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T
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TRATEGIC
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IAGNOSIS:
E
MIRATES
A
IRLINES
Ahmad JAMMOUL
MB
A
G
raduate,
University of Nice Sophia Antipolis, Nice, France
owadays, we cannot imagine the world without the airline industry, because of its fast
services and huge benefits, which offers to many other industries and societies. Also, its
critical role in creating the new global economy. According to the U.S. department of
transport, this industry is divided into four categories:
1.
International: Airlines which provide services from continent to another.
2.
National: within a country
3.
Regional: within the geographical region. They focus on short hauls flights.
4.
Cargo: airlines that provides goods transportation
Today, the airline industry is one of the most important industries, because it is supporting the
internationalization and globalization objectives for many businesses around the globe. This need
creates big pressure on the plains producers and all other suppliers of airline companies. Also, it
drives them to increase investments, inventions and innovations
to satisfy their partners’
expectations by delivering their satisfaction.
I have chosen Emirates, because it is a major competitor for many global companies, especially
Air France.
The “New York Times” mentioned:
“Emirates’ growing reach, from its Dubai hub,
is unnerving rivals like Lufthansa and Air France”.
In this paper, I am analyzing the competition
between Emirates Airlines and Air France; Air France is one
of the sky team’s founders, which
is a carrier network of 19 international carriers and for this reason, I decided to analyze the
competition between Air France and Emirates Airline with its independent growing strategy,
because the carrier network companies cooperate on a substantial level and there is no real
competition between them.
Introduction
“
Emirates
”
is an airline company based in
Dubai and founded by the United Arab
Emirates government in 1985. Its main
activity is the provision of commercial air
transportation services. “Emirates” is the
largest airline in the Middle East and
operating nearly 3,400 flights per week. It is
the world’s fastest growing international
airline and its growth has never fallen below
20% a year. The percentage of passengers
increase is 18.4% in 2012 comparing by
2011.
The Emirates’ Understand
(annual Report)
At the Emirates group, much of their
progress is rooted in the ability of their
people to understand how the world fits
together. It is not just about their customers
and industry; it is also about the outside
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factors which influence both, thinking like
global economics, trade and politics, shifting
populations, diversity and sustainability.
Some call it understanding the big picture,
but they call it, understanding their future.
Emirates versus alliances
The philosophy of Emirates is focused on
consumer interest, an ability to grow based
on their own business plan without seeking
permission from an alliance partner (2). The
Emirates started its introduction
in the “issue
2” of its “Open Sky” in 2009 by saying:
“Competiti
on
–
Who
Cares?”
Emirates
mentioned on th
e “Open Sky” they didn’t
join any alliance and they don’t
have any
plan to join any one of them. The Emirates
see them as having significant anti-
competitive elements and believe that their
membership in one would be an artificial
speed brake on their own business plans. (1)
Emirates
’
Strategy
and
competitive
Advantages
The strategic decision and location of
Emirates
The growth of Emirates had its effect on
many companies operating in the airline
atmosphere, such as Air France, which
merged with KLM, and that growth was one
of the reasons that lead to merge. Also, the
Emirates growth drives Air France to
discuss with “Etihad” Airline
as a step to
cooperate with the Emirates competitors.
Also,
Emirates’
strategic decision had its
effect on Air France, Emirates wanted to
reposition itself as a global transporter and
the strategic location of its hubs in the
International Airport of Dubai, which links
the east by the west, supported that decision.
Emirates can serve the travelers, who are
coming from Asia and Australia to Europe
and America, stopping in Dubai, and it is
very difficult for European and Australian
companies -Air France one of those- to
compete with it, because of its low cost and
their high cost and that is what makes
Emirates a major threat for Air France.
Service Development and selection
“
Emirates
”
operates in a high competitive
market, there are many companies looking
at it, and thinking how they can compete
with it.
For that reason, “Emirates” had to
improve it services continuously. Emirates
was the second company, which ordered the
biggest airplane in the world, the Airbus
A380. Emirates orders were 90, while Air
France orders were12. Moreover, Air France
orders were approximately after nine months
of Emirates orders, which shows that
Emirates is more responding to the market
and
the
customers’
expectations
(3).
Emirates major competitor
“
Air
France”
argued:
“it would seem difficult to meet all
their growth targets”
, but
“
Emirates
”
response:
“
Emirates has ordered the A380,
because we believe it represents the most
efficient,
friendly
environment
and
productive large aircraft available for our
fleet growth and replacement strategy over
the next decade. It, along with our B777
300ER’s,
are the most efficient aircraft in
current operation on a per passenger basis
”
(1). Because of its service improvement,
Emirates has been ranked the top in a
customer service quality survey of airlines
operating longer haul flights out of the UAE,
its overall score is 92.3 percent while Air
France score is 72.3 percent. This survey
was
conducted
by
the
independent
organization
“Ethos Consultancy”
, which is
a third party (4). Airbus, the European plan
maker, said about the mix of quality service,
the efficient operation and low cost of
“
Emirates
” are the reasons which make the
global airlines like air France to be afraid of
it success. Also, Airbus mentioned that
Emirates is the top customer of it. (By
John
Leahy, chief
operating officer of Airbus)
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Differentiation
To pioneer itself, to achieve its objectives
and to compete with global carriers like Air
France, Emirates made its services more
professional and defer than all competitors.
For this reason, Emirates was the first that
put in a personal video in all three classes,
the first to present private suite in the plane
and the first to have on board showers.
Marketing campaigns
On the
website, “Emirates” launches a very
competitive marketing campaign, which is
aiming to compete with Air France in its
home
. “Emirates” offers
Direct flights from
Lyon to Dubai and more than 130
destinations (5). While with Air France, if a
customers wants to book a ticket with Air
France from Lyon to Dubai or other
international locations, they need to stop in
Paris, wait in the airport and also pay more;
it
’s very tiring
and expensive for customer.
“Emirates”
has
more
competitive
advantages, and create more value to
customer
through
the
diversified
and
effective services.
Low prices
“Emirates” competes in pricing
. According
to the standard measure in the industry and
comparing to other companies, the costs per
available seat-kilometer are very low,
According to 2010 data from the forecasting
firm Oxford Economics, labor cost per
employee at Emirates is about 40 percent of
Air France-KLM's and Lufthansa's, and half
of American Airlines and United Airlines.
This low cost gives the “Emirates” a very
strong competitive advantage comparing
with its competitors.
Because of these low prices, Air France
Claimed
that “Emirates” receives
financial
aids from its local state, which provides a
wide array of services: airports, civil
aviation authorities, airport and navigation
charges,
and
finally
complementary
infrastructure.
“Emirates” answ
ered on that
claims by the following:
“Emirates” receives no subsidies from
its
government and is run as a fully commercial
airline;
a
fact
confirmed
by
their
independent auditing and analysis by
various international banks.
“
Emirates
”
pays the same airport and
ATC charges as any other airline operating
in Dubai and receives no subsidy or
preferential treatment.
Emirates pays for comprehensive staff
healthcare and housing, as well as for an end
of
service
benefit/provident
scheme
contribution as disclosed in their audited
financial accounts. On average every year,
Emirates bears a cost in excess of USD$400
million for employee benefits in the UAE.
As the correction of these facts illustrates,
there is hardly a competitive advantage.
Then consider that the greatest form of
subsidy is protection from competition by a
carriers’
government
–
something Air
France has enjoyed for decades compared
with Dubai’s
open skies.
There is no corporate tax payable by any
company in Dubai. Yet Emirates pays its
government shareholder dividends and pays
all taxes in all countries it operates to,
including the billions of Euros we have paid
in taxes in Europe.
Customer Relationship Management
Knowledge-driven In-flight Service (KIS)
Emirates used a specific CRM database,
which runs during the flight in order to
maintain the profitable lasting relationship
with
their
customers
by
delivering
satisfaction.
In 2004, Emirates provided 1,000 pursers
with HP tablets as part of ‘Knowledge
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driven In-
flight Service’ (KIS). It allows the
airline’s cabin crew to see which previous
trips a passenger has taken with the carrier
and based on this, know their food, wine and
seating preferences, or any issues a customer
had during their travels. Moreover, the
gathered data supports Emirates in the
segmentation and targeting, because it can
be analyzed to very specific information
about
customers
’
expectations
.
This
information is the key that supports the
decision making processes of “Emirates”
in
adding and offering the right services that
satisfy its customers’ expectations.
This system allows Emirates to provide
more focused and personalized services.
Pursers use KIS to brief the cabin crew
before every flight and check passenger’s
special needs, as well as see who is enrolled
in
Emirates’
frequent
flyer
program
Skywards. This enables the crew to invest
more in those loyal customers and to
providing a more personalized service.
Cabin crew can also use the KIS system to
perform in-flight upgrades to Business or
First Class, as well as post customer
feedback that’s emailed to headquarters
upon landing. That is one of the most
important sources of information that
pioneers the competitive intelligence process
and allows Emirates to improve its services
and keeping its customers loyal and
satisfied.
Loyalty Program
“
Emirates
”
offers the miles loyalty program.
Two types of membership can be identified:
Emirates Skywards and Business Rewards.
This loyalty program presented hereafter
was implementing in order to satisfy the
customer by first of all allowing him to save
money, but also in order to gather personal
information
concerning
those
clients.
Moreover, because a high number of miles
are needed in order to benefit from them,
those loyalty programs created a lock-in
system where the customer should remain
with the same airline in order to benefit from
them sooner.
Emirates Skywards
•
Cumulate Miles every times you travel
•
/
Spend
those
miles
on
different
destinations, depending on the number of
miles you acquired
•
Have access to a miles dashboard,
allowing to quickly seeing the miles you
have, and the advantages you can get out
of them.
•
Attain a membership level relevant
to the number of miles you were able to
cumulate. Levels available are Blue,
Silver, Gold and Platinum that last 14
months. An example of benefits you can
get with the gold membership are lounge
access and priority check. Assessments
upgrades membership levels occur after
12 or 13 months, giving an extra month to
earn miles and reach a higher level.
Business Rewards
•
Earn miles Business Rewards and
Emirates Skywards for each flight
•
Business Rewards Earn 1 mile for every
dollar spent
•
The
ability
to
book
online
at
emirates.com
or
through
your
designated travel agent or Emirates
customer center service
•
Competitive rates for all classes across
the Emirates network
•
Redeem
Miles
against
theft
and
upgrades
•
Exclusive special offers and discounts
from our partners Business Rewards
•
Tools easy to use online to manage
your
account,
membership,
your
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itineraries and trip reports
•
The convenience of 24 hour access on
24, 7 days on 7 and booking process
easy online
AMEX/VISA Cards
Both cards allow the client to earn miles
while spending. Money spent using those
cards does not have to relate to
“Emirates”
;
it can be spent on anything. It is as simple as
this: 1 mile for every € spent anywhere, then
2 miles for ever € spent EMIRATES
Airlines.
Technologies Used
“Emirates”
has been doing a really good job
on the technology side. As you will see
below, they have been using every media
available. From social media to apps and
online ads, the user feels closer to the brand.
Call Centers
Like most call centers,
“Emirates”
can be
reached by phone for any reasons:
•
Booking
•
Complain
•
Baggage claims
•
Reservation with partners
•
General questions…
Social Media
As mentioned earlier, “Emirates”
is present
on every social media existing. Whether
they are highly active or not, they are
registered in the following social media:
•
Facebook
•
Google +
•
LinkedIn
•
Twitter
•
Instagram
•
YouTube
•
Pin Interest
Google Adwords / Adsenses
After researching for
“Emirates”
CRM
presence on the net, we quickly noticed the
increasing number of Ads I we see on my
Internet browser. Moreover, we could also
notice their adwords banner on top on our
Google research. Meaning that not only they
use internet as a commercial platform in
order to again have the user feel closer to the
brand, but also it allows Emirates to monitor
who has been clicking on their ad, from
where, when, and how many times. This
information is essential to
“Emirates”
allowing them to focus on the right clients,
with the right needs.
Phone Apps
IPhone and android apps can be found as
well. Those apps can be used for buying
tickets, online check-in, or monitoring its
membership. Through those apps, Emirates
is within reach of your pocket.
Workplace Quality level
The management of “Emirates” is highly
qualified, for example the president has 42
years work experience in the airline sector.
They Emirates employees are from different
region, religion and cultures and all create a
very productive team.
Emirates Reputation
On the services level
“Emirates” offers high quality services in an
increasingly
way,
because
customers’
expectations are the only certainty for any
business, it is normally go up.
Financial Performance
“Emirates” airline is always growing by no
less than 20% a year, the profit margin
increased from 2010 to 2011 from 12.7% to
19.4%.
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Social responsibility level
“Emirates”
respect
the
standards
and
policies in dealing with societies and
environment; every year, it issues an
environment report,
highlights Emirates’
position as a leader in the airline industry for
fuel efficiency and CO2 emissions due to its
young, technologically-advanced fleet.
In
order
to
improve
its
reputation,
“Emirates” has committed to sponsorship
around the world since 20 years. For
example: the partnership with FIFA. Trip
Advisor is one of the most respected travel
website, which provides
travelers’ rating for
airline companies. “Emirates” is rated “very
good” while Air France is rated “average”.
This shows that Emirates has better
reputation comparing to its competitor Air
France.
SWOT Analysis
Table:
1
Conclusion
COMPETITORS are fighting back!
Because of the strong competition and
strategies, the global alliance and Sky team,
which includes Air France, mentioned, that
it would add two airlines, the Middle East
Airlines from Lebanon, and the Saudi
Airline of Saudi Arabia, to counter the
dominance of “Emirates” in the Middle
East
region. This addition of airlines companies
shows that Air France and its current
partners are not able to compete with
“Emirates”
and that justify its successful
strategies. Also, that what unnerving rivals
like Air France and Lufthansa
as the “New
York Times” stated.
Emirates’ competitors
are trying to stop its growth by any way; the
strategy has prompted a strong reaction from
Strength
Weaknesses
Strong Hub in Dubai and strategic location
Has a strong workforce of over 50,000 employees
entering the cargo shipping
top global brand
a strong corporate culture
effectively managing the needs of their target
audience
Low emissions and environment friendly
Does not cater a lot of places in US
Labor policies need to be revised
(Salaries…)
Opportunities
Threats
Emirates and Tourism Australia signed a global
marketing agreement for joint marketing activities
focused on Australia.
Emirates and the Mauritius Ministry of Tourism
signed
an agreement for the development of a series of
joint activities. The UAE, Dubai and Emirates
Airline have secured over 60 open or highly
liberal aviations
Agreements
Increasing Competition in Middle
East
Market
Increasing fuel costs
Economic slowdown
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airlines like Air France and Lufthansa.
These carriers hope to persuade their
governments to limit Emirates’ access to
French and German airports. “Emirates’
strategy is
aggressive,” says “
Pierre-Henri
Gourgeon
”
, the chief executive of Air
France, who complains that Emirates is
siphoning off p
assengers from Europe’s
traditional hubs. “
Europe is at the center of
the global aviation world
.”
(New York
Times) (6).
“Emirates”
ranked higher than
Air France in several terms, which proof the
success of it strategies. (Table 2)
Among top
10 Emirates
Table:
-
2
Among top 10
Emirates
Air France
By Scheduled Passenger-Kilometres Flown (Millions)
5
th
7
th
By Scheduled Freight Tonne-Kilometres Flown (Millions)
3
rd
Not in the top 10
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