Etihad SWOT Analysis | Business Teacher
Etihad SWOT Analysis
A unique strength that rival airlines located outside the Gulf region cannot imitate is Etihad’s favourable location: the majority of the population could be reached from Abu Dhabi International airport within 10 hours, which made the region an excellent transfer destination for travellers covering large distances (Mayerowitz, 2013). Etihad has been renowned for its exceptional service quality and has received numerous awards recognising its high-quality in-flight service (Etihad is a Skytrax certified five-star airline) (Etihad, 2017a). Etihad has been financially stable in the last couple of years, reporting a gradually increasing profit (in 2016, Etihad disclosed a 41% increase in its profit from the previous year), which demonstrates the airline’s ability to exploit opportunities in its external environment (Haider, 2017). The airline operates the second largest fleet in the UAE: as of 2017, Etihad operated 128 aircraft with an order backlog of 182 aircraft to be delivered over the course of the next ten years (Etihad, 2017b). Etihad maintains minority shareholdings in other airlines as well and has an extensive code-sharing network (Etihad, 2015).
Ever since its establishment, Etihad has been able to produce growth each year, however, there are certain strategic weaknesses that started to manifest recently. In contrast to other airlines joining alliances to collaborate and to improve their load factors, Etihad decided to purchase stakes in other airlines to grow its route network (Ft.com, 2016). A lot of financial resources have been spent on acquiring stakes in other airlines (Such as Air Seychelles, Air Serbia, Alitalia), however, these airlines’ financial performance is concerning (especially that of Alitalia) (Ft.com, 2016). So far, none of the acquisitions carried out by Etihad was a commercial success, often hindered by the legal disputes (covert attempts on behalf of European legacy airlines to protect their market shares) (The National, 2016).
An ongoing opportunity for Etihad is to focus on emerging markets – this is not to say that capacity should be withdrawn from mature markets, however, if Etihad intends to maintain its current growth rate, focusing on high-potential markets is recommended (PWC, 2015). To overcome the legal difficulties in European markets, it might be worthwhile to investigate the legal options available to establish a subsidiary European airline. The case of Easyjet is by no means similar to that of Etihad, yet there is an interesting strategic move Easyjet has implemented, that might be suitable for Etihad as well (as long as the airline’s European routes are concerned). Easyjet, to isolate itself from the uncertainty of the post-Brexit UK air travel industry, decided to establish a European subsidiary to maintain the airline’s EU operations (Topham and Sweney, 2017). This could be a viable alternative for Etihad as well to secure its legal position in EU markets.
Etihad’s involvement in acquiring stakes in other airlines as a method to expand its route network might cause further troubles for Etihad airlines’ if European courts rule against Etihad’s code share agreements (this threat is generally applicable to other Gulf airlines as well). Hence, the legal uncertainty that is present in Etihad’s US and EU markets is a topical issue that could rapidly influence the airline’s presence in these markets. On the top of the problems experienced in western markets, there is a growing threat coming from the growth of low-cost long-haul airlines with a much lower cost base than Etihad (Economist.com, 2017). The premium travel segment is expected to remain important for Etihad, yet if radical changes are not implemented to compete with low-cost airlines, Etihad’s appeal to cost conscious customers may suffer. Etihad has just recently reported a loss of $1.87bn that forecasts a turbulent time ahead for the airline (Kamel, 2017)
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