Question

The Airline industry provides passenger and freight transport services through its fleet of aircraft flying to domestic and international destinations. The industry is part of the air travel value chain which includes suppliers as well as distributors of the main service provider, the airlines' company. The chain is set up to cater to the needs of the ultimate customers in the process, air travellers.

Qantas Airlines is the designated national carrier of Australia. It operates both domestically and internationally. The company operates 285 aircraft, has assets of $18.6 billion and employs 29,200 staff. In Australia, Qantas is the dominant local airlines with 62.5% market share. The only other significant competitor, Virgin, is a far second with 27.9%.   Through Qantas’ subsidiary, low-cost carrier Jetstar, it achieves wider market coverage, complementing their premium service offering.

Airlines require aviation fuel which is a major cost factor in their operations. Aviation fuel can account for more than 40% of an airline’s operating costs. Supplying Qantas its fuel requirements are petroleum refiners and wholesalers delivering to airports where Qantas planes depart from.

One such aviation fuel provider is Viva Energy which operates a refinery in Geelong, the second-largest facility in the country. Ten per cent of the Geelong refinery’s output is for aviation fuel production, which supplies 37% of the airline industry’s fuel requirement. Viva negotiates directly with airline companies regarding the supply of aviation fuel for their aircraft to be made available at Australian airports. Viva delivers fuel to 50 airports across the country.

Under a license agreement with Royal Dutch Shell, Viva supplies some 1150 petrol retail outlets across Australia with Shell-branded fuels and lubricants. Combined with the aviation fuel business, the supply of retail products gives Viva products a 26% share of the total Australian fuel market, second only to market leader Caltex at 38%.

The last two decades have seen the prevalence of the Internet and mobile technologies in many business processes. This has spurred the growth of many industries devoted to mediating new modes of interactions between service providers and consumers. The online travel booking industry is an example and Webjet with annual revenue of $200 million leads the industry in Australia and New Zealand. The company markets and transacts airline tickets and other travel-related services to consumers (82% of revenue) and corporate clients (18% of revenue). Webjet has a predominantly online business model as contrasted with traditional travel agents operating from shop-front outlets.

The online travel booking industry in Australia is highly concentrated with the four major players accounting for some 70% market share. The competition has been described as of high intensity. The relatively low barriers in entering the market have encouraged smaller players to participate, thus aggravating competition further.

1. Discuss the air travel value chain analysis by considering the part played by Qantas, Viva, and Webjet to the competitive air travel service industry.

Answer 1

Air travel value chain analysis

An industry is a combination of small firms producing similar products or services. Airline industry provides services to their customers. the value chain is a strategy which is associated with organisational ability. Here airline industry is incorporated the activities of the specific industries like viva, Qantas and Webjet. They are highly organised under airline industry. They are working in a travel chin value. The efficiency of airline industry depends upon the collective services or coordination of these specific industries. if one industry is inefficient to supply their services on proper time it adversely affect the others too... Because they are interconnceted. At the same time, proper business strategy, they can make maximum profit.

Airline industry comprises many industries like fuel industries, food industries, online ticket industries, leasing industries etc. They come together and tries to make maximum profit. Here they are in a chain and depends upon each other. If VIVA fuel company is not able to provide their fuel to the commuted airlines on time, then they cannot operate successfully.

Similarly QANTAS airline is a dominant local airline with 62% market share. There are many other airline companies like Virgin and jet star. They have their on space and market share in the airline industry. WEBJET is the famous online travel booking Industry. They acquired 82% revenue from their customers and 18% from corporate clients.

In brief, Airline travel value chain reveals the interlinkages of different companies in the airline industry. The interrelationship among them make this industry a grand success.