Porter's Five Forces - Emirates

Extract

[...] The airline industry is a very expensive sector, with very significant initial investments, absolutely essential expertise, very high staff training costs, massive operating costs. Thus, the appearance of new entrants in the market seems unlikely, with a low threat. The threat of a new entrant in this particular market, especially in the context of a very gradual exit from the crisis linked to the COVID19 pandemic, is indeed very low, especially since credit institutions have drastically reduced their conditions for the granting of funding. [...]

[...] The company is showing good resilience, however, and had already been slightly impacted by new trends in the reduction of unnecessary air travel, which are expected to continue and accelerate in the years to come. In addition, Emirates is the company in the world that owns the largest A380 fleet of aircraft. Airbus recently announced, at the beginning of 2021, to stop it marketing this aircraft. This could have a strong impact on Emirates, which will have to change the composition of its fleet in the medium term. The company has already converted its future A380 orders to other, smaller AIRBUS models. [...]

[...] The barriers to market entry are very high, in particular, due to the investments made essential to acquire (or even lease) aircraft to carry out operations, as well as in terms of security and digitization, technical equipment, team training. The findings of our Porter strengths analysis for Emirates are presented below, but the intensity of competition is low to moderate for Emirates. F. Synthesis We have studied each of Porter's forces one after the other, giving them an individual notation. [...]

[...] Bargaining Power of Clients The bargaining power of customers when it comes to airlines is quite weak. Indeed, the prices are clearly fixed and determined by the companies, in a ‘take it or leave it' orientation. This means that if the consumer is not satisfied, he can go to other airlines to find out more, but it is unlikely to have an individual impact on the companies themselves. Bargaining power is thus identified as weak, customers being entirely dependent on the decisions and choices made by the company. [...]

[...] Conclusion and Strategic Recommendations Emirates has been, like all airlines, shaken by the COVID crisis. The financial results for the fiscal year 2020 are disastrous and those for 2021, although not as bad, are not going to be much more encouraging given the continuation of the pandemic in the first months of the year. With the arrival of summer 2021, the end of the crisis seems to appear at the end of the tunnel, and we are already seeing a resumption of certain air links, an increase in traffic, and a gradual return of tourism. [...]