Introduction
Air Arabia is one of the largest and most popular low-cost companies based in the United Arab Emirates, which operates air transportation. Its main advantages are low prices for tickets, quality service, and wide geographical coverage, as it offers flights to 50 countries and more than 170 destinations, which brought it 15% revenue in 2019 (Air Arabia, 2020). The purpose of this paper is to determine the development strategy for Air Arabia, according to the Anstroff Matrix, based on an analysis of its internal and external environments. In particular, onboard connectivity will be discussed in terms of its appropriateness for Air Arabia. It is hypothesized that the implementation of the mentioned idea into the operation of Air Arabia would be beneficial to both customers and the company.
PESTLE Analysis
The concept of onboard connectivity refers to the opportunity to use the Internet during the flight for connecting with the crew and accessing the necessary information. With the exponentially growing technological development, the demand for such innovation can be identified as high. Among a variety of operational benefits, it is possible to note passenger empowerment and personalization – the key issues that impact customer choices and preferences.
Political Issues
Speaking of the mentioned innovation in terms of the political factors that are present in the UAE, one should stress that political instability in the Middle East region is the main challenge. The introduction of onboard Wi-Fi connectivity may be violated under the impact of ongoing conflicts, extremism, and terrorism. At the same time, the UAE assigns the safety of flights a top priority to protect its passengers by using sophisticated threat detection systems. Nevertheless, the stability or instability of politics can change rapidly, which makes it essential to constantly monitor this issue during onboard connectivity implementation. The latter is likely to improve political stability due to the increased potential to timely identify and address the emerging threats.
Economic Issues
In terms of economics, Air Arabia is a low-cost airline that operates flights to various countries of Africa, the Middle East, and Asia. Given that the target customers of this airline are composed of people who want cheap and comfortable flights, the company strongly depends on the number of passengers. The fact that Air Arabia is the first low-cost airline makes it a pioneer in introducing onboard connectivity. The example of Etihad, another UAE-based airline, illustrates that customers are ready to pay for the Internet to stay connected. In this connection, it is possible to offer a limited amount of traffic for free and design a set of plans for further access. Currently, 80 percent of passengers carry a smartphone or another gadget onboard (Air Arabia, 2020). Considering the economic growth and the average income of customers, the demand for this idea would be high, which is likely to increase the company’s profits.
Social Issues
The population trends include great reliance on technology and smartphones to communicate with friends, resolve business issues, and access new information. The passengers who choose Air Arabia prefer low-cost flights for tourism and business purposes, while their lifestyle attitudes are closely associated with being connected to the world. Therefore, if the airline would introduce onboard Wi-Fi, it would meet customer expectations, making them more satisfied with their experience, which would also improve customer retention.
Technical Issues
The technical aspects are equipping the airplanes with the necessary technology and establishing satellites or air-to-ground (ATG) in various locations. More to the point, the very approach of Air Arabia limits its investments in technological development that can set an extra burden to the company. From this perspective, the technical issues can be associated with significant challenges, which are the core issue that should be resolved by the company before implementing this technology.
Legal Issues
Legal factors relate to agreements between countries on airport taxes and a ban on the use of specific aircraft models. The first risk is the growth of the fees of airports or countries that Air Arabia might face as it will either force them to increase the price of tickets or lose profits. Besides, each state has the right to prohibit the use of certain aircraft models, if there are good reasons for this. For example, after the disaster in Ethiopia, many countries suspended or banned the use of Boeing’s 737 Max (Kaplan, Austen & Gebrekidan, 2019). A similar risk exists for other airplanes, so the company will experience significant losses if the model of its airplanes is prohibited by the countries of its operation.
Environmental Issues
Environmental factors also sharply affect the company’s operations, especially in light of recent ecological trends and the environmental crisis. Airplanes are harmful to nature, so there is a possibility that in the coming decades, their popularity may decrease, and taxes on their use will grow. However, the introduction of onboard connectivity can be used to attract customers’ attention to the problem of climate change. For example, Air Arabia can design a short video that explains the need to resolve this problem and simple steps that can be taken by any person. This video can be shown before entering the Internet as a social responsibility initiative. Accordingly, the company would demonstrate its responsible approach to the environment while also increasing customer satisfaction via a new service.
SWOT Analysis
Strengths
Air Arabia is one of the most successful airlines in the UAE because it uses its strengths, such as low ticket prices, high quality, a variety of services, and a wide selection of destinations. Low ticket prices make it possible for the middle and lower-middle classes in all countries to afford flights. Consequently, the number of customers is statistically higher than for business and luxury airlines. The company also offers a wide variety of services both during flights, for example, amenities for children and entertainment, and as an addition to them, hotel reservations or car rental. The high quality of services is reflected both in the increase in the number of company transportations and honors.
In 2019, Air Arabia received the award as the best low-cost airline in the Middle East and Africa, and one of the evaluation criteria was customer reviews (“Air Arabia,” 2019). A large number of destinations is also an advantage of the company since it allows it to attract more customers and reduce the risks associated with economic or political instability.
Weaknesses
The weakness of the company is an insufficient fleet, which cannot satisfy the demand of passengers. Today, Air Arabia has 52 aircraft that operate scheduled flights. At the same time, the Etihad low-cost airline has a fleet of 102 aircraft, and the largest company in the UAE Emirates has 278 airplanes (“Our fleet,” n.d.; “The Emirates A380,” n.d.; “The Emirates Boeing 777”). However, Air Arabia is already dealing with this issue and replenishes its fleet. The company’s official website has repeatedly mentioned that Air Arabia made the largest order in the region for the purchase of 120 Airbus A320 Family aircraft (Air Arabia, 2019). Therefore, the company is aware of its shortcomings and tries to correct them to satisfy customer demand.
Opportunities
The main opportunities of the company are expanding the market to other countries, increasing the frequency of flights, as well as offering new services. Although the company flies already in 50 countries, there are still many states where Air Arabia does not operate, and its profitability and high organizational level make this expansion possible. Besides, if the purchase of aircraft is successful, the company will be able to increase the number of flights to current popular destinations. Air Arabia can also expand its range of services, for example, build its hotel with low room prices. Thus, Air Arabia has many options for product and market development.
Threats
The company also continually faces threats from other airlines, and there are always risks of changing external political and economic conditions and environmental initiatives. The first threat is current as the competition is high due to such local airlines in the UAE as Etihad and Emirates, and foreign companies, for example, Qatar Airways, British Airlines, Singapore Airlines, and Lufthansa. Besides, in 2019, the Indian company SpiceJet signed an agreement, which could lead to the emergence of new airlines, and Wizz Air low-cost aims to expand its network to the east (Dudley, 2019). However, cooperation with Etihad is a profitable solution for Air Arabia as this allowed it to occupy part of the market without significant investments.
Moreover, any changes in the legal, political, or economic situation of one of the 50 countries where Air Arabia flies threaten to reduce profits. For example, in the Air Arabia report, the outbreak of the coronavirus in China did not affect the company’s operations (Air Arabia, 2020).
However, if it made flights only to China and neighboring countries, this epidemy would significantly reduce the company’s profit. Another possible threat to the future is the need to reduce air travel due to aircraft pollution of the environment and increase taxes due to these changes. A possible solution to the problem is to invest in the development of more environmentally friendly aircraft. Although such a project can cost vast amounts of money, if it is successful, the company will receive increased demand from customers, as well as profit from the invention. Therefore, PESTLE and SWOT analyses demonstrate that Air Arabia has many advantages that open different development opportunities for it.
The Strategic Model: Product Development
Ansoff’s Matrix is one of the most convenient tools for determining a development strategy since it uses the main features of the external and internal environment to select a model and evaluate its risks. The Matrix offers four strategies, such as market penetration, market development, product development, and diversification (Planellas & Muni, 2019). One can conclude that the company needs to use a product development strategy by assessing its weaknesses and opportunities.
Since onboard connectivity is not yet implemented into Air Arabia, product development is the main strategy that should be adopted in terms of the current market. Paying attention to the PESTLE analysis that was provided earlier in this paper, this idea can be evaluated as a viable option to research and introduce by Air Arabia to improve customer satisfaction and, at the same time, increase the positive impact of the company on the environment along with greater profit.
Extensive research in the field of the onboard Internet should be conducted to better understand the current position of the company on the market. Considering that the investment and technical aspects are the key challenges, the partnerships and agreements can be considered to seek support from other organizations and the UAE government. In addition, the experience of competitors should be explored to learn about their strengths and avoid potential mistakes.
Consequently, the company will receive significant profits and will be able to compete successfully with other strong airlines by increasing the market, the number of aircraft, and passengers. In addition, this extension will allow the company to minimize the risks associated with environmental trends and possible political and economic instability in countries. After becoming a leader in its Air segment, Arabia will be able to use a product development strategy or even diversification.
Conclusion
Air Arabia is a successfully developing company that offers excellent services in the low-cost aviation segment, which is its advantage over many competitors. Its main weakness is a small fleet, but management is aware of this problem and makes efforts to correct it. The current economic, social, and environmental factors allow the company to use the product development strategy according to the Ansoff Matrix since onboard connectivity is relevant for many people. Even though there are certain political and technical challenges, partnerships with other companies and governments are likely to resolve this problem. Therefore, researching and developing onboard Internet access for passengers should be the company’s primary strategy, which will help it to develop and become leaders among the regional airlines.
References
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Kaplan, T., Austen, I., & Gebrekidan, S. (2019). Boeing planes are grounded in U.S. after days of pressure. The New York Times. Web.
Our fleet (n.d.). Etihad. Web.
Planellas, M., & Muni, A. (2019). Strategic decisions: The 30 most useful models. Cambridge, UK: Cambridge University Press.
Rahman, F. (2020). UAE Cabinet approves Air Arabia Abu Dhabi as national airline. Web.
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