Trend and Challenges of Gulf Air in the Past 5 to 7 Years
Business strategy, trends & challenges GULF AIR (20 marks)
Airline’s unique value proposition UVP FOR GULF AIR, its best practices
and which of these contribute to revenues and operating margins. A
PARAGRAPH
Trends and challenges which have affected the airline’s ”GULF AIR”
development during the past 5-7 + Trends and challenges during the
recession 2007-2008 PARAGRAPH
and will impact possibly in the next decade. Recommendation on plans
and actions this airline “GULF AIR” can adopt to overcome uncertain
times as during last recession, if the same were to happen again in
future. PARAGRAPH
ITS ALL ABOUT GULF AIR
Solution
Introduction
Gulf Air is one of the fastest developing and reliable airlines in the world. The airline
has over the years received numerous awards highlighting its dedication of serving its
customers and all stakeholders diligently (Gulf Air, 2016). However, the airline has faced
several challenges over the years it has been on the market. Despite the very many challenges
that the company has faced, the airline has remained relevant to the market and much
stronger (Gulf Air, 2016). This paper will discuss the business strategy, trends and challenges
that have affected Gulf Air over the years.
Unique Value Proposition (UVP)
A unique value proposition is a compilation of reasons customers should utilise the
services of the airline (Matzler, Bailom, Friedrich von den Eichen, & Kohler, 2013, p. 30).
The reasons are aimed to convince the potential customers that the services offered by the
airline add value to him or her than other alternatives. Over the years, Gulf Air has
victoriously established customer oriented unique value proposition by offering the customers
with the mixture of products and quality services to enhance their experience when on the
airline (Matzler, Bailom, Friedrich von den Eichen, & Kohler, 2013, p. 32). The airline has
strived to customize each customer’s experience with respect to destination. The airline’s
unique proposition has been enhanced by the airline’s marketing strategy where airline
indicates that its main hub in Muharraq is strategically placed as the gateway to the Asian
Continent (Matzler, Bailom, Friedrich von den Eichen, & Kohler, 2013, p. 33).
The various unique proposition of the airline include competitive fare pricing with
additional offers during pilgrimage and holiday season, utilisation of time effective routes,
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various world cuisines while on board to accommodate various cultures, and on board
entertainment facilities (Matzler, Bailom, Friedrich von den Eichen, & Kohler, 2013, p. 33).
All these factors have effectively enhanced customer’s experience in line with the airlines
mission statement and objectives. The airline’s best practise has been the provision of the
competitive prices and offers especially during the holidays and pilgrimage season. During
those period the airline experience influx of customers with many expressing the benefits of
the offering. The offering of the competitive prices has contributed positively to its revenues
and operating margins. The competitive fare pricing strategy has enabled the airline to attract
many customers and in turn improve on its service sales and profitability (Matzler, Bailom,
Friedrich von den Eichen, & Kohler, 2013, p. 37).
Trend and Challenges of Gulf Air in the Past 5 – 7 Years
The airline has faced several challenges in the past 5 – 7 years. The major challenge
that the airline has faced is the political instability in the region. The Middle East region has
over the years mired by political instability which has given rise to terrorism incidences
(Anandarajan, Anandarajan, & Srinivasan, 2012, p. 64). The political instability issues have
resulted to the reduction of the customers thus affecting the profitability of the airline. The
second challenge is the intense competition from other airlines in the region (Anandarajan,
Anandarajan, & Srinivasan, 2012, p. 66). The popularity of the Emirates Airline and the
Etihad Airways has negatively affected the Gulf Air. With the two airlines receiving
substantial financial backing from their subsequent governments, they have continued to pose
an imminent challenge to the airline. The third challenge is the outbreak of various diseases.
In 2009, an outbreak of bird’s flu resulted to airline cancelling several scheduled flights
resulting to major lose. The fourth challenge is the recession. The recession that occurred in
2007 and 2008 and again in 2010 negatively affected the performance of the company
(Anandarajan, Anandarajan, & Srinivasan, 2012, p. 67).
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The recession that occurred between 2007 and 2008 was one of the major setback
periods for the Gulf Air. The recession proved to be a major challenge to the airline and
during that period the airline made loses (Anandarajan, Anandarajan, & Srinivasan, 2012, p.
69). The reason for loses was due to the many challenges that the airline faced during the
recession period. The major challenge that the airline faced during that recession period was
the collapse in business traffic. The number of travelling customers drastically reduced
which, affected the stability of the airline. The collapse in business traffic led to the airline
cutting down and reducing its fare (Anandarajan, Anandarajan, & Srinivasan, 2012, p. 69).
However, the fare prices continued to fall making it another challenge for the company. The
main reasoning for cutting down fares was to attract the small numbers of customers but the
move failed to elevate the situation at the time. The other challenge that the company faced
during the 2007 – 2008 recession was the increase of the fuel cost. With low customer turn
up, the increase in fuel prices worsened the situation even further. The airline was not making
profits at the time and the increase in fuel price ensured that the company was operating at a
loss. The other major challenge that the airline faced during the recession was the increase in
operating cost (Anandarajan, Anandarajan, & Srinivasan, 2012, p. 69). The operating
activities became more expensive and unbearable for the airline. The recession of 2007 –
2008 was one of the major recessions that almost took the airline out of business. However,
its management was able to implement some strategies with the help of the government of
Bahrain that enabled the airline to see off the recession period (Anandarajan, Anandarajan, &
Srinivasan, 2012, p. 73).
Recommendations on plans of Actions
The Gulf Air airline was seriously affected by the recession period of 2007 – 2008.
However, the challenges that it faced during that period should be a learning lesson for the
company. The company should ensure that such occurrences do not seriously affect the
GULF AIR 5
company’s financial situation (Embrechts, Klüppelberg, & Mikosch, 2013, p. 56). There are
several recommendations on plans of actions that the company should embrace and
accommodate in readiness of such period in future. The first scenario is that the airline should
strive to reduce cost at all times. Recession usually occur unexpectedly. Therefore, striving to
reduce costs and expenses enables the company to reduce the chances of operating under
losses and also ensures that the company has a chance of surviving in case recession re-
occurs (Embrechts, Klüppelberg, & Mikosch, 2013, p. 53).
Another recommendation is that the airline should lobby the government to reduce on
taxes. The tax reduction would ensure that the company’s expenses are reduced and chances
of profitability are increased (Ulrich, 2013, p. 31). The final recommendation is that the
company should be open to idea of mergers. The merger recommendation should be a last
resort but is critical. In severe incidences of recession mergers are usually a strategy of
cutting on cost and ensuring that the company enjoys economies of scale (Ulrich, 2013, p.
31). It is quite easier for large company to shake off effects of a recession than a smaller
company.
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References
Anandarajan, M., Anandarajan, A., & Srinivasan, C. A. (Eds.). (2012). Business intelligence
techniques: a perspective from accounting and finance. Springer Science & Business
Media.
Embrechts, P., Klüppelberg, C., & Mikosch, T. (2013). Modelling extremal events: for
insurance and finance (Vol. 33). Springer Science & Business Media
Gulf Air. (2016). About the Gulf Air. Retrieved from: www.gulfair.com/about
Matzler, K., Bailom, F., Friedrich von den Eichen, S., & Kohler, T. (2013). Business model
innovation: coffee triumphs for Nespresso. Journal of Business Strategy, 34(2), 30-37
Ulrich, D., 2013. Human resource champions: The next agenda for adding value and
delivering results. Harvard Business Press.
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