INTRODUCTION TO MANAGEMENT (MGT400)

GROUP ASSIGNMENT

(FLY EMIRATES)

PREPARED BY

NAME STUDENT ID

1) MOHAMAD IKMAL BIN SULAIMAN 2021853444

2) MOHAMAD ALIM AIRIEL BIN P RAMLI 2021460012
3) SYAWAL BIN JAMIN 2021459928
4) NUR HIKMAH HAYATI BINTI OTHMAN 2021812914

PREPARED FOR
SIR MOHD AIDIL RIDUAN BIN AWANG KADER

SUBMISSION DATE
25TH DECEMBER 2022

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TABLE OF CONTENTS
1.0 INTRODUCTION...................................................................................................................3

2.0 CHALLENGES OF MANAGING COMPANY IN THE GLOBAL ENVIRONMENT..........4

2.1 Huge loss due to COVID-19 restriction....................................................................................4

2.3 Cannot make domestic and international flight journeys to passengers...............................6

2.4 Difficult to predict passenger demand in the long term..........................................................6

3.0 WAY TO OVERCOME THE CHALLENGES..........................................................................8

3.1 Employee reduction...................................................................................................................8

3.2 Purchasing sizable number of oil contract and call options...................................................8

3.3 Change operation to passenger flight mode to cargo flight mode..........................................9

3.4 Provide Free, Worldwide Coverage for COVID-19-Related Expenses...............................10

4.0 CONCLUSION............................................................................................................................12

5.0 REFERENCE...............................................................................................................................13

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1.0 INTRODUCTION

Although it is currently the third-largest airline in the world and one of the most well-known,
Emirates wasn't always like this. This airline, which has its corporate headquarters in the
United Arab Emirates, has undergone a number of transformations to become the powerful
force it is now in the aviation sector. Emirates has firmly established itself as one of the
world's leading airlines, flying to over 157 locations with a fleet of 254 aircraft. Emirates
began as a modest Gulf-based airline and has since grown to offer international service all
over the world. Passengers adore Emirates' distinct blend of comfort, dependability, and
luxury (Duggan, 2022).

It all began in 1984 when Sir Maurice Flanagan, the managing director of Dnata, and Sheikh
Mohammed bin Rashid al Maktoum, the United Arab Emirates' minister of defence at the
time, began talking about the potential of establishing an airline. During this time, the
previously dominant Gulf Air began to scale back its Dubai flights, and a clear market gap
was beginning to develop. The airline was established before year's end under the name
"Emirates," with funding provided by the Dubai royal family. In 1985, a Boeing 737 carried
passengers on Emirates' first trip from Dubai to Karachi, Pakistan (Duggan, 2022).

In order to lease aircraft and receive administrative and technical support, Pakistan
International Airlines was a major source of reliance for Emirates during its early expansion
years. It's hard to believe now, but when Emirates was just starting out, it had a difficult time
obtaining finance because the UAE's government didn't provide any subsidies. Another
significant milestone was reached in 1987 when Emirates' first privately owned Airbus A310-
305 flew from Toulouse to Dubai. Emirates expanded to 14 locations in the first five years of
operation, including Mumbai, Dhaka, Istanbul, and Frankfurt.

Emirates is currently reaping the benefits of the launch of its first fully enclosed First Class
private rooms in 2017 (Duggan, 2022). Emirates placed a second, $8.8 billion order for 30
Boeing 787-9 planes in 2019. Emirates increased their route network by 54 between 2010 and
2019 to a total of 157 locations, including flights to Tokyo, St. Petersburg, Buenos Aires,
Taipei, Cebu, and Bali. Although it is unclear how the 2020 COVID-19 pandemic would
affect Emirates' record-breaking growth rates, if its response to the 2001 Colombo bombing
is any indication, expect Emirates to continue its march toward aviation hegemony for some
time to come (Duggan, 2022).

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These are some facts about on how Fly Emirates has been established and now become the
giant company in airline industry. However, even though how big the company of airlines is,
it will always have their own problem and difficulties that they need to go through especially
when its related with organizational and also their financial. In this case study, we will
discuss on how challenges of managing the company in the global environment and ways to
overcome the challenges especially for the Fly Emirates company.

2.0 CHALLENGES OF MANAGING COMPANY IN THE GLOBAL

ENVIRONMENT

2.1 Huge loss due to COVID-19 restriction.

As the authorised UN organization for tourism, UNWTO has been keeping a close eye on
travel facilitation in recent years and has noticed a clear trend toward economic liberalization.
This has been abruptly ended by COVID-19. As of 6 April, 96% of all international
destinations have imposed travel restrictions in response to the epidemic, according to
research done for the new study. Approximately 90 tourist locations have closed their borders
entirely or partially, and 44 more only allow certain types of visitors depending on their
country of origin.

Firstly, the challenges faced by the Fly Emirates company is huge loss due to COVID-19
restriction. Without regard for restrictions, the COVID-19 virus has spread around the world.
There have been terrible economic and financial losses as well as major uncertainty, which
have had an impact on all industries, sectors, and facets of our life (Business Today, 2021).
The giant airline company such as Fly Emirates also affected by COVID-19 outbreak. The
biggest airline in the Middle East, Emirates, reported a net loss of $5.5 billion over the
previous year as revenue dropped by more than 66% as a result of international travel
restrictions brought on by the coronavirus outbreak. The parent company of the Dubai-based
airline has not made a profit for the first time in more than three decades, demonstrating the
huge impact COVID-19 has had on the aviation sector (Business Today, 2021).

Even though operating costs were down 46%, the airline located in Dubai reported an 8.4
billion dollar fall in revenue. The airline reported a 58% decrease in its annual capacity for
both passengers and cargo. The previous year, Emirates managed to pull out 288 million in
profits. Last year, the airline only carried 6.6 million passengers, a startling 90% decrease
compared to the previous year. In addition to running data transport and ground services at

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airports, Emirates Group recorded a total loss of $6 billion. The fact that Dubai's government
granted the state-owned long-haul carrier a $2 billion lifeline to avoid a financial crisis last
year was a startling sign of how bad things had gotten for one of the top airlines in the world
(Business Today, 2021).

2.2 Oil price volatility

About 30% of aviation expenses go toward fuel.When oil prices rise, profit margins might
rapidly decrease.When oil prices rise, profit margins might rapidly decrease.The price of a
barrel dropped over the previous ten years, from a high of $126 in 2011 to a low of roughly
$36 in 2016.The price is $52 per barrel as of the end of January 2019. Although the cyclical
nature of oil prices is not a new risk, there have been significant increases in quick variations
over the past few decades, and this exposure will remain challenging to manage. According
to estimates, the global aircraft industry might lose $1 billion more annually for every $1
increase in the price of a barrel of oil.According to The Motley Fool, “That is a significant
amount of risk that is outside the control of an individual airline company. Even hedging
strategies cannot fully compensate for their vulnerability to sustained periods of high oil
prices.”

The Fly Emirates company is struggling with the fluctuating oil price. Even as rising jet fuel
prices threaten to overshadow an improvement in travel demand, Dubai's Emirates Airline
reduced its losses to $1.1 billion in the year to March. The world’s largest long haul carrier
said revenue jumped 91% to $16.1 billion dollars, as travel lockdowns eased and the airline
added capacity. The prior year, Emirates reported a $5.5 billion loss. By the end of March,
the airline had resumed service to 140 destinations, but the pandemic-ravaged aviation
industry is still struggling because of the jump in fuel prices, which have increased by more
than 50% so far this year. As the cost of oil and jet fuel increased over the past few quarters,
Emirates reported that its fuel expenditure more than quadrupled to $3.8 billion.“It’s very
difficult to establish where that price will stop, or how far it might go down,” In response to a
question regarding the cost of petrol, Sheikh Ahmed told CNBC in an interview on
Tuesday.“That’s really affecting the airline business in a big way,” He continued, stating that
geopolitics and Russia's invasion of Ukraine were significantly affecting petroleum costs.
Emirates said that compared to just 14% in 2020–21, fuel prices made up 23% of operating
expenses for the whole year.

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2.3 Cannot make domestic and international flight journeys to passengers

Another challenges that Emirates Airline Company faced during pandemic covid-19 is cannot
make inbound and outbound flights across national borders bringing passengers. This is
because when the covid-19 pandemic that has hit the world since 2019 has had a big impact
on various parties, especially airline companies because their main source of profit is
dependent on the journey of passengers who want to travel. However, the covid-19 pandemic
has restricted airline operations. Because of that, one world has closed national borders to
prevent the occurrence of immigration and emigration within the country so that the chain of
spread of the virus can be stopped from getting worse.

The airline sector is facing a number of difficulties as a result of the sharp decline in demand
and the anticipated multi-year recovery phase, the first of which is "to survive and get some
income in when there is no demand" (Kamarudeen & Sundarakani, 2020). Although the
present emphasis is on survival, stressed that how airlines manage the recovery phase is
equally important. As a result, airline profits are affected because they cannot take passengers
to walk across national borders. Airlines' profits have dropped dramatically during the covid-
19 pandemic. (Garrow & Lurkin, 2021) Various efforts are made by the company to ensure
that their airline is still strong and does not want to be declared bankrupt.

The majority of major airlines around the world are currently in a position where they have
more months of cash flow coverage relative to their cash burn than they do in normal
operations. This situation should serve as a warning to all of us because it implies that airlines
are continuing to survive even though they are not in operation. However, after airlines can
resume their operations when the government allows them, their risk exposure to cash burn
grows depending on how the restart is managed. So, it appears that everyone is exercising
tremendous caution. The COVID-19 had a historically bad effect on the aviation industry
worldwide. According to the International Air Transport Association, the demand for
international air travel fell globally last year by 75.6% compared to the previous year.
(Campbell, 2016)

2.4 Difficult to predict passenger demand in the long term.

The airline sector was significantly impacted by the COVID-19 pandemic. Fly Emirates is
likewise not exempt from suffering a significant impact. Airlines were recommended by
many nations to only be utilized in emergencies. As a result, passenger numbers dropped, and

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services were drastically cut (Kamarudeen, N., & Sundarakani, 2019). Large financial losses
were sustained to provide a reasonable service for the far smaller number of ticket costs
customers. The number of domestic and international passengers, or air passenger traffic, has
decreased by an expected 59–60% in 2020 compared to 2019, according to a thorough
assessment by the International Civil Aviation Organization, or ICAO. Because of the
dramatic fall in passenger demand during an epidemic, it is challenging to estimate long-term
passenger demand.

Next, predicting future demand is a significant difficulty for post-COVID-19 considering that
the massive growth of the aviation industry for several decades was mostly driven by
passenger demand. Given the variation in pandemic status, the size of aviation, and the
extremely different development levels, it is obvious that there is no demand prediction or
recovery strategy that can indicate demand rebound across all regions. Furthermore, when
they are on a flight is one issue that worries passengers. There is a high (perceived) danger of
spreading the disease inside an airplane during a flight since passengers spend a lot of time in
an enclosed aircraft cabin. As a result, there is a lack of knowledge on potential transmissions
in the cabin of an airplane when it is in flight. It is also publicly recognized that talking,
coughing, and sneezing face-to-face with another person while in flight is the primary method
of transmission.

Finally, the Covid-19 pandemic is also lowering travellers’ perceptions of safety in the
aviation sector. Protection measures were put in place, including mandatory mask use, the
necessity to space passengers apart wherever possible, ventilation, and cleaning
(disinfection). Passengers and operators had to adapt a lot about how they acted and
functioned to be protected.

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3.0 WAY TO OVERCOME THE CHALLENGES

3.1 Employee reduction

The fly emirates airlines has take a solution for this problem to overcome the profit loss by
the pandemic. The solution they take to overcome this problem is by employee reduction.
The largest long-haul airline in the world, Emirates, is starting its round of layoffs and
becoming leaner to cope with the coronavirus pandemic that has seriously impacted demand
for air travel. The announcement comes as the International Air Transport Association
warned on Tuesday that a crisis with "no comparable" will cause huge losses for airlines
worldwide this year (Kamel, 2021). An Emirates spokeswoman stated on Tuesday, "Given
the tremendous impact that the pandemic has had on our business, we simply cannot support
excessive resources and have to right size our workforce in line with our limited operations."
She added, "We regret having to let some of our employees go after carefully considering all
potential outcomes and solutions.

This was a really challenging choice, and we did not make it easily." Emirates, which
employs over 60,000 people, declined to specify how many employees it has let go or which
departments would be impacted. After a prior wave of layoffs that were announced on May
31, Emirates and Dubai Media Office have already announced more job cuts (Kamel, 2021).
This solution has been taken by Fly Emirates to overcome the profit loss by their company.
By doing this solution, they will cut down on expenses to pay the salary of their employees
and will balance the profit and loss.

3.2 Purchasing sizable number of oil contract and call options

The largest operating cost for airlines is typically fuel expenses. As a significant portion of an
airline's operating expenses, fuel costs can have a significant impact on the company's bottom
line.It's crucial to remember that airlines can only make a profit if they can pay their
operating expenses with ticket sales. With the exception of the short-term costs of fuel,
almost all of their costs are at least somewhat predictable and can be prorated into subsequent
transactions. Airlines frequently hedge their fuel expenses in order to protect themselves and
occasionally to profit from the situation. In order to protect themselves from price increases,
they do this by purchasing or selling the anticipated price of oil through a variety of
derivatives.

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In this hedging scenario, an airline would think that costs will go up in the future. To mitigate
this, For its foreseeable demands, the airline buys a sizable number of current oil
contracts.This is comparable to someone who anticipates needing 100 gallons of gas for their
automobile over the course of the next 12 months due to an increase in gas prices. Instead of
buying gas as needed, the car owner decides to purchase all 100 gallons at the current price,
which they expect to be lower than the price of gas in the future.

Other ways to control the oil price volatility is purchasing call options. The call option gives
the buyer the right (though not an obligation) to purchase a stock or commodity at a specific
price before a specific date.When an airline purchases a call option, it is acquiring the right to
buy oil at a price set today in the future. When an airline purchases a call option, it is
acquiring the right to buy oil at a price set today in the future. For example, let's say the
current price of oil is $100 per barrel, but an airline company believes prices will increase. It
could purchase a call option for $5 that gives it the right to purchase a barrel of oil for $110
within a 120-day period. If oil prices increase to above $115 per barrel within 120 days, the
airline will end up saving money.

3.3 Change operation to passenger flight mode to cargo flight mode

The way to overcome this problem is to expand the operation of passenger airlines to another
mode, namely to the cargo flight mode. With so many and constantly changing travel
restrictions in place across the world, the aim of launching service in new domestic markets,
launching new cargo routes, and/or boosting cargo flights is to help create more money.
"Every country seems to be modifying government policies on a daily basis,” (Campbell,
2016). You first have a 14-day quarantine, which is subsequently lifted, but some places now
want PCR2 testing within 72 hours of arrival or proof that you are COVID-free, and some
countries won't let tourists from certain places enter. The airline company needs to be wise in
organizing the decisions taken to stabilize the economy and finances of the company so that
the company's lifespan can continue for a long time. Because of this, the Emirates Company
has expanded their business operations to cargo flights to deliver goods to their intended
destinations. A good implication of the results of this action is to accommodate some
passenger flights that cannot be made to some countries that cannot be passed through if their
cross-country entry laws are tightened due to concerns about the spread of the covid-19 virus
again. As a result, the profit obtained can be continued to pay the wages of the workers and
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pay for the needs of the company in various aspects. In order to adapt to the environmental
changes in the aviation business, it has made sure to update and establish new plans for its
functional tasks. In practically all areas of its organisations, it has successfully departed from
path dependency. This is because the business has never been reluctant to embrace changes
that are necessary for its expansion. From the discussion between superiors in the Emirates
Airline Company, Emirates Airline has created a brand-new business unit within their
company called Emirates SkyCargo, which handles both aviation freight and passenger
transportation. Since the COVID-19 epidemic, Emirates SkyCargo has improved the
performance of the company's cargo operations by contributing significantly to its global
network (Kamarudeen & Sundarakani, 2020). A bright area for the sector has been air travel.
Due to constraints on passenger flights, the capacity of the air freight sector is drastically
decreasing. However, there is still a considerable demand for cargo transportation capacity.
By shipping cargoes containing vaccines for people as well as equipment for medical
personnel to use when handling the COvid-19 virus, they have played a significant part in the
COvid-19 pandemic. In the 2020-21 fiscal year (April-March), the cargo business of Emirates
contributed to about 60 percent of the carrier's total transport revenue. (Garrow & Lurkin,
2021)

3.4 Provide Free, Worldwide Coverage for COVID-19-Related Expenses

To overcome difficult to predict passenger demand in the long term, Fly Emirates Airplane
offers its customers free cover for COVID-19 medical bills and quarantine fees, in a special
assurance, when they fly to any destination, in any class of travel. The first airline in the
world to provide free, universal coverage for COVID-19-related charges is Fly Emirates
(Emirates, 2020).

In addition, Emirates provides its customers, regardless of travel class or destination, free
coverage for COVID-19-related medical expenditures and quarantine charges. From the time
they fly the first sector of their travel, it is valid for 31 days. This implies that even after
arriving at their Emirates destination, customers of other airlines can continue to take
advantage of the extra assurance provided by this cover.

Next, customers of Emirates may fly with assurance since, should they be diagnosed with
COVID-19 while traveling and away from home, the airline will cover medical costs up to
EUR 150,000 and quarantine fees of EUR 100 per day for 14 days. Customers of the airline
are given this coverage free of charge. Other than that, customers are not required to use this
coverage offered by Emirates, nor are they required to register or complete any forms prior to
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flying. To receive support and coverage, any affected consumer who was diagnosed with
COVID-19 while traveling only call a special hotline.

Meanwhile, Fly Emirates is a business that offers assurance and flexibility. It's because
Emirates updated its booking policies to give customers more flexibility and confidence in
their ability to plan their journey in view of the progressive reopening of crossings over the
summer. If COVID-19-related flight or travel restrictions interfere with a customer's travel
plans, they can choose to hold onto their ticket.

Emirates currently offers service to over 60 locations through its network, enabling travelers
from all over the world to connect easily in Dubai. Each passenger's health and safety are also
top priorities for Emirates. This can be demonstrated by the fact that Emirates has put in
place a thorough set of safeguards at every stage of the customer journey to guarantee the
safety of its passengers and staff both on the ground and in the air, including the free
provision of hygiene kits to every customer that contain masks, gloves, hand sanitizer, and
antibacterial wipes.

Finally, Emirates has changed the way travel restrictions are handled so that customers are
notified that these limitations are still in effect and that only passengers who meet the
eligibility and entrance requirements of their destination countries will be allowed to board
aircraft. The better the operations, the more services airlines provide for the safety of their
passengers. With increased client engagement, it will eventually pay off as a profitable
investment.

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4.0 CONCLUSION

As a conclusion, we are able to identify the challenges related with the organizational
management in Fly Emirates airlines company as well as with the solution of every challenge
that occur in the company. The challenges in the Fly Emirates company were focused during
the world are having the Covid-19 Pandemic in 2019. As a result, we are able to understand
and learned from the Fly Emirates airlines company about how they are able to manage every
problem that emerge during Covid-19 Pandemic especially in organizational and financial
problems. As we know, Covid-19 Pandemic has caused the collapsing of economic which
resulting the world are really struggle for every sector in order to keep on track to back in
normal. Including the Fly Emirates airlines company which they are having a lot losses since
the Covid-19 Pandemic attack the world. Therefore, it is important for the company in every
sector to make a move in order to recover from Covid-19 Pandemic attacks especially for Fly
Emirates airlines company to ensure the company is survive in every conditions.

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5.0 REFERENCE

Kamel, D. (2021, July 4). Dubai’s Emirates lays off more staff to cope with coronavirus
fallout. The National. https://www.thenationalnews.com/business/aviation/dubai-s-
emirates-lays-off-more-staff-to-cope-with-coronavirus-fallout-1.1031267

Associated Press. (2021, June 15). COVID-19 impact: Emirates posts $5.5 billion loss on
global travel restrictions. Business Today.
https://www.businesstoday.in/industry/aviation/story/covid-19-impact-emirates-posts-
55-billion-loss-on-global-travel-restrictions-298698-2021-06-15

Duggan, C. (2022, July 28). The Wind Behind The Wings: The History of the Emirates
airline. Wayviator. https://www.wayviator.com/the-wind-behind-the-wings-the-
history-of-the-emirates-airline/

Dwyer, K. (2020, October 8). 8 Critical Risks Facing the Aviation Industry. Risk &
Insurance. https://riskandinsurance.com/7-critical-risks-facing-the-aviation-industry/

Kamarudeen, N. and Sundarakani, B. (2020) Business and supply chain strategy of flying
above the dessert: A case study of Emirates airlines, Researchgate. Available at:
https://www.researchgate.net/publication/341882568_Business_and_supply_chain_stra
tegy_of_flying_above_the_dessert_A_case_study_of_Emirates_airlines (Accessed:
December 19, 2022).

Campbell, J. (2016) EMIRATES AIRLINES Marketing and Business Strategic Analysis,

Academia.edu. Available at:
https://www.academia.edu/31930246/EMIRATES_AIRLINES_Marketing_and_Busine
ss_Strategic_Analysis (Accessed: December 19, 2022).

Garrow, L. and Lurkin, V. (2021) How COVID-19 is impacting and reshaping the airline
industry, Springer link. Available at: https://link.springer.com/article/10.1057/s41272-
020-00271-1 (Accessed: December 19, 2022).