Emirates PESTEL Analysis
International airlines operating flights across six continents are exposed to global political developments (Reuters UK, 2014). The growing global security concern and the recent terror attacks carried out in Europe and in other parts of the world could reduce the demand for air travel (Reuters, 2016). Emirates operates flights to many emerging regions of the world (such as Africa, Iraq, and the South-east Asian region) with a currently stable political environment, however, any political change or security concern in these regions could halt the demand for these flights (Dudley, 2016). The Trump administration travel ban on certain Muslim country citizens is expected to reduce Middle Eastern airlines' load factors on flights to the US (The Washington Times, 2017).
Emirates is an international airline so the revenues are collected in multiple currencies – any sudden movement in the exchange rate and change in global macroeconomic conditions could lead to revenue fluctuation (Parasie, 2016). The UAE economy's growth has been mostly fuelled by the country's oil industry, however, recent investments into other sectors (such as trade and commerce) attempting to make the UAE as an attractive business destination are indirectly benefiting airlines in the region (through an increased travel demand) (Malek, 2016). The declining oil price is often considered to be a positive development for airlines, however, it also reduces the demand for premium travel to Dubai (and to the Gulf region) (Kamel, 2017).
The rapid increase in the world population is alone an important factor that shapes the demand for air travel (Forbes, 2016). The most lucrative travel segment now is baby boomers (reaching the top of their career ladders and engaging in frequent business travel), however, an increasingly important generation, the Millennials, are emerging with an insatiable appetite to travel (Cederholm, 2014). Millennial travellers have vastly different expectations from previous generations (high reliance of technology and preference for convenience at an affordable rate) (Cederholm, 2014). In emerging regions of the world, the middle class' disposable income is rising that harbours a valuable business potential for airlines to discover opportunities in these markets (IATA, 2014).
The utilisation of digital technology to improve performance, to increase efficiency and to accurately forecast customers' expectations in the highly competitive airline is essential (Accenture, 2016). There is a growing demand from the customer side to use technology to manage and personalise itineraries through mobile applications (particularly if Millennial travellers are considered) that carry the opportunity for airlines to precisely customise services to existing customer needs (Accenture, 2016). Major advancements in aviation technology impacting fuel efficiency are not expected, however, airlines (and aircraft manufacturers as well) remain under pressure to utilise all available technology to reduce their fuel consumption (Phys.org, 2017).
The airline industry is responsible for approximately 12% of the total carbon emission in the transportation industry (ATAG, 2016). Inclement weather conditions (such as hurricanes, extremely high temperatures, snow storms…etc.) could significantly impact airline operations (both in the middle east and in other regions of the world) (Upham, 2015).
The phenomenal growth of Gulf carriers (Emirates, Etihad and Qatar Airways) often incentivised European and American competing airlines to make attempts to limit Gulf carriers' access to their home markets through protectionist policies (although very few of the involved airlines would openly admit that the accusations of alleged subsidies and the lobbying to renegotiate Open Sky agreements with Gulf Airlines are done as part of protectionism) (Flottau, 2015). Middle eastern airlines' traffic on European and American routes have significantly grown in the last couple of years, attributable to the series of agreements to liberalise air travel markets (Parker, 2013). The recent travel restriction applicable to citizens from a selection of high-risk countries to the US is supposedly addressing safety concerns, however, it is well probable that this is part of the covert legal attempts European and American legacy airlines are using to restrict middle eastern airlines' access to their markets (Reuters, 2017).
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- CAPA (2015). Emirates Airline turns 30: Just as it has changed the world, now Emirates faces its own changes. [online] Available at: https://centreforaviation.com/insights/analysis/emirates-airline-turns-30-just-as-it-has-changed-the-world-now-emirates-faces-its-own-changes-245140 [Accessed 24 Jul. 2017].
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- Dudley, D. (2016). Is The Emirates Airline Growth Story At An End?. [online] Forbes.com. Available at: https://www.forbes.com/sites/dominicdudley/2016/11/11/is-the-emirates-airline-growth-story-at-an-end/#71fb9ff966d6 [Accessed 24 Jul. 2017].
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- Flottau, J. (2015). Protectionism Won't Work Against New Competition. [online] Aviationweek.com. Available at: http://aviationweek.com/commercial-aviation/protectionism-won-t-work-against-new-competition [Accessed 24 Jul. 2017].
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- IATA (2014). The Rise of the Middle Class | Airlines International. [online] Available at: http://airlines.iata.org/thought-leadership/sponsored-content-the-rise-of-the-middle-class [Accessed 24 Jul. 2017].
- Kamel, M. (2017). Emirates Profit Down 70% on Oil-Hit Economies, Terror Impact. [online] Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2017-05-11/emirates-profit-tumbles-70-on-low-oil-prices-terror-concerns [Accessed 24 Jul. 2017].
- Malek, C. (2016). Leaders chart new strategic roadmap for the UAE after oil. [online] The National. Available at: https://www.thenational.ae/uae/leaders-chart-new-strategic-roadmap-for-the-uae-after-oil-1.193589 [Accessed 24 Jul. 2017].
- Parasie, N. (2016). Emirates profit falls 75% on stronger dollar. [online] MarketWatch. Available at: http://www.marketwatch.com/story/emirates-profit-falls-75-on-stronger-dollar-2016-11-09 [Accessed 24 Jul. 2017].
- Parker, A. (2013). Emirates: In a sweet spot. [online] Ft.com. Available at: https://www.ft.com/content/c274e63e-580c-11e3-82fc-00144feabdc0 [Accessed 24 Jul. 2017].
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- Reuters. (2016). Air travel demand slows as airlines confront security, fragile economies. [online] Available at: http://www.reuters.com/article/airlines-iata-idUSL8N18R23U [Accessed 24 Jul. 2017].
- Reuters. (2017). Laptop ban, protectionism hang over booming air travel industry. [online] Available at: http://www.reuters.com/article/us-airlines-iata-idUSKBN18T14I [Accessed 24 Jul. 2017].
- The Washington Times. (2017). Emirates cuts US flights, blames Trump travel ban. [online] Available at: http://www.washingtontimes.com/news/2017/apr/19/emirates-cuts-us-flights-blames-trump-travel-ban/ [Accessed 24 Jul. 2017].
- Upham, D. (2015). 4 ways climate change could ground the airline industry. [online] GreenBiz. Available at: https://www.greenbiz.com/article/4-ways-climate-change-could-ground-airline-industry [Accessed 24 Jul. 2017].