Applying Airline Expertise to Emirates Airlines

Based on the case, Applying Airline Expertise to Emirates Airlines, and the required reading, Measuring the Costs of Responding to Business Risks, complete the following requirement as your group case write-up.  

   1. Determine what you believe is the overall business objective for Emirates and identify two key strategies that it employs to achieve its objective.

The overall business objective for Emirates Airlines is to provide the best possible long-haul flight experience for all consumers while maintaining profitability in a high-cost industry.

To do this, Emirates Airlines employs the following strategies:

• Primarily uses Airbus A380 planes to provide their services because they are more cost effective than the competing Boeing 787 planes
• Targets high income travellers and business travellers and provides amenities that many competitors do not--such as on-plane private suites, a bar on board, and a lavish menu

   2. Copy the strategies that you identified in Step 1 and then for each one, identify what you believe are the key strategic risks associated with each strategy and suggest a specific risk response (e.g., accept, avoid, share, reduce) for each risk.  As part of your suggested response, describe the direct and indirect costs associated with the risk and response.

• Primarily uses Airbus A380 planes to provide their services because they are more cost effective than the competing Boeing 787 planes

• Number of Passengers - reduce it by subsidizing tickets or having partnerships with other airlines to transport passengers from locations that Emirates Airlines does not fly out of.  
• The direct cost associated with this risk would be the differential between the original ticket price compared to the subsidized or partnership ticket.  In addition to this cost, there may be additional costs based on partnerships for that of the crew, gas, food and other various equipment for the airplane.  
• The indirect costs of maintenance on the airplanes are substantial compared to the maintenance of Boeing 787s.  The Airbus A380 costs $400 million upfront and has large long-term costs if the fleet is kept around beyond ten years.  Due to this, Emirates tries to sell their plans at this time because there is a market for used planes; this could change at any time though and is a risk itself.  50% of Emirates planes are owned by the company.
• Risk of losing some market share due to people wanting a smaller aircraft for the long-haul flight as opposed to a larger aircraft that is more likely than not to have distracting or irritating noise.  -  Reduce this risk by offering private suites or segmented areas of the airplane

• Targets high income travellers and business travellers and provides amenities that many competitors do not--such as on-plane private suites, a bar on board, and a lavish menu

• Limiting customers to a smaller subset of available travellers - Reduce by designating the upper level of the planes with more Lavish amenities and therefore segmenting the offerings.  The direct cost of catering to high Income travellers is that they will be flying planes with more empty seats.  In-direct cost is that flying the plane with fewer passengers is the effectively the same as flying less efficient plane.
• Increasing operating costs by providing high end items and services - Share by teaming up with high end food providers to gain economies of scale.   Direct cost is higher operating costs.
• High Income Travellers tend to work or operate out of heavily populated metropolitan cities or areas.  By Targeting these High Income Travellers, the airline is likely to cater to only these major airports - Reduce by doing a study to develop demographics of High Income rural Travellers and available airports.  The direct cost is that they will be flying planes with more empty seats.

   3. Select one of the strategies you identified in Requirement 1 (and its associated strategic risks that you identified in Requirement 2).  Then, identify the business process that would be used to manage each risk you identified for that strategy.  For each process, identify one process objective and activity measure that can be used to assess how effectively that process objective is met.  This requirement helps connect ERM, business process analysis, and performance measurement.

        Develop and maintaining a booking and ticketing process that maximizes plane occupancy.  This process would draw on historical booking data and govern the process by setting the prices offered for each of the seating options.  This process would increase the lower priced “Subsidized” seats as the flight date approaches, but only if the minimum “Break Even” seating calculations have not been met.  As for a control mechanism they should actively monitor the flight occupancy of the Dubai to New York Flights as a KPI.  If the Occupancy trends to lower than 70% occupancy the process must be adjusted to increase the number of  subsidized seats or offer them sooner.