Executive Summary
Oman Air is a four-star international airline company operating largely in the GCC and the Middle East. It is the largest air company in the Oman Sultanate and the second-largest carrier in the region. As it stands, it sports a fleet of 47 air carriers and operates 50 flight routes. The Qatar-GCC crisis of 2016 presents a major opportunity to claim leadership over the region, as Qatar Airlines, Oman Air’s primary competitor and the current largest airline company in the Middle East, is suffering from sanctions imposed by Saudi Arabia, the UAE, Bahrain, and Egypt, which prevents it from crossing their airspace and significantly limits the company’s operating capabilities.
Facing no such restrictions, Oman Air has the opportunity to greatly expand its operations in Qatar to cater to thousands of potential customers now unable to freely leave their country. This business proposal suggests renting or purchasing seven additional airliners and establishing a branch office at Hamad International Airport in Doha to support the operation. Estimated revenues from the first operational year are at 300 million dollars and are expected to grow the longer Oman Air maintains its dominant position in the existing political climate.
Company Summary
Oman Air is a four-star international airline operating from Muscat International Airport in Seeb since 1993. The company is the primary air service in the Sultanate of Oman and a second-tier carrier in the region, right after Qatar Airlines, which, until recently, held a dominant position in most aspects of commercial flights. Oman Air’s aircraft fleet currently accounts at 47 individual carriers outfitted for passenger and cargo flights.
Oman Air provides timely and quality services to its customers at an affordable price. Some of the services offered by Oman Air are scheduled regional and international flights, charter flights, and air taxi services. The company receives governmental support, as the Omani government owns over 80% of the company’s shares since 2007, which increased to 99.8% by 2010. Ever since, Oman Air had seen perpetual growth, increasing the number of destinations served up to 50, and growing its air fleet with an end goal of 50 – one per destination. To accomplish that goal, the company purchased new Airbus and Boeing models as well as leased several planes from Kenya Airlines to increase the volume passenger transports and to renovate some of the remnants of the old carrier fleet.
Oman Air values quality and comfort and seeks to deliver a seamless passenger experience, which reflects the number of awards that the company received over the past 8 years. Some of the include Best Business Destinations Awards of 2011-2013 and 2015-2016, Best Business Class Airline of 2016, and Best Inflight Connectivity and Communications Award of 2011. As a member of the Arab Air Carriers Organization, the company provides various offers to its customers, which include frequent flyer programs and Islamic in-flight services.
Airports in Muscat
The current hub for Oman Air is located in Muscat International Airport, which was known as Seeb International Airport before being renamed in 2008. The airport has existed since 1974 and has a total area of 5250 sq. acres. As the importance of the region grew, the airport was expanded several times to accommodate the increased numbers of passengers. In 2008, the estimated airport capacity was 4 million passengers per year. It has been steadily growing by 1 million per year ever since 2009. The airport’s yearly passenger capacity is 14 million passengers as of 2017. The current configuration of Muscat International Airport features a T-shaped terminal, 56 counters, 23 departure gates, and four baggage belts.
Due to Muscat becoming an international transportation hub, the construction of a new terminal was in order. Estimated to be completed in the first half of 2018, the new Muscat airport terminal is going to become the main terminal due to its state-of-the-art features and increased passenger capacity. It will be able to accommodate 12 million passengers and extra-large air carriers such as the Airbus A-380. The old terminal would be outfitted to accommodate low-cost flyers.
The new terminal building will cover the area of 580,000 sq. meters and provide double the number of check-in counters (96 in total) and 30 aircraft remote stands. The terminal will have the capacity for potential expansions to 20, 26, 40, and 56 million passengers per year, should the necessity arise. After the airport terminal is completed, Oman Air will likely move its hub activities to the new terminal and leave a functioning group to handle its low-cost carrier operations in the old terminal.
Opportunity Description
The opportunity for Oman Air arises from the current political situation surrounding Qatar. As it stands, it is experiencing a territorial and economic blockade from Saudi Arabia, Bahrain, the UAE, and Egypt. Some of the sanctions have severely limited the capabilities of Qatar Airlines, the primary carrier in the region, to conduct its operation in these countries. Qatar Airlines is forbidden to make charter flights and even enter the airspace of the countries mentioned above. Its international flights are currently conducted through Iranian airspace, which increased the costs and duration of the flights, making them less attractive for foreign and domestic customers.
This crisis faced by Oman Air’s primary competitor allows the company to claim a larger market share and fill in the power vacuum that was left after Qatar Airlines had its wings cut by various sanctions. As Oman Air is free to fly wherever it wants, the company has the opportunity to increase its transportation services both in and out of Qatar. Doing so, however, would require increasing the number of routes and establishing a secondary base within one of Qatar’s major airports.
Thus, the opportunity presented in this proposal is related to growing the company’s service capabilities and establishing a branch in Hamad International Airport, which is one of the largest airports in Qatar, located in Doha. Such a move would ensure Oman Air’s long-term presence in the country and increase its market share by taking customers away from sanctioned Qatar Airlines.
Market Analysis
As it stands, the market conditions for Oman Air are favorable. According to Owler, the main competitors of the company are American Airlines, British Airways, and Qatar Airlines. American and British companies represent a threat only when it comes to international transportation, their market share in GCC countries, and the Middle East is relatively small. Qatar Airlines, as it was already stated, is the largest airline company in the GCC, but with the current political climate, it is unable to live up to its full potential, leaving many customers that want to fly to or from Qatar in relative isolation. The largest Saudi Arabian air companies, such as Air Arabia, Emirates, and Etihad Airways have joined the blockade and quit all air routes to or from Qatar.
This represents a unique situation for Oman Air in the Qatari air transportation market since a good portion of it is left without a reliable air operator. According to Forbes, the ongoing crisis leftover 100,000 Egyptians living and working in Qatar without any reliable means of traveling home. With the ongoing political crisis promising to last for an undetermined amount of time due to repetitive diplomatic failures on the part of Qatar and Kuwait, which tries to play the role of the mediator in this conflict, Oman Air faces virtually no competition in claiming the Qatari market.
It is a well-established and respected company in GCC and the Middle East, whereas its foreign competitors do not have the same reputation. At the same time, smaller domestic airlines do not have the logistical network, and the air fleet required to address the needs of Qatari customers.
SWOT Analysis
SWOT is a classic marketing analysis framework that helps underline the strengths, weaknesses, opportunities, and threats associated with any business venture. It is popular due to its intuitiveness and simplicity of use. This proposal provides a SWOT analysis of the existing plan to help address its potential weaknesses and provide contingency plans.
- Strengths: The plan is within Oman Air’s capability to execute, as it has a large air fleet and Qatar has the infrastructure capable of supporting the company’s expansion into the region. A lack of opposition in the market. A large customer base in need of reliable transportation. High demand.
- Weaknesses: The necessity to expand the company’s air fleet to preserve the existing airlines and schedules. The necessity of opening a branch in Qatar.
- Opportunities: Oman Air has a chance of becoming the region’s new primary air company. Significant expansion of the customer base. Getting a foothold in Qatar. Elimination of the company’s prime competitor. Significant income increase in the long-term perspective.
- Threats: An abrupt end of the existing political crisis. The event of the crisis escalating to include Oman and bringing an end to its freedom of maneuver. The Qatari government imposing sanctions against Oman Air to protect its leading air company. The economic crisis hurting Qatari ability to travel.
As it is possible to see from the analysis provided above, the main threats to the expansion of Oman Air into Qatar are external in that they lie outside of the company’s control. However, due to the nature of the crisis and Qatar’s need to provide transportation for its citizens, the threats presented here are unlikely to present themselves before Oman Air manages to establish a firm grip on the Qatari air market, after which its position as the country’s dominant air company would be relatively secure.
Execution Plan
The execution plan for the proposed business venture involves two steps. The first step is purchasing or renting passenger aircraft to accommodate the additional influx of customers from Qatar. The estimated number of planes required to comfortably handle the initial load of customers is seven. While purchasing the planes is the most reliable way, the construction of seven planes by any plane manufacturer would take time and money. Renting aircraft from other companies would provide a faster way of expanding the air fleet at lesser initial costs. At the same time, should the political tides shift, and it would become unprofitable for Oman Air to maintain the expanded fleet, the aircraft could be returned to their original owners to save costs.
Several companies are readily available to rent aircraft to Oman Air. One is Kenyan Airlines, which Oman Air already rents two airships from on a regular basis. Since it is a reliable partner, they would be given first priority when establishing a rent contract. The other company that could provide the required planes is Intrepid Aviation – an American company with offices located in Ireland and the USA. The company specializes in leasing modern and fuel-efficient wide-body and narrow-body aircraft. Their air fleet consists of Airbus, Boeing, and Dreamliner models. Should there be a necessity to purchase additional aircraft, Oman Air could always contact either Boeing or Airbus – the primary aircraft manufacturers in the world. Bombardier, Dreamliner, and Sukhoi companies may present additional options.
At the same time with the purchasing of planes, negotiations must be made with the Qatari government and airport officials to allow Oman Air to open its representative post at Hamad International Airport in Doha. Once that is done, the additional aircraft should be moved to Doha in order to resume operations on a daily basis and open airlines to Egypt, Turkey, Europe, and other countries that would see the most demand. The expansion plan will likely mirror the most profitable routes ran by Qatar Airlines before the crisis.
Financial Plan
The following financial plan includes the potential expense estimations for renting and maintaining additional aircraft, maintaining an office in Hamad International Airport, as well as various additional expenses associated with personnel, counseling, and document issues that may arise. They are presented in table form for ease of use:
Sales forecasts for the first year are estimated at 300 million dollars, which is more than enough to cover the expenses for renting aircraft and paying for all and any associated expenses. Sales are expected to grow during the second and third years, as more and more customers would elect Oman airlines over any other company due to availability, quality, and swiftness of transfers when compared to smaller companies and Qatar airlines.
Conclusions
Oman Air possesses a one-of-a-kind opportunity to dethrone its competitor, which is Qatar Airlines, on its own turf, and turn the unstable and difficult political situation surrounding Qatar into a financial victory. Potential revenues during the first year are enough to cover the expenses of the venture, and are likely to continue to grow the longer this crisis continues. Given the nature of the conflict, it is estimated that the political and economic blockade would be maintained for at least 3 to 5 more years, which gives time for the company to establish itself as the new leader in regional air transfers. In terms of risk-reward, this venture offers significant rewards at relatively low risks, as the following business proposal outlines a plan with relatively high returns in the event of an early bailout.