Can the three major Gulf airlines co-exist in this competitive age?

John Brash, the former creative director at the Dubai office of international branding consultancy firm, Landor Associates, explains why he personally believes airlines must develop a solid brand strategy

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By  Gemma Hornett Published  September 4, 2006

|~|Brash,-John-large.gif|~||~|Traditionally airlines have been connected to governments as an essential public transport link with the world, attached to bi-laterals or trade agreements between countries. They have played a vital role in developing national economies, including the opening up of global trade and ease of access between nations, and have also acted as global window shop-fronts for countries, playing out an important ambassadorial role. The traditional role of the airline meant there was not the same pressure for airlines on ROI, as the economic contribution was sufficient to facilitate airline survival and growth. Besides this, airlines tended to operate cosy networks, farmed out by country bi-laterals guaranteeing market share. If costs increased it was easy for the airline to argue for ticket prices to rise also. The picture today is quite a contrast. There has been a significant increase in free-sky policy between countries (like the UAE), as well as extreme pressure on airlines to make profits. This, coupled with the intense cost and external pressures outside the airlines’ control, makes it difficult to establish a successful airline business model. To understand what the biggest of the three Gulf airlines, Emirates, Qatar Airways and Etihad, are striving for, just look at the Singapore Airlines story. In 1971, the Singapore Government launched a national airline as part of its transition from a Third World country to an economic powerhouse. As the national carrier, Singapore Airlines was to be synonymous with how Singapore wanted to portray itself to the world. The new airline was well positioned in that Singapore was a natural geographic hub between North and South Asia, Australia and Europe, but disadvantaged by having a relatively small market of three million people Singapore Airlines is today the most profitable airline in the world and renowned for being cost efficient and providing excellent service. The carrier was able to build a sustainable and successful business model due to three main advantages: absolute government commitment and understanding of the importance of a strong national airline to economic development and contribution, relatively low-cost labour, and geographical hub advantage. In the Middle East the situation is much the same. Dubai, Qatar and Abu Dhabi have adopted a similar approach to the Singapore model. All three airlines have the full support of their respective governments; Emirates and Qatar Airways work on the basis of long-term vision, intrinsically linked with the vision and strategic plan of their two respective countries; and Etihad’s strategy and business model is so far unclear, but appears to be heading the same way. All three airlines also have responsibility for associated businesses including airports, airport infrastructure, catering units, duty free, ground handling and so on. The airlines in the Middle East still enjoy relatively lower labour costs and benefit from operating in a tax-free environment. Lastly, ultra long-haul aircraft such as the A340-500 and 777LR can now virtually reach any major city worldwide non-stop from the Gulf, which supports the growth of the Gulf area as a major hub. This development is a particularly important advantage for the Gulf airlines because around 65% of all of passengers are connecting traffic, notably coming from India to the Gulf and beyond. These traffic flows are needed for growth and survival, because the relatively small population of the Gulf is unable to sustain the aggressive growth rates and total capacity of the three airlines. Emirates has taken on Qantas, British Airways and the major Asian carriers, including Singapore Airlines, to dramatically expand its network and services linking New Zealand and Australia with Europe and the UK, with a one-stop service. India will provide further opportunities for larger, more valuable passenger flows, despite greater deregulation of the aviation markets. In summary, there is an opportunity for the three major airlines in the region to survive, grow, become profitable and continue to make a significant contribution to their shareholders and their economies. The most successful of these airlines will have the following: A clear vision established by the shareholders and their long-term strategic plans. A strong, distinctive and differentiated brand. A consistent, disciplined and experienced airline management team. An excellent partnership between the shareholders and airline management A long-term strategic vision; planning horizon should be 10-15 years. A realistic investment strategy and ROI goal. Finally it must carve out a clear brand position linked to its business model and vision. To date, Gulf Air is the only airline in the region to have established a clear and consistent brand positioning, applied throughout its advertising, lounges, FFP, and aircraft. Ask yourself what Emirates’ brand strategy is, apart from the strap-line “Keep Discovering”. Etihad has not emerged with any clear brand strategy or positioning and Qatar Airways is developing a personal five-star quality image, but there is no indication of what the airlines really stand for. The most successful Gulf airline will be the one that articulates its brand and brand strategy, then executes the strategy in a disciplined way with a long-term view. This is the key opportunity yet to be exploited. ||**||

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