Quest Journals Journal of Research in Business and Management Volume1 ~ Issue 2 (2013) pp: 19-28 ISSN(Online)

:2347-3002 [Link] *Corresponding Author: Dr. Lalita Mishra 19 | Page {[Link], Ph.D, Ugc Net
Qualified} Guest Lecturer Govt. Krg Pg College Gwalior Research Paper
Airlines and Profitability Case of Saudi Arabian Airlines [Link]
Mishra {[Link], Ph.D, Ugc Net Qualified} Guest Lecturer Govt. Krg Pg College Gwalior Received 14
October, 2013; Accepted 02 November, 2013© The author(s) 2013. Published with open access at
[Link]
ABSTRACT: This particular research study deals with exploring and uncovering ways which could augment
profitability and competitiveness of the airline players with special reference to Saudi Arabian Airlines. The report also
deals with data analysis and then only put forwards various recommendations to fortify strengths and mitigate
weaknesses. This report will be beneficial for all the stakeholders of the airline industry who in some or other way are
associated with this particular sector. The airline has also commenced the facility of e-ticketing for domestic flights
which is supposed to render a super competitive advantage to the airline player. Even on board services in terms of food
as well as entertainment has improved significantly. The airline management also is in practice of sending almost a
million SMSs on a monthly basis to remind passengers about ticket time limits, to confirm reservations and render
information with respect to departure times. This has rendered airline a sustainable competitive advantage in today’s
marketplace. Saudia believes that completion among various airline players in quintessential if demands of air travelers
have to be catered in an effective manner. In this case the airline player in consideration renders regular schemes for
travelers if they are flying to select European destinations. If we consider UK then the airline in consideration has a
total of almost a dozen flights to London Heathrow. Apart from London connection, airline offers flights to various
international destinations such as Athens, Manchester, Munich and Vienna. New routes which will augment coverage of
European Continent- one more notable fact in this case is that residents and nationals of Saudi are highly inclined
towards international tourism and thereby there are ever increasing number of tourists from this pace which ultimately
renders huge benefits to the airline players especially Saudi Arabian Airlines.
I. INTRODUCTION

Even in case of airlines, privatization, open competition have brought a turnaround in which business is being carried
out in this segment. This has not only influenced private carriers but also nationalized carriers. The first airline
operations in Saudi Arabia commenced in the year 1945. In the next six decades, airline became the biggest in its
segment across the globe. It has a fleet of almost 91 carriers which have the capacity of carrying 16 million passengers
annually. It flies to almost 70 domestic and international destinations across the globe. Now with advent of 21 st century,
air travel in Saudi Arabia is into a new era of coming up with low cost service airlines. As compared to other airline
players across the globe, this particular player is in quite good shape and its profits double between the years 2003 and
2005. The figures totaled to somewhere around $133 million. Volume of passengers also augmented by nearly half a
million in the year 2006 and is predicted to rise by 15% annually. The airline player has prepared itself in a manner so
that it is quite capable of challenges and demands of booming economy and amplified volume of traffic. The airline has
differential service offerings to cater to needs of different classes of travelers traveling through this airline. Thereby it is
able to record sustainable growth for such a long period. Though airline player is all set for sustainable growth, but it
still faces challenge in form of exploring the best way out to cater to the increasing demand. (Karen, 2004) The airline
was quite fast in recognizing the fact that if it had to better its overall competitive position, then it has to amplify the
level of customer service it renders to its customers. This led to development of successful growth strategy under the
dynamic leadership of Khalid Almolhem who was responsible for successful privatization of Saudi Arabian Airlines.
The strengthening of customer service was the signal for airline undergoing a major reform in the form of privatization.
In this case privatization began with sale of almost 49% stake in catering unit for almost $373.3 million. The catering
business of the airline commenced its operations in the year 1981 and had the capacity to Airlines and Profitability
Case of Saudi Arabian Airlines *Corresponding Author: Dr. Lalita Mishra 20 | Page {[Link], Ph.D, Ugc Net
Qualified} Guest Lecturer Govt. Krg Pg College Gwalior
render 15 million meals in first nine months in the year 2005 itself. This accounted for almost a revenue of $171.5
million in the year 2005 and in this case net profit amounted to an amount of $38 million and net operating margin of
25% which made it a very lucrative business with respect to investments and returns. The catering division was first out
of the five divisions to undergo transition in the form of privatization. Then cargo, ground handling, maintenance, and
flight academy followed in sequence which underwent privatization. The strategy in this case for the airlines has been to
adhere to strategic planning of approaching strategic partners. The airlines is very confident that it will be able to form
independent organizations to augment its growth trajectory which will be helpful in carving out customer oriented
mentality and aid the process of fighting and sustaining in the marketplace in the 21 st century. (Paauwe, 2009)
II. OBJECTIVES OF THE RESEARCH STUDY
The various research objectives of this particular research study are as follows-
1. To explore ways to be competitive in airline industry
2. To uncover various measures taken by Saudi Arabian Airline to stay competitive
3. To suggest recommendations and areas of improvement with respect to staying competitive with special reference to
Saudi Arabian Airlines

III. LITERATURE REVIEW

Competitive Advantage
The competitive advantage can be attained by giving great value to the customers. This value can be provided by
lowering the price of products or service and give benefits to the consumers so that they can satisfy. Competitive
Strategies: On the basis of his studies and research, Michel Porter suggested 4 generic business strategies that will be
helpful to get competitive advantage over its competitors. These business strategies are dependent upon the scope of
business i.e. narrow versus broad and the degree of differentiation in the product is narrow or strong. Strategy –
Differentiation: The differentiation strategy will be useful to get competitive edge but the uniqueness in product will
come with the increase in price of that product. To provide value –added services to the client and make product
differentiated from the competitors increase its cost. So in differentiation strategy the premium price is charged form the
consumer. So generally this strategy will cater the people who are premium class. This will give the clear reason to the
consumer to why they will purchase this particular product because people generally think that good things come with
the good price. Ultimately this strategy is helpful to attract the clients.(Michael, 2006) Strategy - Cost Leadership: The
cost leadership can be attained by provide low cost product than the competitors and the quality of the product remains
the same. The public will be very attracted towards the low price things. To achieve the cost leadership generally
companies will get the material in lower prices from the suppliers. Then only companies will be able to provide products
at comparatively lower prices than the competitors. This strategy is used by generally large businesses who can suppress
their suppliers otherwise the suppliers will not provide materials to small business units. The companies that uses low
cost leadership also able to provide good discounts and arranges too much of sale to sell the products. Even in the sale
also these companies will generate good amount of money. Strategy - Differentiation Focus: In this strategy, the
business is differentiated in one or small number of target market segments. This segment has specific consumers and
their needs so according to this strategy differentiated product is provided to this consumer that makes an ultimate
difference from the other competitors. Because this kind of strategy is helpful in satisfying the needs of that customer
group. The main thing which is to be considered over here is that businesses must ensure that there will be different
needs of consumers must occur. If there will be no consumer with different needs; this strategy will not be useful.
(Gartner, 2009) Strategy - Cost Focus: This strategy is applicable at small market segment where a low cost similar
product is made to the high priced product. The features of both the products are same and accepted by the group of
consumers. These products are often called "me-too's".
IV. RESOURCE BASED COMPETITIVE STRATEGY
The resource-based view (RBV) will be helpful in determining the strategic resources for the company. The resource
based competitive strategy is dependent upon the disposal of important resources of the company. To get the competitive
advantage over the competitors in very short time can be achieved when the resources are heterogeneous and not same.
They must have to be mobile. This will also be helpful in attaining long term competitive edge. In this condition the
group of firms resources will be helpful in getting competitive edge. The VRIO model also constitutes a part of RBV.
The key points of the theory are: Airlines and Profitability Case of Saudi Arabian Airlines *Corresponding Author:
Dr. Lalita Mishra 21 | Page {[Link], Ph.D, Ugc Net Qualified} Guest Lecturer Govt. Krg Pg College Gwalior
1. Determine the potential resources of the business.
2. Evaluate whether these resources fulfill the following criteria (referred to as VRIN):
Valuable – The value creating strategy will be applicable when business wants to get an edge over the competitors
and it will efficient enough to decrease the weakness. Relevant in this perspective is that the transaction costs associated
with the investment in the resource cannot be higher than the discounted future rents that flow out of the value-creating
strategy.
Rare – The value can be created when the resource is available in rare quantity. And in perfectly competitive market,
the cost of the product will give the information about the discounted futures above average returns.
In-imitable – A single company will get the competitive edge when the resource is in control of that firm only. This
advantage will be converted in long term competitive advantage when competitors will not be able to make copies or
substituent of that product. The term isolating mechanism was coined by Rumelt, this helped to give information about
why the companies are not able to copy the product on the basis of that one it will be able to get competitive edge. One
of the most important factors responsible for inimitability of competitive advantage is causal ambiguity which happens
when the source or root cause of competitive advantage with the organization is not known and cannot be made out. In
this case if the resource in consideration is based on knowledge or is socially complex, then there are more chances of
social ambiguity to take place. In the viewpoint of Conner and Prahlad, knowledge based resources are the prime
essence of concept of resource based perspective.
Non- Substitutable- For a resource it is equally important to be rare, imperfectly imitable as well as should have lack
of substitutability for its long term high sustainable value. In case when competitors in the market place are able to
counter competitive advantage of the organization with a counter policy or product feature, then parent organization has
to lower down the prices to that point where price offered is almost equal to discounted future rents which results in zero
economic profits for the organization.
3. One should care as well as protect the prime resources as this act can foster overall performance level of the
organization for long run of time in a sustainable manner.
to get to know about the factors on the basis of company has certain expenses and still clients do not care about the
particular problem of this. When we work for this process it will help to improve quality. These frills cutting are based
on the thrust on factors where business units are providing below the quality of consumer’s expectation. It gives a great
opportunity to decrease cost and provide value to the customers that will be able to attract consumer from the market
which we are not catering. The Southwest Airlines strategy is based on no frills so the services that are provided to the
clients are mostly depends upon the cheap fares and prompt schedules. The strategy to satisfy consumers is mostly
dependent upon this. There are several roles that can be played by HR in developing knowledge management system.
First, the human resource department is responsible for describing the knowledge management system. The clear
understanding of knowledge management is required before its execution in the office. The organizations are very much
interested to adopt those technologies that are used for problem solving in the company. Once the error is identified its
become very difficult to reach the correct solution and for that data collection and resources related to this is difficult to
explore. To get the real success of knowledge management it is very important to decide the course of action but first of
all the framing of issue is important. Secondly, one fact that should be given due consideration is the fact that HRM also
render its functionality as a knowledge facilitator, thereby we can understand the fact that it is the responsibility of HRM
designer to design this function in proper synchronization with business ethics as well as organizational policies
simultaneously. All the former factors mentioned should aim to carve out an environment which fosters knowledge
sharing as well as utilizing it to deliver the desired advantage for the organization. It is the responsibility of human
resource management function to maintain a good culture in the organization so that seamless and streamlined
communication is possible at all the levels in the organization. Thirdly, it is a vital fact that associates working in HR
department should understand that it is their duty to make sure that they have mechanisms in place which pave way for
cordial relation between associates working in the organization. This can be accomplished through transfer of tactical
knowledge and then converting the same into explicit knowledge referred to as education. This all is possible or feasible
only in those cases where in proper learning mechanisms are in place and is alignment with vision and mission of the
organization inconsideration. Fourthly, associates working in HR business function should synchronize their work in a
manner so that sharing of knowledge takes place in the desired manner. All such positive activities must be recognized
as well as recognized within the organization to help organization progress faster and in an easy manner. It is vital that
there is mechanism for ensuring effective knowledge management to be in proper shape within the organization and in
this case there should be coaches and mentors to take proper care of everything in place. The various sub-functions
which form HRM as a complete business function involve recruitment, appraisal, remuneration, designing etc. Fifth,
HRM must relax controls and permit (even foster) such kinds of behaviors that augment the organizational efficiency
round the clock. Today, everyone including individuals as well as businesses are living in a world which is referred as
knowledge economy and thereby the people working in this world are referred as knowledge workers. It is quintessential
for organizations to realize one fact that they should simultaneously selectively recognize as well as reward, rather than
only discouraging and punishing the above mentioned behaviors. The emphasis should be on building a conversation
that is productive as well as constructive. It is also an already established fact that human resource management will
have to accommodate both the perspectives into picture for desired fruitful results.
Sixth, it is very essential for HRM to work as per strategic direction chosen for overall organization to aid organization
manage all the communication technologies such as e-mail, instant messenger, surfing and related mechanisms in a
better way. Thus one thing that is very clear from above discussion is that internet has a very vital role to play in transfer
of knowledge in the intended manner. Thus, we can say that internet acts as a messenger in case of knowledge
management. There has to be obviously some control that has to be exerted so that internet delivers intended results and
organization is saved from bad impacts associated with internet.
V. RESEARCH METHODOLOGY
PRIMARY RESEARCH: The research study is done over here is related to the aviation industry so all the aspects are
done according to it. It is done on the basis of how the whole process is carried out here. Therefore both kinds of
research are done for carry this study i.e. quantitative and qualitative both researches are helpful. The presentation of
data that is collected was done by various statistical tools like graphs, diagrams, charts, etc. without charts and graphs
the research paper is appears as incomplete. If there are any charts and graphs are available in the dissertation, it should
be arranged in the proper fashion. The usage of such analytical Airlines and Profitability Case of Saudi Arabian
Airlines *Corresponding Author: Dr. Lalita Mishra 23 | Page {[Link], Ph.D, Ugc Net Qualified} Guest Lecturer Govt.
Krg Pg College Gwalior
tools brings out more clarity and understanding of the data. Also, a point noteworthy in this case is that pictures are very
attractive, thereby they further add to the thesis clarity and understanding. (Boland, 2009)
Process of Research
In order to gain a relatively deeper understanding of the circumstances which will be encountered during the process, it
is very important to lay down a plan, design and carry out procedural objective oriented research. The procedure is
referred to as research process. The research process so devised has several steps which are as follows-
1. Establishing the research problem
2. Establishing the research objective
3. Carving out an effective research plan
4. Assessing collected data and related information
5. Presenting the conclusions so derived in a systematic procedure
6. Selecting the right step and executing the same

Data Collection
The data is collected in very good way so that it’s counted by the researcher very easily. The data is collected in a way
so that it can be very useful to validate the research hypothesis in very accurate way. This emphasizes the need for
appropriate data collection methods..
Primary Data Sources
The data that is collected by the researcher himself by qualitative and quantitative research methods is called as primary
data. The primary data is unique because it is collected by the researcher to solve a particular problem and it becomes
unique till it is published anywhere. Questionnaires It is a complex task to derive exact questionnaire. The responses
derived with the help of questionnaire can be really helpful in devising and uncovering real facts which may lead to solid
findings and recommendation in relation to the research topic under consideration. There are various benefits that
researcher can yield with the help of questionnaire which are as follows-
1. Questionnaires have the capability to derive quick responses from the respondents
2. Researcher in this case need not directly go in person to fetch the required data
3. Cost effective method of gathering the required data for the research topic
4. Anonymous responses can also be gathered
5. Biasness can be minimized to the lowest possible extent in this particular case

The clear deadlines are given to the respondent so that they will fill the questionnaire on time and return it to the
researcher, so it becomes easy for the researcher to make out the results on time. So that the research can be done on the
given time period. The researcher should be in contact with the respondent so that he will provide any support to the
respondent if required during filling the questionnaires. The questionnaire should also be sent to the HR department and
the technical team too. Tables below illustrate the questionnaires (draft and provisional). The guidelines for filling the
questionnaires are also sent to the respondents so that they can fill it with ease.
Secondary Data Sources
The secondary data is gathered for different purpose and that purpose is to collect the data that supports the research
study and give an in-depth knowledge about it. For the formation of hypothesis a thorough review of data is required.
The secondary data is helpful in forming the literature review of this research study. The data is collected through
various secondary sources like magazines, brochures, company papers, books etc. The list of other secondary data
sources that the researcher proposes to refer to are listed as below (but not limited to):
- Paper based material/data sources on CRM across the globe, (and its associated subjects and topics) such as books,
journals, newspaper articles, periodicals, magazines, research reports, etc.
- The data available on internet in forms of ebooks, journals and other forms are helpful in this research study.
- The data is also present in forms of videos. In addition to the secondary data sources mentioned above, the researcher
will seek to refer to official data sources and any other institution’s work.
Airlines and Profitability Case of Saudi Arabian Airlines *Corresponding Author: Dr. Lalita Mishra 24 | Page
{[Link], Ph.D, Ugc Net Qualified} Guest Lecturer Govt. Krg Pg College Gwalior
Customers considered as
And now-a-days
Convenience5 customer is
0% king 20 said
Operational operational
Loopholes And loopholes and
Critical critical path
should be given
Path20%
high priority 20
Service
said service
Maintainence2 maintenance
0% should be taken
Miscellaneous into
10% consideration
FACTOR 10 opted for
other
S miscellaneous
options
FEASIBILITY30 2. What are
% factors
TIME30% generally for
RESOURCES20 the services
% design and
ROI20% development of
airline industry?
SERVICE
30 said
DESIGN Feasibility
AND (Technical and
Economical) is
DEVELO most critical 30
said Time is
PMENT most critical 20
said Resources
VI. DATA are the most
ANALYSIS critical
Questionnaire 20 aid Return
was floated to on investments
a sample of is most critical
almost 100
respondents as 3. How do
stated earlier in airlines perceive
the report. The the impact of
questionnaire alliances on
had various their operation
questions such in general and
as- on passenger
1. What are the traffic in
factors that particular?
should be
considered for Good (30)
developing the Average (20)
services Superior (20)
blueprint for Poor (25) Can’t
the airline Say (5)
industry? Airlines and
Profitability
Out of 100
respondents-
Case of Saudi
50 said Arabian
customers and Airlines
their *Corresponding
convenience Author: Dr.
should be Lalita Mishra
25 | Page Guest Lecturer
{[Link], Govt. Krg Pg
Ph.D, Ugc Net College
Qualified} Gwalior
GOOD30%
AVERAGE20%
SUPERIOR20%
POOR25%
CANT SAY5%
IMPACT OF ALLIANCES
POSITIVELY40%
NEGATIVELY35%
CANT DETERMINE25%
PARTNERSHIP
GREAT IMPACT35%
HARDLY ANY IMPACT20%
AVERAGE IMPACT30%
NO IMPACT15%
DEGREE OF EFFECT
4. How partnership agreements and different types of routes have affected the results?

Positively (40) Negatively (35) Can’t determine (25)

5. Have airlines of different size, operating from a different region and belonging to different alliance grouping been
affected differently.

Great impact (35) Hardly any impact (20) Average (30) No impact (15)
6. What are the various measures that can be taken to augment profitability of airline player in consideration?

Low cost carrier (55) Increased Service Levels (25) Tie ups (10) Others (10) Airlines and Profitability Case of Saudi
Arabian Airlines *Corresponding Author: Dr. Lalita Mishra 26 | Page {[Link], Ph.D, Ugc Net Qualified} Guest
Lecturer Govt. Krg Pg College Gwalior
LOW COST CARRIER15%
INCREASED SERVICE LEVELS47%
TIE UPS19%
OTHERS19%
MEASURES
YES60%
NO25%
MAY BE10%
CANT SAY5%
REALTIONSHIP BETWEEN CUSTOMER SERVICE AND
PROFITABILITY
Customer Service35%
Additional Beenfits For Members20%
Ancillary Services20%
Comfor And Ease For Customers20%
Others5%
PROFITABILITY MEASURES
7. Do you think increased consumer service level can augment profitability of airlines given the fact that it will bring in
costs in form of training as well as manpower?

Yes (60) No (25) May be (10) Can’t say (5)

8. Apart from low cost carrier do you think that there are some measures which can be incorporated to augment
profitability?

Customer Service (35) Other additional benefits for members (20) Ancillary services (20) Comfort and ease in travel
with respect to traveler (20) Others (5) Airlines and Profitability Case of Saudi Arabian Airlines *Corresponding
Author: Dr. Lalita Mishra 27 | Page {[Link], Ph.D, Ugc Net Qualified} Guest Lecturer Govt. Krg Pg College Gwalior
VII. SUGGESTIONS
There are some suggestions which could improve the conditions of airline players which are as follows No add on
charges- if we consider present market conditions, then we come to realize the fact that they all resort to charging 15%
extra for first piece for checked luggage. This is not going to do any good to the airline players. Airlines have to get
delayed due to additional baggages on board. Flights will be further delayed trying to get all those extra bags on board.
That's a lot of hassles just so the airlines collect a measly 15 bucks. Most passengers would probably be willing to pay a
little more for their ticket to avoid added headaches. Simple structure with respect to pricing will do a lot of good to the
airline player as customers will know for what service they are paying what amount and will lead to loyal customers.
This will do good for airline player. Extra array of services-There should be more classes rather than just economy and
first class. This will prvode room for additional services and will open a window for earning more. This would increase
loyal customer base as well as pull in new customers as well.
Re-regulation- It was long back in the year 1978 when this industry (airline industry) was deregulated and was open to
competition as well. Thereby regulations remained same so it is time for re-regulation to take place. Tasks That Can
Augment Organizational Efficiency With respect to HR, there is a need for streamlining the overall business
operations and augmenting the overall efficiency as well. As per the viewpoint of Cascio, HR of any organization has to
be very efficient in case of following competencies parameters-
1. Aiding the organization’s business model in order that it is capable to compete for gaining the share with respect to its
product or service offering in the market segment in which it has its operations running
2. Knowing basic fundamental terms with respect to corporate finance, marketing, finance, technology and other related
areas with respect to business
3. Various functional areas and functions within the HR umbrella sucg as recruiting, staffing, training and development,
performance management, remuneration, industrial relations, occupational safety and health standards etc.
4. Listening skills and having the capability to raise serious issues in front of management
5. Augmenting skill set pertaining to selecting and nurturing the right talent and having in place the right HR strategy
with respect to aligning process, people and systems.

As per the viewpoint of Cascio (2005), IT is the basic fundamental with respect to overall strategy for improvement in
human resources management. (Rebore 2011)
VIII. CONCLUSION
Thus according to the research conducted by Curtis and Wright (2007), it is explained that if any one form the company
is being replaced by the new one, the company incur a huge loss that is up to 150% of the annual salary of the employee
who is replaced by the new one. With this fact an another fact is also revealed that if organization is gaining more profits
than also employees thinks that something fishy is going out there. So that if company is investing a lot for the retention
of the employees they also have to invest in good management of the employees in the Human resource department so
no problems will be raised. According to the research study work of Tsai and Tai and its findings, the training programs
play an important role for the development of the employees and to get new talented employees in the organization.
Employees feel if they will work in this company for a long they will gain benefits in terms of their personal
development. This process is very necessary to motivate employees in the company so that they will ready to work for a
long. So this research study is dedicated to find out the importance and aims of implementing good training modules in
the organization and its long term effects. So that organization will able to maintain the profitability in the market
through its workforce. Good training is also beneficial for the employees as well as the organization because employee
retention is possible for these practices. As per the above research study with respect to role of IT in HRM at Saudi
Arabian Airways, it is very clear that HRM have an increased pressure from management of becoming all the more
productive. Technology should be utilized by Saudi Arabian Airways in a manner which is beneficial for the
organization. Technology plays a central role with respect to HRM in today’s organizations and their strategic plans.
There should be a dedicated platform as well as resources with respect to technology for proper and effective
management of HRM. Technology is incorporated into today’s business operations to make the overall decision making
process very effective. Thus if Saudi Arabian Airways is able to deploy technology with respect to its business
operations, it can derive exponential growth for the organization in consideration as well. Airlines and Profitability
Case of Saudi Arabian Airlines *Corresponding Author: Dr. Lalita Mishra 28 | Page {[Link], Ph.D, Ugc Net
Qualified} Guest Lecturer Govt. Krg Pg College Gwalior