Connecting the Unconnected
Harvard Business School – Case Study
MIP – Politecnico di Milano
1. In an industry where profitable firms are scarce, Emirates has delivered solid growth and solid financial performance for years. Why? What is behind Emirates’ success?
Ṝecently, on May 20th 2014, the Air French – KLM announced their results showing record losses. The strategy of alliance between two struggling airlines is yet to prove its success. Meanwhile, in a complete contrast, The Emirates Airlines have passed a massive order of 32 Airbus 380 super jumbo jets at the Berlin Air show 2010. Today, Emirates has a total of 140 orders for the Airbus 38010 and is the largest operator of A380 crafts around the world. Emirates is an industry bellwether for aircraft purchases, having purchased a whopping 200 aircrafts in 2013 alone.
In over a period of 29 years, Emirates has grown to be one of the biggest players in the airlines industry. This solid growth and an impressive financial performance over the past years is the proof of an invincible business strategy adopted by the company. We can link its success to the leadership of the company and to the Dubai Government’s support.
The Emirates Airlines success has been the continuity of its management team, many of whom have been with the airline since its start of the company. The leadership team has 23 years of experience inside the company. HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Maurice Flanagan, Executive Vice Chairman and Tim Clark, President of the Emirates Airline.
The major contribution on each of the below mentioned fields has taken the airline and the aviation industry, far from where it started.
Realising the Advantages: The government-owned Dubai carrier has lower personnel costs than much of the industry, in part by drawing many workers from the nearby lowwage nations of Pakistan and India1. Emirates has other advantages that have placed it on a par with Singapore Airlines - the two are the world’s fastest-growing and most profitable jetliners- including its remarkable Dubai location within an eight-hour flight of more than half the world’s population2.
Customer Service: In an industry characterized by decreased service amenities and increased discomfort to improve bottom lines, part of Emirates’ appeal to many passengers was its emphasis on a premium service experience. Differentiating itself through service not only enabled Emirates to build passenger loyalty and reap subsequent value, it also allowed the airline to avoid direct competition with low-cost competitors based on price.
Small wings, Big dream – Capitalization of the Initial Fund: In contrast to other major Airline operators such as Air France and British Airways, who have often received huge bailout packages or debt reliefs from the government; The Dubai government had given the airline a total of just $18 million, including the start-up money.
The leadership in the organisation were able to capitalize on this initial funding by the Dubai Royal Family and flew out of Dubai with just two aircrafts, leased Boeing 737 and an Airbus 300 B4 from the Pakistan International Airlines. The first flights connected to the neighbouring cities of Karachi, Pakistan and Mumbai, India, and they soon started an operations to the capital of India, New Delhi.
The Positioning1: The location is a strategic one – A well-oiled hub centred in a major catchment area. Emirates enjoy the low price of fuel and also the low cost labour in this region, which is more than just convenient for an Airline operator. Emirates moves passengers west-east, east-west, north-south and vice-versa and many of them only touch Dubai in transit.
Dubai benefited from relatively good weather; aside from occasional fog and the general heat, airport operations remained relatively free of the rain and snow...
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