft. This is a long term strategy which is meant to reduce the challenges the company has experienced as a result of unstable oil prices. Middle Eastern airlines have become more active in global air transport. Thus the airline companies are targeting to expand their global reach to take advantages of new opportunities.
The global air industry has experienced a slump in the number of passengers, yet Middle Eastern airlines continue to expand their operations (Baker, 2012). The market trends in the region show that in the past year, passenger traffic has not reduced by a large margin as compared to that of Europe, North America and the Far East.
The Emirates airline is well placed to take advantage of various opportunities in the market. The airline’s Dubai hub’s location is strategic which makes it benefit from high passenger traffic. The city is also popular with shoppers and tourists who are attracted to it. Many travellers have to transit through Dubai to other destinations in the Far East, Europe, Africa and the Middle East.
This gives the Emirates Airline an opportunity to structure its operations to meet the needs of such travellers (Baker, 2012). The acquisition of new aircraft by the company is intended to give it a stronger foothold in lucrative passenger markets.
In conclusion, the Emirates airline has experienced various challenges which have had an impact on its performance. Its new market strategy which focuses on long haul operations and fuel efficiency is likely to improve its performance. This will make it keep its dominant position in the global aviation industry.
References
Baker, L. (2012). Emirates flagship A380 network expands east and west. UK Zambians. Web.
Black, D. (2012). Aircraft demand to soar in Middle East as orders expected to hit $470bn. The National. Web.
Bundhun, R. (2011). Emirates airline sees profits hit by rising fuel costs. The National. Web.