ATTACK ON THE

GULF AIRLINES
MANAGERIAL ECONOMICS
INSTRUCTOR: DR. ABU ALI
GROUP MEMBERS:
MUHAMMAD SAQUIB
NADER AL SUNAIDAR

OUTLINE

BACKGROUND STORY

U.S AIRLINE INDUSTRY

U.S BEING THE LEADER OF THE MARKET

GULF AIRLINE INDUSTRY

ENTRY OF GULF AIRLINES INTO THE WORLD COMPETITION

THE CONTROVERSY

BARRIERS TO ENTRY IN THE FREE MARKET PORTERS FIVE FORCES

MARKET ECONOMIC ANALYSIS REASONS FOR THE CONTROVERSY,

THE ECONOMIC DOWNTURN OF US AIRLINES, PRICE ELASTICITY OF
DEMAND & GAME THEORY ADOPTED

CONCLUSION

BACKGROUND OF WORLD AIRLINE

INDUSTRY

Has played a vital role in the worlds economy

2000 airlines, 23,000, 3,700 airports

Annual growth of 5% since 2006

Single departing passenger generating a profit

of $ 2.56 (Brian Pearce, Chief Economist of
IATA)

US AIRLINE MARKET

Consists over 100 airlines, 11 million departures

1/3 of the worlds total air traffic

545,000 employees, 8,000 aircrafts, 31,000 flights per day

8% of US GDP

GULF AIRLINE INDUSTRY

World in recession, GCC Aviation in expansion

8% of the global air transport

10% growth rate

Arab Air Carriers Organization (AACO)

400 million passengers by 2020

Airport expansions

GULF AIRLINE FACTORS WHICH

AFFECT THE WORLD AIRLINE
MARKET

DEMAND & SUPPLY REVENUE

MANAGEMENT STRATEGY

THE CONTROVERSY

Let me tell you that some of the figures in there were factually incorrect the
conclusions that were drawn were incorrect and we will put the record straight with
regard to the fuel hedge, Sir Trim Clark, CEO Emirates.

PORTERS FIVE FORCES

Degree Of
Rivalry

Supplier
Power

Threat Of
Substitute
s

Threat Of
Entry

Porter'
s Five
Forces
Buyer
Power

Analysis (Impact on US airlines)

Gulf carriers aggregate seat capacity growth 1094%

Analysis (Impact on US airlines)

1 %Gulf carrier growth =

0.0917% decrease in US airline
traffic for international routes

Aggregate growth 104.8%

9.62% decrease in passengers

traffic for US airline.

Analysis (Example: Impact on US

airlines)
Flight to New York to Rome Flight to New York to Milan

Price: $1075
Why, although is within the same country?

Emirates airline started a route- JFK-MIL

On-price elasticity North American to Europe = -1.7

40% decrease in Price = 68% increase in demand

Price: $635

Factors and Consideration

Price
Emirates Airline

Uses Airbus A380 on JFK-DXB

Calculated Fuel efficiency

21.052 liters/Km

0.0407 liter per passenger

kilometer

Flight LAX-DXB 13,412 Km

o

Round trip saving $162 per

passenger

American Airways

Uses Boeing 747 on JFK-DXB

Calculated Fuel efficiency

17.862 liters/Km

0.0478 liter per passenger

kilometer

Flight LAX-DXB 13,412 Km

o

Round trip extra cost $162

per passenger

Factors and Consideration

Services and convenience

William Evans an Atlanta-based director for a major aviation industry

company who was interviewed by USA Today.
o

Herkea Jea, a small-business owner from Fremont, Calif also

interviewed by USA Today
o

I began to shift my business especially to Emirates. The U.S.

carriers are usually the most expensive, and the service is
lacking USA

Why? He rattles off a list of advantages for the Gulf carriers,

including new aircraft, high-quality food and friendly staff.

Stated by Airways News

o

They are flying out of a region thats a central hub that allows
travelers to get to places around the world easier.

CONCLUSION

REFERENCES

1.
http://www.airbus.com/presscentre/pressreleases/press-release-detail/detail/new-airbus-aircraft-list-pri
ces-for-2015/

2.http://www.boeing.com/assets/pdf/commercial/startup/pdf/business/prices.pdf

3.http://www.nytimes.com/2012/05/26/business/start-up-airlines-face-big-obstacles.html?_r=0

4.
http://www.wsj.com/articles/u-s-airlines-battling-gulf-carriers-can-cite-experience-of-others-142654397
1

5.
http://www.flightglobal.com/news/articles/analysis-how-have-gulf-carriers-impacted-us-airlines-407813
/

6.http://www.wsj.com/articles/emirates-etihad-and-qatar-make-their-move-on-the-u-s-1415226589

7.
http://www.bizjournals.com/bizjournals/blog/seat2B/2015/03/us-airlines-challenge-persian-gulf-airline
s.html?page=all

8.https://www.iata.org/whatwedo/Documents/economics/air_travel_demand.pdf

9.http://www.usatoday.com/story/travel/flights/2012/11/12/qatar-emirates-airlines/1700609/

10
http://airwaysnews.com/blog/2015/02/17/the-passenger-experience-on-u-s-airlines-versus-the-big-three-g
ulf-carriers-fair-fight/