Comparing Air India and Air Arabia

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International Journal of Marketing and Human Resource Management (IJMHRM)
Volume 7, Issue 3, September–December (2016), pp. 01–09, Article ID: IJMHRM_07_03_001
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A COMPARATIVE ANALYSIS BETWEEN AIR INDIA
AND AIR ARABIA AIRLINE SERVICES INTERNAL AND
EXTERNAL ENVIRONMENTAL FACTORS
S. Aisha Rani
Ph.D Research Scholar, Jamal Institute of Management,
Jamal Mohamed College, Tiruchirappalli.
Dr. M. Shiek Mohamed
Professor (Rtd), Jamal Institute of Management,
Jamal Mohamed College, Tiruchirappalli.
ABSTRACT
Air India Ltd. (Air India) provides domestic and international passenger and cargo transportation
services. Strong fleet network, comprehensive services and star alliance are the company’s major
strengths, whereas lawsuit and technical glitches in aircraft remain areas of concern. Air Arabia PJSC
(Air Arabia) is a low-cost carrier (LCC) based in the UAE. The company provides domestic and
international air transport services for passengers and cargo. Air Arabia also offers other services
such as trading of aircraft, spare parts and telecommunications devices, along with aviation training
and aircraft repairs and maintenance activities.
Key words: SWOT Analysis, Air India and Air Arabia.
Cite this Article: S. Aisha Rani and Dr. M. Shiek Mohamed, A Comparative Analysis between Air
India and Air Arabia Airline Services Internal and External Environmental Factors. International
Journal of Marketing and Human Resource Management, 7(2), 2016, pp. 01–09.
http://www.iaeme.com/ijmhrm/issues.asp?JType=IJMHRM&VType=7&IType=3
1. AIR INDIA LTD - COMPANY OVERVIEW
Air India Ltd. (Air India) is a state-owned airline service provider in India. The company offers both passenger
and cargo transportation services. It operates a wide range of aircraft under three categories wide body, narrow
body and regional aircraft. Its fleet size includes Boeing 777-200, Boeing 777-300, Boeing 747-400, Boeing
787-800, Airbus 319, Airbus320, Airbus321, CRJ-700, ATR42 and ATR72. The company serves domestic
and international destinations across Asia-Pacific, Europe, Africa, the Middle East, and North America. It also
serves destinations through its code-share agreement with Aeroflot, Air Mauritius, Egypt Air, Ethiopian
Airways, Air Canada, Turkish Airlines Lufthansa and Singapore Airlines. The company operates its route
system through two major hubs in Mumbai and Delhi, along with secondary hubs in Kolkata and Chennai. It is
also involved in providing aircraft maintenance and engineering support services and managing hotels in India.
Air India is headquartered in New Delhi, India.

S. Aisha Rani and Dr. M. Shiek Mohamed
1.1. Air India SWOT Analysis
Air India Ltd. (Air India) provides domestic and international passenger and cargo transportation services.
Strong fleet network, comprehensive services and star alliance are the company’s major strengths, whereas
lawsuit and technical glitches in aircraft remain areas of concern. In the future, risks related to unforeseen
circumstances, stringent regulations and intense competition in the airline industry may hamper its
performance. However, growth in global airline traffic, code-share agreements, positive outlook for global
travel and tourism industry, and new mascot are likely to present growth opportunities to the company.
1.2. Strength - Strong Fleet Network
The company maintains a diversified fleet strategy comprising a variety of aircraft, which provides flexibility
as per the changing conditions. Air India operates a fleet of 225 aircraft, which includes 154 owned aircraft, 44
aircraft under sale and lease back agreement and 27 aircraft under dry leased agreement. It operates 41 wide
body, 66 narrow body, and 11 regional aircraft including 21 B787 Dream liner, three B777-200LR, 12 B777-
300ER, five B747-400, nine A320 (twin class), 15 A320 (Classic), 22 A319, 20 A321, three CRJ-700, five
ATR72 and three ATR42 aircraft. With these vast fleets, the company serves 52 domestic destinations and 34
international destinations across Asia-Pacific, Europe, Africa, the Middle East, and North America. Strong
fleet strategy enhances the company’s ability to serves a large number of customers by providing a number of
flying option and safety assurances.
1.3. Strength - Comprehensive Services
Air India’s comprehensive service portfolio gives it an edge over its competitors while attracting wide
customer base. Air India provides air transportation and offers cargo services through its fleet of 225 aircraft.
It is the largest handler and carrier of perishables in India and acts as a handling agent for other cargo carriers
in its Mumbai, Delhi, Kolkata, and Chennai hubs. Air India offers airport services and charter services, and
passenger services such as check-ins, arrivals, lounge, and ticketing and baggage services. It also provides on-
board services such as first class, executive class, economy class, in-flight entertainment, and shopping
facilities. Additionally, the company provides on-ground services, which includes advance web check in,
mobile check in, and kiosk check in services. Air India also provides special offers including international
schemes, domestic schemes, holiday schemes, and special offers for corporate clients. Air India operates low
cost carrier Air India Express, which serves 13 international destinations from 13 domestic destinations. Air
India Express also operates domestic flights between Chennai, Thiruvananthpuram, Kozhikode, and Kochi.
The company owns and operates two hotels one each at Delhi and Srinagar under the brand Centaur and 2
flight Kitchens. It also operates one hotel each at Mumbai and Delhi under Chefair brand. These hotels provide
luxurious accommodation for travelers. Air India also offers maintenance and engineering support services
such as structural repairs, base maintenance, landing gear repair and overhaul, asset management, material
management, and engineering training services. It offers specialized services such as hydraulic tubing, facility
and equipment support, engine borescopes, and non-destructive testing services. Apart from this, the company
offer frequent flyer program and other customers support services. Comprehensive services portfolio helps the
company to provide and-to-end solution in travel and tourism industry, thereby minimize its business risks. It
also helps in serving diversified customers, and generating high revenues.
1.4. Strength - Star Alliance
Strong business alliances help companies to benefit from the synergies. Star Alliance is a leading global airline
network, which has the highest number of member airlines, daily flights, and destinations. Star Alliance has 28
member airlines which currently offers more than 18,500 daily flights in 192 countries. Founded in 1997, Star
Alliance operates 1,330 airports and carries passengers through its member airlines, which include Air China,
Air Canada, and Asiana Airlines, Copa Airlines, LOT Polish Airline, Turkish Airlines, Singapore Airlines,
Shenzhen Airlines, Ethiopian Airlines, Brussels Airlines, Air New Zealand, and others. Its total network
handles more than 1000 lounges. The alliance enables its members to provide more services and benefits than

A Comparative Analysis between Air India and Air Arabia Airline Services Internal and External Environmental
Factors
any airline can provide on its own. The alliance allows Air India passengers to utilize its Silver or Gold Status
benefits across the alliance, wider choices of flights and more frequent flyer mileage points. The services
offered include a broader route network, opportunities to earn and redeem frequent flyer miles and points
across the combined network, and more airport lounges. This strategic alliance allows the company to share
best practices while minimizing expenses and ensuring that contract deadlines are met.
1.5. Weaknesses - Lawsuit
Lawsuits and litigations initiated against the company may divert management attention. In May 2016, Air
India settled a multi-district air cargo shipping services antitrust litigation against it by agreeing to pay
US$12.5 million to direct purchasers of air cargo shipping services. This was started on February 2006 when
the direct purchasers of air cargo shipping services filed an action suit against over 30 companies including Air
India for alleged overcharges involving price-fixing conspiracy for shipments to or from the US between
January 2000 and September 2006. Furthermore, in October 2015, a lawsuit was filed against the company in
the New York Federal Court for breaching of contract. The company subcontracted with Dynamic
International Airways LLC for carriage of holy pilgrims from India to Saudi Arabia round-trip for the year
2013 and 2014. Accordingly, Dynamic carried 47,976 passengers for Hajj in 2014 and carried around 6000
passengers for Hajj in 2013. Later on, Air India decided to discontinue future business relationship with
Dynamic which caused expectation damages of US$84 million to Dynamic. As a result, Dynamic launched a
US$97.7 million breach of contract lawsuit against Air India. Lawsuits against the company may tarnish its
brand image and increases the financial burden on it in form of penalties or fines.
1.6. Weaknesses - Technical Glitches in Aircraft
Technical glitches in aircraft have been posting challenges for Air India in regular basis. Major problems for
the company were created by its Boeing-787 Dreamliners fleet. Air India has been suffering from technical
problems and other malfunctioning in its Dreamliner aircraft since last three years. As a result, the company
made decision to ground Boeing 787-800 planes on multiple occasions, which has resulted in long flight
delays and major loss of revenue. In March 2016, the company’s AI 701 Kolkata to New Delhi flight was
cancelled due to technical glitches. Due to which the company had to make arrangements for hotel
accommodation and food for all 236 passengers. In the same month, the company grounded its Paris to Delhi
flight in Paris due to technical issues. Air India had reported about 334 delays of more than 15 minutes
between April 2015 and March 2016 due to technical snag in its Dream liner Boeing 787-800 planes. Earlier in
February 2014, its Dream liner flight from Sydney to Delhi was grounded in Kuala Lumpur under emergency
conditions as its cockpit panels undergone a software malfunction. Air India already inducted 21 owned and
leased Boeing 787 Dream liner into its fleet. Additionally, it has also made commitments to purchase more
Dream liner fleets from Boeing by 2018. Apart from Dream liners, another Air India aircraft, Boeing 777-
300ER, scheduled fly from Hyderabad to Chicago through Delhi, was delayed by 18 hours for the same issue,
causing inconvenience for over 300 passengers, in March 2016. Technical issues lead to delay in flights,
cancellation of scheduled flights and mostly hamper customer satisfaction and confidence, thereby loss of
customers as well as market share.
1.7. Opportunities - Growth in Global Airline Traffic
Air India is likely to benefit from the positive outlook in global airline industry. According to International Air
Transport Associations (IATAs) 2016 outlook, the airline industry is expected to realize average net profit
margin of 5.1% with total net profits of US$36.3 billion. The growth in the airline industry is expected to be
driven by several factors, including strong demand for passenger travel, strong economic performance in
major economies such as Euro-zone and efficiency gains by airlines due to high load factors. In 2016, the
airline industry revenue is expected to increase by 0.9% to US$717 billion from last year, primarily attributed
to the passenger airline, which is expected to generate revenue of US$533 billion, up from US$525 billion in
2014. Apart from this, the demand for passenger travel is projected to increase by 6.9%, with 3.8 billion

passengers are expected to travel in 2016. The air cargo demand is expected to rise to 3% exceeding 1.9% in
2015. The major contributors towards the strong industry performance are North America, Europe, Asia-
Pacific and the Middle East. North America is expected to generate US$19.2 billion profit in 2016 and the
capacity growth in North America is projected to increase by 4.8% in 2016 compared to 3.7% in 2015, while
European airlines are expected to deliver net profits of US$8.5 billion in 2016, up from US$6.9 billion in
2015. In Asia-Pacific, the profits are projected to increase from US$5.8 billion in 2015 to US$6.6 billion in
2016. The Middle East is expected to grow with a net profit of US$1.7 billion in 2016. Air India provides
passenger air transportation and cargo transportation services across several domestic and international
destinations. Therefore, growing global airline traffic is expected to increase demand for the company’s
services, and improve its financial performance.
1.8. Opportunities - Code-share Agreements
Code-share agreements may strengthen the company’s revenue, apart from attracting a wide customer base. In
May 2016, the company entered into a code-share agreement with Flybe, Europe’s regional airline to offer its
customers flight services onward to Delhi. Under the agreement, the company would place its marketing code
on Fly be flights. Through this agreement, the company intends to provide benefits to tourists travelling to and
from domestic sectors of the UK and India. In April 2016, the company signed an agreement with ALAFCO, a
Kuwait based leasing company for leasing 14 Airbus A320neo aircraft. The new A320neo aircraft would
comprise a new generation CFM leap engine which helps to reduce noise and emissions, reduce fuel
consumption by 15%and enhance the operational efficiency. In June 2015, the company signed a code-share
agreement with Air New Zealand, a provider of international and domestic air passenger and cargo transport
services throughout New Zealand and the South West Pacific and Avianca, an operator of airline services
based in the US, to provide its customer connectivity to New Zealand and Colombia. Under the agreement, Air
India would have access to Air New Zealand's services from Melbourne, Sydney, Hong Kong and Singapore
to destinations in New Zealand. Similarly, it would also have access on Avianca operated flights on the New
York-Bogota/Medellin/Cartagena and London-Bogota sectors. With the implementation of such code-share
agreements the company anticipates significant growth in the revenues in the long run.
1.9. Opportunities - Positive Outlook for Global Travel and Tourism Industry
The company is likely to benefit from the global travel and tourism sectors positive growth potential.
According to the World Travel & Tourism Council (WT&TC), the sectors direct contribution to the worlds
GDP is expected to increase by 3.3% in 2016 and by 4.2% per annum during 2016–2026 to reach US$3,469
billion at the end of the projected period. The sector's total contribution to the world economy is forecast to
reach US$10,986.5 billion in 2026. Visitor exports are expected to increase by 3% in 2016 and by 4.5% per
annum during 2016-2026 to reach US$2,056 billion at the end of the projected period. A rise in investments to
US$1,254.2 billion in 2026 is likely to support activity within the sector. Further, according to WT&TC, total
revenue of the global hotel industry is projected to reach US$550 billion in 2026. The major contributors
towards the sector are Europe and Asia Pacific with highest occupancy rate of 68% respectively. Air India is
an airline service provider that connects various Indian cities with a wide range of international destinations in
Asia-Pacific, Europe, Africa, and North America. It also operates hotels in Indian. Further, to take hold on the
growing trends the company took several expansion initiatives. In April 2016, the company launched direct
operations between Delhi and Vienna, the cultural city of Austria as well as Europe. The new flights is
expected to provide better options to Indians in Austria and neighboring European cities and to locals visiting
the Indian sub-continent, thereby increasing the geographic coverage of the company. In the same month, Air
India’s subsidiary Alliance Air launched new flights between Delhi - Jammu, Bengaluru –Vijayawada and
Kolkata- Agartala to boost its „Connect India‟ program.

Factors
1.10. Opportunities - New Mascot
The company brought a new approach for it brand promotion. Air India has been portraying itself through the
mascot “Maharajah” since 1946. The distinctive mascot that showcased a person with outsized moustache,
striped turban and an aquiline nose was symbolizing graciousness and high living. The mascot associated Air
India with premium concept. But in view with changing trends and in terms to position itself as a brand for
general traveler across the globe, the company gave a make-over to its previous mascot and changed it with a
younger version. In January 2015, the company introduced a new mascot with spiky hair, jeans and sneakers.
Though, the twirling moustache of the mascot remained but was cut down to size. This was part of the
company’s strategy to bring flying within the reach of the common man and not limited only to the rich. The
new mascot is aligned with the modern times. Further, the mascot was launched with 27 different pictures to
showcase some of the destinations the company flies such as a lover boy in Paris or a sumo wrestler in Tokyo.
The initiative is expected to support the company’s focus to become a lean commercial entity by capturing a
large customer pool.
1.11. Threats - Unforeseen Circumstances
The operations of Air India may be adversely affected due to unfavorable events in near future. The
occurrence of swine flu, SARS, Ebola virus and bird flu epidemic has resulted in a drop in the number of
tourist arrivals in the affected countries. The outbreaks of Zika virus spread in 2015 has also become a cause
of concern for the travel industry. Precautionary measures such as the suspension of flights impacted the
hospitality industry. Natural calamities such as polar vortex in the US, earthquakes in Nepal, and other
disastrous calamities, eroded the revenues and income levels of the companies operating in the airline industry.
It may also lead to people reducing their traveling to few countries due to the fear of natural disasters. Apart
from these, terrorism factor has also affecting airline industry as well as travel and tourism industry on regular
basis. The November 2015 attacks in Paris, the rise of new terrorist groups such as Islamic State of Iraq and
Syria (ISIS) and terrorist attack in Brussels in March 2016 raised security concerns worldwide, leaving the
overall travel and tourism industry under constant threat of terrorism. As a result of the Paris attack, Air
France-KLM had to suffer a loss of EUR70 millions in 2015. Furthermore, the terrorist attacks at Istanbul
Airport in June 2016 that killed 41 people heavily impacted the airline providers those operate in Europe. Such
unforeseen circumstances could affect the performance of the airline service provider such as Air India.
1.12. Threats - Stringent Regulations in Airline Industry
Air India is required to comply with Federal Aviation Administration (FAA) and Department of
Transportation (DoT) regulations under the provisions of the Federal Aviation Act of 1958. The FAA
prescribes standards and licensing requirements for both aircraft and components. The airline industry outside
the US is regulated by agencies such as the EASA in Europe, the JCAB in Japan, and the CAAC in China. In
February 2015, the FAA issued a framework of regulations that would allow routine use of small unmanned
aircraft systems (UAS) in today‟s aviation system, while maintaining flexibility to accommodate future
technological innovations. The new rules impact the timing and amount of rest periods for pilots between work
assignments, and the numbers of scheduled segments, time zones, and flight types. As a result, the company
may be required to recruit more pilots, leading to increased costs. The company is also subject to inspection by
the FAA and other regulatory agencies, with non-compliance leading to possible fines and other penalties.
1.13. Threats - Intense Competition
Air India competes with other airlines in various areas including customer service such as ontime
performance, passenger amenities, flight equipment type, and comfort. Its competitors may have more seating
options and associated passenger amenities than does the company, including first-class, business class, and
other premium seating and related amenities. The company also faces competition due to initiatives taken by
its competitors. Some major airlines have announced plans to add a significant number of new aircraft to their

fleets. This provides cost benefits to these airlines through improved fuel efficiencies, fleet simplification and
lower maintenance costs.
For Instance, in May 2016, the company’s close competitor Malaysia Airlines collaborated with Lufthansa
Technik AG for a joint venture to establish a regional maintenance, repair and overhaul (MRO) facility at
Kuala Lumpur International Airport. The facility is planned to open by 2017. Further, it’s another competitor
SpiceJet, launched lounges at Varanasi, Jaipur and Guwahati, India in March 2016, offering customers with
facilities including Wi-Fi access, flight information screen, televisions, newspapers and magazines among
others.These competitors may introduce aircraft with newer and different passenger amenities than those
contained in the company‟s existing fleet. This may lead to loss of customers and revenues, or unnecessary
commission payments and is likely to pose a major challenge for Air India. According to a statement given by
the minister of state for civil aviation Mr. Mahesh Sharma in 2016, the market share of Air India has declined
in the last three years, with the company capturing 16% of the total domestic traffic till February 2016 against
a market share of 18% in the fiscal year ended in March 2015 and 19% in the previous year.
2. AIR ARABIA - COMPANY OVERVIEW
Air Arabia PJSC (Air Arabia) is a low-cost carrier (LCC) based in the UAE. The company provides domestic
and international air transport services for passengers and cargo. Air Arabia also offers other services such as
trading of aircraft, spare parts and telecommunications devices, along with aviation training and aircraft
repairs and maintenance activities. In addition, it provides services such as aircraft rental, travel and tourism,
air cargo agency, and document transfer services. The company operates a fleet of 34 aircraft, connecting 93
destinations across the Middle East, North Africa, Asia, and Europe. Air Arabia is headquartered in Sharjah,
the UAE.
2.1. Air Arabia SWOT Analysis
Air Arabia is an LCC in the UAE. The company’s strong operating performance, strong market position and
enhanced financial position are its major strengths, even as limited liquidity position remains an area of
concern. Going forward, foreign currency fluctuations and risks related to unforeseen circumstances may
impact the company’s performance. However, growth in global airline traffic, positive outlook for travel and
tourism (T&T) industry in the UAE and its strategic growth initiatives are likely to present new growth
opportunities to the company.
2.2. Strength - Enhanced Financial Position
Enhanced financial leverage or solvency position of the company strengthens its ability to borrow and repay
money, which, in turn, enhances its business operations. The solvency position of Air Arabia has improved
due to limited debt funding than equity. The company recorded a debt-to-equity ratio of 0.4 at the end of
FY2013 against its competitors: El Al Israel Airlines and Jazeera Airways Company KSC, which reported
debt-to-equity ratios of 3.5 and 1.4 respectively. Furthermore, at the end of FY2013, the company recorded a
2.3% increase in equity to AED5.6 billion, compared with AED5.4 billion at the end of previous year. Strong
solvency position indicates utilization of lower financial leverage and its comparatively higher equity position,
underlining the better creditworthiness of the company.
2.3. Strength - Strong Market Position
Air Arabia's strong market position has built its brand equity and helped the company in establishing itself as a
leading airline service provider in the Middle East. The company is the first and largest LCC in the UAE. The
company operates a fleet of 34 aircraft, connecting 93 destinations across the Middle East, North Africa, Asia,
and Europe. Air Arabia operates from three hubs, located in Sharjah International Airport, the UAE; Mohamed
V International Airport in Morocco and Borg Al Arab International Airport in Alexandria, Egypt. The
company received many awards for its performance. The company is in the world’s top five lowest airline in
terms of operational cost. It is also the world's best operator of an Airbus A320 fleet with highest aircraft

Factors
utilization and operational reliability. Therefore, leading market position helps the company in attracting larger
customer base, while improving the top-line performance of the company.
2.4. Strength - Strong Operating Performance
Air Arabia displayed strong operating performance in FY2013 during which the company recorded revenues
of AED3.2 billion, with an annual growth 12.4%. The increase in revenue was primarily a result of
partnerships and introduction of new services. The operating margin of Air Arabia was 10.8% in FY2013
which was higher than its competitors such as El Al Israel Airlines Ltd. (El Al Israel Airlines) and Turk Hava
Yollari AO which reported operating margins of 1.8% and 6.6% respectively. Therefore, strong operating
performance against its peer group and industry helps enhance investors’ confidence and improve the growth
prospects of the company.
2.5. Weakness - Limited Liquidity Position
Air Arabia's current ratio was 1.2 at the end of FY2013. This was lower than its current ratio of 1.5 in the
previous year. A lower current ratio indicates weaker financial position of the company and its inability to
meet short-term obligations compared with other companies in the industry. At the end of the review year, the
company had total current liabilities worth AED1.7 billion, an increase of 35.6% over the previous year. Its
current portfolio of long-term debt or capital leases, too, increased from AED110.3 million in FY2012 to
AED176.0 million in FY2013. Therefore, limited cash and liquidity position puts the company at a
disadvantage while funding any potential opportunity arising in the market.
2.6. Opportunity - Strategic Growth Initiatives
Air Arabia is taking various strategic initiatives to drive its business growth. In May 2014, the company
started operations from Ras Al Khaimah International Airport with an inaugural flight to Jeddah, Saudi Arabia.
This expansion further strengthens the travel and tourism industry of the emirate. In April 2014, the company
included Ras Al Khaimah International Airport as its new hub with two new Airbus A320 aircraft. These
aircraft offers services to Jeddah in Saudi; Muscat in Oman; Cairo in Egypt; Islamabad, Peshawar and Lahore
in Pakistan; Calicut in India and Dhaka in Bangladesh to cater to the travel needs of the Northern Emirates.
Furthermore, in February 2014, Air Arabia started three weekly direct flights to Cairo, Egypt from 7 February,
2014. It strengthens connectivity between the countries and further contributes to the growing bilateral ties
between the UAE and Egypt. In January 2014, the company launched three weekly non-stop flights to
Antalya, Turkey from July 29, 2014. Such strategic initiatives are expected to align the company's business
operations in line with the industry and generate higher returns.
2.7. Opportunity - Growth in Global Airline Traffic
Air Arabia is likely to benefit from the rising global airline traffic. According to The International Air
Transport Association (IATA) Airline Industry Forecast 2012-2016, airline passengers are expected to grow at
an average of 5.3% per annum during the forecast period (2012 to 2016), to reach 3.6 billion passengers in
2016, as compared to 2.8 billion passengers in 2011. Domestic passengers are expected to grow at a CAGR of
5.2% while international passengers are expected to grow at a CAGR of 5.3% during the forecast period,
adding 494 million and 331 million new passengers, respectively. Strongest passenger growth is expected in
emerging economies of Asia-Pacific, Latin America and the Middle East, with China accounting for a majority
193 million new passengers. Passenger traffic in Asia Pacific is forecast to grow at a CAGR of 6.7% compared
to 6.8% in Africa and 6.6% in the Middle East. Europe, North America and Latin America are expected to
grow at CAGRs of 4.4%, 4.3% and 5.8%, respectively. Through 2016, the US is expected to remain the largest
single market for domestic as well as international passengers, accounting for 710.2 million and 223 million
passengers respectively. The company is a LCC operating majorly in the Middle East. Therefore, increase in
global airline traffic is expected to increase the demand for the company’s services, and increase its top line
performance.

2.8. Opportunity - Positive Outlook for T&T Industry in the UAE
Air Arabia is likely to benefit from the positive outlook for travel and tourism industry in the UAE. As per the
World Travel & Tourism Council (WT&TC), direct contribution of travel and tourism industry to the
country’s GDP is expected to increase by 4% in 2013 and by 5.1% pa during the forecast period (2013-2023)
to reach US$41.8 billion in 2023, in comparison with US$24.4 billion in 2012. Moreover, the industry's total
contribution to the country’s economy may increase from US$52.7 billion in 2012 to US$88.6 billion in 2023.
The visitor exports are expected to increase by 4.9% in 2013 and 5% pa during the forecast period to reach
US$56.4 billion in 2023, up from US$33 billion in 2012. In addition, rise in investments to US$39 billion in
2023 is likely to boost activities within the travel and tourism industry in the UAE. The UAE government’s
treatment of tourism as a priority sector has resulted in the development of key infrastructure and promotion
plans which have increased the appeal of the nation as a tourism destination. The country has usually marketed
itself as a luxury destination, but a weak global economic environment has caused the country to shift focus
towards budget travelers as well. Its air transport infrastructure was ranked fourth on the Travel & Tourism
Competitiveness Index in 2011 by the World Economic Forum, which ranks 139 countries. The country was
ranked sixth based on the quality of roads and eighth on the quality of port infrastructure. Furthermore, Dubai
International Airports plans to expand capacity to 90 million passengers by 2018. These initiatives are likely to
strengthen the country’s travel and tourism industry. The company provides low-cost passengers air
transportation services in the UAE. Therefore, positive outlook for the travel and tourism industry in the UAE
is expected to offer growth opportunities to the company, in turn enhancing its business results.
2.9. Threat - Risks related to unforeseen circumstances
The operations of Air Arabia may be adversely affected due to unfavorable events. The occurrence of swine
flu, SARS, mad cow and bird flu epidemic has resulted in a drop in the number of tourist arrivals in the
affected countries. Precautionary measures such as the suspension of flights impacted the airline industry.
Moreover, natural calamities such as earthquake in Japan and subsequent tsunami, earthquake in Haiti and
volcanic eruptions in Iceland, and other disastrous calamities, eroded the revenues and income levels of the
companies operating in the airline industry. It may also lead to people reducing their traveling to few countries
due to the fear of natural disasters. In addition, the September 11 attacks in the US and attack on Mumbai in
2009 raised security concerns worldwide, leaving the airline industry under constant threat of terrorism.
Therefore, unforeseen circumstances such as these may affect the performance of the leisure/airline/travel
service provider such as Air Arabia, which provides passenger and cargo air transportation services in the
Middle East.
Unfavorable changes in foreign currency exchange rates are likely to increase the expenses for the
company. Air Arabia has operations in over 35 countries and recorded significant portion of its total sales from
international customers during FY2013. The non-UAE Dirham currencies’ appreciation over UAE Dirham or
vice versa could incur additional costs to the company, as well as increase capital expenditures in UAE
Dirham terms. This may impact the company's competitive position against its close competitors Abu Dhabi
Aviation and Dubai Aviation Corporation, in turn affecting its profitability.

Factors
Table Overall Sum-Up SWOT Analysis
AIR INDIA AIR ARABIA
Strength Strength
- Strong Fleet Network
- Comprehensive Services
- Star Alliance
- Enhance Financial Position
- Strong Market Position
- Strong Operating Performance
Weakness Weakness
- Lawsuit
- Technical Glitches in Aircraft
- Limited Liquidity Position
Opportunities Opportunities
- Growth in Global Airline Traffic
- Code Share Agreement
- Positive outlook for Global Tourism
- New Mascot
- Strategic Growth Indicatives
- Growth in Airline Traffic
- Positive Outlook for T&T Industry, UAE
Threats Threats
- Unforeseen Circumstances
- Stringent Regulation in Airline Industry
- Intense Competition
- Risks related to unforeseen circumstances
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[2] www.airarabia.com
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