A Marketing Research on Etihad Airways

4.1 Profitability of the Market

The profits of the Middle East carriers are expected to fourfold this year to $400 million through increased passenger traffic and cargo traffic. The region will act as a hub between Europe and Asia, as per the latest forecast from the IATA (International Air Transport Association, 2011)

“The report points to the growing role carriers in the region are playing in the global travel industry. The IATA tripled its earnings forecast for the industry to $8.9bn worldwide this year based on a stronger than expected recovery but said profits would encounter turbulence next year and slow to $5.3bn. It warned the industry would achieve only "razor thin" profit margins and could come down with a bump as austerity measures bit across the globe.” (The National, UAE, 2011)

Etihad announced promising positive EBITDAR (earnings before interest, tax, depreciation, amortisation and rentals) in 2011 Q1, with revenue growth of 28 per cent. (The Business Traveller, UK, 2011)

4.2 Competitor Analysis

Etihad main competitors are the players from the same region rather than European, American or Asian airlines. Qatar Airways which is operating in Doha as a hub and their biggest rival Emirates which is also from UAE and uses Dubai as its hub. “Emirates Airlines is the dominant carrier, although Qatar Airways and Etihad, combined, are roughly 70% of its size. Emirates turnover is almost 20% of Dubai’s GDP, and the airline is regarded as the embodiment of Dubai’s rapid rise to international prominence’’ (O’Connell 2011). In addition, Emirates is spending huge amount of money for its brand awareness especially in sports like $380 million in 2008 which is %4 of its turnover.

These carriers are mainly based on extra-regional services. “Emirates are offering 82% of its seat capacity on extra-regional services. Most other important carriers from the region like Etihad (74%), Qatar Airways (66%) and Gulf Air (54%) also operate more than half of their seats on extra-regional flights (AEA, 2006). Air France (26%) and Lufthansa (23%) show that the share of extra regional offer for European network carriers is considerably less, indicating that these carriers have stronger domestic markets. Seat offer by Middle Eastern carriers to Europe is concentrated around three countries – the United Kingdom, Germany and France – which together account for 64% of offer” (Vespermann, Wald and Gleich 2008).

Qatar Airways continues to invest in both its fleet of aircraft and at the same time its hub. For instance the company set up an additional terminal only for First Class and Business class passengers to minimize the queuing. “The new terminal for premium passengers will be a big boost for Qatar Airways. It is the first of its kind, not only in the Middle East, but anywhere in the world” (Clothier, 2006) as company’s CEO Akbar Al Baker states. The company has strong policy to expand and since 2010 they launched 25 new destinations. So with these new routes they fly to 101 different points worldwide. They are also about to announce a new business class for their passengers aimed at differentiating them from their competitors.

One of the important advantages of Etihad competitors is their hubs which are located on highly attractive touristic locations with significant purchasing power like Dubai.

“Also these competitors, especially European carriers have good pricing systems, for example, have been developed in decade-long processes and are difficult to copy. Other important fields and assets for reaction are strategic networks and co-operations, frequent flyer programs and booking systems’’ (Vespermann, Wald and Gleich 2008).

According to the Centre for Asia Pacific Aviation, the market share of Etihad in the Middle-east region is nearly 4.5% with stiff competition from the market leader Emirates at 19.3 % & Qatar Airways which has a share of 6.2 %.As a young airliner which started its operations in 2003, Etihad has challenged these well established airliners & succeeded in strategizing its expansion spree in the middle-east aviation sector.

(Centre for Asia Pacific Aviation, 2011)

Etihad’s competitors weaknesses are generally their policies that focuses mainly high profit value customers instead of  budget travellers and middle class travellers, they also when compared to European predecessors have less flights to the USA.

4.3 Customer Value

Perceptual segmentation of the market, whether it is perception, belief or value, shows how both individuals and groups understand the market place and it residual value. Successful marketing will understand this concept and focus in on the highest value customer base available (Jobber, 2007)

It is perceived by the customer that they are receiving value when benefits outweigh sacrifice. Therefore:

Customer value = benefit – sacrifice

Perceived benefit can be generated from the product (for example, first class travel), associated services (for example, the luxury of its airport lounges) and the company image (an attractive company profile giving a positive feel).

Successful marketing will target customers from the largest value pool, communicate the perceived benefits in order to maximise spending.

4.4 Customer Analysis

Customer analysis is part of the microenvironment and focuses on buyer behaviour. Firstly, the target market or customer must be identified and then its requirements or needs conveyed.  The marketing plan will then address these requirements and needs. An understanding of market segmentation, benefits sort, choice criteria, how they are rated verses the competition, distribution channels, promotions and price will be needed to complete the analysis (Kotler, 2005)

4.5 Etihad - PESTEL Analysis.

There are some factors in the macro environment that effect the decision making process in an organization. To help analyze these factors marketers can categorize it using PESTEL model. This distinguishes factors between political, economic, social, technological, environmental and legal.  

The political situation in Emirates gives a competitive advantage to UAE companies because of political stability in this region in comparison with other Arabic countries. Etihad is based in Abu Dhabi which is a rapidly developing city. Dubai has the advantage of starting its development earlier than other locations, but on the other hand now the growth of Abu-Dhabi’s economy is higher. It even more influences the Etihad’s role because its headquarters are located in a capital of the country. There is a competitive advantage for Emirates and Etihad airlines because they, as other companies in the country, benefit from a low tax regime and lower costs in domestic airports.

The currency value of UAE is closely associated to the US Dollar, which resulted in a lower exchange value base cost advantage over the EU rivals. The other features of macro environment are shown at the PESTEL diagram.

4.6 Etihad - SWOT analysis.

The SWOT analysis is a simple method used to synthesize the results of the marketing audit. Strengths and weaknesses are internal resources (controllable) or capabilities where threats and opportunities are external resources (uncontrollable). The analysis will help align strategies to the needs of the business (Jobber, 2007).

Etihad’s strengths are focused on taking advantage of their opportunities, having a strong market brand, the backing of the government helps them take advantage of the growth opportunities in the region.

The matching of strategies is seen where in threats there is a shortage of trained and qualified personal so Etihad have set up their own learning academy.

Conversion strategies can be used to remove any threats from the business, Etihad are working on developing environmentally friendly fuels to help address the environmental lobbyists, and this is further improved by the fleet of efficient planes.

The benefits of matching and converging strategies using the SWOT analysis will reduce the threats to the business and help change weaknesses into strengths.

4.7 Etihad - Porters 5 Forces Analysis

Michael porter says that there are three horizontal and two vertical factors exist when we analyze the competition in a market. ‘The porters 5 forces’ model can be used in the airline industry to evaluate the competitiveness in the airline industry. This model can review the internal as well as external competition in the industry. There are five factors included in the Porters analysis.

Fig 1: Porters 5 Forces Model

• Threat of New Entrants: Aviation industry was pretty tough for new comers to break into in the past. The entry barriers slowly disappeared when the borrowing became cheaper. Etihad is facing serious threat from the new entrants to the market. The new Middle East ‘no frills carriers’ RAK Airways and Air Arabia are major concerns while considering the threat from new entrants. The Brand Name recognition and incentives to lure customers from the rivals, mainly from the Emirates and Fly Dubai are major threats to the Etihad.  
• Power of Suppliers: There are only a few suppliers in the aviation industry which leads to the dominance of the suppliers over the airlines. The aircraft manufacturers and the aviation fuel suppliers are very limited in their numbers and the airlines have limited influence on them. The advantage of Etihad is the support of Abu Dhabi government which is an OPEC member.
• Power of Buyers: The customer power to influence marketing strategy or industry is very limited in airline industry. But the Arabian customer base can influence Etihad at least in the Middle East.  
• Availability of Substitutes: Etihad has major concerns in the business class as the business travels are replaced by the technology and communications infrastructure. The Leisure travelers may choose either shipping or road travel as a substitute.
• Competitive Rivalry: The competition is very tight in the domestic and international market for the airlines in tough economic conditions.  Strong competition from the Middle East causes serious threats to Etihad.

5. Marketing Mix

There exist two key concepts in marketing management namely the marketing mix concept and the relationship marketing concept. Marketing mix is considered to be the foundation of marketing since 1950s where the 4Ps is the cornerstones of the concept.  We can blend the concepts of relationship marketing with marketing mix concept as they can work in tandem. Some marketing experts debate over the fundamental reasons for extending the orthodox marketing mix also. The fundamental 4Ps and some weighted Ps are discussed in the below context for Etihad (Kotler et al, 2005).

“Based upon its understanding of customers, a company develops its marketing mix” (Jobber, 2001:13).

5.1 Product

In general the product is defying as anything which is capable to satisfy customers’ needs (Jobber, 2010).  Etihad is satisfying clients in different ways, so we should go deeper in theory to clarify what we are assuming of their product. Kotler defines product as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need and adds that products include more than just tangible objects (Kotler, Armstrong, 2005). This aspect is close to Etihad, because they don’t offer airlines or seats inside it, but they are operating at the service market. So the core product of Etihad is definitely a service, the air transportation service.

Under definition of James Fitzsimmons service is “a time perishable, intangible experience performed for a customer acting in the role of co-producer” (Fitzsimmons, 2003).

The involvement of the customer in the aircraft routine and non-routine service and repair operations need attention to hanger design that is not found in classical manufacturing process. E.g. aircrafts are manufactured in factories and the supplier is of not worried about it, because clients first see the result as a well-operating mechanism in the pleasant surroundings of an air show. That’s the reason for Etihad to pay much more attention to satisfy customers and not only with convenient routes of travel, but with lots of other features. It must be said they are operating with quality of services as an industry leaders.  

The core product is quality air transportation services, the company currently serves 66 destinations in 44 countries and Etihad has serious proposals to operate from more business hubs and tourist spots across the globe by 2020. The average operational schedules of Etihad are:

 147 flights per day;

 1,032 flights per week;

 4,472 flights per month; and

 53,664 flights per year   ( Etihad , 2011 )

In the Gulf and Middle East they operate over 90 flight schedules per week from Abu Dhabi to 12 major airports within Europe. (Etihad, 2011)

Etihad has major business opportunities in Australia and tremendous scope in the Australian continent. Etihad operates 21 schedules per week from Abu Dhabi to the airports in Australia. The company also operates 22 flight schedules to Northern East Asia and 14 schedules to East Europe (Etihad Airways, Feb 2011)

One of the slogans of Etihad is a commitment to providing guests with a superior travel experience both inflight and on the ground. (Etihad, 2011).

In the air product line of Etihad includes the following core services which are becoming well-known brands among customers:

• Diamond First class: This service was presented in 2009 which can be converted into a comfortable bed for the passenger. Your cabin is isolated with two doors to make you enjoy your privacy. This service is available for flights from USA to Australia and already awarded as todays best first class.
• Pearl Business class:  This service of Etihad is also awarded as best business service both because of convertible seat to a bed and wider at the same time when compared to its competitors. Additionally it has entertainment systems and well-designed lighting system.
• Coral Economy class: This is also a new service which is mainly focusing on families and provides support including guiding, new menus and entertainment before and during the flight.

It draws attention that all of the products mentioned are still young, but surely they have passed successfully the stage of introduction (at least at basic geographical destinations of company) and their lifecycle is now at the stage of growth.

When reading different prospects of Etihad, you are paying attention that every product of company is suggested the idea of high quality. Quality (including services) is defined in different ways and is often considered as measure of excellence, but this is very misleading as quality is really a comparative evaluation of one product against another (Addock, 2000). Speaking about flight services in Etihad, clients are mentioning that their quality is incomparable.   The best way to approach quality is to understand that it is everything that leads to customer satisfaction.

To further improve customer satisfaction and the whole flying experience Etihad is also offering the following air service package enhancements:

• Interior Finish: Every seat has its own screen for entertainment purposes and it has many other details on the seat for a comfortable flight.
• Dining: This is another exciting experience especially in Diamond class and Pearl Business cabins (Etihad, 2010). Although In the Coral class customers can choose three main courses, one of which is normally inspired by the destination.
• Inflight entertainment: In every Etihad flight you will have a choice of hundreds of movies and music channels, radios and pc games for pleasurable hours during the flight.
• Inflight Duty Free: “Etihad offers all guests the opportunity to shop inflight from the airline’s exclusives range, featuring more than 170 products” (Etihad, 2011).

Etihad also offers facilities for children and families for all users as well as first class commodities of top brands for Business class passengers.  

The augmented product of Etihad is a range of on-the-ground services as top-class lounges, which are now spread all over the world, Etihad has also an exclusive  service that is called Etihad Chauffeur and it provides a rare travel experience,  Online check-in, Priority boarding, Luxury coach Service in Abu Dhabi.  

Therefore, Etihad as a successful company with great investment opportunity creates the service profit chain, which  provides all range of services from home in Abu-Dhabi through luxury coach and auto check-in to comfortable business class seat and finally to a limousine in London, which can drive you to your destination hotel.

 This chain of services deals with not only with satisfied and happy clients, but with trained, hardworking and well-paid employees as well, due to greater service value and retaining superior firm performance and economic growth as a result. All the five elements of Kotlers’s service profit chains are here.

The Etihad managers continue the service profit chain by providing a limousine service from home to the airport and then to the final destination. In 2009 the plans to penetrate the hospitality sector were announced. Now they are finding its reflection in a loyalty program with Habtoor hotels, building hotels near Etihad stadiums etc.  Management also understanding that even such a great company can’t provide access to all destinations by air. To this reason there is an Etihad rail covering 1200 km of railroads in Gulf region and some loyalty programs with railroad companies abroad, for example; French SNCF.

Etihad is not a member of any global alliances, preferring to affiliate and bilateral relationships with other airlines, hotel chains and railways and like loyalty programs. This makes your trip more comfortable and on the other hand bounds the consumer to Etihad with the system of accumulating miles and associated benefits.

Etihad both their brand and the “word of mouth” can be a guarantee to a client, that the product of a company can match the highest expectations.

We shouldn’t pass by the plans of Etihad to enter the low-cost segment, which were announced in summer 2010. “This is about destinations which have high demand for economy traffic and low demand for premium traffic such as Alexandria, Calicut, Colombo, Damascus, Doha and Thiruvananthapuram” (Zawya, 2010). This is not a classical low-cost, because passengers are provided with beverages and similar facilities like clients at standard flights, but there are more seats in such airplanes and cheaper prices. In general the development of this sector doesn’t seem to be cloudless, because there are already some low-cost operators in both the Gulf and India regions which have a competitive advantage in price.

Etihad is also operating in the cargo sector which is a profitable one but is not a core product for this company.

Let’s place the products of Etihad in BCG Matrix.

 

5.2 Pricing Strategy and Practices

Price can be defined as “The amount of money charged for a product or service, or the sum of the values that consumes exchange for the benefits of having or using the product or service“(Kotler et al, 2005). Pricing is a fundamental element used in the concept of marketing which produces revenue and one of the most basic elements of the marketing mix. The pricing decisions of a firm are influenced by micro economic and macro-economic factors in the aviation business.

(Kotler et al., 2005)

The common pricing objectives in any organization are Increasing Profit, Increasing Revenue, Increasing Quantity, Increasing profit margin and sustainability of the business.

“The price that company charges will be somewhere between one that is too low to produce a profit and one that is too high to produce any demand. Producer costs set a floor to the price; consumer perceptions of the product’s value set the ceiling. The company must consider competitors prices and other external factors to find the best price between these two extremes” (Kotler et al., 2005).

We have different approaches in fixing the price for a product or service. The pricing approach is connected to three factors namely cost, consumer perception and the competitors.  The main approaches are listed below:

1. Cost based approach
2. Buyer based
3. Competition based
4. Complex dynamic pricing

The complex dynamic pricing approach is used in the airlines as the competition is so close in the industry.

Two types of marketing strategies are widely used for pricing of the new products or services.

Market Skimming – A high initial price with the objective of profit margin maximization

Rapid penetration – A low initial price with the objective of quantity maximization

The pricing strategy can be selected based on the life cycle position of the airline.

Etihad – Pricing and Revenue Management:

Etihad are in the early maturity stage of the marketing product life cycle. The transformation from rapid growth stage to sustainable maturity stage is not an easy task in the aviation industry. Etihad have a market penetration strategy to capture the market share in the Middle East region with the strategic support from the Abu Dhabi government. Etihad was delivering the same service as Emirates and British Airways to attract more business and revenue. Etihad would like to achieve its revenue breakeven point by the end of 2011 and to achieve profit by 2012.

The pricing and revenue management of airlines are so complex and dynamic. Dynamic pricing strategy is used in Etihad pricing now. The dynamic pricing software is used for the yield management and revenue management in Etihad with the objective of increasing profits based on the value of proposed sales. Etihad adopted SITA fare pricing software for ticketing and Descartes & Sabre solutions for cargo pricing and revenue management.

After the breakeven point Etihad can increase the prices to compete with the rivals and can achieve the target profits with its luxury high quality image. Load factor (the seating capacity which is actually sold) and yield (Revenue obtained for one passenger per one kilometer) are the two variables associated with the airline revenue. Etihad can use a balanced load factor and yield among the new congestion pricing mechanisms to remain sustainable in the business.

5.3 Promotion

“Promotion is the process of marketing communication involving information, persuasion and influence” (Hundekar et al. 2010:102).

Any form of corporate communication which uses various methods to convey certain message to its targeted audience in order to achieve a particular organizational objective can be called as Promotion. In order to carry out this process multinationals or organizations engages in spending huge amount of money through different Promotional strategies. Various such efforts undertaken by most companies and in this case Etihad are demonstrated as follows:

Advertising:  “Advertising is any paid form of non-personal communication of ideas or products in the prime media, i.e. television, the press, posters, cinema and radio” (Jobber, 2001: 353).

Etihad follows a massive advertising strategy through mediums such as radio, television, newspaper advertisements, magazines, billboards, digital hoardings, brochures and catalogs, airport and travel agencies in-store displays, posters, motion pictures, signs, and web pages. The presence of the brand and its reach is widespread throughout UAE and the world. From the aggressive advertising campaigns Etihad was awarded ‘World’s Leading Airline’ at the World Travel Awards in 2010 for the second consecutive year. It set the benchmark for the airline’s brand communications enabling “Etihad to inspire its audiences through a range of campaigns to ‘fly with the best’. The same year, it launched an international television advertising campaign titled ‘He Likes, She Likes’ showcasing the airline’s continued investment in products and services and commitment to offering a tailored, personal experience for every traveller” (New Business Age: 2011).

Direct Marketing:

“Direct Marketing is the direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships” (Kotler and Armstrong, 2011: 405).

Having established its International offices in more than 35 cities around the world and through the presence of Etihad Premium Lounges in London Heathrow, Frankfurt, Manchester and Dublin the company uses its staffs and employees to market their service through direct sales and exhibitions in many travel and tourism trade shows. Etihad has also set up a dedicated Global Sales Team which promotes its Business focusing on corporate and travel management companies. The UAE and Global marketing team has explored diverse techniques of promoting and boosting their business through various channels and services such as Etihad Holidays, global contact centers, Hala Abu Dhabi (destination management company) , Etihad.com ( e-commercial website for sale of tickets, holiday packages , chauffer service, hotels, car hire and luxury coach services, etc.) & Etihad shops located in UAE and abroad.

Sales Promotion:

“Sales Promotions are incentives to consumers or the trade that are designed to stimulate purchase” (Jobber, 2001: 490).

Etihad carries out a number of sales promotions, one of the noted such promotion is “Breaking Deals”. Through these special offers Etihad provides the cheapest air fare for flights originating from Abu Dhabi and other operating destinations. Etihad also provides complimentary ground transfers between Abu Dhabi International Airport (AUH) and Dubai, attracting customers travelling to and from UAE with their competitive flight fares. The ground transfer service provided between Dubai & AUH has managed to attract travellers from their rival carriers as the customers choose to fly with Etihad for their competitive price. Other sales promotion by Etihad includes the online web promotions such as “Getaway Deals” available on the website every Monday offering Etihad customers amazing last minute bargain fares. The latest promotion includes the “November Super Sale” again available only on Etihad’s webpage which offers discounted fares for flights operating from London Heathrow and Manchester to other favorite destinations.

Loyalty Program: 

Etihad boasts of its award-winning “Etihad Guest” loyalty program which has an estimate of one million customers to date. The Etihad Guest miles offer the Etihad Guest subscribers to redeem the accumulated points at 1800 flight rewards and over 200 participating partners for non-flight rewards. The non-flight rewards include various categories ranging from lifestyle products to electronic and computer products. Every year, Etihad hosts over 40 promotional activities to boost the Etihad Guest Loyalty campaigns to attract more members to this program.

Sponsorships: 

“A business relationship between a provider of funds, resources or services and an individual, event or organization which offers in return some rights and association that may be used for commercial advantage” (Sleight, 1989).

As a young and innovative carrier, Etihad positions them in a global market with an aim to help bring the world together. The company promotes both the UAE local and world cultures in the form of sponsorship of local and world events. The innovative airline associate itself with a variety of causes and events as a facilitator of change to bringing the world cultures together.

Etihad supports and promotes a variety of cultural and sporting events both in UAE and abroad. Listed below are a number of such sponsorships by the company so far:

• Etihad Stadium – Melbourne, Australia

This is the company’s first and major Sponsorship in the field of Sporting in Australia. Under this sponsorship, the branding has been prominently featured both inside and outside the Stadium. This premium stadium is located in the Docklands precinct with a capacity of approx. 55,000 audiences and hosts a variety of cultural and sporting events.

• F1 Etihad Abu Dhabi Grand Prix

The Formula 1 Etihad Abu Dhabi Grand Prix is a sponsorship by the company in the field of Racing. Located at Yas Island, UAE the circuit boasts of its spectacular architecture showcasing Abu Dhabi and brand Etihad to the world audience of more than estimated 600 million viewers.

• Manchester City Football Club

The three year partnership contract between the Manchester City Football club and Etihad showcases the Etihad Brand Logo on the Club’s stadium throughout, official team shirt, Club’s website and merchandise.

• Sport Australia Hall of Fame

Etihad plays a major role in the sponsorship of Sport Australia Hall of Fame and also facilitates young athletes for International competitions through their Scholarship programs.

• Golf

The Abu Dhabi Golf championship’s official airline and a diamond sponsor of the event - Etihad. This event is held in Abu Dhabi Golf Club and is considered to be one of the region’s biggest tournaments in golf.

• GAA Hurling All-Ireland Senior Championship

Etihad Airways is once again the official carrier and sponsor of the GAA Hurling All-Ireland Senior Championship. The sport is considered to be one of the oldest sporting competitions of Ireland which has a history to speak of its own and is also a fastest growing game in the world.

• Harlequins Rugby Football Club

Harlequins RFC (UK Premiership Rugby team) are mainly sponsored by Etihad Airways. The team plays at the Rugby league in UK and Europe and are located at Twickenham Stoop in London.

• Arts and culture

As part of Etihad’s initiative to bring culture and arts to Abu Dhabi and its people, Etihad has been sponsoring various media events and exhibitions. A range of Etihad’s sponsorships includes the Abu Dhabi Film festival, Gourmet Abu Dhabi and international music events such as Coldplay, Shakira, and Justin Timberlake concerts.

• Katrina Kaif

Celebrity Brand endorsement of Etihad is through the Indian Bollywood star - Katrina Kaif. The move is mainly to attract Indian customers who are a major market for the company. Katrina Kaif being the brand ambassador has participated in promoting the brand and has taken part in many fashion style shots and international campaigns representing Etihad.

5.4 Etihad - Place:

“Place includes company activities that make the product available to target consumers” (Kotler and Armstrong 2011: 83).

The main objective of this aspect of the marketing mix is to make sure that good quality services & products are available at the right time & that too at the right place, for the customers. The distribution channels are managed well & used judiciously to achieve this.

The approach of Etihad towards the PLACE aspect of its marketing mix is outlined below.

Services offered at different locations or offices:

Based on the different categories of customers served by Etihad, it offers distinct travelling classes for all its flight services which have been listed below.

1. Diamond Suite and First Class
2. Pearl Class (Flat Bed and Seat).
3. Coral Economy Class.
4. Crystal Cargo.

At the airport:

Etihad airways offer luxury coaches or free chauffeur service to its customers who wish to travel between Abu Dhabi International airport & Dubai or Al-Ain.

Inside the flight:

Etihad have a series of special facilities lined up for its customers aboard their flights:

1. Providing soft toys to kids, facilities to warm food for infants & changing their clothes.
2. Assistance to unaccompanied minors.
3. 600 hours of entertainment facilities through their entertainment system E-BOX.

The marketing strategy of Etihad has been a proven success as it took only seven years for Etihad to reach the level of excellence which took Qatar Airways and Emirates thirteen years and eighteen years respectively and is undergoing a major revamp as per the suggestions of Booz and Company, the high profile global consultation company which was employed for this particular task by Etihad (Etihad Airways, 2011).

Pros & cons of Etihad’s Place aspect of Marketing Mix:

Pros:

1.  Market penetration:

“It involves expansion of sales of existing products in existing markets by selling more to present customers or gaining new customers in existing markets” (Hundekar et al. 2010: 58).

Etihad, as a newcomer in the aviation sector, competed against some of the big players like Emirates and Qatar Airways with panache. It penetrated into the market by placing its products and services in such a way so as to ensure its customers had easy access to them.  

Their success in a very short span of time can be attributed to their robust marketing strategy which includes management of a well maintained company website through which they reach their customers and potential customers, which portrays the clarity of their functioning in the best possible way or in a way which their competitors had never adopted before. In 2010, the official website of Etihad was visited by as much as twenty million people and the company launched its website in 12 new countries.

As a newbie, Etihad had to make its presence felt in the aviation sector through implementing certain new ideas like Crystal cargo, which in 2010 accounted for about 19% of its operating revenue. It is currently on a freighter network expansion spree which also includes introduction of an intra-Gulf road freight business which most of its competitors are not into.

2. Coverage and logistics:

Etihad increased its coverage by forging new code share agreements with airliners like Air Malta, Hungary’s Malev, Virgin Blue, Siberia Airlines (S7) etc. Etihad has a total of twenty eight code share agreements till date with some of the best airliners across the globe with twenty eight percent of the airline’s 2010 passenger revenue coming from this alliance. Etihad currently serves 144 destinations along with its partners (Etihad Airways, 2011).

Etihad has an efficient network management system which relies on logistics & planning. In a bid to match the demand for its services, Etihad has ordered for new airplanes like A380, A320, and B777 etc. to its existing fleet of air-carriers which by any standard is a step in the right direction by a company which is highly service oriented (Etihad Airways, 2011).

Cons:

Maturity:

Etihad is at a stage where it is recording growth with increasing sales but it has its own share of woes in the form of tough competition from its competitors. In this case,

“Overall marketing effectiveness becomes the key factor in the stage of maturity” (Hundekar et al. 2010: 54).

Etihad, as an airliner, is performing well in trying to reach out to its customers through its different marketing programs. However, when it comes to the place aspect of its marketing mix, it has reached a saturation point, like its competitors, with not many options left to satiate the demands of its customers.

As the adage goes THE HIGHER THE RISE, THE GREATER THE FALL, the aviation sector has reached a stage where the introduction of innovative ideas will either yield the same results or no results at all. There is a lot to choose from for the customers since the aviation market is vibrant & the ambit for development within this sector is medium if not low as a result of increase in air traffic & aviation fuel prices & other non-conducive factors. For e.g.: Kingfisher airlines, India’s second biggest airline, recorded a loss of £58 million or 4.69 billion rupees because higher fuel costs adversely affected its revenue in the current fiscal year. It also leads to the company calling for an end to its presence in the low-cost sector in September with the shutting down of its carrier Kingfisher Red (BBC, 2011). 

Etihad on the other hand maybe one of the ‘big three’ in the middle-east with the others being Qatar Airways & Emirates

But, the major advantage which Etihad enjoys at this stage i.e. being a part of an oil rich United Arab Emirates, which is keeping it insulated from the problems which most of the airlines in the western world are facing in procuring aviation fuel cannot be kept at bay for too long. In the not so distant future, every sector is going to face the brunt of oil shortage & the aviation sector is no exception to this fact. 

The other concern for Etihad is its absence in the low-cost carrier sector. With Air Arabia as the market leader for this sector in the Middle-east (Watson, 2011) it is going to be a not-so-easy job for Etihad to penetrate into this segment as it involves a lot of planning & expenditure.  

One question can sum it all up for Etihad: Why would an airliner like Etihad try to jump into the bandwagon of road freighter business?

5.5 People

Success in aviation sector requires dedication of all intellectual resources at all organizational layers with a strong leadership and effective management. Thus communication, application, strategic choice, decision making, training, rewarding and resource allocation are the main essentials for the understanding of these crucial organizational processes.

Management:

Etihad Airways is headed by James Hogan since 2006 formerly CEO of Gulf Air. Other executive managers are James Rigney (CFO), Peter Baumgartner (CFO), Richard Hill (COO), and Ray Gammell (CPPO).

Staff:

Etihad is aiming to be the best airlines in the sector with the best customer service as Etihad’s chief commercial officer (for marketing and product), Peter Baumgartner states “We aim to be the best airline in the world but importantly our benchmarks are not set within the airline sector, but elsewhere where customer service is at its best” (Tumer 2008). The company employs almost 8,000 staff from 120 different nationalities (including 900 pilots and just under 3,000 cabin crew), the company has projected this number will grow to 27,000 by 2020.

Training:

Etihad provides a broad range of training opportunities for its staff including a cadet pilot scheme, a technical engineering development program and a graduate management development program (Etihad Airways 2010).

Etihad Airways’ cadet pilot training is a distinctive program that includes many pilots from all over the world. The successful pilots will join Etihad but first they should complete an eighteen month course in Abu Dhabi where company’s all training courses are held. The company has also another 18 month-long course at its academy in Abu Dhabi which is designed to provide managers for company’s future growth. Also the carrier hired 190 food and beverage managers from the hotel industry to generate a service similar to a hotel environment for its customers. Currently it seems that they’ve achieved this goal with a 91.5% company score according to a customer service benchmarking survey performed by Ethos Consultancy (Ethos Consultancy, 2010).

After these successful training periods, in engineering side (their technical division) Etihad has achieved providing MRO capabilities for many airlines and it was accredited by Swiss Federal Office of Civil Aviation in 2009.

Rewarding:

Organizations do need incentive systems to encourage highly qualified employees to make them achieve their goals in all departments. The company has a new performance evaluation system called “I achieve” and within this new approach they established performance based pay awards. 95% of the employees were included to this system and all the performance objectives and the results were recorded after reviews of the line managers so the employees started to get their performance based bonuses since April 2011. In addition, at Etihad Plaza and at different company accommodation points across Abu Dhabi, Etihad provides ‘Fit 2 Fly’ leisure facilities including gymnasiums, pools and recreational amenities for the best welfare for their people (Etihad Airways 2010).

5.6 Physical Evidence Strategy.

Physical environment has emerged as an important concept for understanding customer’s behavior in the service industry (Bitner, 1992).

Whether it’s the chauffer driven limousine with the pristine chauffer, visions of the cabin staff, the executive lounge or just a sighting of the Royal Decree on the tail fin of an Etihad airplane at the airport; Etihad is portraying a visual image of luxurious travel, comfort and superiority through its servicescape environment.

A product can be touched, experienced and demonstrated. Etihad’s services cannot, and, as such must be communicated through the surrounding environment. The physical evidence strategy given to any perspective customers by Etihad must reflect that Etihad is committed to providing guests with a superior travel experience both inflight and on the ground (Etihad, 2011).

Diamond, pearl and coral are used to differentiate and identify the different classes of travel; Frau, leather seats, flat beds, privacy doors and many other luxurious accessories all promote the superior luxurious travel. Passengers can dine when they are ready choosing from an extensive menu. On the ground the luxurious theme is continued in the many lounges available and then home in a chauffeur driven limousine or on to your Etihad holiday!

Customer perceptions of Etihad status of a company supplying “the superior travel experience” are further substantiated with the company’s involvement in a number of superior promotions and sponsorship deals that are consistent with its core values, these include, the F1 Abu Dhabi Grand Prix, Manchester City Football Club and Sport Australia Hall of Fame.  

5.7 Strategic Behavior -Ansoff Model

As per the Capital Magazine, the Etihad strategic behavior is so close to the Ansoff product strategy model matrix.  The business strategy of Etihad include market penetration strategies, new product development strategies, market extension strategies and a diversification strategy.  (Capital ME, 2011)

• Market Penetration

The Middle East aviation market was the prime focus of the Etihad in the initial stages of its growth. The Middle East aviation market is aggressively penetrated by the Etihad  with its deliberate marketing strategies and Etihad is flying high in the world aviation market too.

• Product Development

The new product development activities are in a correct proportion in the Etihad Airways. New products or services are introduced with positive changes in the existing products or services.

• Market Extension

The market development and geographic extension activities are pretty active in the Etihad. The new destinations like Australia and US are typical examples for this.

• Diversification

The cargo services and the engineering services like the MRO services are the diversification initiatives from the Etihad.

6. Conclusion

Etihad emerges as a new leader in the global aviation industry, substantiating itself as a sustainable growth leader for its Middle East based rivals and is causing a serious threat to the global carriers.  Etihad transformed from a challenger to leader in not more than eight years of its existence. The journey of Etihad is with the mission and vision of becoming the world’s best airline with sustainable growth and serving customers with its best in class services, supporting Abu Dhabi the achievement of its 2030 plan as a mission critical player.

Etihad has the potential to improve the relationships with global alliances and code share agreements with other airlines and may promote the Etihad loyalty program further to capture the client base. Etihad may also add more high demand destinations in all the price segments increasing the product offerings.  Etihad may also diversify the product offerings with Engineering and MRO services by adding the airline mail services, road freighter services and storage services to its product range. Etihad would be better off if it sticks to strong marketing of its services to cater to its existing customer requirements and make its presence felt in the low-carrier sector by forging relations with the main players of this sector and with aggressive promotional activities.

Etihad will highlight Abu Dhabi as a global tourist destination and business hub in the Middle East and this ‘Abu Dhabi’ factor is crucial in the marketing strategy of the Etihad and its future success.

Etihad Airways should evaluate the creation of a long haul, low cost subsidiary enabling the group to compete against other low cost carriers without risking the Etihad premium carrier brand image being diluted by the cheaper no thrills airline.

After the breakeven point Etihad should increase the prices to compete with the rivals and can achieve the target profits with its luxury high quality image. Etihad can use a balanced load factor and yield among the new congestion pricing mechanisms to remain sustainable in the business.

From Etihad’s promotional mix strategies, it is evidenced that the airline is carrying out a very wise and different approach in the field of brand building and promotional techniques. The company’s main focus is currently on sponsorships. However, since Etihad is a young and modern brand it would be highly beneficial for the company to invest more on corporate social responsibility. Even though the brand is doing considerably good in the field of commercial aviation with respect to its age, a better advertising strategy would help the company in establishing new fleet routes in areas where they haven’t yet established a strong hold. An increase in outdoor and indoor visual display units for advisements in foreign countries focusing on main aero hubs would assist Etihad in reminding the international travellers of the advantage of the brand’s service and presence.  

Etihad can achieve a sustainable business model with the help of ‘Emirates business model’ in the Middle East by mixing the airlines business strategy with the Abu Dhabi’s growth plans in the region. The growth plans can be achieved by establishing Abu Dhabi as both a tourist and financial business hub with high class brand image and can position the airline as a market leader in the global aviation industry.

With escalating unrest in the middle-east region, ever increasing price of aviation fuel and declining demand, Etihad would be better off if it sticks to strong marketing of its services to cater to its existing customer requirements & make its presence felt in the low-carrier sector by forging relations with the main players of this sector (BBC, 2011)

 

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8. Bibliography

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<>

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9. Appendix

• Price Comparison – Table

Depart: AUH -> Arrive: LHR

Date: 16- Nov-2011 Return 17-Nov-2011

(Ticket Price is the total ticket price stated in AEDs and includes return fare, taxes and surcharges for 1 adult passenger)

• Market Analysis: O&D Traffic Manchester-Australia 2010

Table Source: IATA BSP (January 2010 – December 2010)

 

The above graph shows the O&D traffic of different airliners, providing their services in the UK from Manchester to Australia, for the years 2005 & 2010. An analysis of these graphs clearly shows that the market leader position in Manchester is currently held by Emirates. But it needs to be mentioned that Etihad managed to capture nearly 13% of the market share even though it started operating flights in this route only from March 2006.It has shown a similar trend in its services from London Heathrow to Australia in 2010 by capturing a market share of nearly 6%.This is the perfect example of Etihad’s intention to establish itself in the western world by employing meaningful measures in its business.