Emirates Airlines’ Strategic Management in 2011-13

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Table of Contents

Emirates Airline’s Current Mission
Emirates Airline’s Current Financial Condition
Emirates Airline’s External Opportunities and Threats
Emirates Airline’s Internal Strengths and Weaknesses
Recommendations
References

Emirates Airline’s Current Mission

The current mission of Emirates Airline is focused on achieving global growth while supporting the development of communities where it operates. As Plunkett (2009) observes, the mission of this firm states, “Caring for our employees and stakeholders, as well as the environment and the communities we serve, have played a huge part in our past and will continue to shape our future” (p. 90). As shown in this statement, Emirates Airline’s mission statement focuses on the development of all the stakeholders within the firm. In its effort to earn profits to its owners, the firm is still determined to ensure that all other stakeholders’ interests are taken care of in order to achieve holistic growth. It is committed to improving the welfare of its employees, customers, and the community as an approach to achieving sustainability. The following are some of the objectives of this firm.

To engage in community initiatives focused on improving the living standards of the disadvantaged children in various parts of the world.
To offer continued support to the workforce, the stakeholders, and our environment as a way of achieving sustainability.
To maintain business ethics as the foundation of the firm’s success both in the local and international market.

The above objectives of Emirates Airline have defined its current strategies in the market. The firm has introduced a new approach to handling its customers as a way of increasing their level of satisfaction. It has introduced different modes of entertainment for its passengers when they are on board. For the employees, there are initiatives meant to reward the best performing workforce on an annual basis. The firm has also increased its corporate social responsibilities focused on environmental protection and community development. This strategy has endeared the customers and the community at large to this firm. Employees also feel respected and have the desire to give their best to this firm.

Emirates Airline’s Current Financial Condition

In order to understand the Emirates Airline’s current financial condition, it is important to analyze some of its financial statements over the past few years. In this section, it would be important to review the firm’s balance sheet and income statement for the last three years.

Emirates Airline Balance Sheet

Period Ending		Dec 31, 2013	Dec 31, 2012	Dec 31, 2011

Assets
Current Assets
	Cash And Cash Equivalents	2,966,000	2,791,000	2,962,000
	Short Term Investments	959,000	958,000	958,000
	Net Receivables	3,345,000	2,156,000	2,024,000
	Inventory	1,063,000	1,023,000	535,000
	Other Current Assets	1,318,000	1,344,000	1,250,000

Total Current Assets		9,651,000	8,272,000	7,729,000
Long Term Investments		–	–	–
Property Plant and Equipment		21,854,000	20,713,000	20,223,000
Goodwill		9,794,000	9,794,000	9,794,000
Intangible Assets		4,658,000	4,679,000	4,751,000
Accumulated Amortization		–	–	–
Other Assets		1,303,000	1,092,000	1,002,000
Deferred Long Term Asset Charges		4,992,000	–	–

Total Assets		52,252,000	44,550,000	43,499,000

Liabilities
Current Liabilities
	Accounts Payable	6,020,000	5,686,000	5,110,000
	Short/Current Long Term Debt	1,547,000	1,627,000	1,944,000
	Other Current Liabilities	6,585,000	5,957,000	5,647,000

Total Current Liabilities		14,152,000	13,270,000	12,701,000
Long Term Debt		9,795,000	11,082,000	11,847,000
Other Liabilities		14,103,000	17,654,000	15,619,000
Deferred Long Term Liability Charges		2,559,000	4,675,000	4,728,000
Minority Interest		–	–	–
Negative Goodwill		–	–	–

Total Liabilities		40,609,000	46,681,000	44,895,000

Stockholders’ Equity
Misc Stocks Options Warrants		–	–	–
Redeemable Preferred Stock		–	–	–
Preferred Stock		–	–	–
Common Stock		–	–	–
Retained Earnings		3,049,000	(7,389,000)	(8,398,000)
Treasury Stock		(258,000)	(234,000)	(231,000)
Capital Surplus		13,982,000	14,069,000	13,999,000
Other Stockholder Equity		(5,130,000)	(8,577,000)	(6,766,000)

Total Stockholder Equity		11,643,000	(2,131,000)	(1,396,000)

Net Tangible Assets		(2,809,000)	(16,604,000)	(15,941,000)

Source (Bamber, Hoffer, Kochan & Nordenflycht, 2014, p. 18)

Emirates Airline Income Statement

Period Ending		Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Total Revenue		37,773,000	36,670,000	35,115,000
Cost of Revenue		20,964,000	21,658,000	20,907,000

Gross Profit		16,809,000	15,012,000	14,208,000

	Operating Expenses
	Research Development	–	–	–
	Selling General and Administrative	11,349,000	10,820,000	10,468,000
	Non Recurring	402,000	452,000	242,000
	Others	1,658,000	1,565,000	1,523,000

	Total Operating Expenses	–	–	–


Operating Income or Loss		3,400,000	2,175,000	1,975,000

	Income from Continuing Operations
	Total Other Income/Expenses Net	(175,000)	(338,000)	(305,000)
	Earnings Before Interest And Taxes	3,225,000	1,837,000	1,670,000
	Interest Expense	698,000	812,000	901,000
	Income Before Tax	2,527,000	1,025,000	769,000
	Income Tax Expense	(8,013,000)	16,000	(85,000)
	Minority Interest	–	–	–

	Net Income From Continuing Ops	10,540,000	891,000	786,000

	Non-recurring Events
	Discontinued Operations	–	–	–
	Extraordinary Items	–	–	–
	Effect Of Accounting Changes	–	–	–
	Other Items	–	–	–


Net Income		10,540,000	1,009,000	854,000
Preferred Stock And Other Adjustments		–	–	–

Net Income Applicable To Common Shares		10,540,000	1,009,000	854,000

Source (Bamber, Hoffer, Kochan & Nordenflycht, 2014, p. 16)

From the above income statement, it is possible to develop some of the financial ratios for this firm in order to determine its performance in the market.

Gross profit margin

Gross profit margin= (Gross Profit/Revenue) ×100

= (16,809,000/37,773,000) × 100

= 44.5%

This is a clear indication that this firm’s operations generate enough income to support its short term financial needs

Operating profit margin

Operating profit margin= (Operating profit/Revenue) × 100

= (10,540,000/37,773,000) × 100

= 27.9%

This percentage clearly demonstrates that Emirates Airline has the capacity for its overhead costs. These two financial ratios and the balance sheet show that this firm has positive financial growth over the last two years. The balance sheet shows a consistent increase in the asset base of this firm. The income statement also demonstrates the ability of the firm to meet its financial obligations in the market.

Emirates Airline’s External Opportunities and Threats

Emirates Airline is operating in a highly competitive industry. According to Jha (2011), the airline industry has experienced massive growth over the years as the world becomes increasingly globalized. In order to understand the external opportunities and threats of this firm, it is necessary to use a SWOT analysis model at this stage. The airline industry has experienced massive growth in the global market as the need to travel from one part of the world to the other increases over time. This expansion has brought massive opportunities for airline companies in terms of the increased number of customers. This firm has experienced an increase in the number of passengers that use its services because of the expansion of the industry. The advancement in technology has also offered Emirates Airline the opportunity to expand its facilities to ensure that its passengers can get maximum satisfaction from their services. The firm now has better screening services to increase the safety and security of the passengers, employees, and all other assets that may be the target of criminal gangs.

Despite the above opportunities that this firm enjoys in the market, there are some threats that the management has been forced to deal with in order to sustain its operations. One of the major threats is increasing competition in the market. There has been a consistent rise in the level of competition in the aviation industry following the growth of the aviation sector. This firm must find a way of dealing with this threat in order to ensure that it remains operational in the market. The rising number of terror groups, especially in the Middle East, is posing serious challenges to this firm in the market. The sophistication of the approaches used by these criminal gangs exposes serious threats to many airline industries.

Emirates Airline’s Internal Strengths and Weaknesses

According to Walker (2005), a firm’s ability to deal with some of the external environmental factors always depends on its internal strengths and weaknesses. A SWOT analysis will be vital in understanding the firm’s internal strengths and weaknesses. The strength of this film lies in its financial capacity. The firm has experienced massive growth over the years, and this has been accompanied by prolonged financial success. This means that it has the financial capacity to support its operational activities in the global market. Another strength that has been important to this firm is its strong brand in the market and the support it has been receiving in the region. It is one of the preferred airlines in this region.

The management of this firm will need to deal with some weaknesses that may affect its normal operations in the market. One of the weaknesses of Emirates Airline that may affect its operations is its inability to turn its competitors into partners. According to Ranchhod and Gurau (2007), some of the leading airlines in the world have managed to turn their competitors into partners. They link with other airlines and connect their passengers to regions they do not operate. This is one of the most successful strategies that some of the leading airlines are currently using. Emirates Airline should find a way of employing this strategy.

Recommendations

Emirates Airline has been successful using its current mission and objectives in achieving global expansion. Although the mission and objectives of this firm have helped it achieve success in the market, it may be necessary to adjust them a little to reflect the changing environmental forces. The mission statement of this firm should focus on the need to protect the environment and enhance the living standards of those who are less fortunate in the society. Its objectives to achieve success in the market should be intertwined by the desire to make the world a better place for all. The following statement should be reflected in the firm’s mission statement.

To work with the local communities in an effort to conserve the environment and enhance the living standards of the less fortunate members of the society.

This firm should develop appropriate corporate business strategies that can enable it to achieve its mission and objectives. It is recommended that management increases its budgetary allocations to corporate social responsibilities in order to achieve the objective of making the world a better place. Most of the corporate social responsibility activities should be based on environmental protection and enhancing the living standards of the less fortunate members of society.

Actions Needed for the Implementation of the Chosen Strategies

In order to achieve the above objectives, there must be some specific actions that the management should take in areas such as marketing, finance, human resource, information system, and operations. There should be a long term plan on how the human resource will be managed to help the firm achieve the above objectives within the stated timeline. The marketing strategies should use some of the modern technologies in order to address some of the issues raised above.

The management should develop annual objectives that would ensure that the marketing needs, financial expectations, operational targets are achieved. The marketing unit should show an effort to work with local communities when developing new marketing strategies. In this new strategy, the focus should be on how to improve the results of this firm. The pro forma statements given above should experience consistent positive growth.

Recommend procedures for strategy review and evaluation

Based on the above recommendations about the new objectives for this firm, it is necessary to formulate some of the procedures for strategy review and evaluation. The following procedures should be observed.

The management should set aside specific funds for its corporate social responsibility activities.
Corporate social responsibilities should be considered an integral part of the marketing activities of this firm.
There should be a specific team that will be fully responsible for all the activities meant to protect the environment and improve the living standards of the less fortunate.
Advanced technologies should be incorporated into marketing management.

References

Bamber, G., Hoffer, G., Kochan, T. & Nordenflycht, A. (2014). Up In the Air: How Airlines Can Improve Performance by Engaging Their Employees. New York. Cengage.

Jha, A. K. (2011). Institutions, Performance, and the Financing of Infrastructure Services in the Caribbean. Washington, D.C: World Bank.

Plunkett, J. W. (2009). Plunkett’s transportation, supply chain & logistics industry almanac 2009: The only comprehensive guide to the business of transportation, supply chain and logistics management. Houston, TX: Plunkett Research Ltd.

Ranchhod, A., & Gurau, C. (2007). Marketing strategies: A contemporary approach. Harlow: Financial Times Prentice Hall.

Walker, O. C. J. (2005). Marketing strategy: A decision-focused approach. Boston: McGraw-Hill Irvin.

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