EN02 – Economía Gerencial

Primera Práctica Calificada

Ciclo 2022 - 1

Sección : ENA1 Profesor : Azabache Moran, Carlos Alberto

Integrantes % de
Participación

1. Meza Aguilar, Nicole 100%

2. Corcuera León, Luis 100%

Fernando

3.

4.

5.
1. Perfil de la empresa (EA) Visión, Objetivos Estratégicos
● Vision: To fly towards a better future.
● Strategic objectives: Reverse the years of lost profits and optimize costs, unbundle
its services
2. Evaluación del entorno -- de la economía y el comercio mundial – así como la del
sector aviación en particular –así como análisis PESTEL --Mercado – segmentos
– competencia – entre otros a nivel global y a nivel del país sede y de la región de
Etihad Airlines (EA).

Force Variable Result Impact

Policy / Legal International Protectionist political Market growth

standards norms in different
countries.

Legal Standards The UAE government Increased tourism

mandated the safe and inflows to the UAE.
commercial operation of
the airline. It designated
many free trade zones
offering full tax-free
ownership of the
company in order to
attract foreign investors.

Political Stability They launched Eithad's To be a company

commercial airline that generates
services with the backing tourism in the
of state resources, United Arab
worldwide service Emirates.
personnel, outsourced
data management and
accounting services, and
two leased aircraft.

Demografy Growth or 2018:The population of Market growth

population. the United Arab Emirates
was approximately 10.4
million.
88% of its workforce
were expatriates.

Social Life rhythm Interconnect cities where Increased market

the population did not potential
have access.

Economics New markets Entered new markets Market growth

such as Germany,
Ireland, Italy, India,
 among others. Offered
new sources of income.

Aviator sector 2008: the aviation sector Etithad withstood

was affected by the the blow and
economic crisis. committed to an
expansion plant. It
also ordered 205
aircraft.

Economic growth Increased tourism Increased

economy. UAE's GDP investment.
has a growth rate of
around 2.8%.

echnological Aeronautical Entry of several trends Cost increase

innovations such as the u 777X and
A380 appeared in the
market.

New trends Emergence of Low Cost Increased

airlines with competition in new
low-tech aircraft, service markets
and new markets.

3. FODA de la empresa – precisar cuáles son sus elementos diferenciales

competitivos.

STRENGTH
● Etihad Airway is the second largest
airline in the United Arab Emirates
and known for its excellent in-flight
services.
● It has quality products and services
such as in-flight chef, food and
beverage managers, and in-flight
nannies.
● It is the national airline of the UAE
and is wholly owned by the
Government of Abu Dhabi.
● Its passengers had increased from 1
million to 17.6 million. In addition, in
2005 they operated 10 aircraft and as
of 2015 they operated 121.
● The airline flies in 55 countries, has
over 5000 cabin crew.
● It has ownership stakes in several
partner airlines, such as Jet Airways,
Virgin Australia, Niki, Air Serbia and
among others.
OPPORTUNITIES
● Upon entering the market the airline
sector had declined.
● Etihad should look for organic and
additional growth opportunities in the
Indian subcontinent and Asia.
● The airline can add depth to the
network with increased frequencies in
some of the key countries such as
Cairo, Dammam, Istanbul, Dublin,
Dusseldorf, Calicut, Jeddah, Riyadh,
Bangalore, Ahmedabad, Manila and
among others. Some of these
countries have experienced an
increase in frequencies
●
 ● Over the years the airline has been
winning awards such as 4th and 2nd
in North Dakota in the World's Best
First Class Airlines 2019 and Best
First Class Airline Seats 2019.
● It won the 'World's Leading Airline'
award given by World Travel Awards
(WTA) on several occasions.

WEAKNESSES THREATS
● Strategic decisions such as buying ● Etihad faces two major regional
ownership stakes (inorganic growth) competitors, namely Emirates Airline
in several airlines to grow its route. and Qatar Airways. Other
This resulted in a large financial loss. competitors are British Airways,
● In addition, the airline in 2016, American Airlines, Air Canada; only
blamed losses of $808 million on some of them operate different
financial exposure to partner airlines routes.
such as Airberlin and Alitalia. Air ● Threats to Etihad's economy class
Berlin and Alitalia went into come from low-cost carriers such as
administration and caused huge Fly Dubai, Air Arabia and many other
financial losses. airlines.
● There were complaints from .
economy class passengers as all
their attention was on business and
first class passengers. They also
complained about the waiting time for
stopover flights as they are much
longer compared to other
competitors. This causes them to
generate bad reputation about the
quality of their attention and flights.
● The airline also expanded to the
Middle East and further afield in its
early days. But, it failed to maintain
the momentum as the competition is
strong and the backlash is fierce from
airlines in Europe.

4. PREGUNTAS DEL CASO:

4.1. ¿ Cuál(es) fue ( fueron ) la estrategia ( estrategias ) que siguió EA para su

ingreso en la industria ( sector ) de la aviación global ?

4.1.1. Responder tomando en cuenta las decisiones básicas ( key basic decisions ) que
aplican las empresas en su proceso de internacionalización ( cuando y en qué
escala ) – fundamente su respuesta y explique las ventajas y desventajas de cada
opción (1.5 puntos )

Ethad opted for an aggressive expansion strategy to strengthen its global travel. In
addition, it was associated with companies already existing in the market such as
Sky Team, One World and Star Alliance, using the routes of each airline to expand
the member networks. In addition, it made codeshare agreements with various
 airlines in the Middle East, Asia, Europe, Africa, Australia, and North America to sell
tickets. Most airlines use these strategies in their internationalization process and
use a service differentiation strategy.The strategy allowed new income and
expansion in global travel promotions and entering into shared code agreements,
this allowed it to operate and seek independence from a single market, diversifying
services to reduce costs and reduce risks. But, the downside of this strategy is that
the companies had low returns that they had recession. That is why it is important
to take analyzed measures when investing in these airlines since it generated many
problems.

4.1.2. ¿Con qué posicionamiento o dirigido a qué segmento ingresó EA ?– ¿ Contra

quienes competía en ese segmento ? – fundamente y explique ( 1.0 puntos )

Entered the airline Etihad in the airline and aviation sector. At first they wanted to
start an airline that would establish the state as a center for business and tourism.
In 2003, Etihad officially launched its commercial services supported by state
resources, contracted talent from around the world, outsourced accounting and data
management services and two leased Airbus A330-200s. To be competitive, Etihad
entered the market with high standards of customer service. Differentiating itself
from many full-service airlines, Etihad offered its customers three services:
Diamond, Pearl and Coral. In addition, they used large aircraft such as Boeing and
Airbus, positioning themselves as a full-service luxury airline that treated
passengers as guests. It also offers post-flight experience services such as car
rentals, lodging, transfers and excursions. It competed with airlines such as Air New
Zealand, Emirates Airline, Gulf Air, Singapore Airlines Group, Virgin Atlantic
Airways, Tiger Airways, Virgin Australia and Vistara.

Pregunta 2

¿Qué tan efectiva fue la estrategia de internacionalización de Etihad a través de Code

Sharing y Equity Partnership? (1.0 puntos)

Eithand's first attempts to internationalize by signing code-share and equity partnership

agreements were not effective. First, Air Seychelles (a company in which Eithand held
40% equity) recorded losses for two consecutive years after Eithand's investment.
Similarly, in 2011 Eithand had acquired about 30% equity of Air Berlin in order to break
into the European market, however, in August 2017 the company became insolvent and
lost about $50 million. Likewise, the acquisition of the airline Alitalia, which had a similar
purpose to the intentions with Air Berlin, was declared bankrupt in May 2017 despite the
interest in rescuing it. On the other hand, the situation of Jet Airways in India also did
not show good results due to the depreciation of the rupee against the dollar and the
drastic increase in oil prices; finally, in 2019 the company also declared bankruptcy.
Finally, one of the first airlines with which it shared capital, Virgin Australia, presented
highly significant losses during 2017.

¿Cómo fue la estrategia de su diversificación? Describa el modo de su entrada al

mercado y la política de precios vinculada con su estrategia de mercado con el
servicio principal. (1.5 puntos)

In its early years Eithand Airlines focused its competitive advantage on the high quality
of its services compared to the competition, having acquired the largest aircraft models
 on the market at the time in order to offer different amenities such as convertible leather
seats, wood-finished tables, TV screens and minibars, positioning itself as a luxury
airline that offered a different experience, seeing customers more as guests who could
enjoy long journeys that could otherwise be overwhelming. Also, the experience was not
only limited to airline flights, as Eithand also offered passengers accommodation in
various luxury hotels, car rentals and vacation plans. For the same reason of the high
quality of its service, Eithand presented high prices for the market, from which it was
able to make a large profit in its early years.

Subsequently, its diversification strategy focused mainly on the creation of different

types of service, which were Diamond, Pearl and Coral. However, all of them were still
maintained as luxury or high quality services. On the other hand, its diversification
strategy consisted of aggressive expansion in order to strengthen its worldwide network
of travel services. As a result, it participated in the acquisition of equity in several airlines
around the world, as well as signed code-share agreements in almost every continent.

Pregunta 3

3.1 ¿Cuán efectivas fueron las medidas de recuperación de Douglas para mejorar la
estrategia y el rendimiento de Etihad? (1.0 puntos)

Douglas' recovery strategies for Eithand can be described as very effective. It is

important not only to analyze the results of 2018 but also those of subsequent years.
Douglas joined the company in January 2018, and in that same year managed to reduce
the company's losses from $1520 million to $1280 million. What's more, the positive
effects of these changes could still be seen in subsequent years. By 2019, according to
its own financial reports, the loss was reduced to $870 million, by 2020 it reached $650
million, and by 2021 it was already showing profits of up to $410 million.

3.2 Ante las siguientes iniciativas propuestas por Tony Douglas, presentar al menos
una estrategia propuesta en el caso (1.5 puntos):

Unbundling Services: First, while services such as complimentary private chauffeurs or

the exclusivity of its premium lounges for only the highest-end clients were essential to
its success in the beginning, they were now no longer cost-effective and some would
have considered getting rid of them. However, Eithand opted to replace the chauffeur
service with cars at negotiated rates, as well as allowing tourist class clients to use the
premium facilities for a fee. This allowed a more efficient use of these resources.
Eithand also started a new policy that allowed economy class passengers to purchase
their tickets at a lower price if they did not carry checked baggage.

Adding new economy class: Douglas realized that Eithand could not pass up joining
the trend of offering a new, more economical class to its passengers. While it was no
longer going to convey the message of being a completely luxury service, this strategy
allows it to acquire part of a whole new market that is always growing. In addition, this
strategy did not focus on imitating others, Eithand went so far as to offer customer-
specific flight plans. Passengers could have great flexibility in choosing what type of
service they wanted to purchase, giving them the option of selecting seats with an
empty seat next to them or adding special meals to their package. This strategy
responds to what is known as second-degree price discrimination, as it allows
consumers to self-classify themselves according to their preferences and thus pay a
higher price for a more appropriate service, enabling the company to further maximize
its profits.
Pregunta 4 . - ¿ Que opciones estratégicas tiene EA, específicamente de cara al o en
el contexto del Medio Oriente ( Middle Eastern ) ? -- ¿Qué debería de hacer para
contar con un futuro sostenible ?

First of all, it is essential to think about the competition in the future. In the luxury airline
service market there were Emirates Airline and Gulf Air, who had presented very good
results in recent years and had a much larger fleet and employee capacity, and it is
important to note that this type of service had been focused mainly on long-haul flights,
because those were the experiences that could be more stressful in case of a normal
flight. On the other hand, there was also strong competition in the low cost market, the
demand for this service had increased greatly mainly on short-haul flights. Globally, 33%
of short-haul flights were low cost, and the main region where this is predominant in
Southeast Asia.

Against this backdrop, it is important that in the coming years Eithand aims to improve
its competitive advantage in each market in which it is participating. Firstly, the luxury
airline market already presented strong competition and increased capacity, aggravated
by the necessary actions of Douglas to reduce the aircraft order placed years ago, that
is why in the following years Eithand had to refocus its luxury service on the most
profitable routes and subsequently raise the quality offered from the market but under a
lower cost. This is possible since Douglas' actions had allowed to greatly reduce
maintenance costs by rationalizing the fleet. This was to allow Eithand to maintain its
presence in the luxury market in the short term and then think about increasing its
capacity. In other words, Eithand would remain a premium airline, but by lowering its
prices it would be attracting a larger number of passengers.

On the other hand, it was also important not to neglect the lower-cost customer market,
but not to neglect the company's goal of offering the highest quality service. The main
strategy to this end is to offer different types of flexibility to customers when purchasing
their tickets, such as offering their own VIP lounges to smaller customers or different
types of in-flight benefits at different rates as required, services that few competitors had
and that gave a great optional added value to those who wanted to purchase them.
Also, Eithand has to continue with the strategy of leaving aside some of its
complementary services such as courtesy chauffeur until it is considered that it can do it
better by itself, until then it was more efficient to leave it to the market and collaborate
with the companies that were in charge of it, that way customers would still feel that
Eithand's experience does not end in the flight.

Finally, some general strategies to be followed by Eithand was to gradually migrate its
fleets so as not to be so dependent on the price of oil. A bad currency situation and fuel
costs had already caused some airlines to go bankrupt, so Eithand had to continue to
diversify its energy sources wisely. This strategy also helped the environment by
reducing coal. Other small activities that could add to Eithand's development include
using its aircraft not only to transport passengers but also to transport baggage, thus
making more efficient use of capital.
5 COMENTARIO FINAL.- Como grupo de élite seleccionado por el Presidente de EA
para proveer un análisis y diagnóstico claro – presente sus Conclusiones y
Recomendaciones al CEO – especificando los supuestos o modelos que las
sustentan
Para realizar algunas recomendaciones es importante partir desde el conocimiento del
mercado y de los principales competidores. En los siguientes años es crucial que EA
siga apostando tanto por el mercado de aerolíneas de lujo como también en el mercado
económico, pero sin dejar de lado el hecho de considerarse una empresa que ofrece
servicios de alta calidad. Este fin puede ser posible mediante dos estrategias. En primer
lugar, aprovechar la reducción de costos que pudo ocurrir gracias a las maniobras de
Douglas, para ofrecer un menor precio por el servicio VIP con el fin de abarcar a una
mayor cantidad de clientes. Por otro lado, seguir apostando por servicios diversos hacia
los clientes más económicos como permitir que ellos mismos seleccionen distintas
características de los paquetes de avión, desde salas VIP hasta una cenas de mejor
calidad durante el vuelo, obviamente todo de manera opcional y bajo una tarifa. Esta
última estrategia responde a lo que se conoce como discriminación de precios de tercer
grado, lo que permite que los empresarios presenten aún ´mas ingresos, y que los
clientes adquieran un servicio más acorde a sus gustos y preferencias. Finalmente,
algunas otras recomendaciones son el enfocar al menos en el corto plazo las
operaciones de EA en las rutas que presenten una mayor ganancia, así como también
migrar poco a poco a tecnologías de aviones que no dependan tanto del petróleo para
disminuir el impacto de las subidas en el costo del combustible.

(5 puntos)