Future of Emirates Airlines - Case Study

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Emirates is a state-owned airline based in Dubai, United Arab Emirates. Emirates has pioneered the business model of the hub and spoke. Which means instead of direct flights between city pairs, Emirates direct their passengers through their hub in Dubai and connect them to their final destination. Emirates had a lot of success with this model, but the industry is changing. Demand for more point to point (city to city) travel has increased. There are newer planes that can fly for longer times, covering longer distances with their exceptional technology. Emirates is losing profits at a steady rate. Their dominance in the aviation market is far gone. The critical technological, financial, and business changes needed for Emirates to implement, are given in this article at depth.

Introduction

Emirates is a state-owned airline based in Dubai, United Arab Emirates. It is the largest airline in the Middle East. Emirates is the world's fourth-largest airline by scheduled revenue passenger-kilometers flown and the second-largest in terms of freight tons kilometers flown. Emirates operates from its hub in Dubai International Airport (DXB) 3,600 flights per week, to its 159 destinations worldwide (Wikimedia Foundation, 1 Mar. 2020, para 1). Emirates has a total of 63,594 employees from 174 different nationalities. Emirates has a total fleet of 270 airlines consisting of 115 Airbus A380-800 aircraft which are the largest wide-body passenger aircraft in the world with 4 engines and passenger-carrying capacity of 853 passengers at max. (All economy configuration). Emirates also has 134 Boeing 777-300 ER (Extended range) and 10 777-200 LR (Long Range) aircraft (Wikimedia Foundation, 1 Mar. 2020, para 1). They have a capacity of 368 passengers max. Emirates also operates 11 Boeing 777F cargo aircraft for cargo deliveries. Emirates is the largest operator of both the Airbus A380 and Boeing 777 aircraft in the world (Wikimedia Foundation, 1 Mar. 2020, para 1).

The success of Emirates is largely associated with its Hub and Spoke model. The strategy is worked like following: Emirates choose its main “hub” city Dubai, and then ran all flights to or from Dubai, like spokes on a bicycle wheel. Instead of direct flights between city pairs, Emirates direct their passengers through their hubs in Dubai and connect them to their final destination. It is totally opposite to the point-to-point model in which airlines have small hubs all over the world and they operate their flights directly from point A to B (Medium, 27 Dec. 2018, Para 1-2). This model is largely used by budget airlines that operate smaller aircraft. Emirates is known for its cost-effective method and low pricing in order to fill their flights. Emirates has one of the best if not the best Economy, Business, and First classes. They are known for their on-time service, food, friendly and helpful flight crew, and the overall quality of their aircraft. They are the number one in the inflight infotainment systems, ICE. But these types of exceptional service came with a cost and that is a financial operating loss. Emirates had its weakest full-year in profits from 2018-2019. They reported a record loss in profits of $237 Million which was 69% lower than the previous year (Emirates, 16 Sept. 2019, Para. 1). The reasons behind this loss and the ways to prevent this in the future are discussed in this article in depth.

  1. Business Drivers

The business drivers for this case study are as following:

  1. High oil prices.
  2. Ever-growing and flexible competition.
  3. Strengthening of the US dollar.
  4. Drawbacks of the hub-spoke model.
  5. Low travel demands.
  6. Record fall in profits.
  7. Airline fleet of only wide-body aircraft (Boeing 777 and Airbus A380).

Emirates carried 59 Million passengers from 2018-2019 which was a moderate increase of 0.2% over the year before. In this time their revenue increased by 6% which was $29.8 Billion but their net profit fell 69% to $237 Million. Emirates officials have reported in their 2018-19 annual reports that “Emirates Group posted a profit of AED 2.3 billion (US$ 631 million) for the financial year ended 31 March 2019, down 44% from last year. The Group’s revenue reached AED 109.3 billion (US$ 29.8 billion), an increase of 7% over last year’s results. The Group’s cash balance was AED 22.2 billion (US$ 6.0 billion), down 13% from last year mainly due to large investments into the business, including significant acquisitions and payment of last year’s AED 2 billion (US$ 545 million) dividend (Emirates, 16 Sept. 2019, Para. 1).” They have reported the reasons for these losses to higher oil prices, strengthened the US dollar which affected their earnings, intensified competition in their key markets, the uptick in global airfreight demand from the previous year appears to have gone into reverse gear and low travel demand. All these factors have contributed to triggering this business case.

  1. Scope of Business Case Analysis
  1. Purpose of this Business Case

The purpose of this Business case is to improve the overall efficiency of operations and fleet of Emirates in order to prevent further loss of profits. These improvements are recommended with respect to the financial capability of airline and capability of the smooth integration of such said improvement so that it does not affect the airline in major ways. These improvements are crucial for the airline due to many factors like recent profit loss instead of having growth in revenue, high fuel prices, low travel demand but the most important factor is to maintain the current reputation of Emirates and be create global dominance in the airline industry over the coming years.

  1. Options Evaluated

Emirate’s core business model is of the hub and spoke model in which Emirates choose its main “hub” city Dubai, and then ran all flights to or from that Dubai, like spokes on a bicycle wheel. Instead of direct flights between city pairs, Emirates direct their passengers through their hubs in Dubai and connect them to their final destination. This has been an evolutionary model for the airline but it’s bleeding money. Emirates ONLY operates wide-body aircraft like Airbus A380 and Boeing 777. Although they are exceptional aircraft in the sense of quality and safety, they are very large and need to filled at least 80% to make a profit. Which is not the case most times. Airlines have seasons of air travel. This means there are months when airlines operate at their full passenger capacity, like in Summer and at end of year when people have more holidays and low seasons like January and February which are considered DEAD ZONES (Reids Guides, n.d., para. 1). The rest of the months are average. To optimize profits in such times Emirates can implement the following recommendations:

  1. Completely change their business model to point to point service.
  2. Get rid of all wide-body aircrafts (Airbus A380 and Boeing 777).
  • Change their fleet to all narrow-body aircrafts (Airbus A319, A320, A321).
  1. Change their fleet to all mid-size wide-body aircrafts (Airbus A330 neo, A350, Boeing 787 Dreamliner).
  2. Buy old aircrafts at cheap prices and invest more in maintenance.
  3. Adopt a hybrid version of the hub-spoke model and point to point model.
  • Change their fleet to a hybrid version of wide-body, mid-size wide-body, and narrow-body aircrafts.

All these recommendations can be implemented but only a few are optimal from an IT, financial, and business standpoint. Analysis of all the above recommendations are below:

  1. Completely changing business models to point to point service does not make any sense from all standpoints. Changing the entire business will directly have a diverse impact on all operations of the airlines. And it is not the case that the hub and spoke model is not making any profits. It is proven to be an efficient model but, it is just not suitable for the current travel market.
  2. Getting rid of all wide-body aircrafts is impractical because they have already invested so much in the purchase of state-of-the-art aircrafts and their maintenance it would be financial disasters.
  • Changing their fleet to all narrow-body aircrafts like Airbus A319, A320, A321 makes sense for short flights between 1-5 hours but for longer flights they are not at all useful.
  1. Changing their fleet to all mid-size wide body aircrafts like new Airbus A330 neo, A350, Boeing 787 Dreamliner sounds excellent because of their newer technologies but replacing all the fleet is not feasible from a business and financial standpoint.
  2. Buying old aircrafts at cheap prices and invest more in maintenance is done mainly by Delta airlines and it’s proven to be financially possible but again there is the same problem of existing fleet.
  3. Adapting a hybrid version of hub-spoke model and point to point model is the most suitable for needed improvements in Emirates business strategy to make use of untapped passenger market.
  • Changing their fleet to a hybrid version of wide body, mid-size wide body and narrow body aircrafts is the best solution from a technological stand point so that Emirates can make use of all the new technologies fount in these newer aircrafts like Boeing 787 Dreamliner, Airbus A330 Neo, A350, A319, A320, A321 etc.

My recommendation for Emirates is to make their fleet hybrid so that they can make use of the efficient technologies these new aircrafts will bring. In order to do that they have to change their business model to a hybrid version of hub-spoke model and point to point model in order to increase passenger growth.

  1. Business Case Analysis Process and Resources

Emirates have to drastically change their business model in order to survive in this ever-growing competitive airline industry. They have to get rid of their model of hub and spoke not totally but in some ways and have to merge it with point to point model in order to get maximum efficiency of both models. Also, from a technical point of view they must change their fleet to more diverse aircrafts instead of using same wide body aircrafts to all destinations. Making the fleet more diverse will give Emirates to make use of potential market in small cities which are mainly dominated by small budget airline with their small narrow-body aircrafts because their aircrafts can land and support the runways and infrastructure of those said airports. Emirates have a big market to explore in this advanced aviation field where companies like Boeing, Airbus and Bombardier are dominating in both small and large plane market. Emirates have options to select from Boeings new aircrafts like 777X and 787 Dreamliner. They can also consider new aircrafts from Airbus like A330 Neo, A350 and A320 family. But for optimal efficiency, considering Emirates changes their business model to hybrid model of combination of hub-spoke and point to point model, they must choose Boeing 787 Dreamliner, Airbus A330 Neo and Airbus A350 as new their mid-size wide body aircrafts and Airbus A320 family (A319, A320 and A321) exclusively as their small narrow body aircrafts for small distances and less passenger demand areas. Emirates already owns 134 Boeing 777-300 ER’s and 10 Boeing 777-200 LR’s so, buying new Boeing 777X makes little promise but not as compared to other aircrafts which can promise significant cost savings. The technological, financial and business advantages of all these recommended aircrafts are discussed below in analysis section.

Analysis

  1. Key Assumptions of Analysis

The key assumptions of this analysis if we Emirates were to get more wide variety of aircrafts are as follows, mainly the infrastructure. Emirates have built its terminals to support Airbus A380’s and Boeing 777’s. The Airbus A380 is a double decker aircraft with 2 floors.  Dubai international terminal is equipped with the gates and air-bridges needed to support these aircrafts. The Boeing 777’s has only one floor so it is easy for Emirates to support newer Boeing 787, Airbus A330 Neo’s and A320 family. The next assumption for this analysis is the ability of Emirates to sell some of those A380’s and 777’s so that they can buy new aircrafts with that money. Selling 777 is easier because most of the airports can support 777’s because of its popularity and demand. But Emirates must find a way to sell some of A380’s because the A380 program has ended and there is low demand for these aircrafts. Last but not the least, in order for Emirates to adapt this hybrid version of hub-spoke and point to point model, they must find a way to set up service and maintenance in airports for their fleet other than DXB. It is highly important because this factor determines whether Emirates can adapt this hybrid model. This is because from point to point service, aircrafts need servicing and maintenance so that they can run smoothly.

  1. Analysis of the 5 Pillars
  1. Strategic alignment: Yes, this investment is very significant in the sense that buying new aircrafts and getting rid of some aircrafts is a substantial investment. Just one new Boeing 787 Dreamliner cost on average of $230 Million (Wikimedia Foundation, 20 Feb. 2020, Para. 2). So, buying bunch of them and also other A330,A350 and A320 family is going to cost Emirates a lot. But making this move is crucial for changing the business model to hybrid. And changing their business model is crucial for making sure Emirates makes use of potential passenger market in small cities and make sure that profit loss like one from 2018-2019 does not happen again.
  2. Business process impact: The business process impact of these changes is certainly going to be significant because by making this move of diversifying the fleet, Emirates is changing their entire business model from only hub-spoke system to hybrid version of hub-spoke and point to point. There will be a time for adaptation to new processes and ways, but in the long run, it will greatly benefit the company.
  3. Architecture: By making this move, there will be some impact in IT architecture, but not as significant as compared to business model. Surely they have to add more destinations, add more information about the fleet seat map, new prices, set up network for point to point services and set up systems for new airports, but these are just small changes which every airline has to do from time to time as they buy new aircrafts and add new destinations. So overall, the IT architecture impact will not be that significant.
  4. Risk: There are some risks associated with these changes as all any new changes have. The main risk is of diversifying the fleet is that Emirates will have to scrap/retire some of the current A380’s if they are not able to find buyers for it. It is a possibility because of continuous decrease in demand for this aircraft and from the example that Emirates have already retired 10 A380’s and is making use of them for spare parts due to low demand. Next risk is that Emirates is used to hub and spoke model. So, in order to implement hybrid version, they have to bring in new people or train the existing employees. Changing entire business model is definitely difficult, but this part is crucial for airline to maintain harmony in their operations. Lastly, training the existing pilots for these newer aircrafts is going to cost Emirates.
  5. Direct payback: Cost analysis and payback is given in financial analysis section.
  1. Technology map: This article recommends following technology map which can be used in implementation of hybrid version of hub-spoke and point to point model, so that Emirates can get best of both worlds. This involves purchase of newer technologically advanced aircrafts and selling fewer older aircrafts. This also involves hiring and training new employees who can make use of these new state of the art technologies like head’s up display, pressurizing cabin at much lower height of 6000 feet, make use of fuel saving to use it for longer routes and many more. Emirates must give crew enough time to get familiarized with it for safety reasons. Next process is to change business model to hybrid and create, implement and make use of new systems in order to support the new business model. Again, hiring and training existing employees is very crucial to the airline in order to save time and money.
  2. Value Analysis Results
  3. Top Benefits: In order to change business model from hub-spoke to hybrid version of point to point and hub spoke, Emirates need to buy new aircrafts. I have shown below in financial analysis the specific requirement and units of each variants of aircrafts. Technical benefits over the current fleet are as follows:
  1. Boeing 787 Dreamliner: The new Boeing 787 Dreamliner has revolutionized aircraft manufacturing. It is made up of carbon fiber reinforced polymer (plastic) which makes it more durable than any other aircraft in history. This material can be found in both fuselage and wings which are the main parts of any aircraft. Boeing 787 Dreamliner is more efficient because of its less weight which gives it more performance with less energy. This light-weightiness enables aircraft to fly more distances with less takeoff weight which helps in point to point travels reducing layovers (CNN, 25 Oct. 2011, Para. 1). The humidity in Boeing 787 Dreamliner is higher than normal aircrafts because it is pressurized at 6000 feet instead of 8000 feet on other aircrafts. This lower pressurization lowers the rate of fatigue, dry eyes, reduces jet lag so, then passengers feel more comfortable and can stay inside airplanes longer (CNN, 25 Oct. 2011, Para. 3). This is possible because of less corrosion at 6000 feet, because it is made up of composite materials. It also has more legroom, overhead bin space (CNN, 25 Oct. 2011, Para. 4). The key aspect of the popularity of this aircraft is its fuel saving capabilities. Boeing 787 Dreamliner is 15-20% more fuel efficient than any other airline, which drastically saves money (CNN, 25 Oct. 2011, Para. 5). So, aircrafts can fly more distances on less fuel and make more money. Another factor of Boeing 787 Dreamliner is its cockpit heads up display (HUD) so that pilots have all the necessary information right in front of them all time therefore pilots can see all the data without any efforts (CNN, 25 Oct. 2011, Para. 6). Boeing 787 Dreamliner also have electronic dimming windows instead of traditional plastic shades. As per Boeing “A thin layer of gel is sandwiched between two pieces of glass. Applying an electrical current to the gel causes a chemical reaction that changes its opacity. Electrodes are placed on the sides of the windows, out of view of the passengers. The windows are also networked together, for centralized control by the flight attendants. (Boeing, n.d., Para.4)” It also includes flat screen multifunction display, duel electronic flight bags and an electronic checklist. The wide display provides clear view of info related to flight information and navigation systems. These displays can be reprogrammed for any future updates without any change in hardware (GeekWire, 8 Aug. 2011, Para. 3). The on-board fly by wire control system allows the pilot to actuate wing and tail control surfaces. Finally, the electronic braking system from Bugatti gives more Boeing 787 Dreamliner advantage over regular hydraulic brakes (GeekWire, 8 Aug. 2011, Para 2). It also prevents turbulence with the help of revolutionary Gust suppression system which recognizes change in speed and direct with the help of sensors and adapts accordingly (The Telegraph, 28 Mar. 2018, 1). The swept design makes aircraft create less drag and decrease fuel consumption. Boeing 787 Dreamliner has reduced operating cost by 15% and maintenance fees by 30% (The Telegraph, 28 Mar. 2018, Para. 1).
  2. Airbus A330 Neo: Airbus A330 Neo is a newer version famous A330-400. New Airbus A330 Neo offers brand new wings which help decrease fuel burn by 14% which is significant in aviation industry (Airbus, n.d., Para.2)”. It reduces greenhouse emissions so it is kinder to the environment. Airbus A330 Neo is very versatile mid-size wide body aircraft with 2 aisles, which can travel longer as well as shorter distances. The main reason why I have included Airbus A330 Neo and A320 family in hybrid fleet is that, although A320 is smaller aircraft, a pilot trained in Airbus A330 Neo, can also fly A320 with only hours of training (Airbus, n.d., Para.5)”. So, we can have same pilots for multiple aircrafts which saves money. It also has runway overrun prevention technology which prevents aircrafts in an incident from going off of runways (Airbus, n.d., Para.4)”. Aircraft also comes with duel heads up display for both captain and first officer. It also reduces maintenance cost by 15% (Airbus, n.d., Para.8)”.
  3. Airbus A350: Airbus A350 aircraft provides 25% improvement in fuel efficiency and 25% lower seat mile cost compared to Boeing 777’s (Airbus, n.d., Para.1)”. Airbus A350 burns 9% less fuel than Boeing 787, therefore it also has 10% less operating costs than Boeing 787 (Airbus, n.d., Para.4)”. Overall Airbus A350 provides 10% revenue increase compared to Boeing 787 (Airbus, n.d., Para.9)”. Airbus A350 can fly for ultra-long time. It set a record flight of 19 hours and 15 minutes from Sydney to Newark airport directly by Qantas airlines. It can easily seat as much if not more people than Boeing 777.
  4. Airbus A320 family: A320 family includes A319, A320, A321 which are primarily used for short-haul flights. Most of the budget airline uses this aircraft for short distances. It saves 15% more fuel than Boeing 737(Airbus, n.d., Para.3)”. This aircraft uses less fuel, require short runways and can operate in any airport. This is the best aircraft for turn back which is time it takes to get aircraft ready for next flight.

These all new aircrafts are epitome of technological innovations. Implementation and purchase of all these aircrafts will definitely make Emirates a very diverse airline which can serve any city, any runway, go to the places not visited by bigger airlines, aircrafts and also carryout point to point travels for more passenger traffic in an efficient way.

  1. Risk Analysis: The main risk is of this plan is that Emirates will have to scrap/retire some of the current A380’s if they are not able to find buyers for it. It is a possibility because of continuous decrease in demand for this aircraft and from the example that Emirates have already retired 10 A380’s and is making use of them for spare parts due to low demand. They can make some profit if they can sell A380’s at price of $300 Million per unit. Plus, point is that Emirates 777’s can be easily sold at price of $150 Million per unit as these are some of the high ranked aircrafts in reliability and quality. Next risk is that Emirates is used to hub and spoke model, training new people and setting up system is also going to be risky as a part of adapting new technology. Main risk which has affected airline over the years is fuel prices. Fuel prices goes up and down and hurt the airlines most. Many of the airline have gone bankrupt because of it. Famous example is of legendary Pan Am airlines which went bankrupt after buying new 747 double decker airlines because the prices of fuel west sky high. Maintenance, operation cost must be managed to a minimum to create some profit. New highly trained people must be hired in this transitional process of business model change to maintain continue flow of revenue and profits.

       iii. Tangible factors: The main tangible factor in the favor emirates is that they have dedicated terminal at Dubai International Airport. It is one of biggest airports in the world. So, supporting 40 new aircrafts is not a big issue for the airline or the airport. Most of the gates and bridges already are built for bigger aircrafts like A380 and B777, so smaller aircrafts such as B787, A350 and A320 family will be easily supported by those assets. This is a very big advantage for Emirates that they have this kind of infrastructure already built to support any kind of aircrafts. Money is the big factor in investment of 10-15 billion dollars. But they have to take risks to become a dominant airline in aviation industry. New technology incorporated in these new aircrafts will have to be leant by cabin crew and pilots very quickly. Emirates have to spend money on training them. But it is all worth in the long run.

  1. Intangible Factors: The main intangible factor in this hybrid plan of hub-spoke and point to point model is that it will improve Emirates’s reputation as airline for all. They will be able to reach people from all backgrounds, from cities to villages. People will be attracted more because they will have more options to travel from city to city or get a layover. For example. At this moment if I want to fly from San Francisco to London by Emirates, I have to go for layover at Dubai. Because, right now Emirates’s all origins and destinations have at least one Dubai layover which is very inconvenient. By implementing point to point model, Emirates will get back customers who they had lost from situation like this. They can go for high income high demand with newer flights and flights and at cheap prices. This hybrid model will definitely make Emirates more accessible to people all over the world.
  2. Sensitivity Analysis: Aviation industry is one of the most robust industries in the world. But as true with all industries, aviation also has some chain reactions with change to a variable. By implementing hybrid business model of hub-spoke and point to point model, Emirates has to buy newer aircrafts. Which means more investment. This investment can be wasted if uncertain situation like high fuel prices arrive. It happened once to an airline giant named PAN AM which went bankrupt after buying new Boeing 747 jumbo jets. After they bought it, fuel prices sky rocketed and they had no option than to declare bankruptcy. Changing fleet by buying smaller aircrafts will affect technical department because they have to change their systems which mainly supported big aircrafts like A380 and B777. Cabin crew, pilots and other staff have to get familiarized with new airplanes, their advance technologies and their workings very quickly lo minimize loss. Increasing fleet from 270 to 300 planes will definitely have effect on take-off and landing times. Delays can happen at the beginning of these changes. Airline must learn to cope with more workload and pressure. Increasing fleet is directly proportional to increasing assets to support those fleet and routes. Which means more manpower and money! This hybrid change will definitely have more than significant impact on Emirates operations but in the long run, these efforts of initial phase will definitely pay out.
  3. Financial Analysis

Operating an airline is not a cheap job. It requires a lot of investment. One of the highest in any industry. In order to change their business model completely, Emirates has to invest a lot but the outcome (profit) will justify the cost (investment). Following is a detailed analysis of cost to adapt this said hybrid model.

  • New aircrafts: Emirates has lot of choice when it comes to buying a new aircraft. There are many variants of each aircrafts. Following are the aircrafts I have recommended with respect to diversifying the fleet in order to have perfect combination all aircrafts types as per seating, range and size.

 

Aircraft Name

Unit Price

Seating capacity

Recommended Orders

Boeing 787 Dreamliner - 8

$220 Million

242

20

Boeing 787 Dreamliner - 9                            

$260 Million

280

20

Airbus A330 Neo – 900

$260 Million

257

20

Airbus A350 -1000

$367 Million

367

20

Airbus A319

$93 Million

124

25

Airbus 321

$120 Million

200

25

Total

$28.2 Billion

 

130


Emirates need to invest $28.2 Billion in new aircrafts. It is a huge amount but airlines are used to invest such amount of money at a time.

Following is analysis of cost of selling older planes. I have recommended selling 35 A380 at market price of $300 Million and 10 Boeing 777-200 LR because they are old planes and they are 90% similar to Boeing 777-300 ER. Also, I have recommended that Emirates sell 34 of Boeing 777-300 ER because some of them are old and newer aircrafts such as Airbus A350-1000 can seat same amount of people and can fly same amount of distance and 777 is known for its reliability and quality so they are always in high demand, so selling them won’t be a problem.

Current Aircrafts

Expected Selling price

Current fleet number

Recommended selling number

Airbus A380

$300 Million

105

35

Boeing 777-200 LR

$150 Million

10

10

Boeing 777-300 ER

$180 Million

134

34

Total

$18.1 Billion

 

79


So, by selling the older planes to small airlines, Emirates only need to invest about 10-15 Billion Dollars in new aircraft investment.

  • Operating cost: One of the main expenses in operating an airline is cost to operate. All that cost analysis is given below in detail for operating these above new aircrafts.

These costs mainly include resources as following:

  1. Crew: Crew includes cabin crew and pilots.

 

Hourly salary

Yearly salary

Salary of all current employees

Salary of expected employees

Pilots

$15000

$120K

4000*120= $480 Million

$550 Million

Cabin crew

$2500

$30K

6000*20= $180 Million

$250 Million

Total

 

 

$660 Million

$800 Million

*All prices are average*

                           (Arabian Business, 26 Aug. 2019, Para.1)

  1. Maintenance: In airline industry, maintenance on average costs $500/hr. Emirates has to spend total of $ 600 Million at most on maintenance of all fleet. This cost is calculated to considering all aircrafts, daily service of at least 2 aircrafts for whole year.
  2. Airport slots: A ‘slot’ is simply the permission of the airport operator for an airline to land a plane and take off. Airline have to pay airports these costs. The highest recorded slot for a pair of slots is $75 Million by Oman Air at Heathrow airport (Simple Flying, 28 Jan. 2020, Para. 1). On average cost paid by airline at airports for slot is $25 Million considering all types of aircrafts and airports (fees) (Simple Flying, 28 Jan. 2020, Para. 3). Emirates don’t have to pay slot fees at Dubai airport because both the airline and airport is owned by government of UAE. So, they are saving massive amount of money. But for other airports, they have to pay these fees. On average they will pay $500 Million/year.
  3. Fuel: Fuels costs are the biggest factor of success of an airline. Aircrafts use jet fuel known as Jet A1. But we can calculate approximately. Average B777-300ER burns 17,300 lb. fuel per hour. That is approx. 2071 Gallons/hour which is considering jet fuel price of $1.7/ Gallon which is $3520.7 per hour is the price of flying a B777-300ER for one hour (FlightDeckFriend, n.d. Para 1). This is the best calculation of how expensive is to operate an aircraft.
  4. Miscellaneous costs: $1 Billion on food, new technology, airport charges like baggage handling etc.
  5. Profits per flight: Emirates makes minimum of $18 per seat per flight (The Wall Street Journal, 14 Feb. 2018, Para 1). Emirates operate 3600 flights daily. That comes to when considering average seating capacity of 302, $195 Million/week 270 current fleet. After implementing hybrid plan, the number of aircrafts will become 300. Even if flights numbers stay the same, the profit comes to $217 Million/week. That becomes approx. $12.3 Billion as compared to $10 Billion now. That’s a profit of $2 Billion per year MINIMUM. (Excluding other expenses). If we calculate new routes and number of flights to 4500, revenue comes to $15 Billion/year (Excluding other expenses).

Total profit from hybrid model and new aircrafts: Considering all expenses including new aircraft prices, operating cost, resources etc., Emirates will have profit of $1.8 Billion at the end of the year of system implementation.

  1. IT Governance Plan
  1. Lines of ownership for business and technical teams: The new aircrafts will be owned by Emirates group. The regular operations, maintenance, painting, cleaning and other operational things of aircrafts will be the responsibility of Emirates. The regular software, technical and physical updates of those new aircrafts will be responsibility of aircraft manufacturer (Boeing and Airbus). In an event of an aircraft crash, the responsibility of causes of failure will fall on Emirates and manufacturer. Investigation will be done by NTSB (National Transportation Safety Board). Integration of new systems from hub-spoke to hybrid will fall on Emirates’s internal IT department.
  2. Service delivery requirements for business and IT: Deliveries of those new aircrafts will be determined and negotiated at the time of contract signing. Average time for an aircraft delivery is about 2-3 years. After that all deliveries must be made by manufacturer on time, it is their responsibility. Integration of hybrid system will be responsibility of IT department o Emirates. When those systems will be launched, they will be online 24*7. Maintenance of those systems will be done by IT department. The new HUD (Heads up displays) and many more new systems will also be available 24*7 as a part of aircraft functionality and safety.
  3. Customization policy: Aircrafts are highly customizable. There are many variants available for each aircraft. I have recommended the exact type of aircrafts need for Emirates considering seating capacity, distance, size and price. The new integration of system will be highly configurable to fit the needs of the company for optimal result on determined time.
  4. Site management storage and lifecycle policies: Emirates will be able to store all the new aircrafts in already available hangers on airports in Dubai. Purchase of those new aircrafts are made so that no new hangers are needed for new aircrafts. But considering hybrid model, Emirates must build or lease hangers or airport space at the point to point route airports. The database required for the new system will be used in Emirates’s Dubai datacenter. On average an aircraft lasts 17-25 years so this investment is considered long term.
  5. Education and training plan: Emirates MUST train their employees on the new hybrid system. They can outsource the training program if needed. The training of the new technologies on the newer planes is done by the manufacturer. Overall knowledge about aircrafts and its systems is upmost for the safety of aircraft and its passengers, so this part is very crucial and must be done regularly to get an optimal performance.

Next Actions

  1. Conclusion: Emirates is one of biggest airlines in the world known for their economy, business, first classes, food, service and overall quality. It pioneered the hub and spoke model by making Dubai International Airport DXB their hub with support of the UAE government. But their plan to buy 134 Boeing A380’s has somewhat backfired and they have and are losing money. They lost approximately $237 Million last year despite having one of the biggest airports dedicated to them. Emirates has blamed the reason for it on high fuel prices and tough competition, which are the permanent factors in the aviation industry from years. In order to grow, make use of untapped passenger market in small cities and never ever face such profit losses, they need to change their business model from hub-spoke to hybrid version of hub-spoke and point to point model. Which will make use of best of both models. Their current fleet of 134 Airbus A380’s and Boeing 777’s cannot support this hybrid model. Emirates need new state of the art planes in order to save fuel, carry more passengers and get more passengers to book Emirates as their travel option in the first place. In order to do that, they need to buy 130 new aircrafts comprising of Boeing 787 Dreamliner, Airbus A350, Airbus A330 Neo and Airbus A320 family. These aircrafts will let Emirates go to the places they thought they would never go with their current fleet. Purchase of these aircrafts is investing a lot of money but they can save some money by selling some older A380’s and B777’s (79 Aircrafts to be exact). After sell of these aircrafts Boeing will have to invest only 10-15 Billion dollars in new ones. Yes, hiring and training new and existing people, building maintenance spots at new airports and buying new airport slots will take time and money, but in the long run, it will be worth it as I have shown in financial analysis section that, Emirates will have $1.8 Billion profit after implementing said changes. It is not certain that everything will go according to plan. But airline needs to take chance on themselves in order to reinvent themselves so that, airline’s dominance in aviation market will increase by making use of untapped passenger market. If Emirates can serve people from all backgrounds, people from all corners of the world at a cost-effective manner, they can truly become the airline of the people.
  2. Next steps: Emirates needs to act fast in this ever-growing competitive airline market. So, the next steps to start this process are first we need to get approval from CEO and members of the board. If that goes well, we need to start negotiating with airlines for aircraft purchases. We must not show any signs of weakness while negotiating so get the best prices on the aircrafts as possible. Airbus’s whole A380 program of $35 Billion dollars were solely dependent on Emirates buying most of those aircrafts, 134 to be exact. We can leverage this loyalty in order to get less prices on A330’s, A350’s and A320’s. Boeing’s 787 is in high demand and deliveries of last month’s order are not until 2022. So, we need to act fast in order to get an order in. We need to order all the 130 aircrafts at once as it will guaranty us of at least 10% discount on whole order. We need to start changing our business model as suitable and start hiring new people and also train existing employees about new aircraft’s technology and new hybrid model so that when the deliveries finally start to come, we will be ready, wasting no time. Finally, we need to start finalizing new routes and destinations considering passenger market and specific aircrafts for those markets and start building maintenance centers at those desired airports. All these changes need to be done quickly and efficiently.

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