Company’s Growth and History
Oman Air, the Sultanate of Oman’s flag carrier is based in Muscat. It mainly operates in the Seeb International Airport in Muscat. It operates international air services, scheduled domestic flights, charter work and local air taxi. Although it was founded in 1981, the company began operations in 1993. It started under the name Oman Aviation Services after a merger between Oman International Services and Gulf Air Light Aircraft. The company’s inaugural flight was from Muscat to Salalah with its international services starting in July of 1993.
The company is partially owned by the government with an initial 33.8% stake in the company. This has since changed as will be espoused later. Since its inception, the company has experienced exponential growth in its fleet, destinations, passengers and revenue. The company boasts of an extensive international network. It has forty two destinations in thirteen countries some of which include The United Kingdom, France Egypt and Germany among others. It also has other destination in countries in South East and West of Asia. There are plans to increase the destinations from the current forty two to fifty ( & 2011, pp.7). However, the company has since stopped flights to the United States of America, Tanzania and Kenya.
The company has also made alliances with other airlines globally. The company is an associate of the Arab Air Carriers Organization, the regional airline trade organization. The national carrier is also a partner with the KLM Royal Dutch Airlines. The company manages a fleet of twenty eight aircrafts, a tremendous improvement from the leased aircraft that made the inaugural flight in 1993. There has been a sustained increase in the passengers handled over the years by the airline. The following graph shows the growth in annual passengers ferried by the airline since 2002 to 2011.
Fig 1: A graph showing the growth in passengers ferried by Oman Air from 2002 to 2011.
Over the years, Oman Air has also experienced exponential growth in its revenue. However, the company made an operational loss of 252 million dollars in 2011. The company bounced back in the financial year ending 2012 with a 30% revenue growth owing to expanded operations. In the year 2007, the government of Oman increased its share in the company prompting the government to pull out of Gulf Air in order to concentrate on the company. It increased its shareholding from 38.8% as indicate earlier to a whopping 97.6% leaving other investors with a measly 2.4%
The organization structure of Oman Air sees the company run by a Chief Executive Officer answerable to an autonomous board. The flow chart below summarizes the organizational structure of the company.
Fig 2: A flow chart showing the organizational structure of Oman Air
PEST Analysis of the Company
Political Factors
The primary law in Oman that regulates aviation industry is the Civil Aviation Law of 1975. It provides for the founding of a state run civil aviation organization and also stipulates the responsibilities of the organization. The law also empowers the minister of aviation to administer all civil aviation related issues. The Civil Aviation Regulations in Oman also ratified subsidiary legislation adopted by other contracting states.
The government of Oman is very invested in the company. As espoused earlier, the Oman government has a 97.8% stake in the company. Being the biggest shareholder, the government is responsible for the decision making in the company. The concentration of the government on the affairs of the company has been influential in its success. The government of Oman quit the Gulf Air in order to concentrate on the company. This brought in expanded funding that spur ahead the company’s growth ambitions (Larsen, Sweeney & Gillick, 2012, pp.17)
Economic Factors
Oman is an associate of the Oil Producing and Exporting Countries. The revenue from the oil sales provides a conducive economic environment for the airline to grow. The Oman government in its blueprint for national development has committed over twenty six billion dollars for the development of the national aviation infrastructure under the tourism and projects related to travel over the last decade. The government has also committed another eleven billion dollars in the past five years to improve its aviation infrastructure (Buckley& Rynhart, 2011, pp.77)
The country is developing its two main airports in order to increase connectivity and the number of flights the airline can handle. Other regional airports are also being developed in order to diversify air transport in the country. The position of the country in an economic hub also gives the airline a large customer base. The oil producing countries in the region give their citizens the purchasing power by providing high living standards.
Social factors
The Oman government has a law against the removal of artifacts with aesthetic value. Consequently, there are beautiful sceneries for tourists to see. This has resulted in a vibrant tourism industry which has contributed to the increase in passengers the airline handles over the years. Oman is chief religion in Islam. The Ministry of Heritage and culture in Oman is mandated to organize Islamic functions like the annual pilgrimage. During this period, tens of thousands of Omanis travel to Saudi Arabia to pay pilgrimage to their religion. This provides business for the national airline, thereby contributing to its annual revenue.
Omanis are also known for their generosity and hospitality in both professional and social contexts. Omanis welcome visitors in their country with a diversity of rituals and traditions, the most significant of which is serving visitors with coffee. The generosity and hospitality is very connected to their need to establish trust and make relationships with other people prior to doing business. Omanis culture gives importance to saving face. Dignity and respect are essential elements in their culture. They practice self-control, compromise and patience in order to avoid embarrassing other people in public lest they lose face. Omani people treat people with kindness, probably the reason that business thrive well there (Ghubash, 2006, pp.203).
Technological factors
Oman has a dominant fixed-line carrier that operates a relatively contemporary and efficient telephone system. Virtually, all businesses in Oman have fax machines, and mobile phones are widely used in the country. There has been a monopoly in the provision of telephony services in Oman. However, a second mobile phone operator was commissioned in order to compete for Oman subscribers in order to better service delivery.
The two service providers offer internet services for use by nationals and business proprietors. International telephone access cards are not used in Oman due to the high international call rates. Voice Over Internet Protocol (VOIP) service providers are not used in the Omani market. However, internet-based programs work from time to time. This has an effect on business in the Middle Eastern country (Gross & SchröDer, 2007, pp.25).
Analysis of Findings
Political factors have an effect on the operations of a business. Political stability is very important in the business operations of the aviation industry. In the recent era of terrorist attacks, travels advisories are harming aviation businesses globally. The political stability that Oman enjoys has as a result enhanced business for Oman Air. The harmonization of authority in regulating the affairs of the aviation industry in Oman under a government appointed minister also helps Oman Air thrive. The government has made a sizeable investment in the airline with a 97.6% stake in the company. This offers a stable leadership for the company, a factor that is essential for a vibrant business.
The airline business, like any other business thrives in perfect economic conditions. The Oman government being the largest shareholder in the company invests a lot of capital in the operations. The government has also embarked in projects to develop the aviation infrastructure in Oman, a factor that is pertinent to the operations if Oman Air. Omanis have relatively high living standards owing to the vibrant economy. The proceeds from the oil exports have augmented the gross domestic product of the nation thereby giving its citizens a high purchasing power. This is important for the aviation business (Walker, 2010, pp.23)
The culture of a country determines the relations that the nationals have with foreigners and other locals. This has an effect on business operations because the big part of a business involves human relations. The hospitality and generosity of the Omanis has a positive effect on the business community, especially the aviation business. The welcoming nature of the Omanis-they welcome visitors with rituals and traditions-is important for the aviation business as it makes the visiting foreigners welcome into the country.
Technological advancements are important in vital to the prospects of a business. The high international call rates are harmful to business environment in Oman. This is because the aviation business essentially deals with planned visits to foreign and local places. Foreign business such as imports and exports rely on efficient communication channels. The lack on Voice Over Internet Protocol services cause harm to the company.
Strategy of Omani Air to adjust with these Factors
Omani Air’s administration is aware of the enabling factors that its business can benefit from. The Sultanate of Oman is also conversant with these potential times that the business operates in. Consequently, the government in revamping the aviation industry in the nation in order to benefit from the enabling conditions. Omani Air plans on increasing its fleet in order to profit from the increasing tourists into the country and region at large.
Recommendations
In its expansion project, Oman Air plans on conquering new destinations. East Africa is a prime business region because of business trips by regional entrepreneurs to the Middle East, especially Dubai. The cancelation of flights to earlier destinations like Kenya and Tanzania, countries in East Africa, has increased business for other regional airlines, like the Etihad Airways. Therefore, I recommend that Oman Air reconsiders the booming export and import business in this region and reinstitutes flights to Kenya and Tanzania.
In the light of increasing passengers in the previous year, the airline made an operational loss of 252 million dollars. This is very significant especially because the company recorded an increase in passengers. This implies that the company’s operations need restructuring in order to cut out loopholes that increase the operational costs. I recommend the use of Business Process Reengineering software to pinpoint redundant operations thereby reducing operational costs of the company.
References
Buckley, G. & Rynhart, G. 2011. The Sultanate of Oman: The Enabling Environment For Suitable Enterprises: An “EESE” Assessment. Geneva. International Labour Organization
Ghubash, H. 2006. Oman: the Islamic democratic tradition. London: Routledge.
Gross, S., & SchröDer, A. 2007. Handbook of low cost airlines: strategies, business processes and market environment. Berlin, Erich Schmidt Verlag.
., . & . 2011. Oman Air. Betascript publishing,
Larsen, P. B., Sweeney, J. C., & Gillick, J. E. 2012. Aviation law: cases, laws and related sources. Leiden, Martinus Nijhoff Publishers.
Walker, J. 2010. Oman, UAE & Arabian Peninsula. Footscray, Vic, Lonely Planet.
