Emirates Airlines: In a League of its Own

Only available on StudyMode
  • Download(s) : 62
  • Published : February 1, 2014
Open Document
Text Preview
Business Strategy

Emirates Airlines
In a League of its Own

T

By Prof Dr M. S. S. El Namaki

With the global economy

Is this
the Right
Strategy?

he airline industry, which plays a
pivotal part in any country’s economy, is one of the most volatile industries, plagued with excessive losses,
restructuring and bankruptcies. There is a
long history of bailout packages in the
United States, and efficiency seeking
mergers in Europe. The industry is cyclical.
Four or five years of poor performance
precede five or six years of improved performance. But profitability in the good years is generally low, in the range of 23% (net profit). In times of profit, airlines lease new generations of airplanes and

upgrade services in response to higher
demand. Consolidation is a trend, though
variable in shape. Airline groupings may
consist of limited bilateral partnerships,
long-term, multi-faceted alliances between
carriers, equity arrangements, mergers,
or takeovers.
Since governments often restrict ownership and mergers between companies in different countries, consolidation is
restricted within the country. The Middle
East is a textbook example of such weaknesses. Events such as September 11, the Iraq conflict, the conflict in Lebanon
and Palestine, constitute to the socio-political imbalance in the region. These factors invariably affect the economy of the
region. Directly or indirectly.
Emirates Airlines was conceived within
this turbulent environment and has demonstrated an unfailing ability to grow in these unstable conditions. Moreover, it has been
able to develop a global strategy that has
taken it beyond the limits of the regional
market. (New Nation Online, 20 May,
2006).
The following case study explores
Emirates Airline’s rise to success and
questions present day strategies of the
airline and their sustainability in the long
run.

booming,

globetrotting

is no longer a perk in the
corporate world. With
the advent of internet
and rapid innovations in
the field of communications and travel, the
world has truly shrunk in
size. Plastic money is
passé. Time is the new
global currency.

The Competitive Profile of Emirates
Airlines
Emirates Airlines is the product of a
search for effective key drivers for the
Dubai economy. It belongs to a package
8



www. capital-me.com

Capital Magazine



April 2007



9

Business Strategy

that includes air transportation, tourism,
hospitality and real estate. Lack of oil
resources and a search for alternative
sources of economic growth induced the
Dubai government to embark upon this
venture. The launch of the airline came in
1985 with the Dubai government as the
sole owner and the sole investor. Early
services extended to 60 destinations in
42 countries throughout Europe, Middle
East, Far East, Africa, Asia and Australia.
Early strategies stressed quality in product, equipment, organization and services. A multi national crew was recruited, a modern fleet purchased and an overall
quality image was promoted. The airline
took off and managed within a fairly short
period of time to expand its destinations
network, achieve high returns, boost technology and enter new markets. Emirates’ foray into new markets was a
subject of envy for major globals carriers,
who had till then perceived Emirates as a
global airline based in the Middle East and
not an Arab airline operating abroad. This
induced established carriers in Europe
and Australia, such as Air France, KLM,
British Airways, Lufthansa, and Qantas, to
perceive Emirates Airline's strategic positioning as a global carrier, as a major threat.
Most of these carriers not only found it difficult to deal with Emirates’ competitive cost advantage, but others such as, Air
France and Qantas, openly accused
Emirates Airlines of receiving hidden state
subsidies and of maintaining a too cosy

(

Emirates Airline's
revenues totalled
AED...
tracking img