Jet Fuel accounts for 40% of Emirates operating costs. Few companies supply jet fuel, with BP and Chevron being Emirates main energy suppliers.
Although this is not the case with Emirates, other airlines form alliances such as Skyteam and Star Alliance, not only to achieve network size economies, but also bargaining power when purchasing fuel or even aircraft.
Intensity of competitive rivalry
The global airline industry consists 2000 airlines, 23,000 aircraft and 3700 airports. With negligible switching costs, budget airlines pose a threat. However, airlines defend themselves by differentiating their services or forming strategic code sharing alliances with other airlines
A strategic partnership that Emirates stroke with Qantas airlines in 2013 gives the airline a distinct advantage over other Middle Eastern airlines. The partnership will see Emirates passenger load factor increase, with 200 destinations in six continents offered to its customers.
What keeps the competition high are the low switching costs from one service provider to another.
Pricing
Emirates Airlines prices its services slightly above its competitors. This is due to the large costs that the company incurs to differentiate its product from other offerings. High ticket prices coupled with its differentiated travelling services results in an average flight occupancy of 80%.
Its premium pricing strategy targets customers who demand better services over price. Direct flights from Dubai international airport, allows for customer to have less travelling time. Moreover, it offers customers a more comfortable travelling experience with its young fleet. Lastly, Emirates operates to 200 destinations, some of which lack competition. These uncommon routes are less ...
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...es has been able to gain market share during the recessions in 2001 and 2008, mainly thanks to protectionism from its local government. Since its foundation, the airline company has benefited its government’s regulations and policies. The Dubai government being the sole owner, it has ensured the successful and effective performance of the company. Access to cheap labor, lack of a tax system, abundant infrastructure, political and economic stability, all due to the government, has ensured that Emirates Airlines out perform its competitors.
The main reason for Emirates Airlines success is its strategic position. Within a 4000 mile radius, Dubai can access 3.5 billion people, surpassing half the world’s population in eight hours. Emirates Airlines owners capitalized on this opportunity, ensuring future dominance in the airline industry for decades to come.
Bargaining Power of Suppliers – High – two key supplies needed are planes and fuel. Fuel prices are negotiable on quantity. There are only two airplane suppliers, Airbus and Boeing.
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
In a dysfunctional time for the airline industry, most airlines, especially major carriers, are adapting the concept of "doing less with more." One low-cost carrier, JetBlue, is changing the domestic aviation landscape in this regard and is defying the odds. Here is a company that has examined each marketing mix elements carefully, has adapted them to its customer’s needs, and is succeeding because of this approach.
1. Issues 2. American Airlines’ objectives 3. The airline industry 4. Market 5. Consumer needs 6. Brand image 7. Distribution system 8. Pricing 9. Marketing related strategies 10. Assumptions and risks
volatile and potentially rising fuel costs. Even though a drop in fuel prices reduce air fare pricing
Twenty-two consecutive years of profitable operations which is unmatched in the US airline industry.
Before to select the proper alternative, three alternatives were analysed and evaluated under four decisions criteria: customer experience, cost, growth rate / market penetration and ease to implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the customer experience which means adding more flights from and to the East; furthermore, entering to new markets will reinforce “the power of the network” through LGA. At the same time, this decision will allow signing more code-sharing agreements with other airlines flying to international destinations and offer new products and services to LUV customers as loyalty rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is potential risk by selecting this alternative, in the recent years the energy prices has had a huge increase affecting costs, fares and even capacity needed, however Southwest Airlines has been able to hedge fuel for decad...
The airline industry has long attempted to segment the air travel market in order to effectively target its constituents. The classic airline model consists of First Class, Business Class and Economy, and the demographics that make up the classes have both similarities and differences to the other classes. For instance there may be similarities between business class travellers on a particular flight, but they will not all be travelling for the same reason. An almost-universal characteristic of air travel is that customers do not fly for the sake of flying; the destination is the important element and the travel is a by-product, a means-to-an-end that involves the necessity of an aircraft that gets the customer from point A to point B. Because the reasons can differ greatly in the motivations for a customer wanting to fly, it can be difficult to divide the market into discrete segments, that is, there is always going to be overlap in the preferences and characteristics of any given segment. With that in mind, the commonalities that are shared between the clientele that make up the respective classes can easily withstand analysis.
Alliance with Airbus: - May never be possible given their histories. Certainly isn’t good for the air travel industry.
When an airline does not have a sustainable competitive advantage, it does not have any properties of differences from there competitor and turns to a dangerous price war. The sustainable ...
Lufthansa, one of the world’s biggest airliners, has divisions handing maintenance, catering and air cargo. Since the World War II the airline industry has never earned its cost of capital over the business cycle (Hitt, 2010). Most of the airline companies have either filed for bankruptcy or are being bailed out by their government. Lufthansa had also gone through these tough times, but had resurfaced to become one of the worlds most profitable airline company. The company adapted a transnational strategy, seeking to achieve both global efficiency and local responsiveness. Lufthansa’s monopoly in Germany came to a halt with the creating of the European Union. All the EU member countries become one regional and therefore the European competition became, an increasingly a local competition. Lufthansa created its regional Hubs, to cater for its domestic market. But the availability of substitutes such as bullet trains and the Euro tunnel, made is necessary for Lufthansa to create short traveling time, customizations and quality standards in the region to achieve a competitive advantage. But outside the EU there are no substitute to air travels as such all the flag carriers are competing in the market, the international airline industry is a highly competitive environment. A new force has also emerged in the world of air travel, in the form of three Gulf airlines with jumbo ambitions. Within a decade Dubai’s Emirates, Qatar Airways and Eithad from Abu Dhabi have between them carried the capacity of two hundred million passengers (Micheal, 2010). The company had to go global and therefore adopted the international corporate-level strategy, where Lufthansa will ope...
Several large scale, interrelated conditions have affected the airline industry over the past several years in such a manner that every carrier has had to respond in order to remain viable and competitive.
Within the airline industry currently the airlines can be divided into low cost airlines and full service airlines. The low cost airlines targets customers that are seeking no frills connectivity between cities at low ticket prices. The full service airlines provide several add-ons like free meals, on plane entertainment, and communication facilities. The target market for full service airlines are customers who are willing to spend extra for the services that the airlines provides.
In the 1990s, Emirates airlines began to expand its route network to various international destinations including Paris, Rome, Zürich, and Jakarta. With the advancement in aeronautical engineering, long haul flights became more frequent which lead to the airline's route expansion and earned it the name, “finest in the sky”. By 1994, the airline had 4000 employees and netted a profit of about 24 million dollars (The Emirates Story).
This will lead to the limitations on the number of routes the international carriers fly, flight schedules, fares, etc. The past five years witnessed an increase in the cost of fuel, leading many airlines into bankruptcies, which resulted in consequences such as the $30 billion loss faced by the US airline industry as estimated by the US Airport Transport Association. One of the major political factor of globalization that affected airline industry was 9/11. In order to deter future terrorist threats, several security rules and regulations were enforced, which led to the increased cost of aviation operators to administer the fundamental training and personnel to follow these rules. Additionally, the post 9/11 period saw a decline in passenger and consumer requirements, negatively affecting the airline profits. There was a revenue drop of dollar 22 billion and three years were taken to recover them. But these revenues were dropped by 14% during the global financial crisis during the years 2008 and 2009, which was reclaimed to a large extend in the following year. The 9/11 period brought forward a huge global impact such as decline in traffic, revenues and profitability, increase in oil price and bankruptcies,