Question

Qantas – strategies for current and future success

The Qantas Group maintained its strong position in the Australian domestic market in 2016/17. Through a dual brand strategy encompassing both the Qantas brand and the Jetstar brand, Qantas continued to service the premium leisure and business market segments, while Jetstar provided low fares to millions of customers in the price-sensitive market. Between them, these two airlines have approximately 90 per cent of the domestic profit pool from two-thirds capacity share.

As the Australian economy continues to transition from the mining boom, Qantas redirected some of their domestic capacity to service the growing tourism markets on the east coast of Australia. Qantas Domestic maintained a clear lead as the airline of choice in the corporate travel market, and continues to grow in the small business and premium leisure markets. Their extensive network, on-time performance, and service earned record customer satisfaction levels, are their major internal strengths. Looking ahead, Qantas will berolling out free, fast, inflight Wi-Fi on all domestic A330 and 737 aircraft, which will further strengthen their hold on the domestic market.

On the international front, they have continued to build alliances with key partner airlines, including Emirates, China Eastern and American Airlines. They have also improved their cost base, increased aircraft utilisation and redesigned our network to high-growth market s, largely in Asia.

During 2016/17, Qantas obtained the first Boeing 787-9 Dreamliner to their fleet, to replace older Boeing 747 aircraft. The Dreamliner provides unprecedented flying range, substantial cost efficiency and unrivalled customer experience, offering a sustainable competitive advantage. It also allows them to use Australia’s long distance from major international tourist hubs to advantage. A prime example is the new Perth–London route using the Dreamliner. The 17-hour flight will be the first regular, non-stop passenger service to link Australia with Europe when it commences in March 2018.

Asia remains the world’s fastest growing aviation market, and is expected to be bigger than the North America and Europe markets combined by 2035. By 2030, it is estimated that two-thirds of the world’s middle class will be in the Asia-Pacific region. Qantas believes they are well placed to capitalise on this growth. More than 50 per cent of the Qantas Group’s international capacity is currently focused on Asia, with daily services into the major business hubs of Singapore, Shanghai, Beijing, Hong Kong and Tokyo.

This year, Qantas launched Sydney–Beijing (China) and Melbourne–Narita (Japan) and increased capacity to Singapore, Hong Kong, Indonesia and the Philippines to meet growing demand. Jetstar launched services to Ho Chi Minh City (Vietnam) from Melbourne and Sydney and will start services between Melbourne and the Chinese city of Zhengzhou in 2017/18.

Focusing on Greater China, they have a three-pronged strategy to take advantage of the country’s huge growth:

1. Serve the key business hubs: Hong Kong, Shanghai and Beijing (with a combined population of 53 million people).

2. Further strengthen partnerships with China Eastern and China Southern, which provide the Group with 22 destinations in China.

3. Funnel inbound Chinese tourists — who take an average 2–3 domestic flights when visiting Australia — onto the Group’s domestic network. Jetstar-branded airlines based in Asia now have 54 aircraft in the region. This growing network — which remained profitable in 2017 — gives the Qantas Group a strong presence in key markets.

Jetstar Japan, which has entered its sixth year of operation and has grown to 21 aircraft, was ranked 58^th in the top 100 most recognised brands in that country. During 2016/17, Jetstar Japan launched flights from Tokyo (Japan) to Shanghai (China). Jetstar Asia continues to evolve its network out of Singapore and Jetstar Pacific has grown to tap into the increasing travel market both in and out of Vietnam.

Qantas Loyalty continues to provide a diversified, stable earnings stream for the Group, while strengthening loyalty to the Qantas brand. Now in its 30th year, Qantas Loyalty has diversified and expanded into new areas, bringing members fresh opportunities to earn Qantas Points. This includes travel, life and health insurance (Qantas Assure) and a travel money card that has captured 17 per cent of the market in four years (Qantas Cash).

The core Frequent Flyer program grew its membership by almost 4 per cent to 11.8 million, helped by the addition of 22 new partners (including Airbnb, Jaguar Land Rover and Samsung) as well as a renewed partnership with supermarket chain Woolworths. At the same time, Qantas Loyalty is taking advantage of business opportunities in other segments to grow revenue through a pipeline of new ventures. The Qantas Business Rewards Program strengthened their presence in the small business market. Red Planet and an equity stake in Data Republic are examples of how Qantas continues to invest in big data services. Looking ahead, Qantas Loyalty will continue to innovate and diversify to achieve annual growth of 7–10 per cent through to financial year 2022.

In June 2017, the Qantas Premier credit card was launched, which offers a high rate of points earn as well as a number of travel benefits. The credit card provides our business with another revenue stream and our customers with more choice and more ways to earn points. Around 35 per cent of credit card spending in Australia currently earns Qantas points

The introduction of free, fast inflight Wi-Fi started midway through 2016/17 with a trial on a Boeing 737. A major upgrade to the Qantas App allows our customers to keep track of their Qantas Frequent Flyer benefits, with a personalised news feed providing additional offers and news features. We launched a Facebook Messenger bot called Qantas Concierge to give customers 24/7 personalised travel inspiration, along with faster responses and more relevant information. Almost 90 per cent of customers rated their Wi-Fi experience as positive, with reliability of the service at 98 per cent. The rollout will ramp up during 2017/18 with around 80 domestic aircraft equipped by the end of calendar 2018. Our intention is to extend the service to our regional and international fleets as Wi-Fi technology improves.

Question 3 ​

3a) Apply the PESTEL model to the Qantas case, identifying any 5 external factors, and indicating which may be regarded as Opportunities and which as Threats. [5 marks]

Answer 1

PESTEL MODEL:

The model helps in scanning and analysing those factors that are external to the organisation ( here Qantas). These factors include political , Economic, social, technological, environmental, and legal factors. The changes taking place in these dimensions are beyond the control of organization and have direct as well I direct impact on the working of any enterprise. Therefore critical and regular analysis of external factors (PESTEL) is crucial for succes and growth of any organisation.

Political : the various aspects relating to the functioning of the government in the country where the business operates also have an important bearing on its smooth working. the main constituents of political environment are generally stability and peace in the country, organisation and philosophy of political parties, ideology of the government, image of the country and its leaders, foreign policies pursued by the government in power, attitude of the government towards various types of business organisation etc.

The company enjoys good relations with China and other countries. Due to this , it is able to diversify its business in other nations. It is very clear from the above case study that the company enjoys strong Government support both from Australia as well as others Nations because of which it is now one of the major dominant player in aviation industry.

Economic : the economic environment comprises of all those economic forces which are likely to exert an influence the functioning of any business enterprise. This includes the economic system, level of economic development, availability of economic resources, the level of income of people, economic policies, rate of inflation, stock market indices etc.

Qantas Airways can juice country's economic factors such as growth rate, inflation and industries economic indicators such as consumer spending.

Social: social environment includes the social forces like believes, customs and traditions, values, social trends, society's expectation from business etc. Since the Qantas group operates in several countries in continents, the company has a challenge of understanding the social diversity is of the Nations in which it operates. Ignorance of the social factors may cause downfall of any organisation.

technological: technological environment includes forces relating to scientific improvement and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business. Over the years the company is doing good and technological field. the company is regularly working on improving its Wi-Fi I service. the company has also launched a Facebook messenger bot called Qantas concierge to give customers 24 x 7 personalized travel inspiration along with faster responses and more relevant information.

Environmental: different markets have different environmental norms which business should consider. Ignoring source and mental factors can affect the profitability. Many countries are environmental laws which are required to be followed by organisations.

Before entering into new market or starting a new business in the existing market, firm should carefully evaluate the environmental standards that are required to operate in those. In case of airline industry, carbon emissions from airflights, is a cause of environmental pollution.

legal: the legal environment serves as a regulatory framework of business. it includes various legislations passed by the government, administrative orders issued by the government authorities, judgements as well as the decisions taken by various commissions and agencies at every level of the government. Every nation has different regulatory framework within which any organisation has to operate. Ignorance of these laws may hamper the survival of any business. This includes employment laws, health and safety laws, patents copyrights etc.

the study of business environment not only provides a box and it is for growth but at the same time sometimes it may threaten the very existence of the Business firm as well.

in context of business the term opportunity refers to the positive external trends or changes that will enable a form to improve its performance. if a business is able to identify a forthcoming opportunity and use it to the best of its advantage, it is said to have made the first mover advantage.

the term that refers to those trends and changes in the business environment which are likely to create an adverse effect on the performance of an organisation. the knowledge of the approaching threads in able the business managers to face it in the best possible manner by deciding upon the course of action in advance. the environmental threats may be considered to be an early warning signal which if comprehended on time by the business manager can help to avert severe consequences.

External external factors that will be regarded as an opportunity or threat:

1. Australia is considered as a continent making it a big space for domestic airline. So this is an opportunity for the airline company as they enjoy a vast domestic market.

2. Continuously rising fuel prices may hamper the profitability of the company. This is regarded as a threat.

3. Weakening of global economy had affected the entire aviation industry. Especially during the covid-19 the whole aviation industry is badly affected. ( Threat)

4. Company has the potential to diversify in e-commerce business segment. This is an opportunity for the airline company.

5. Low cost flights, mergers and acquisitions of different airline companies like merger of Etihad Airways with virgin Australia has posed a threat for Qantas Airways.