INFORMATION ABOUT THE FIRM
2.1 Industry of the firm
The global airline industry is rapidly growing, however, unswerving and robust profitability is elusive. Over the past decade, the industry has double measuring its growth by revenue. According to the International Air Transport Association (IATA), the revenue increased from US$369 billion in 2004 to a projected $746 billion in 2014. The low-cost carriers (LCCs) control about 25% of the world market and the growth of the airline industry has been driven by them. As reported by IATA, the growth also emanated from the continued gains by carriers in developed market. However, the profit margin is still so low which is less than 3 percent overall. Every player in the value chain of the commercial aviation sector such as airports, jet engine makers, air plane manufacturers, service companies etc. turns a tidy profit. It nonetheless one of the enduring ironies of the industry that companies that transports passengers from one location to another struggle to break even. This is mostly due to the complex nature of the business which is seen in the degree of regulation (minimizes consolidation) and the vulnerability of the airlines to exogenous events such as volcanic eruption, security concerns and infectious diseases.
The phases of industry restructuring resulting from deregulation are expansion, consolidation and concentration. The state of the industry at 2002 was to survive while adaption in 2003, in 2005 the industry experienced recovery after the 9/11 attack and between 2008 and 2010, there was financial crises and made the airline sector to be in the state of ‘rethinking' (Wensveen, 2010). The top five issues in the industry is fuel, pollution control, personnel, cutback, global economic woes and recurring safety lapses. The typical airline operating expenses are landing and associated airport charges (4.1%), depreciation & amortization (7%), maintenance and overhaul (10.1%), fuel & oil (12%), flight crew (7.4%), enroute facilities (2.4%), station expenses(10.8%), passenger services (10.5%), ticketing, sales & promotion (16.4%), others (12%) and general administrative & others (12.2%). The cost increases from $46 billion dollars in 2002 to a whopping $149 billion dollars in 2008 (IATA industry outlook, 2007).
Global Aviation Challenges in the 21st Century include new operating environment, bankruptcy and shut downs, “Generic” vs. “Airline” business plan, “Flexible” strategic plan (key), regulation vs. liberalization vs. deregulation, rising costs (fuel, labor, maintenance, security), new generation airlines vs. legacies (tiers), restructuring and alliances, competition (transport and technology), customer (target, loyalty), internal challenges, strategy, functional and departmental barriers to mention a few. Strategies to be used in the 21st century are understanding the reality of change and become “flexible”, revitalize strategy, LCC, LC/HV, “Virtual” carriers, customer focus (ask what they want), eliminate duplication, organizational accountability, staff relations into strength, updating of airline systems, build partnerships (alliances, interactive marketing), acting decisively, diversifying the business (core and non-core),, airlines “inventing” new ways to reduce future costs and spending of capital, increased efficiency, airlines taking control of business issues and working in partnership. (first time in history)
In order to achieve success, the players in the industry must be willing to embrace the following: have solid “airline” business plan, flexibility, diversity, leadership, steady and moderate growth strategies, effective cost cutting strategies, fleet commonality, reasonable capital requirements, long-term vision, carefully evaluate new partnerships and alliances, respond to consumer needs, create an environment that enhances labor/management relationships and cooperation, engage in effective lobbying efforts to influence critical government policies, laws, regulations and taxes, reduce cost structures, eliminate inefficiencies and increase productivity to the greatest extent possible (e.g., technological applications)
2.2 Product Line
The product offered by airlines is essentially a service, although it can be supplemented by a number of physical products too.
a) Core Product: The core product of the emirate airline is the service of transporting passengers and goods to different destinations. This includes:
• In-flight services: The services provided inside the flight include the core service of travel, in-flight entertainment, crew, ambience and comfort, etc.
• On ground services: This includes efficient checking of baggage, efficient service at reservation counter, transport to the airplane, etc.
• Cargo Services:
b) Supplementary Services
• Information: Current information regarding flight schedules, promotion schemes, ticket fares, new policies and systems, etc.
• Consultation: Provision of various options regarding the route of flight, in-flight cuisine & benefits.
• Order taking: The order taking procedure is essentially the booking procedure of the airlines.
• Hospitality & Caretaking: Post flight help is extended. It also includes safeguarding the baggage.
• Billing & payment: Emirate airlines use the open account system with their corporate clients. Frequent fliers are also given special payment privileges.
2.3 Size and Market Position
Emirates has grown by broadening its reach and expanding into six continents to become the fastest growing airline in the world, based on passengers carried. This is quite impressive owing to the fact that it was only founded 25 years ago and has become the dominant player in the Middle East. Emirates have been gaining market share faster than any airline in the world, as it's now the fourth largest airline after only cracking the top 10 two years ago.
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