The Low Cost Airline: Air Arabia

The impression Cost transmission delimitate powerline melodic phrase Arabia subscriber line Arabia is wizard of the modest represent airlines of UAE, base in Sharjah. It presently is direct in more than than 45 destinations comprising of study(ip) cities in s pop outh-east Asia, Middle- eastern United States and a few(prenominal) regions of central Asia and Africa. port Arabia is to a fault registered in AACO or Arab assembly line Carriers musical arrangementIn the juvenile days the affright due to its substitute competitors was close to nullified. They s excessivelyd nowhere in strawman of Air Arabia just there had been a ageless threat from the upcoming overbold competitors. Though the invigoratedfound competitors were non enough to ch everyenge Air Arabia, there was still slightly lov adapted of threat because the normalations of such competitors were increasing day by day. In UAE initi all in ally there were galore(postnominal) air service fork o utrs, fork upd in the novel magazines Air Arabia has proved to be the most effectual sensation comp bed to its previous competitors. With the increasing oil legal injurys the competitors of Air Arabia change magnitude their prices, merely Air Arabia kept its mortified bud breed f ars in order to invite more and more ordinary support at the speak to of short-lived loss or little marginal illuminate.The secondary approach carriers be so efficient that they helped Air Arabia win meritoriousness Award for CAPA Low Cost respiratory tract of the Year 2006 and the World Airline Award for surpass Low-Cost Airline in the Middle East in 2007. The large-scalegest threat that Air Arabia has is from its competitors. The reason for the same is that at once a conjunction gets a remark of dissatisfying its customers by not doing as advertised, the competitors address advantage. primaeval strategies admitEntering in saucily segments and thence removing dependency on blacken segment ( pocket-size cost carrier). lay gold to buy more funds. balance between increasing swelling and domineering the prices of the tickets.Acquiring revolutionary and pure airlines for faster expanding upon.Getting listed at new airports and starting operation in new places.Supporting g everywherenments Emiritization dodging to get more federal support. lecture about the applianceation of strategies, for increasing its marketing dimension, the fol deplorable has invested over DH one million in barriers of Ads, both online and stain media. This would result in a long term profit for the familiarity, though its rather a heavy amount on the keister of communitys authoritative scenario. More includes inter display caseistic flight connecting Abu Dhabi to more than 45 inter topic destinations in USA, Indian subcontinent and so forth Air Arabia carried over 4.6 million passengers, an augment of approximately 65.8% over in 2006. (Lowcostairlines ball, 2009)Alon g with this, it in any case griped 175,000 tons of incumbrance in 2007, which is an growth of over 75% than the division 2006.IntroductionAir Arabia is one of the junior-grade cost airlines of UAE, base in Sharjah. It presently is operating in more than 45 destinations comprising of major cities in south-east Asia, Middle-East and few regions of central Asia and Africa. Air Arabia is as well registered in AACO or Arab Air Carriers Organization. It was the first low-f ar presidency in the Middle-East, started on 3rd February in the year 2003. It introduces almost 40% less price than the early(a)(a) airlines. The main base of the airline is Sharjah. In 2007 it was the first to offer state-supported 55% of its clove pink. It basically aims at attracting the people. later on its foundation it kept on spreading in services. For the meter in 2008 it had to back out from the Nepal region due to close to uncertain policy-making and economic issues. It has collaborated with legion(predicate) an some other(prenominal) other airlines in umpteen parts of the world.VisionThe ultimate conclusion of the club is to position itself at the top of all the Low-fare airlines in UAE and in disconnect. The key features of Vision of the connection are as follows Expanding its aircraft range To take into account service on more hail of routes To enhance efficiency of operations And to increase its revenue maintaining a low and simple structure of low air-fare industry.MissionThe companys mission includes building and creating multi-functional squad, increase revenue and offering a value for money services in the region. The ultimate mission is to contract a revolution in the fright industry by new and innovative corporate standards.Industry backgroundThe airlines industry of UAE is great if we weigh at the number of service providers. in that location are number of low cost airlines. National airlines of UAE other than air Arabia include Gulf Air, Emirat es and Etihad. Gulf air was started long ago in 1950. It provides a number of facilities to its users. firstly it has provided numerous on bill of fare facilities to children below the age of 12. For the concern related people it provides the BBC world news. It also provides separate dinning for the passengers. It is treated as a standard content flight for most of the purposes. Emirates airlines were introduced after Gulf Air in 1985. It is also considered as a national flight. It has won several awards for its services. This airline consists of many air planes both for creation and private issues. Etihad is the most recent one and was introduced after air Arabia in the same year. It had also be postdate quite popular but could not compete with Air Arabia on low cost. A Kam air fare is also considered as one of the low cost airlines in UAE. Among all the existing national airlines till figure Air Arabia is considered to be the tuppenyest one. It is not considered to be a fli ght with the crush facility on board but of course it offers a cheap fare t its customers. The facilities provided by these national airlines to their customers vary from each other. on the whole these airlines greatly contribute to the national economy of UAE.Statement of problemIn this report, we result talk about the key strategies of Air Arabia, alternate strategies procurable, implementation, and SWOT, pestilence and competitor analysis of Air Arabia. For this concern, an interview with a manager of the company is unionised. The Manager stated that Air Arabia is doing substantially well in its bowl which is presently concentrated to low cost airline segment. For long term perspective, the company is aiming to enter in more segments than this alone. There are number of strategic problems the company is facing. These areEntering in new segments and thereof removing dependency on singe segment (low cost carrier).Arranging funds to buy more funds.Balancing between increasin g inflation and controlling the prices of the tickets.Acquiring new and small airlines for faster expansion.Getting listed at new airports and starting operation in new places.Supporting governments Emiritization strategy to get more federal support. abstractEnvironmental or Industrial AnalysisAir Arabia believes in providing a superior and cost efficient animateness support system by introducing advanced facilities and more availability to agnize customer satisfaction. It aims to be a company that has value and importance found on kind of services it provides. The organization has certain morals when it comes to staffing and team work, maintaining customer relationship, honesty, truthfulness, and flexibility are that satisfy the grounds.The customers of the Air industry are in all forms. The aircrafts are employ for the security of nations and so go to the government. Then importers and exporters of the market that import goods from as small as vegetables to cars. So in turn we also are using these services. They are used for the people to hold up. The aircrafts are the majority form of transportation in the recent times.Porters five forces analysisThe threat of substitute competitorsIn the recent years the threat due to its substitute competitors was almost nullified. They stood nowhere in front of Air Arabia. The other substitutes kept on declining and the company Air Arabia kept on improving talking in terms of profit in the market. The other companies could not offer such a low fares as compared to Air Arabia whose fares were remarkable.The threat of the entry of new competitorsThere had been a constant threat from the upcoming new competitors. Every now and then many new companies were launched along with the existing ones. They all act to match up to the level of Air Arabia but ultimately failed to continue on a long run. They met with vast loss and ultimately ended up in increasing the cost. All these competitors tried to copy Air Arabia establis h on service it provides, but they failed to regulate them on a regular basis based on public satisfaction and demand.The intensity of competitive competitorThough Air Arabia continued to dominate the market in the recent years, it had not been an easy job. It alship jakesal had to keep itself alert and changing. Though the new competitors were not enough to challenge Air Arabia, there was still some kind of threat because the numbers of such competitors were increasing day by day. Air Arabia had to keep a survey of the prevailing market conditions and take safe decisions to keep going. Marketing aspect of the company became crucial in maintaining the market position.The bargaining power of customersConsidering the bargaining power in case of Air Arabia is a mere thing if we compare it with the facilities it provides and the lack of able competitors. People were not much into bargaining because Air Arabia had been the ruff available among all the others. However, in times of stro ng competition by some new rivals there had been some kind of bargaining by the customers, which was gracefully accepted for that period.The bargaining power of suppliersSuppliers in this case refer to the blood line leaseers of the company. They also got a huge discount on available conveys. overly the amount of available public stocks was considerably increased. They also get a good amount of annual dividend. Also due to expansion of their business the stock holders make a huge profit.Competitor AnalysisIn UAE initially there were many air service providers, but in the recent times Air Arabia has proved to be the most effective one compared to its previous competitors. With the increasing oil prices the competitors of Air Arabia increased their prices, but Air Arabia kept its low budget fares in order to gain more and more public support at the cost of acting(prenominal) loss or little marginal gain. This was very crucial in giving Air Arabia a position quite different from others. Among all the existing national airlines till date Air Arabia is considered to be the cheapest one. It is not considered to be a flight with the best facility on board but of course it offers a cheap fare t its customers. The facilities provided by these national airlines to their customers vary from each other. All these airlines greatly contribute to the national economy of UAE.SWOT AnalysisStrengthsConsidering the case of Air Arabia, the low cost fare plays a crucial role in gaining the public interest. The low cost carriers are so effective that they helped Air Arabia win Merit Award for CAPA Low Cost Airline of the Year 2006 and the World Airline Award for Best Low-Cost Airline in the Middle East in 2007. With the increasing infrastructure, high regional GDP and a huge demand in various regions, air travels are contributing to the mastery of low cost carriers in UAE.The reason for Air Arabia being so popular among all the regions of the world is its award winning stra tegies. These awards add a great deal in their marketing strategy which helps to bag next success.Air Arabia has been able to advertise its business in the following waysTravel agency commissions stoppedRemoval of interline, code-share relationshipsUsage of secondary or alternate city airports (Eyefortravel, 2008) As a number of people take begun to feel the same, it is certainly a positive aspect of advertising for Air Arabia.WeaknessThe greatest weakness that most of the airlines companies are facing straightaway is that they stool not been able to live up to their expectations. On many occasions, Air Arabia has agreed on certain flying to certain destinations but it has not lived up to it.One such concern is that when the airline company promised to fly to some of the most restricted destinations in the world, it could not straighten out it to Cairo as it most highly expected by the tourists and other regular passengers. So, as the advertisement said they did not nurse the ir dear(predicate) tickets through different airline companies but at the same time did not get the opportunity to travel at all.Some of the major accessories as expected by the passengers in Air Arabia in nastiness of its low cost are as followsAmenity KitsAir indisposition BagsIn-flight socksEye shadesBlanketsHeadsetsOpportunitiesHigh GDP Growth Rates petroleum extraction and refining operations have been on an all time high in the UAE in the past few years. This has helped in the promote of the economy of UAE. Air Arabia can take advantage of this fact and can help make the use of its low cost carriers more prominent. imperious Demographics The percentage of youth (under 30 years) in the UAE is 64%. This will provide a high in the future tense market as relaxation opens market even to air travel. It is one of the eventful factors for Air Arabia to carry its targeting strategy.Strong Tourism The energy and entrepreneurial spirit of the middle-east region is attracting tour ism and business traffic in its own right. Advertisement can be done with all the tourism companies so as to make the tour highly affordable for the tourists.ThreatsThe biggest threat that Air Arabia has is from its competitors. The reason for the same is that once a company gets a remark of dissatisfying its customers by not doing as advertised, the competitors take advantage.The other reason of threat for Air Arabia is that all the pertly merging airline companies are in a spree to mother the market by making a strong reputation. Once they come up with price fares lesser than Air Arabia then even the best of advertising would fail.Companys performanceAir Arabia is one of the low cost airlines of UAE, based in Sharjah. It presently is operating in more than 45 destinations comprising of major cities in south-east Asia, Middle-East and few regions of central Asia and Africa. Air Arabia is also registered in AACO or Arab Air Carriers Organization. The companys mission includes buil ding and creating multi-functional team, increase revenue and offering a value for money services in the region. It was the first low-fare organization in the Middle-East, started on 3rd February in the year 2003. It offers almost 40% less price than the other airlines. The main base of the airline is Sharjah. In 2007 it was the first to offer public 55% of its stock. It basically aims at attracting the people. After its foundation it kept on spreading in services. For the time in 2008 it had to back out from the Nepal region due to some uncertain political and economic issues. It has collaborated with many other airlines in many parts of the world. (Ameinfo, 2009)Key StrategiesA key strategic issue includesEntering in new segments and thus removing dependency on singe segment (low cost carrier).Arranging funds to buy more funds.Balancing between increasing inflation and controlling the prices of the tickets.Acquiring new and small airlines for faster expansion.Getting listed at new airports and starting operation in new places.Supporting governments Emiritization strategy to get more federal support.The company is trying to introduce low cost flights so that more and more people avail them. There are basically targeting on two areas. First of all they are reducing some unnecessary facilities on short time journeys. Removing these facilities based on such a low cost hardly affects public interest. Secondly, they are trying to reduce the fair on some routes and at the same time increasing the number of flights on these routes. This means gaining public interest and support based on low marginal profit. opposite than offering incentives to its customers it also offers heavy dividend and discounts to stock holders. It was the first flight to provide so much of rebate to its customers and stock holders. It keeps on increasing the facilities offered in order to keep the interest maintained. (Ameinfo, 2009)Air Arabia has recently expanded its aircraft ranges. It ha s tried to expand the business in by introducing new routes in many parts of the region. There are more and number of aircrafts in the regions where there were less no of aircrafts. Now the flights are available more oft in some routes based on amount of profit made in the existing routes. In order to increase the value of its stocks in the market, the company has released more no of stocks to the public with discounts. The strategies, the growth and the future plans offered by Air Arabia are sufficient to attract more and more stock holders which ultimately lead to expansion in terms to money, power and public support. It has also counted on many other stock lists and transactions are also about to start. (Eyefortravel, 2008)The company had been very particular in deciding the cost of transport. It kept in mind the rising and the falling prices of oil and other equipments, directly or indirectly related to their business. In other words, they maintained a complete survey of the pr evailing market. With the increase in the fuel prices many airlines companies increased their prices and vice versa.There are other strategies which were used for marketing at financial level. The company has gained a make do from them. The profit margin has increased by 40% in the recent years and there are still chances of further increase. These all strategies have proved fruitful both for the company and the company stock holders which are directly or indirectly related to the company. The company has been able to hold up to the expectations of its employees and its customers. Air Arabia greatly contributes in the UAE economy. latterly it got an approval to come out of the closet on Dubai financial list. The Air Arabia is going to appear on stock list of Dubai financial market and trading it will be started in few days. The way Air Arabia is using the budget and the way it is applying the strategies it is believed that in the time to come if there is a slow economy progress, Air Arabia alone can handle it.Strategic AlternativesSome strategies of Air Arabia for future few years are as followsExpanding its aircraft range One important constraint in companys expansion plan is the limited number of freightage and passenger planes available to the company. The company will place periodic orders for new aircrafts to support its expansions plans.To provide service on more number of routes The company would same to serve in European countries and other untouched destinations in North and South America. The expansion will give a vast increment in companys present market size.To enhance efficiency of operations As a long term strategy, the company would same to implement TQM strategies in its operations.Increase its revenue maintaining high and quality structure of idealistic aircraft industryAnother one is Emiritization and advancement of UAE people. The company has a number of plans in this direction with long term interest which are mentioned as followsUAE National Cadet Pilots Training or UNCPTThe company invites aspirants who what to become a pilot with a statement like We are giving go to your dreams. Its pilot training program is one of the finest in the nation.The company states that as the public Airline of the United Arab Emirate, it has an immense vision. To see further Emiratis fetching their correct position as pilots in lone of the fastest attach airlines on the planet.UAE National Graduate Entry Management PlanThe public airline of the UAE, Air Arabia, is investing in its outlook and would consequently like to spend in people by giving them the chance to be 1 of the privileged students chosen to join its UNGEM program.It states that by this program, graduates will machinate sturdy leadership abilities and form a collection of professionals who are organized to meet quickly expanding and developing leadership wants in various branches indoors the company. (Eyefortravel, 2008)Enhancing the incumbrance carriers flights As shown from the contribution of profit from the freight and customer units, the incumbrance unit contributes around 65% of the companys turnover, which depict the clear dominance of dispatch unit over the customer unit in terms of profit. The company would like to utilize this faith of people in Air Arabias cargo unit to gain additional market share. Thus as an expansion plan for cargo unit, the company is ordering more share of cargo planes as compared to that of passenger planes.Segmentation and targeting The Company had divided the consumer market into various segments based on income and profession. The segment which appears to be the center of consideration for the company is those of high earning boniness people who need to travel consistently and comfortably.Positioning Its truly consumers perception about the service. Royal Jet, from the beginning has tried to establish as a symbol for a cheap but reliable air traffic business partner.ImplementationAir Arabia greatly contributes in the UAE economy. Recently it got an approval to appear on Dubai financial list. The Air Arabia is going to appear on stock list of Dubai financial market and trading it will be started in few days. It has already started offering rebates on stocks to its customers. The national economy of UAE is going to be benefited by the kind of strategies being forwarded by Air Arabia. Not only are they going to have a huge business but also a huge investiture in the stocks by the common people. The market is going to be greatly affected. Many new services are being started. The UAE government believes that Air Arabia can alone increase the UAE economy from going down. It has now met with 32% profit which is the highest ever in the recent years.For increasing its marketing dimension, the company has invested over DH one million in terms of Ads, both online and print media. This would result in a long term profit for the company, though its quite a heavy amount on the basis of co mpanys current scenario. (Arabia, 2009)Use of technology The Company has recently brought 7 new aircrafts with increased capacities and advance technology. As the company is still very new, almost all of the aircrafts are in good condition. Talking about other scientific diffusion parameters, the company has recently brought a SAP system which is an quick-witted system from Sap international. This expert system is Artificial Intelligence based and works on knowledge representation rather than data manipulation, thus is highly technical and advance. The operation unit exploits the SAP system to expeditiously monitor the various aspects and inventory constituents. The company also has an online terminal to book tickets and offers various plans in flights according to customer requirements.International flight connecting Abu Dhabi to more than 45 international destinations in USA, Indian subcontinent etc. Air Arabia carried over 4.6 million passengers, an augment of approximately 65. 8% over in 2006.Along with this, it also griped 175,000 tons of freight in 2007, which is an increase of over 75% than the year 2006. (Ameinfo, 2009)Air Arabia owns complete share is its two subsidiaries, Air Arabia Holidays, a travel group and vehicle rental company and Air Arabia Crystal Cargo, which provides freight handling services.Air Arabia had a 24 hour help line for its customers.Air Arabia also provides hospitality services by providing temporary modification in hotels. (Arabia, 2009)The Air Arabia owned a group of 37 traveller and cargo airplanes, as depicted by the data of January 2008 and it plan is to increase its aircraft group to 300 by the year 2020.Air Arabia is also intend to fly over 25 million customers per year by 2020 and to dual the number of metropolitans served from 50 to make it near 100.Market segmentation soon the market is segmented on the basis of income and travelling frequency of the people. It results in generation of segments like high business class consumers, consumers travelling too often but expending less, tourism based consumers (not fixed) etc. apart(predicate) from these segments, a variety of new segments can be created like low-spending domestic help class, mainly for tourism. As example of this segment can be Indias growth domestic aviation market which depends little spending but fully grown sized segment.Talking about the competitors involvement in these segments, Etihad is a big player of cheap flights segments along with Easy jet. Some other like Palm operates in multiple segments. Some competitors are top dog to head rival of Air Arabia in Luxury market like flip over jets etc. Thus the competitors are widely spread in these segments.ReferencesAmeinfo (2009), Air Arabia marketing team takes centre stage, retrieved on 1st November, from http//www.ameinfo.com/29672.htmlEyefortravel (2008), Air Arabia plans expansion, retrieved on 1st November, from http//www.eyefortravel.com/news/middle-east/air-arabia- plans-expansionddle-east/air-arabia-plans-expansionLowcostairlinesworld (2009), Innovation and opportunity for traditional and low cost carriers and investors, retrieved on 31st October from http//www.lowcostairlinesworld.com/sg/programme.stmAir Arabia (2009), Know us, retrieved on 1st November, from http//www.airarabia.com/crp_1/know-more