Competitive Dynamics in Emirates Airlines Quest for Global Expansion
Paul Mugendi MBA 604
Embry Riddle Aeronautical University
In an industry beset by unpredictable geo-political factors and cyclical crises, only one international carrier has consistently managed to increase revenue and report a profit for the last 25 years. This carrier is Emirates airline (Riva, 2013). Emirates has managed to achieve in less than three decades what giant and well established global carriers like British and Lufthansa managed in about five decades, and that is to serve all five continents without any alliances or partnerships. The objective of this term paper is to analyze ...view middle of the document...
The investment was a mere $10 million, and destinations were all in the Middle East. Fast forward to 2014, Dubai is a total contrast of its old self with a skyline that rivals major European and American cities like New York and London. Emirates airline has a network extending to all five continents and is now the world's fourth-largest by international traffic. (IATA, 2012) By 2012, Emirates was serving over 100 cities in over 60 countries, and had a fleet of 138 planes and 140 more on order including 50 of the spectacular Airbus A380, of which it is the largest operator and also the largest customer (over 100 and counting) for the Boeing 777 long range super jet.(Riva, 2013)
The location of Dubai is both a curse and a blessing. The United Arab Emirates' backyard is the Middle East, a region in the headlines for violence, terrorism and anti-western ideological states like Iran, Iraq and Afghanistan. The Israeli-Palestinian conflict has raged for generations and the end is nowhere in sight. (Mouawad, 2011)
Geographically, Dubai's location is a blessing. According to Peng, (2014) Dubai International airport may be regarded as the center of the world and Peng goes on to refer to Dubai as the world's natural "pinch point". Over two billion people live within four hour flight and four billion within an eight hour flight of Dubai. (Peng, 2014). Dubai is also strategically located in between the two major emerging economies of Africa and Asia and within an eight hour flight of most financial and industrial cities of Europe, Asia and Africa. Under the leadership of CEO Tim Clark, Emirates airlines has exploited the geographical location of Dubai and in the process turned it into an ideal transfer point between emerging markets of Africa and Asia with double-digit economic growth rates while avoiding the economic crisis in the western developed world that has hurt aviation industry.
Regional Competitive Dynamics
With relative peace and security compared to their neighbors, it is easy to see why carriers from the United Arab Emirates and Qatar have dominated the air traffic within the Middle East and to and from the outside world. Notably, the concentration ratio greatly favors Emirates. The government of Dubai has heavily invested in trade, infrastructure, construction and tourism, therefore diversifying the economic activity and attracting more investors from regional and multinational firms to invest in Dubai's vibrant economy. (Basit, 2014) Collusion between the regional carriers would prove to be unsuccessful because international carriers have also flooded the Middle East and especially Dubai. Emirates has proven to be the industry price leader and has set a very high bar given the investment in new and advanced aircraft from both Boeing and Airbus, creating high barriers to entry into the lucrative business class and first class travel facilities. For the regional carriers, the deal breaker has been the promotion of Dubai by Emirates as a...