Emirates Group Airlines SWOT Analysis Assignment Essay Help

SWOT Analysis on Emirates Group-Airline Industry-Assignment and Essay Writing Help

A business analysis of Emirates Group, an airline industry, is provided, focusing on its strengths, weaknesses, opportunities for improvement and threats to the company. Strengths include benefits strong market position. Weaknesses include high debt burden. Opportunities for improvement include expansion of operational network. Threats to the company include intense competition from low cost carriers.


SWOT Analysis of Emirates Group Airlines Industry

COMPANY OVERVIEW

Emirates Group (Emirates or 'the group') operates Emirates Airline, which is wholly-owned by

the United Arab Emirates (UAE) government. It provides scheduled passenger services to more

than 100 destinations. The group has operations across Middle East, Europe, the Americas, Africa

and Asia-Pacific regions. It is headquartered in Dubai, the UAE, and employed 42,422 people as of

March 31, 2012.

The group recorded revenues of AED61,508 million ($16,742.5 million*) during the financial year

ended March 2012 (FY2012), an increase of 16.2% over FY2011. The operating profit of the group

was AED1,813 million ($493.5 million*) in FY2012, a decrease of 66.7% over FY2011. The net profit

was AED1,502 million ($408.8 million*) in FY2012, a decrease of 72.1% over FY2011.

Weaknesses

High debt burden restricting the group's financial flexibility

Emirates holds a substantial amount of debt. As of March 31, 2012, its long-term borrowings and

lease liabilities reached AED26,843 million (approximately $7,307 million), as compared to AED16,753

million (approximately $4,5602 million) in FY2010. In addition, the group's net operating cash margin

decreased from 24.2% in FY2010 to 13% in FY2012. High debt obligations make it more difficult for

Emirates to pay principal and interest with respect to its debt obligations. It requires the group to

dedicate a substantial portion of its cash flow from operations for interest, principal and lease

payments. It also reduces the group's ability to use cash flow to fund working capital and other

general corporate requirements. In addition, decrease in operating cash margin would also limit

Emirates' flexibility in planning, and in reacting to changes in business and industry.

Opportunities

Partnerships likely to expand operational network

Emirates has entered into strategic alliances and partnerships in the recent years. For instance, in

October 2012, Emirates and Tourism Australia signed a global marketing agreement for joint marketing

activities focused on Australia. 

 Under a new Memorandum of Understanding (MoU), Emirates and Tourism Australia

announced to collectively spend up to A$14.3 million (approximately $14.7 million) over the next

three years.

In addition, in January 2012, Emirates and the Mauritius Ministry of Tourism signed an agreement

for the development of a series of joint activities to increase the visibility and awareness for around

more than 100 destinations to which the airline flies in the country. Further, in 2010, the UAE, Dubai

and Emirates Airline have secured over 60 open or highly liberal aviation agreements. These

agreements would allow carriers of each partner country to offer open services between each market.

The US, the UK, Spain, Thailand, Singapore, Switzerland, Malaysia, Chile, New Zealand and Lebanon

are among the 60 countries that have signed highly liberal or completely open agreements with the

UAE and Dubai. These partnerships would enable Emirates to expand its operational network.

Positive outlook for Dubai tourism industry

According to MarketLine estimates, the UAE economy, the second largest in the Arab region

rebounded by nearly 4% in 2011, after registering growth of 1.2% in 2010, and -2.1% contraction in

2009. In addition, the city of Dubai has delivered several key projects in the last few years, and more

are nearing completion. Metro, the first highly-automated, driverless trains, which provides residents

and tourists with fast and reliable connections, was opened in 2009. It provides stops at Emirates

Terminal 3 and Dubai International airport. Metro is planned to operate a total of 47 stations, 29 on

the Red Line (four underground and 25 elevated), and 18 on the Green Line (six underground and

12 elevated), and carried three million passengers in the first year.

The launch of several key projects like the Metro and the positive outlook of tourism in Dubai would

boost the number of tourists visiting the country and provide significant growth opportunities for

Emirates.

 

Threats

Intense competition from low cost carriers could affect the group's market share

The emergence of low cost carriers, including China Airlines, Hong Kong Flights, Japan Flights,

Jetstar Asia, Air Asia in the East Asian region, has intensified competition in the airlines business.

The low fare charged by these budget airlines makes Emirates airline operations less competitive.

In the long-haul market, the group is confronted with competition from local operators in most

geographical areas such as the Middle East, China and India. In the medium-haul market, low-cost

carriers have established strong market positions and continue to grow.

The demand for low cost carriers has all the more increased due to the economic crisis suffered by

many countries. As a result of the economic crisis, passengers have been looking for economical

travel options. Thus, growing number of low cost, and low fare airlines would adversely impact the

group's market share across all its geographic regions.

Consolidation in airline industry may intensify competition

The airline industry has recently gone through a period of consolidation and transition, consequently

the group has fewer potential partners. Since 1978, the airline industry has undergone substantial

consolidation, and it may in the future undergo additional consolidation. Most recently in February

2013, American Airlines and US Airways announced their $11-billion merger to create the world

largest airline company. United Airlines merged with Continental Airlines in 2010. Further consolidation

could limit the number of potential partners with whom the group may enter into code-share

relationships. Emirates operates through code share agreements with Air India, Air Malta, Air

Mauritius, Continental Airlines, Japan Airlines, Jet Airways, Korean Airlines, Oman Air, Philippine

Airlines, Royal Air Maroc, South African Airways and Thai Airways for airline services. Although

none of the group's contracts with its partners allow termination or are amendable in the event of

consolidation.
 

Disclaimer- This Report should be used only for academic purpose and Copyright of Emirates Group SWOT Analysis is the property of MarketLine, a Datamonitor business.

 

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