Brand image and customer perception in Emirates Airlines

¶ … Emirates Airlines

The purpose of this study is to assist in the identification of the key concepts of brand image and development utilized by industries and to examine the issues of how the brand image of Emirates Airlines might be changed based on performance and scope of operations. The research issues will result in the provision of new tools for the company in defining strategies for brand nurturing and development globally. The questions addressed in this research study include those of: (1) How is the brand of Emirates Airlines viewed currently and how is this brand image impacted globally? (2) Who does the company view as its main competitors for its brand image and why? And (3) What steps can be taken to ensure brand success for the short-term as well as the long-term? Study objectives include the assessment of the significance of the Emirates brand in the lives of air travelers and whether the exposure to different brands have a positive or negative impact on preference of travel as well as the assessment of the cross-cultural impact of the Emirates Brand globally and the effect of routes and service (ground and in-flight) on the brand image. Additionally this study has the objective of providing an analysis of the brand name success and its impact on customer perception and the assessment of changes and improvements that ensure brand success. Finally, this work intends to provide, where appropriate, recommendations for improvements to the current airline strategies and services managed by Emirates Airline.

THE SUCCESS of AIRLINE BRAND (EMIRATES AIRLINES)

CHAPTER ONE

INTRODUCTION

AIMS and OBJECTIVES

The objective of this study is to identify the factors that affect brand image as perceived by both the management and the customer. The proposed objectives for the dissertation will focus on the following: (1) to assess the significance of the Emirates brand in the lives of air travelers and whether the exposure to different brands have a positive or negative impact on preference of travel; (2) to assess the cross-cultural impact of the Emirates Brand globally and the effect of routes and service (ground and in-flight) on the brand image; (3) to provide an analysis of the brand name success and its impact on customer perception; (4) to assess the changes and improvements that can ensure brand success; and (5) to provide, where appropriate, recommendations for improvements to the current airline strategies and services managed by Emirates Airline.

THE SUCCESS of AIRLINE BRAND (EMIRATES AIRLINES)

CHAPTER TWO

EMIRATES AIRLINES

ORGANIZATIONAL BACKGROUND

Mayerowitz (2008) reports in the work entitled: "How Foreign Airlines Thrive as U.S. Flounders" that the world's largest "passenger aircraft has arrived in the United States. United isn't flying it. Neither is Delta, American, Continental or any other domestic airline. No, the first Airbus A380 to land in the United States is flow by Dubai-based Emirates Airlines." The work of Knorr and Eisenkopf entitled: "How Sustainable is Emirates' Business Model?" relates that that the Dubai-based Emirates Airline, founded in 1985 with just 2 leased aircraft is one of the fastest growing and most consistently profitable carriers in aviation history." (nd) the UAE rulers decided in 1974 to establish 'Gulf Air' a 'joint flag carrier but this relationship was a tense one between the Dubai government and the airline. The government in Dubai simply would not "give in to Gulf Air's demands to abandon its open-skies policy. In reaction, Gulf Air reduced frequencies and capacities to and from Dubai by more than two thirds between 1984 and 1985 without advance notice." (Knorr and Eisenkopf, 2004) There were no carriers that were capable of, or willing to, fill in the gap so the ruler of Dubai at that time, Sheik Mohhamed bin Rashid Al-Maktoum gathered a team of experts for designing a plan for an emergency which resulted in a recommendation for a home carrier to be set up specifically for Dubai to which the ruler readily agreed upon two conditions being met:

1) the new airline should meet the highest quality standards; and 2) There would be no additional capital injections from the government (except for the USD 10 million agreed for start-up capital)

The first flight of Emirates airlines departed in October 2005 and in 1987, Emirates began serving the destinations of London Gatwick and Frankfurt. By 2001, 2003 and 2005 Emirates is stated to have "...placed some of the largest aircraft orders ever." (Knorr and Eisenkopf, 2004) by 2007, Emirates serviced 91 destinations globally. It is related that Emirates Airline is a "crucial element of Dubai's growth and development strategy." (Knorr and Eisenkopf, 2004)

Emirates Business Model - Primary Features

It is stated in the Dubai Strategic Plan 2015 the objective to "prepare the emirate for the post-oil era by firmly establishing it as a leading tourist destination (including trade and fair conferences) as a center for financial, it and professional services, as a location for corporate headquarters and light manufacturing, and, last but not least, as a regional transportation logistics and distribution hub (regional refers to the area between Singapore, Europe, Southern Africa)." (Knorr and Eisenkopf, 2004) it is held that the factors of 'sound politics' and 'its very favorable geographic location' are to be accredited for "spectacular growth in recent years - on average, GDP increased by 3.4% per year since 2000, and its population is set to grow from today's 1.45 million to around 5.4 million." (Knorr and Eisenkopf, 2004) the primary features of Emirates business model are those features as follows:

1) Well-balanced mix of O&D- and transfers traffic in its passenger business;

2) Very strong focus on cargo traffic, which generates 20% of Emirates' revenues - one of the highest percentages in the airline industry;

3) Strong presence in those secondary markets that are underserved by Emirates' competitors such as BA, LH, and AF, which focus on their own hubs for long-distance flights. Typical destinations in this category include Newcastle, Manchester, Birmingham, Glasgow, Dusseldorf, and Hamburg in its European network as well as Kochin, Kolkata, Thiruvananthapuram, and Ahmedabad in India, to name just a few. Emirates' competitive advantage in these markets is enhanced by the fact that it, unlike the competition, does not have to deploy a fleet of rather small and, hence, inefficient short-haul and even regional air crafts for feeder flights to its hub, but can offer long haul service standards instead (moreover, given its much longer average stage length;

4) high-quality service in all classes onboard and on the ground including up to 600 entertainment channels in all classes and limousine service (pick-up and drop-off) for first and business class passengers;

5) High labor productivity; and 6) No alliance membership. (Knorr and Eisenkopf, 2004)

Strengths of Emirates Airline Identified

Knorr and Eisenkopf (2004) state that many of the strengths of Emirates Airline "come from the right decisions taken at its foundation, and from its unique organizational structure. Not only does the carrier benefit from having been created from scratch only 22 years ago, resulting in flat hierarchies and essentially no legacy costs, but, more importantly, the central role of aviation in Dubai's development strategy also guarantees Emirates a very favorable political environment." (2004)

Additionally stated as among Emirates Airline strengths are the profits that Emirates makes "from the very low charges at its home airport. While landing fees are largely identical to those at major European airports, no airline flying into DXB has to pay any additional charges (such as noise charges, ATC charges, security charges etc.). This is because the airport infrastructure and all related services are provided by Dubai's government and fully financed from the state budget. It is a hotly debated issue whether this particular fee regime is a form of indirect subsidy to Emirates. Judged against the EU's state aid rules, this would clearly not be the case since Dubai operates an open-skies policy and all airlines are subject to the same non-discriminatory treatment." (2004)

Next stated among Emirates Airline strengths is that the Emirates "like all other companies doing business in Dubai or, for that matter, in most Gulf states - benefits from Dubai's low tax regime, which only subjects subsidiaries of foreign banks and energy companies to corporate tax. Obviously, this is an advantage as long as the company remains profitable. As ordinary citizens including expats do not pay income tax either, and enjoy generous government-financed social benefits, too, Emirates is a very attractive employer paying above average net wages although gross wages are lower than in Western countries." (Knorr and Eisenkopf, 2004) the fourth strength stated in the work of Knorr and Eisenkopf to be attributed to Emirates Airline is that regarding its immigration laws, which are stated to be "...quite generous by international standards. This does not only hold for foreign experts who may be easily recruited by local firms. It also applies to transit passengers who do not have to clear immigration at DBX when changing planes. While this might appear to be a negligible fact at first sight, it greatly improves Emirates' competitive position on quite a few routes." (Knorr and Eisenkopf, 2004) the fifth and final strength identified for Emirates Airline in the work of Knorr and Eisenkopf (2004) is stated to be the Emirates "...award-winning service in all classes, which is matched or exceeded only by very few other carriers such as Singapore Airlines. Sixth, clever marketing - for example, Emirates, not Lufthansa - was named official carrier of the 2006 FIFA World Cup hosted by Germany - has created a very strong brand awareness worldwide. Finally, since the UAE's currency is firmly pegged to the U.S. dollar, Emirates has benefited, at least in recent years, from an additional devaluation-related cost advantage, especially vis-a-vis its Eurozone-based rivals." (2004)

Strengths of Emirates Airline Identified

The work of Knorr and Eisenkopf (2004) state that Emirates Airline weaknesses are really hard to pinpoint however, derived from what is a "notoriously unreliable...source...some posters on travel-related internet blogs are complaining about (allegedly) slipping service standards in general and lack of consistency in service quality in particular." Identified in terms of 'opportunities' presenting to Emirates Airline is the "most important contributing factor to Emirate's success, and a huge opportunity for future growth...is Dubai's very favorable location." (Knorr and Eisenkopf, 2004) Dubai is located at the "crossroads of some major passenger and cargo flows, the economic importance of which is set to grow in parallel with the rise of the near-by emerging economies." (Knorr and Eisenkopf, 2004)

The UAE's government has experienced great success in the negotiation of free-trade agreements and with all major economies which is believed to have the potential to increase air travel demand to and from the UAE and as well "the entire Arabian peninsula has been one of the fastest growing regions worldwide." (Knorr and Eisenkopf, 2004) the countries neighboring Dubai have been on a path to progressive liberation of the airline markets presently potential for new growth and as well the decision of Emirates to "operate a huge fleet of A380 aircraft will enable the airline to continue to grow..." (Knorr and Eisenkopf, 2004) Noted in the work of Knorr and Eisenkopf (2004) as the biggest threat to Emirates success is that instability of the political climate in the Middle East. Stated additionally as a threat is "the increasing lobbying by some of its competitors in core markets such as Australia, France and Germany, as well as in large untapped ones like Canada..." (2004)

THE SUCCESS of AIRLINE BRAND (EMIRATES AIRLINES)

CHAPTER THREE

LITERATURE REVIEW

The work of Kleymann and Seristo (2004) entitled: "Managing Strategic Airline Alliances" states that in the marketing initiative and specifically in marketing of services such as "air transport, images in the eyes of customers and identities - as seen by the organizations themselves - are of utmost importance." Customers do not only buy transportation from one location to another location but at the same time, other dimensions of services are being purchased by customers as well which include:

1) Quality;

2) Dependability;

3) Punctuality;

4) Attention;

5) Friendliness;

6) Safety;

7) Life-style;

8) Nationality; and 9) Prestige, among others. (2004)

Brand identity can be viewed from four perspectives including:

1) Brand as a product;

2) Brand as an organization;

3) Brand as a person; and 4) Brand as a symbol. (Kleymann and Seristo, 2004)

Airline brands have traditionally been linked quite closely to "...national cultures, symbols of nations and personalities of executives, and the starting point for creating a successful alliance brand to replace member carrier brands..." (Kleymann and Seristo, 2004) Kleymann and Seristo (2004) state that brand image is representative of "the perceived values that make up the brand existence; these values are evaluated positively or negatively by potential customers and others in the market. Brand image is a perception, not necessarily a fact." (2004)

Brand image is also representative of the expectations of the customers and it has been demonstrated in research that "in service marketing the danger of creating expectations that are difficult to fulfill is a real danger indeed." (Kleymann and Seristo, 2004) in addition, brand image, directly affects the company internally and primarily through motivation of employees and thereby resulting in an effect on the productivity as well as the quality of the service provided. Kleymann and Seristo state that branding and brand strategy "concerns a wide spectrum of issues, it is not only about advertising and logos..." But include such as brand strategy components of:

1) Distribution channel policy;

2) Design of retail;

3) Customer interface;

4) Product design;

5) Service quality;

6) Pricing;

7) Advertising;

8) Corporate communications; and 9) Corporate actions and public relations. (2004)

Brand equity is described by Kleymann and Seristo as "...a set of brand assets and liabilities linked to a brand, its name and symbol add to or subtract from the value provided by a service to a firm and its customers. It represents a financial concept associated with the valuation of the brand; it stems from loyalty by customers, name awareness, perceived quality, brand associations and other assets, such as channel relationships." (2004) the work of Holt (2002) divided brand value into four components as follows:

1) Reputation value;

2) Relationship value;

3) Experimental value and 4) Symbolic value. (Kleymann and Seristo, 2004)

Kleymann and Seristo states that airlines "typically have monolithic brands, in other words, there is only one brand which is the same as the company name." (2004) Kleymann and Seristo relate as well that "stronger roles of alliances in marketing can be seen as a sociological issue too. If alliances are replacing individual airlines as brand, a sort of new patria is created." (2004) the benefits of the common alliance brand is appreciated differently by various types of alliance members. Kleymann and Seristo relate that there are existing "challenges, costs, and potential risks in being associated with an alliance brand." (2004)

Stated as an interesting "component in airline alliance marketing is pricing..." because aggressive pricing is implemented during times of weak demand however during times of strong demand "airlines underline the quality of service, comfort, etc. In advertising. The eternal challenge in airline marketing and particularly advertising is striking a balance between building a quality image and conveying the message of low prices: too much emphasis on low prices in ads may hurt an airline's brand and quality image, but a failure to inform consumers about low prices may result in lost traffic." (Kleymann and Seristo, 2004) Alliance advertisements are very quiet concerning pricing and this is stated to be because the low-cost carriers "are really challenging the established carriers in terms of pricing - and making it more difficult for the established carriers to justify the higher fares..." (Kleymann and Seristo, 2004)

The price-quality balance is a challenge however for Ryanair and its aggressive pricing strategy results in prices being so very low that "the product experience typically exceeds expectations. " (Kleymann and Seristo, 2004) This is in contrast to today's regular carriers who use advertising that inflates expectations resulting in expectations that are unmet. Related in the work of Kleymann and Seristo is the fact that a critical factor in marketing of services is the factor of information flow. Airline customer surveys report that "belated information, wrong information or the lack of information are serious causes for dissatisfaction among passengers." (2004) Information flow includes information needed by customers related to seating, availability of electrical outlets for laptop PCs and the problem is that this information is not always immediately available. Also stated as a problem in many airlines is the "flow of customer feedback within a company..." (Kleymann and Seristo, 2004)

Alliances in Branding in the Airline Industry

It cannot be stressed how important the strategic alliances and accompanying influences are upon the airline branding initiative. According to Kleymann and Seristo the assessment of the performance "...of an alliance proves difficult as many of the objectives of alliance are very general and thus tricky to measure." (Kleymann and Seristo, 2004) Stated as examples are the following:

1) Add value to an airline's product line;

2) Reduce competitive pressure;

3) Provide access to new capabilities; and 4) Share and decrease risks. (Kleymann and Seristo 2004)

Past research has indicated that assessment of the performance of an alliance is done quite poorly by organizations in terms of:

1) They fail to measure performance of individual alliances rigorously;

2) They fail to recognizes performance patterns across alliance portfolios; and 3) Alliance portfolio managers fail to know whether the portfolio really supports the overall corporate strategy. (Kleymann and Seristo, 2004)

Kleymann and Seristo state that it is important to understand that in assessing performance "there are two sides of a coin: revenue side and cost side." (Kleymann and Seristo, 2004) Cost sources in the airline business is stated to be categorized 'as follows' and 'in descending order of typical significance:

1) labour;

2) fuel;

3) charges for landing, en-route navigation, etc.

4) aircraft (depreciation)

5) other materials;

6) ground equipment and property (depreciation);

7) outside services expenses (ground handling, etc.)

8) financial expenses; and 9) other expenses. (Kleymann and Seristo, 2004)

3) human resources; and 4) marketing. (Malaval and Benaroya, 2003)

All four of these play an equal role in the process. However, marketing evolved to a centric place in this process and over time, this model evolved once again making the customer centric to human resources, production and marketing and finance.

Malaval and Benaroyastate that marketing has as its bases "a set of methods and techniques for measuring and analyzing information, making choices, planning, communicating and influencing the market, customers, etc." (2003) Malaval and Benaroya state that the aeronautics and space sector have both been characterized by "...a high level of innovation and technology." (2003) in fact, it is held in the work of Malaval and Benaroya that aeronautical companies have "for a long time been characterized by the pre-eminence of the product to the detriment of the other marketing variables (distribution, price, communication)." (2003) This way of thinking which is termed as "engineering' based reasoning in the work of Malaval and Benaroya "...often results in an obsession with the product excellence which in turn engenders a non-stop race to innovate and improve." (2003) in the very extreme of this race for innovation and improvement "the product oriented process leads to excessive sophistication without really taking into account what price the customer is ready to pay." (Malaval and Benaroya, 2003)

In the Aeronautics and Space Industry, the marketing mix has the components and relative factors shown in the following illustration labeled Figure 1 in this study.

Marketing Mix in Aeronautics and Space Industry

Marketing Mix

Product Price Promotion Place

Variety List Price Advertising Channels

Quality Discounts Personal selling Assortments

Features Allowances Trade shows Locations

Design, style Payment periods Promotions Point of sales

Brand name Credit terms Trade press Inventory

Packaging Public relations Transport

Services Direct marketing

Warranties Publicity

Target Market

Two specific different types of marketing are identified in the work of Malaval and Benaroya (2003) who state them as follows:

1) Consumer goods marketing - business to consumer when it is selling to the end consumer; and 2) Business to business marketing - selling to a company or an organization. (Malaval and Benaroya, 2003)

Malaval and Benaroya state that in aeronautic marketing the relationship that exists between manufacturers of parts and manufacturers who build aircraft are determined based upon "project marketing in the design and development phases and business to business marketing as soon as there is series production. (2003)

Malaval and Benaroya state the relationship between the builders of aircraft and their customer as well as rental firms is stated to be "characterized by b-to-b marketing. (Malaval and Benaroya, 2003) the airlines and customers relationships is focused on b-to-b marketing or services when consumers are companies in particularly and "...general public marketing of services when they are private individuals." (Malaval and Benaroya, 2003) in order to completely grasp the idea of branding this work takes into consideration the individual and organizational preferences in purchases. Malaval and Benaroya state that buying behavior is presented in a manner that is both "hierarchical and simplified" and includes four types of influence and specifically those of:

1) cultural;

2) social;

3) personal; and 4) psychological. (Malaval and Benaroya, 2003)

Malaval and Benaroya state that there are four phases from motivation to behavior and that motivation "plays a driving role in the building of desire" toward purchasing a product or service. The four phases are as follows:

Phase I - Motivation

Phase II - Perception

Phase III - Attitude

Phase IV - Behavior (Malaval and Benaroya, 2003)

Abraham Maslow proposed the classification of needs into five categories, which are those of the base needs, which are physiological needs such as hunger, thirst, etc. The second level of needs in Maslow's 'hierarchy of needs' is the needs of 'safety' including protection and security. The next level of needs in this hierarchy of needs is that of 'social' needs or a sense of belonging. The fourth level are the needs of 'esteem' and particularly self-esteem, recognition and status. Finally, the last level of needs are needs related to 'self-actualization'.

Maslow held in his theory that once the lower level needs are satisfied that only then can the individual think about the higher level needs. The individual perception will be dependent upon the "various messages received and experiences lived through..." (Malaval and Benaroya, 2003) if the individual is motivated, that individual will be "more likely to increase his level of information to optimize his decision." (Malaval and Benaroya, 2003) the individual's attitude toward the messages from a company is formed and the buyer "will gradually build up an attitude concerning the product category and the different suppliers on the market." (Malaval and Benaroya, 2003) Also influencing the attitude of the buyer are the experiences of friends and family. Stages of the individual buyer's decision-making process is stated by Malaval and Benaroya (2003) to include:

1) Need recognition;

2) Information Search;

3) Evaluation of Alternatives;

4) Purchase Decision; and 5) Post-purchase behavior. (Malaval and Benaroya, 2003)

THE SUCCESS of AIRLINE BRAND (EMIRATES AIRLINES)

CHAPTER FOUR

RESEARCH METHODOLOGY

DATA COLLECTION/ANALYSIS

Interview Questions

What have been the key success factors behind the evolution and development of Emirates airline? The key factors behind our success are many but the key ones are as follows. From the formation of the airline in 1985, we laid out a plan to always offer the best possible service on any route that we flew. At the same time, Emirates laid down a policy to always be a leader in innovation in the airline business. We were the first airline in the world to introduce seat back TV's on all our aircraft back in 1992. We were the first airline to offer in flight phones as well. One of the other major factors in our success has been geographical as Dubai is perfectly positioned half way between Europe and the Far East and also in an ideal position to serve the Indian Sub-Continent and Australia.

Emirates is trying to expand its fleets sizes with a number of huge aircrafts orders so what have been the studies behind such an aggressive expansion plan and what do you consider are the risks of growing too big? Many of the airports we operate to are restricted in slots and sometimes we are restricted to one or two flights a day. In these cases, we need to operate the A380 super Jumbo as it makes maximum use of scarce airport slots and limited frequencies. There are huge numbers of people who live within 8 hours flying time of Dubai and more and more of these people are beginning to travel. China is just opening up and currently less than 1% of that countries population are travelling overseas, this number is sure to rise and Emirates wants to have the fleet in place to meet this increased demand. Many of the aircraft on order will replace current aircraft, as the new ones are much more fuel-efficient. Throughout its short history Emirates has always under estimated the demand for travel in the region.

How successful have the new route launches been and why introduce flights to these destinations? We study each new route very carefully before we launch. Extensive market research is carried out and we will only launch a new route if there is sufficient demand and it will add to the companies overall profitability. We look at traffic flows and in the example of Sao Paolo, there is strong traffic to Japan, which now flows over the Dubai hub.

How is the brand of Emirates Airlines viewed currently and how is this brand image impacted globally? The brand is at different levels throughout the world depending on how long we have been in the market. In the UK, we have a very strong brand due to our sponsorship of Arsenal and many other sporting events like cricket and Rugby. We are building our global brand by sponsoring world events such as the Football World Cup in Germany in 2008 and South Africa in 2010. Our image is very strong globally for a company that is just 23 years old.

Can you tell me what importance do you give to branding in Emirates? Branding is vital for Emirates as it projects our name and image to a Global audience. In the case of the Arsenal sponsorship, the aim behind this was not just to spread our brand in the UK market but was to also spread this globally as English Premiership football is watched by over 1 billion people every week many of whom come from India and China and will almost certainly be the travellers of the future.

Who does the company view as its main competitors for its brand image and why? Our main competitors in the UK would be British Airways and the main Far eastern airlines such as Singapore Airlines and Cathay Pacific.

What steps can be taken to ensure brand success for the short-term as well as the long-term? Brand is very important at all times especially in the current economic down turn. Long-term branding is important to build loyalty with our Customers but short-term branding is important when building awareness in a new market.

What about alliances with other airlines, are you considering this type of business strategy? Emirates does not believe in alliances with other airlines and we have always made it clear that we do not believe that the alliances such as One World and the Star Alliance offer any benefits to the Customer and in fact often restrict competition. In addition, Emirates was established to promote Dubai and any alliance could take us away from our core responsibility of helping the development of Dubai.

What has made Emirates so successful at a time were other airlines have been struggling and what are your expectations for coming years performance? This really goes back to the first point Emirates has been successful as we have been a leader in innovation in the airline business. Dubai is ideally positioned geographically between Europe and the Fare East and we have also shared in the Economic development of Dubai, which has seen the demand for air travel increase many fold.

The airline industry has undergone widespread change and disruption over the last few years, which have left many Airlines bankruptcy. How would you assess what has happened and what the future holds for Emirates Airline? The future should be very bright for Emirates as air travel continues to grow in the region. We will continue to offer the best service on any route that we fly and continue to innovate. We have 58 A380's joining the fleet over the next decade and this will give Emirates the ability to increase our throughput of passengers whilst at the same time reducing our cost per passenger. We have an advantage being based in Dubai because of the strength of the economy and the tax-free status of the UAE.

How do you envision Emirates Airline in the next five to ten years? We will continue to grow strongly and connect more and more cities throughout the world over the Dubai hub. Already we have established traffic flows such as Lagos to Beijing and Moscow to Johannesburg which are naturally connected over the hub of Dubai. We are the only airline in the world to fly non-stop to all 6 continents from its hub city. One constraint on our growth will be the size of Dubai airport however, we will move to the new World port at Jebel Ali when we have outgrown Dubai.

THE SUCCESS of AIRLINE BRAND (EMIRATES AIRLINES)

CHAPTER FIVE

FINDINGS & ANALYSIS

THE SUCCESS of AIRLINE BRAND (EMIRATES AIRLINES)

CHAPTER SIX

CONCLUSION & RECOMMENDATIONS