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Competiti

ve
Industry
Analysis
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is typically a short summary of the contents of the
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contents of the document.]

Emirates
Vs. Etihad
Airways

Contents
Introduction................................................................................................................................4
Selected Companies for Competitive Analysis:.........................................................................5
Emirates Airline......................................................................................................................5
Etihad Airways.......................................................................................................................5
Industry Indicators:....................................................................................................................6
Size and Growth Rate:............................................................................................................6
Emirates Airline..................................................................................................................7
Etihad Airways....................................................................................................................7
Market Size:............................................................................................................................7
Products/Services:..................................................................................................................8
Profitability.............................................................................................................................9
Capital Requirements.............................................................................................................9
Entry and Exit Barriers.........................................................................................................10
Level of fragmentation/consolidation...................................................................................10
Customer characteristics.......................................................................................................10
Capacity Utilization..............................................................................................................10
Industry Driving Forces...........................................................................................................11
PEST Analysis..........................................................................................................................12
Political Factors:...................................................................................................................12
Economic Factors:................................................................................................................13
Social Factors.......................................................................................................................13
Technological Factors..............................................................................................................14
Competitive Analysis (SWOT)................................................................................................15
Porters Five Forces Model......................................................................................................17
Five-force Analysis:..............................................................................................................17
2

Risk of entry by potential customers:...............................................................................17


Threat of Substitutes.........................................................................................................18
Bargaining Power of Suppliers.........................................................................................18
Bargaining power of Buyers.............................................................................................18
Intensity of rivalry among established firms....................................................................19
Industry Attractiveness.............................................................................................................19
Current position of Emirates Airline in the Aviation Industry.................................................20
Future Outlook.........................................................................................................................20
References:...............................................................................................................................20

Introduction

Aviation industry in UAE is one of the main industries which help to drive the economy of
the country. Airlines help UAE growth stay aloft, was the headlines of The National (Local
UAE newspaper). At this time of credit crunch when highly-leveraged companies restructure
and the property market continues to face challenges, billions of dollars of investment is
being ploughed into the UAEs burgeoning aviation industry, which could ultimately help the
country fly well above a global financial crisis (Bundhum, 2010).
UAE aviation to get USD136bn of investment, further UAE companies and state agencies
will invest AED500 billion (USD136.12bn) in the aviation industry over the next decade to
diversify the economy and make the country a global transport hub, says the Ministry of
Economy. Further Sultan al Mansouri said the UAE has plans to develop its transport and
communications infrastructure. The backing includes new aircraft for the five flag carriers in
the UAE, huge investments for new airport capacity throughout the seven emirates, and plans
for Abu Dhabi to become a regional centre for aircraft maintenance, manufacturing and flight
training as noted by Gale, I. (2010, December 24).
Also the article states that UAE government has plans to invest AED500bn over the nest ten
years in the aviation infrastructure improving connectivity and making aviation the key driver
of UAE economy and also the key growth driver in Global Aviation. Commercial passenger
airline operators based in UAE are listed below in Table-1:

Table 1 - Commercial passenger airlines operating in UAE

Air Arabia
Fly Dubai
Al Hajar Airlines
Etihad Airways

RAK Airways
Rotana Jet
Emirates

Boeing ranks UAE as a top-four market and further states that over the next two decades
UAE will become Boeings fourth most important market in the world for commercial
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aeroplanes, that would leave it only behind the US, China and Germany as noted by Gale, I.
(2010).

Selected Companies for Competitive Analysis:


Focus: Emirates Airline
Close Competitor: Etihad Airways

Emirates Airline
Emirates Airline an operation of Emirates Group, which is committed to the highest standards
in everything they do as explained on the group website, the slogan Hello Tomorrow
presents a strong marketing campaign the Emirates Group is continuously involved with.
Emirates Group has the following operations:
1.
2.
3.
4.
5.
6.
7.

Emirates Airline (Fleet 169 Aircraft further increasing to 223 Aircraft)


Emirates SkyCargo
Skywards
Emirates Official Store
EmQuest
Emirates Aviation College
Emirates Engineering

Established in 25th October 1985 the Emirates Airline has always focused on quality but not
on quantity.

Etihad Airways
Etihad Airways, the national airline of the UAE as stated by firms slogan the airline was
established in July, 2003.
Etihad has combined equity partnerships with following Airlines:
1.
2.
3.
4.
5.

Etihad (Fleet 379 aircraft)


Aer Lingus (Fleet 43 aircraft)
Air Seychelles (Fleet 6 aircraft)
Air Berlin (Fleet 170 aircraft)
Virgin Australia (Fleet 90 aircraft)

Industry Indicators:
Size and Growth Rate:
Knowing how quickly or slowly your market is growing is vital because its a key driver of
your sales growth and profits
Passenger traffic growth in UAE is expected to increase at the rate of 10% annually in 2013
and 2014. Dubai airport aims to be the worlds largest airport in terms of international
passenger by 2015. The following figure-1 shows the projected passenger capacity of the
major GCC airports as noted by Nuseibeh, G. (2011, January):

Figure 1 - Projected Passenger Capacity GCC airports (*2009 projection, subject delays)

Emirates Airline
According to Annual Report 2011 Emirates Group the revenue and other operating income
increased by 17.8% from AED 57.224bn in 2010-2011 to AED 67.394bn in 2011-2012.
(Annual Reports, 2012).
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Etihad Airways
According to annual report 2011 Etihad Airways the total revenues increased from AED
10.9bn in 2010 to AED 15bn in 2011 (Annual Reports 2011).
Table 2 Size and Growth Rate

Revenue and

Etihad Airways

Year

Emirates Airline

2011

AED 67.4bn

(Competitor)
AED 15bn

2010

AED 57.2bn

AED 10.9bn

other
operating
income

Market Size:
The following Figure-2 shows the UAE capacity share by carrier (Centre for Aviation,
2008):

Figure 2 - UAE capacity share by carrier - 22 Dec, 2008

The following Figure-3 shows the UAE capacity share by carrier (Centre for Aviation,
2009):

Figure 3 - UAE capacity share by carrier 22 June, 2009

Products/Services:

Emirates Airline has the following products and services:


1. Passenger Services
2. Emirates Holidays
3. Arabian Adventures
4. Congress Solutions International
5. Emirates Tours
6. Wolgan Valley Resort & Spa
7. Timeless Spa
8. Dubai Desert Conservation Reserve
9. In-flight catering
10. Airport Operations
Etihad Airways has the following products and services:
1. Passenger Services
2. Cargo Services
3. Tour Services like luxury coaches, book chauffeur, book cars, hotel and train.

Profitability
Profitability is very important for almost all the businesses. At the simplest level, profit is one
of the essential reasons that a business exists; there are two main ways to measure
profitability of a business as explained by Barrow, C. & Molian, D. (2005):
1. Profit Margins
2. Return on Capital Employed (ROCE)/Return on Share-holders Funds (ROSF)
To measure the profitability of the focal firm Emirates Airline and the competitor Etihad
Airways please observe the following Table-2:
Table 3 - Profit Margins and ROCE/ROSF

Profit Margins
ROCE/ROSF

2011
2010
2011
2010

Emirates Airline
2.4%
9.9%
7.2%
28.4%

Etihad Airways 2011 revenues up by 36% to USD 4.1 bn. Passenger Numbers increased by
17% to USD 8.3m with a Net profit of USD14m.

Capital Requirements
Emirates airline is continuing to invest heavily in its revenue generating assets taking its
capital expenditure during the year 2010-2011 to AED 13,644million. Capital Expenditures
consists of expenditures in purchasing aircraft, major overhauls, spare engines and parts
comprised 91% of the total capital expenditure.

Entry and Exit Barriers


There no entry or Exit barriers for both the firms in UAE as government supports the aviation
industry and aims to make it the worlds largest aviation industry.

Level of fragmentation/consolidation
Operationally, the key to effective supply management is usually effective demand
management, in order to source effectively it is essential that buying organizations develop
appropriate specifications, avoid unnecessary, last minute changes to specification, creat
regular patterns of demand, and ensure that as little buying as possible takes place outside of
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the organizations commercial rules. Most importantly, however it is essential that


organizations do not unnecessarily fragment spend, thereby spreading their demand across an
artificially large number of suppliers as stated Waters, D. (Ed.). (2007).
Emirates has a natural level of fragmentation and the company is committed to standardize
demand to reduce level of fragmentation.

Customer characteristics
Emirates has a very exclusive customer base, people looking for quality, probably Emirates is
not in competition with Etihad when it provides all quality centric services and not quantity
and all its customer base are the customers looking for quality travel, tour management,
dining facilities, hotel, coaches and luxury. Emirates Airline product line offers the same
variety, on the other hand Etihad has a different customer base and it has a very precise
services for people looking to travel more and more destinations.

Capacity Utilization
When demands high and capacity is fully used, a firms fixed costs are spread over more
units, which lowers average unit costs and vice versa, the basic concept of capacity utilization
suggests that a firm that is able to maintain higher levels of capacity utilization, through
better demand forecasting, conservative capacity expansion policies, or aggressive pricing,
wil be better able to maintain a lower-cost structure tan a competitor of equal size and
capability as stated by Enz. C. A. (2010). Emirates Airline has the policy of using aggressive
pricing and only targeting its exclusive customers seeking quality travelling and lodging.
Both the companys are using concepts of capacity utilization.

Industry Driving Forces


The following forces drive the aviation industry in UAE:
1.
2.
3.
4.
5.

Number of aircrafts in the fleet.


Airport Capacity
Number of passengers travelling
Number of Destinations covered
Technological innovations in aviation

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PEST Analysis
The following figure-4 explains the main components of PEST Analysis:

Figure 4 - PEST Analysis

Political Factors:
Political factors of UAE fully support Emirates Airline and Etihad Airways, government is
very stable and they support aviation industry and have the target to make UAE Aviations the
biggest in the world.
Tax policies are also favourable as Dubai already has zero taxes for almost all the businesses,
which always comes as an added point for you and your companys presence in Dubai.
The political environment is also very favourable for Emirates Airline and Etihad Airways
there are lesser regulations and deregulations trend in UAE Aviation Industry. UAE also has
very low level of corruptions for all the industries.
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Economic Factors:
As far as the stage of business styles is concerned after doing the research on Aviation
Industry in UAE we have discovered that the industry is in Boom period as both the firms
Emirates Airline and Etihad Airways have ordered new aircrafts for their fleet, also all the
city governments are planning to expand their airports, increasing passenger capacity of the
airport.
Globalization has its clear impacts on the firms under observation as Etihad Airways
continues to combines its partnership and add more and more aviation firms to its global
network of feel. Hence Globalization has proven very positive for both the firms and has also
reduced Labour Costs for the firms in aviation industry.

Social Factors
The following figure-5 presents graphically the growth rate in UAE which was at its lowest
since 1960 to 3.92% in 2002 and goes upto 14.78% in 2007 and now back at 4.93% in 2011.
The population growth in UAE has slowed down but there is so much goin on in UAE that
government is continuously dedicated to attract the whole world to come to Dubai, which
presents favourable factors for both Emirates Airline and Etihad Airways.

Figure 5 - Population Growth Rate UAE

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Technological Factors
The technology in aviation changes rapidly which is also another reason of competition
among Emirates Airline and Etihad Airways. Both the firms are competing with each other to
acquire new technologies in UAE Aviation Industry and the global aviation and acquiring
new aircraft as well as other technologies in aviation industry.
Boeing and Airbus committed to revolutionize flying and making it easier for all to fly, will
bring more and more innovations in aviation industry.

Competitive Analysis (SWOT)


The following Swat Matrix as explained by Kazmi, A. (2008) presents the SWOT for our
college with current mission, vision and goals:

Helpful for Emirates


Harmful
Airline
for Emirates Airline

Internal

External

Dedication in providing better facilities in aviation


Commitment to expand airport and fleet capacity
Increasing capacities airport
- Aircapacity
Craft fleet
and fleet
capacity
- Destinations Covered
- Etihad Airways Customer Loyalty Programme
- Competitors keeping pace with Market Needs,
market research.

UAE becoming the hub- forTravel


globaldestinations
aviation captured by Etihad Airways
International travellers-travelling
to UAE. ever-growing aircraft fleet
Etihad Airways
UAE Airport Expansions
- Credit Crunch/Financial Recession in the global
world.
- Fierce competition in the market as the aviation
industry in UAE is still developing.
- Environmental concerns for aviation industry,
reducing carbon omissions.

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Porters Five Forces Model

Five-force Analysis:

According to Porters Five Forces Model once the boundaries of an industry have been
identified, next step is to analyze the competitor forces in the industry environment to
identify opportunities and threats as explained by Hill, C.W.L. & Jones, G.R. (2008), further
explains the model with the help of following Figure-1.
Risk of entry by
potential
competitors

Bargaining

Intensity of

power of

rivalry among

suppliers

established

Bargaining
power of
buyers

firms

Threat of
substitutes
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Figure 6 - Porter's Five Forces analysis of UAE Aviation Industry

After analyzing the UAE aviation industry locally and internationally Emirates Airline has to
face following five forces in the aviation industry:
Risk of entry by potential customers:

World has become a global village after the credit crunch and the financial depression the
global aviation industry is already saturated and due to inflation travellers have to pay more
for travelling. In such a changing and variable external environment Dubai becomes the safe
house for all the investors looking to invest in UAE aviation industry.

Since Dubai is expanding its airport a long with AbuDhabi airport extension and UAE has a
target of becoming the aviation hub for the global aviation, are few of the factors attracting
new entrants.
Threat of Substitutes
UAE Aviation industry presents a greater threat of substitutes to Emirates Airlines. Etihad
Airways is posing a big threat as it continues to build partners and adding more and more
airlines in their network, multiplying their fleet capacity and travel destinations.
Bargaining Power of Suppliers

The bargaining power of suppliers for aviation industry refers to the ability of aircraft
suppliers and other suppliers to raise input prices or to raise the costs of the industry.
Therefore powerful suppliers are a threat.

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In the case of Emirates our suppliers would be the aircraft suppliers, the catering suppliers,
the tour suppliers etc. Boeing and Airbus are the two largest suppliers in global aviation
industry and provides both the suppliers alternatives to choose and bargain before supplying
or reach any sales contracts.
Bargaining power of Buyers
Hill, C.W.L. & Jones, G.R. (2008) stated that the an industrys buyers may be the individual
customers who ultimately consume its products (its end users) or the companies that
distribute an industrys products to end users, such as retailers and wholesalers. The
bargaining power of buyers in our case refers to the ability of the travellers/customers to
bargain down prices charged by Emirates Airline to raise the costs by demanding better
quality travelling, catering and tour management services.
Therefore Emirates Airline faces a threat by travellers who have all these options to choose
between different carriers.

Intensity of rivalry among established firms

Rivalry occurs because one or more competitors either feels the pressure or sees an
opportunity to improve position. Some actions that may be taken are reducing price,
increasing promotional effort, increasing product line and launching new products as noted
by Phadtare, M.T. (2011). Etihad Airways pose a bigger threat to Emirates Airlines as they
continue to multiply their fleet by adding more and more global partners, the current aircraft
fleet of Etihad Airways adding their global partners is around 379 aircrafts owned by Etihad
and309 aircraft owned by their global partners. Making it probably the largest airline firm of
the globe.

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1.
2.
3.
4.
5.

Etihad (Fleet 379 aircraft)


Aer Lingus (Fleet 43 aircraft)
Air Seychelles (Fleet 6 aircraft)
Air Berlin (Fleet 170 aircraft)
Virgin Australia (Fleet 90 aircraft)

309 aircraft

On the contrary Emirates Airlines owns 169 aircrafts and has ordered more aircrafts to
increase its fleet to 223 aircrafts and still has a long way to go to at least benchmark Etihad
Airways. Hence the rivalry is very fierce and more marketing research on Etihad Airways is
required to keep abreast of everything they are planning to come up with in future.

Industry Attractiveness
We have learned after analyzing the aviation industry that the industry is very attractive as
new developments in aircraft industry are taking place making it easier for everyone to fly,
increasing demand.
UAE is set to become the global aviation hub of the world, therefore offers countless
opportunities for Emirates Airline.

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Current position of Emirates Airline in the Aviation


Industry
The profit margins of Emirates have reduced in 2011 also ROCE has also reduced, according
to facts n figures the airline is increasing their fleet from 169 to 223 and has ordered new
aircraft which could be a reason to this drop, but at the same time Etihad Airways has
multiplied its aircraft fleet from 379 aircraft to 688 aircraft adding their global partners into
the fleet and taking the revenues to AED 15bn in 2011 from AED 10.9bn in 2010.

Future Outlook
The future is very competitive for Emirates Airline and they have to come up with a strategy
to counter Etihad Airways ever growing fleet.

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References:
Bundhum, R. (2011, November 20). Airlines help UAE growth stay aloft. The National.
Retrieved from http://www.thenational.ae/thenationalconversation/industryinsights/aviation/airlines-help-uae-growth-stay-aloft
Gale, I. (2010, December 24). UAE aviation to get $136bn of investment. The National.
Retrieved from http://www.thenational.ae/business/aviation/uae-aviation-to-get136bn-of-investment
Center for Aviation. (2009). Retrieved from http://centreforaviation.com/analysis/ras-alkhaimah-airport-seeking-funding-for-new-master-plan-8141
Center for Aviation (2008). Retrieved from http://centreforaviation.com/analysis/the-outlookfor-middle-east-airlines-in-2009-poised-to-shine-4779
Gale, I. (2010, May 2). Boeing ranks UAE as a top-four market. The National. Retrieved
from http://www.thenational.ae/business/aviation/boeing-ranks-uae-as-a-top-fourmarket
Nuseibeh, G. (2011, January). UAE announces massive investment in the aviation industry.
Retrieved from http://www.riskandforecast.com/post/united-arab-emirates/uaeannounces-massive-investment-in-the-aviation-industry_632.html
Annual Reports. (2012). Emirates Group. Retrieved from
http://content.emirates.com/ae/english/images/Annual_2011-2012_tcm277926013.pdf
Annual Reports. (2011). Etihad Airways. Retrieved from
http://www.etihadairways.com/sites/Etihad/Etihad%20Images/Resources/annualreport-2011-en.pdf
Barrow, C. & Molian, D. (2005). Enterprise Development: The Challenges of Starting,
Growing and Selling Businesses. Retrieved from http://books.google.com /books?
id=cecl2Ut24_0C&pg=PA117&dq=measuring+profitability&hl=en&sa=X&ei=r
Y3KUIaqN6iS0QXovoCgDQ&redir_esc=y#v=onepage&q=measuring
%20profitability&f=false

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Kazmi, A. (2008) Strategic Management and Business Policy. 3rd Edition. New Delhi, Tata
McGraw-Hill.
Hill, C.W.L. & Jones, G.R. (2008)Strategic Management: An Integrated Approach. 9th
Edition. USA, South-Western Cengage Learning.
Waters, D. (Ed.). (2007). Global Logistics: New directions in Supply Chain Management.
Retrieved from http://books.google.com/books?id=8vly4i5pgUC&pg=PA102&dq=level+of+fragmentation+consolidation&hl=en&s
a=X&ei=4e7KUIebEMjL0QXXgoHIDQ&ved=0CEIQ6AEwAw#v=onepage&q=
level%20of%20fragmentation%20consolidation&f=false
Enz. C. A. (2010). Hospitality Strategic Management: Concepts and Cases. Retrieved from
http://books.google.com/books?
id=x77o93fmiKQC&pg=PA173&dq=capacity+utilization+aviation+industry&hl
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%20aviation%20industry&f=false

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