Emirates Airline: The Secrets of the Legends Success

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Table of Contents

Executive Summary
Introduction
Local Responsiveness and Global Integration
Financial Performance
Conclusion
References

Executive Summary

This proposal outlines the secret of the Emirates Airlines’ success. The first part provides information on how the airline has managed to reach out to six continents using global integration and local responsiveness strategies. The paper also points out how the global strategy has poised the Dubai based airline for international success.

Finally, the proposal paints the success picture of Emirates Airlines with respect to several factors. These factors include profitability, environmental and social responsibility, and the “Hello Tomorrow” marketing initiative. The latter is considered to be one of the most creative promotion campaigns in the market.

Introduction

Emirates Airlines is one of the fastest growing corporations in the world today (Roberts 2012). The airline is part of the larger Dubai based Emirates Group of companies. The group is composed of four companies which include Emirates SkyCargo and Emirates Airlines (Datamonitor 2012).

The other two companies are Dnata and Emirates Holiday (Datamonitor 2012). The Emirates Group was started in 1985 and has expanded over the years. It is noted that today, Emirates Airlines flies to over 120 destinations in six continents (Datamonitor 2012).

On May 2011, one of the largest airlines in the world (Air France- KLM) announced losses that have never been recorded in the aviation industry before. At the same time, Emirates Airlines had just placed an order for 32 Airbus 380 jumbo jets in addition to 2,000 new crew members to support the operations and growth of the company in the same year.

Between March 2010 and May 2011, Emirates had increased its total number of planes from 146 to 165. These are some of the indications of the successful performance of the company in a market that is very unpredictable. The company has some of the youngest planes operating in the industry today. It has received more than 310 awards for its exemplary performance in the industry.

This proposal aims at outlining the secrets of this success. In the proposed study, the researcher will analyse the factors behind the success of the company. This is especially so given the fact that the aviation industry is one of the most unpredictable and volatile industries in the world.

In spite of these challenges, the company has continued to record positive growth in profits. It is also one of the most competitive industries in the world. The proposed study will also try to analyse the factors that differentiates the company from the competitors in such a competitive environment.

Local Responsiveness and Global Integration

Large companies like Emirates Airlines are charged with the responsibility of striking a balance between local responsiveness and global integration in order to attain the kind of success that has been witnessed in the company. Local responsiveness is the ability of a global corporation to efficiently respond to certain needs in host countries it is operating from.

At the same time, the corporation should have global subsidiaries that are differentiated to confront the different business practices, markets and cultures abroad. Globalization has created both opportunities and tensions for global corporations. Emirates Airlines has taken full advantage of the opportunities while managing the tensions effectively (Underhill & Patel 2011).

Local Responsiveness

According to O’Connell (2011), local responsiveness can be conceptualised as the endeavour of a multinational company to understand and adequately respond to the conditions of the host country. Local policies and decisions are supposed to determine the local environment’s unique characteristics. These are characteristics such as government regulation, competitiveness, and demands of the customers in the market and business culture.

This means that companies like Emirates Airlines should align their business operations according to the host countries’ structural attributes. Local responsiveness has to do with three main factors. The three factors include

environmental factors,
structural factors in the industry which are meant to determine the strategy, behaviour and conduct of companies in a specific country and
organizational factors.

Underhill & Patel (2011) are of the view that Emirates Airlines has managed to stay competitive in the industry because of the high level of local responsiveness that is integrated into the company’s business strategy. This has been very crucial for Emirates because unlike the local corporations which are already established and enjoy a high degree of loyalty from customers, its subsidiaries depend so much on the global resources of the company.

For instance, Emirates Airlines has been very successful in Malta. However, the business environment in the country is characterised by the presence of large global companies such as British Airways in addition to other corporations like Lufthansa and Ryan Air. These companies are competing with Emirates Airlines in this tiny nation.

However, Emirates has continued to be successful because of the way the company has increased the value of the services provided. The excellence with which Emirates enhances the experiences of its customers cannot be compared with any of its competitors in Malta or such other nations.

Young (2012) is of the view that one of the secrets of Emirates explosive growth in the region and in the world in general is the ability to manage both growth and service provision. The proposed study will try to analyse this issue in relation to Emirates Airlines.

Local Responsiveness Pressures

Multinational corporations face diverse local responsiveness pressures. The pressures are driven by several factors. These include government regulation on subsidiaries, meeting the diverse needs of the consumers among others. Local competition as well as the significance of the markets served by the subsidiary is also important determinants. These pressures play a role in enhancing the global strategy of Emirates Airlines and thus improve global operations and overall services (Maier 2010).

These pressures can be divided into two major categories. These are government policies and customers’ divergence. The policies of host governments include local legislation, product and service regulation, workplace policies, and economic freedom. Customer divergence is composed of factors such as economic conditions, national attitudes and cultural differences. The proposed study will also analyse this aspect in the company.

Subsidiaries of Emirates Airline

Emirates Airlines have been very successful in working with subsidiaries and agents abroad. For example in Malta, Emirates has been working with the ROCK Group of companies so as to penetrate the market. But it has managed to keep the business strategy from being affected by customer divergence concerns. The management of Emirates makes efforts to come to terms with government policies while the real business agenda is executed by subsidiaries or local agents in the country (Roberts 2012).

Global Integration

The main factors that determine the global success of a multinational include technological and economic factors among others. The success of Emirates Airlines in this area will be analysed.

Integration of Business Strategy

The business strategy is integrated in terms of two major aspects. These include:

The Business Model

This means that the processes of realizing profits and incurring costs should be coordinated and integrated with respect to local and universal elements.

Business Goals and Objectives

This is another important factor. It means that the metrics to make profits, access new markets and increase revenue should be realistic.

According to Young (2012), the global business objectives of Emirates Airlines are various. They include the following:

To make the company a successful global airline and the choice carrier in the region and beyond.
To promote the city of Dubai as a technologically advanced, safe, progressive and very modern Middle Eastern commercial centre.
To showcase the award-winning and outstanding safety record, service level, profitability, global reputation, and fleet.
To focus on the highly seasoned and professional senior management of the airline to become a leader in aviation.

Operational Integration

For global success, the operational procedures, reporting functions and processes must accommodate the entire international operations of the company and be properly coordinated. This means the foreign requirements should be integrated with the domestic requirements for the organisation (Kingsley-Jones 2011).

This in effect increases the number of compliance activities for the company. An example of such activities is provided below:

Global marketing programs.
Distribution and sales channel.
Manufacturing requirements.
Reporting and accounting.
Compliance and due diligence.
Organization and management.

Operational integration at the global level requires a high skilled labour force that helps the company to overcome several challenges such as language barriers in foreign markets. Currently, Emirates Airlines has some 47,000 employees including cabin crew, flight deck crew and general staff. This has been very helpful in enhancing the globalization efforts in the company (Datamonitor 2012).

Technology

Emirates Airlines has always placed a lot of emphasis on the quality of technology used in its business operations. This is one of the reasons why the company was one of the first airlines to provide seatback entertainment for all customers. This is irrespective of their class of travel.

The investment of the company in technology has been an integral part in its internationalization strategy. For instance in 2008, Emirates was the first airline to adopt the use of NetOp remote control to help reduce the cost and time needed to provide world- class information technology support (Davis 2012).

Because of its increasing global presence, the company has come up with 37 websites all in different languages. These include Japanese and Arabic websites. The aim is to assist in operations. This has been as a deliberate action on the part of the company to reach out to the global community. The regional offices update their sites with local content while ensuring that the content reflects the corporate objectives of Emirates Airlines.

The company adopted the Tridion Content Management Solution in efforts to improve its operations. The solution was meant to handle the content of its international websites. This has helped the company to increase its audience. It can also reproduce information in the various domains using various languages (Lee 2012).

Flottau (2012) is of the view that Emirates Airlines was the first company to launch the in- flight mobile phone service.

Emirates have also collaborated with Sun Microsystems to improve the company’s information technology infrastructure. This is to help it sustain the fast growth in the global market while reducing operational costs. Because of this two- fold objective of driving costs down while increasing information technology capacity, the company’s management decided to move its business applications from Sun Enterprise TM servers to Sun Fire TM (Kingsley-Jones 2011).

Global Integration Pressures

Global integration pressures are evidenced by several factors. Some of them include:

Technological changes and complexity.
Reduction in cost through exploitation of global sale.
Global competition.
Scope economies. These are efficiencies which are mainly associated with changes in demand.

These pressures can be divided into production and service globalisation on one hand and market globalisation on the other. The two are analysed below:

Market Globalisation

Maximum value.
Minimal cost.
Customer preferences’ convergence for products.

Production and Service Globalisation

Efficiency gains through standardisation.
Location economies and maximisation.

It is important to note that commodities are meant to meet universal needs across cultures and countries. This being the case, the commodities are strictly traded depending on their prices. This adds more pressure on the process of formulating effective global strategies.

One of the greatest challenges that the company has faced in recent years is the recruitment of a global workforce. This is made quite difficult especially given the high level of global competition as the company continues to make progress in efforts to become one of the world’s largest and most profitable airlines. This means that as the company plans for the future, the management has to make efforts to recruit more skilled members of staff. These include engineers, cabin crew among others.

The Balance between Local Responsiveness and Global Integration

To a large extent, the success of Emirates Airlines can be attributed to the ability of the company to strike a balance between local responsiveness pressures and global integration pressures. While global integration is very important when it comes to reducing costs and managing risks for the business, local responsiveness makes it possible for Emirates Airlines to integrate with partners and conditions in the local economy.

Consistent Global Service Provided to Customers

All global airlines in the world are faced with the need to provide homogeneous customer experience all over the world. In order for Emirates to provide consistent customer experience and services in such a case, the company makes use of the centralized business strategy (Roberts 2012).

The endeavour to provide consistent customer experience is evident in the airline’s e-Ticket system. The company has continued to lead others in the market in e-ticketing and more people are now able to use the service as they fly with Emirates. This system has been very beneficial to both the airline and its customers because it has largely reduced the time needed for ticket processing. To this end, the system provides increased convenience, faster check- in and simplified operations.

Global Strategy

The global strategy adopted by Emirates Airlines champions worldwide cost competitiveness, standardisation and consistency. The company has made efforts to increase its price competitiveness in the market. This is by adopting highly efficient operations. The company has created value by effectively and efficiently developing, designing, and marketing its services (King 2012).

There are various strategic principles for global business at Emirates. These include but are not limited to the following:

Attracting customers.
Creating value.
Market positioning.
Achieving goal.
Effective competition.
Conducting operations.

Multinational enterprises have strategies that range from global to multi-domestic. In this regard, all the subsidiaries of the multinational play distinct roles that ultimately fit into the overall strategy adopted by the organisation.

Global Routes

Close to 1000 Emirates Airline flights are routed through the city of Dubai each week. These are then routed to diverse destinations in the world. Today, these flights constitute slightly more than 61 per cent of all the flights that leave or enter Dubai. The company has being working towards increasing this number by more than 70 per cent by the end of 2013 while placing a lot of emphasis on quality and customer experience (Davis 2012).

The achievement of corporate goals and value creation are very essential objectives for profitable multinationals like Emirates Airlines. Since the airline started, it has continued to improve the global services that it provides to its customers. From mid July 2008, Emirates Airlines entered Africa and South America and the company is in the process of transforming the aviation industry in these regions (Maier 2010).

Financial Performance

Profitability

In 2011, Emirates Airlines recorded the highest profits since the beginning of the Emirates Group. Figures 1a, b, and c below show how the financial highlights of the 2010- 2011 financial year differ from those of 2009- 2010 financial year. The airline experienced a very robust growth in profitability during the first quarter of the period. This was mainly because of the increase in cargo business and the number of passengers.

The passenger- seat factor during the first quarter reached an all-time high of 82 per cent. The revenues of the second half of the year were higher than in the first half. However, the profits were brought down by the increasing cost of fuel during the same period.

By the last quarter, the price of jet fuel had increased by 26 per cent in comparison to the first half of the year. On average, the profits of 2010- 2011 financial year were 9.9 per cent higher than in 2009- 2010 financial year. Although the operating costs continued to increase, the growth in revenue remained stable (Flottau 2012).

Emirates Financial Highlights. — *Figure 1 (a) Financial Highlights. Adapted from: Flottau 2012.*

Emirates Financial Position and Cash Flow. — *Figure 1 (b) Financial Highlights. Adapted from: Flottau 2012.*

Airline Operating Statistics. — *Figure 1 (c) Financial Highlights. Adapted from: Flottau 2012.*

Revenue Growth

In comparison to the previous year performance, there was a 25.7 per cent increase in the revenues of Emirates Airlines. Cargo and passengers were responsible for 95.2 per cent of the company’s revenue in the same period. The revenues collected from passengers increased by AED 7940 million for the company in the same company.

This represents a 25 per cent increase from the previous year. Emirates continue to enjoy a wide base of revenue from all regions in the world. The increase in geographical revenue in 2010- 2011 was led by Australasia and East Asia and followed by Europe and the Americas.

Figure 2 below shows how revenue changed in 2010- 2011 in comparison to the previous year. The changes are due to the increasing revenue and reflects Emirates’ introduction of six different services. This also increased the capacity and frequencies of flights to various destinations (Flottau 2011a).

Environmental and Corporate Social Responsibility

Emirates Airlines- just like the other companies under the Emirates Group- operates 24 hours a day throughout the year. The case is the same for the outreach and sustainability programs of the airline. The airline is aware of the fact that its processes and services leave an environmental footprint.

As such, Emirates Airlines continually monitors the impacts of these processes and services. In 2011, the company introduced an environmental program dubbed Environment that Focuses on Waste. This touches on the airlines supply chain, fuel saving, control of air traffic, and emission (Flottau 2011b).

Above all other environmental concerns, the airline focuses very much on the emission of greenhouse gases. This focus has made the airline invest billions of dollars in the most modern, environmentally friendly and efficient technology in ground equipment, engines and aircrafts.

The company’s fleet has an average age of 76 months. This makes Emirates the owner of the world’s youngest fleet. Emirates flagship airbus- the A380s- are not only the largest aeroplanes but also the most efficient in the industry. They burn less than 4 litres of jet fuel after covering 100- passenger kilometres. This is a more environmentally friendly performance than that of the most efficient compact car. Moreover, the Emirates aircrafts are among the lightest in the industry (Davis 2011).

Hello Home Campaign

“Hello home” is the latest global brand direction and platform for Emirates. This campaign emphasises on the capability of Emirates to provide the most meaningful experiences and global connectivity for its customers. The theme has been designed to flow with the message of consumer empowerment and engagement. It encourages people to embrace the unlimited possibilities and potentials that tomorrow brings.

This marketing campaign outlines the confidence that Emirates has with their existing services and products (Morris 2012). It is meant to portray Emirates as more than the airline that connects people from one point to the other but one that connects their aspirations, dreams and hopes. This campaign is just one of the airline’s endeavours to become the largest airline in the world by 2015 (Davis 2012). The illustration below captures the spirit of this marketing campaign.

Emirates Hello Tomorrow Advert. — *Illustration 1: Emirates Hello Tomorrow.*

Conclusion

Emirates Airlines is currently among the fastest growing airlines in the world. Since it was started in the year 1985, the company has extended to more than 120 destinations in the world. This success has been to a large extent brought about by the business model adopted by the airline.

The management noted that it is not going to replace the business model any time soon. This model has enabled the airline to respond to the diverse needs of its global customers. This high level of local responsiveness has been enhanced through cooperation with international agents. The company’s global integration strategy is however facing the challenge of finding employees in an overly competitive industry.

The year 2010- 2011 was the most profitable for the company since the formation of the Emirates Group. Although the revenues of the airline increased in the same period, profitability was highly affected by the increasing cost of jet fuel in the global market. The company has also come up with one of the most effective marketing campaign that reflects the shift towards customer engagement.

References

Datamonitor, 2012, ‘The Emirates Group 2012: Group SWOT Analysis’, London Times, p. 8.

Davis M 2012, ‘The remarkable record of Emirate Airlines product differentiation and cost control deliver exceptional performance’, Strategic Direction, vol. 28 no. 3, pp. 10-12.

Davis, T 2011, ‘Emirates woos west from Seattle’, Canadian Travel Press, vol. 44 no. 8, pp. 1-8,

Emirates.com, 2012, Hello Tomorrow. Web.

Flottau, J 2011a, ‘Going places’, Aviation Week & Space Technology, vol. 173 no. 39, pp. 62-64.

Flottau, J 2011b, ‘The beat goes on’, Aviation Week & Space Technology, vol. 173 no. 41, pp. 26-28.

Flottau, J 2012, ‘The will to grow’, Aviation Week & Space Technology, vol. 179 no. 1, pp. 35-37.

King, M 2012, ‘TNT, Emirates SkyCargo sign space agreement’, Joc Online, p. 1.

Kingsley-Jones, M 2011, ‘Master tactician’, Airline Business, vol. 27 no. 11, pp. 28-33.

Lee, ER 2012, ‘Business & industry news – air cargo news’, Airguide Business, vol. 1 no. 2, pp. 1-6.

Maier, M 2010, ‘Rise of the Emirates empire’, Business 2.0, vol. 6 no. 9, pp. 98-106.

Morris, N 2012, ‘Emirates Airline launches new Iraq service’, Air Cargo World, vol. 102 no. 6, p. 11.

O’Connell, JF 2011, ‘The rise of the Arabian Gulf carriers: an insight into the business model of Emirates Airline’, Journal of Air Transport Management, vol. 17 no. 6, pp. 339-346.

Roberts, GH 2012, ‘Emirates wins Gold “Airline of the Year” at ATN Awards’ 2012’, Canadian Sailings, p. 33.

Underhill, W & Patel, V 2011, ‘The Wings of Dubai Inc.’, Newsweek, 147, 16, pp

Young, JS 2012, ‘Emirates fleet continues to lead airline industry in fuel efficiency’, Canadian Sailings, p. 13.

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