SWOT and PESTLE Analysis of Etihad Airways

Weaknesses

• Strategic weaknesses: Since development, it has been gaining profit every year. But due to strategic deficiencies, the company is facing loss since then. For the growth of its route network, Etihad airways decided to purchase stakes in other airlines like Air Serbia, Air Seychelles, and Alitalia; however, their financial performance is not right of them has been a commercial success. (Teacher, 2020)
• Limited transparency: Etihad only discloses its annual statement avoiding the account details; being a state-own enterprise, the US has accused Etihad of little transparency and financial assistance against the open skies policy.
• International destinations: Etihad only prefers international destinations meaning high operating costs; due to intense competition, market growth is restricted (mbasakool, 2020)

Opportunities

• Political Being a flag carrier airline of UAE, Etihad airways being encouraged by the HH Sheikh Hamed bin Zayed Al Nahyan to become the best in the world.
• Economic: It is time to focus on the high potential and emerging markets if Etihad aims to sustain the current rate of economic growth. On the other hand, due to the strong dirham compared to USD, operating costs are high for Etihad; however, USD is stronger comparatively. Currency fluctuations suggest the operating costs that depend upon the international currency trend. The implementation and formulation of free trade agreements have provided Asia opportunities due to cost-cutting and business growth. (Case, 2020)
• Social: More destinations might be added domestically for economy class to expand the global network moreover, agreements with airports to give excellent facilities and the Emiratisation program.
• Technological: It is a great time to make a strategic investment in seem less technology concerning COVID 19 to make air travel the first choice of passengers.
• Legal: Having a government that supports the Aviation and labor laws and rules for the legal perimeters for Etihad. (ukessays, 2017)
• Environmental: Etihad Airways owns modern and efficient fleets to this time, minimally affecting the environment.

Threats

• Political: In the Middle East, political instability has posed threats and challenges over the years to business operations. The UAE’s capital city has played a crucial role in development and country growth because of continuous operations (Case, 2020)
• Economical: In the Middle East, the competition is increasing due to lowering fuel prices that may affect the business.
• Social To expand its route network, acquiring stakes in other airlines might cause further distress.
• Technology: IT and internet security measures are the need of the airline industry due to increasing cyber threats. It is speculated that missing Malaysian flight MH37 may have been hacked; therefore, Etihad must consider new technologies to enhance security and data management. (Case, 2020)

Legal  An accusation from the rivalries in the US is a significant threat to the reputation. (mbasakool, 2020) To restrict the air travel of Muslim citizens from six countries due to the increased risk of a terrorist attack is a political and legal decision that may limit the market growth and contribute to discontinuing specific routes.

Environmental Carbon footprints are growing as the air travel demand increases, which will bring about a significant challenge. (Teacher, 2020)

Porters Five Forces Analysis of Etihad Airways

The Threat of New Entrants (Medium)

New airline service providers are more likely to emerge because of increasing growth in the Middle East. Customers having more options will indeed pose a threat to Etihad Airways. It requires enormous capital investment to venture into the airline industry that may discourage the new entrants. As Etihad has modern and efficient aircraft, brand loyalty, and massive support from the government, moreover, Pandemic has crushed the aviation industry that it may take a couple of years for even operating airlines to stabilize. Etihad Airways has faced the threat of emulation of new entrants; however, new entrants cannot match competitiveness, customer satisfaction, and service value.

The Threat of Substitutes (High)

Etihad Airways is more inclined towards international destinations, which are best for long-haul flights and the fastest mean of air travel, customers having limited options. It is more likely to attend business meetings and functions online in the long run due to COVID 19 and technological development in IT. Most people opt for cars, buses, and trains for regional travels in Europe and the Middle East. 

Bargaining Power of Buyers (High)

The seasonal fluctuation of prices doesn’t attract budget travelers but the pleasure and business travelers. Customer loyalty is facilitated through innovative strategies like extra baggage, class upgrade, redeemed for tickets, priority check-ins. Business travelers usually have low bargaining power as the airline is concentrated on other categories, ex. High season (December- January)  Due to the new entrants, buyers’ bargaining power is higher as the competitiveness. Low fares strategies by Etihad airways facilitated market penetration as the customer prefer low fares.

Bargaining Power of Suppliers (Low)

Etihad Airways is limited to its options for the quality of aircraft, Airbus, and Boeing. If Etihad expands its operation necessities, meaning more aircraft purchases would lead to suppliers’ reduced bargaining power. In aviation, the agreements are for the long term, limiting airlines’ options as Etihad didn’t cancel previous orders even going in loss due to COVID 19. (Case, 2020)

Rivalry Among Existing Competitors (High)

Competition has always been challenging for Etihad as the rivals are offering the same services. Qatar Airways, Emirates Airlines, and Saudi Arabia airlines pose great competition to Etihad airways as in market share. Since the rivals have increased the frequency of flights that threatens Etihad’s increased market penetration. (Case, 2020)

Conclusion

Recommendations to minimize the weaknesses and threats Etihad Airways must upgrade its strategy as the company has lost 5 billion $ since 2016, 2017 working on cutting cost as a part of turnout strategy, the aim was to be profitable by 2023, but due to COVID 19, it would take a couple of years to get back to normal. Etihad must add more international destinations to make a more robust network and domestic for the economy class passenger to compete with Air Arabia LCC. Etihad Airways needs to be transparent against US rivalries’ accusations to stay a well-reputed organization in the Middle East. According to the pertaining threat of cybersecurity and COVID 19, Etihad Airways must consider strategic technology investments to digitalize operations for safe and secure air travel.

Recommendation to Maintain Strength

Etihad Airways must keep adding value to its services to become the fastest-growing airline. Etihad Airways had made terrible decisions acquiring stakes in other airlines going in loss. It’s time to learn a lesson and consider changing the strategic environment as an opportunity. In recent times, complaints are reported regarding poor customer service and refund; however, there is still hope for improvement not to lose loyal customers. On the contrary, there will be a need for next-level collaboration with the software provider, hardware provider, and master interrogators to provide seamless services. The internet of things (IoT) and big data analytics will play a significant role in ensuring proficient health screening at touchpoints and optimizing operations. In this time, airlines must negotiate and strike a deal to reduce the fixed cost as they have high fixed costs that negatively affect cash flow and liquidity. Reducing variable cost by optimizing resources and being proficient with the help of digital solutions. (Industry, 2020)

Before this Pandemic, the aviation industry had anticipated the global fleet growth and passenger volume for the next decade; however, now the dynamic has been changed. The industry is facing new challenges where passenger demand is down and the capacities for a predictable future. The airlines’ financial strength and the industry’s landscape will be impacted significantly by the delayed development of vaccination and prolonged lockdowns. Private airports will face difficulties in maintaining low-cost due to negligible revenue generation. To this pertaining nature of Pandemic, poor economic conditions and passenger confidence will affect the number of passengers traveling domestically and internationally. Airports and airlines must consider investing in technology to re-establish air-travel. Digital solutions will prove useful to scale up the operations to match the rise in travel in airports and airlines in planning and aligning the resources. (Industry, 2020)

Bibliography

• alotrip.com, 2018. alotrip.com. [Online] Available at: https://www.alotrip.com/flight/airline/etihad-airways-introduction [Accessed 19 october 2020].
• Case, E. A. C. S., 2020. Etihad Airways Company’s Strategic Case. [Online] Available at: https://studycorgi.com/etihad-airways-companys-strategic-case/ [Accessed 19 october 2020].
• Industry, P.-p. G. O. A. o. t. G. A. &. A., 2020. RESEARCH AND MARKETS. [Online] Available at: https://www.researchandmarkets.com/reports/5078188/post-pandemic-growth-opportunity-analysis-of-the?utm_source=CI&utm_medium=PressRelease&utm_code=mgzmr8&utm_campaign=1440904+-+Post-pandemic+Growth+Opportunity+Analysis+of+the+Global+Airport+%26+Airline+In [Accessed 21 october 2020].
• mbasakool, 2020. mbasakool. [Online] Available at: https://www.mbaskool.com/brandguide/airlines/525-etihad airways.html [Accessed 19 october 2020].
• swotandpestle, 2020. swotandpestle. [Online] Available at: www.swotandpestle.com/etihad-airways/ [Accessed 19 october 2020].
• Teacher, B., 2020. Business Teacher. [Online] Available at: https://businessteacher.org/swot/etihad-swot.php [Accessed 19 october 2020].
• ukessays, 2017. Study On Etihad Airlines. [Online]
  Available at: https://www.ukessays.com/essays/aviation/study-on-etihad-airlines-aviation-essay.php [Accessed 21 october 2020].