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 5 ​

5a) Why does Qantas’s believe the introduction of Loyalty and Credit Cards will benefit the group and the customers? [5 marks]

Answer 1

Qantas’s believe the introduction of Loyalty and Credit Cards will benefit the customers due to following reasons.

1. TRAVEL BENEFITS: The loyalty and credit cards in association with qantas may offer a large number of travel benefits that may include subsidy in tickets,free meals or any other feature which will directly benefit the customer as they might not have to pay as much as they were already paying.

2. INSURANCE: The loyalty and credit cards offered by the qantas are coming up with the travel,life and health insurance which is very beneficial for the customer as they do not have to individually buy the insurances from some other firm because with qantas they are getting it for free.

3. SAVING ON TICKET: Using the credit card may provide diversified access to the points ie more number of points can be earned which can later on be redeemed in some offers and hence the benefit of the customer is ensured.

4.ACCESS TO FREE WIFI: The loyalty card offers the customers free access to wifi and that too with a very good speed. This is also going to benefit the customers for sure.

5.EARN POINTS: The customers get the chance to earn points via the loyalty and credit cards and that points can be used to buy the tickets which will make the travelling of the customer very cheap.

Qantas’s believe the introduction of Loyalty and Credit Cards will benefit the group due to following reasons.

1. INCREASED REVENUE: The introduction of loyalty and credit cards will attract the customers and more the customers more is the revenue, so by benefiting the customers ,the company is indirectly being benefited.

2. MARKET REPUTATION: Having increased customers, internationally running flights will definitely make the reputation become 3,4 times of the earlier as due to the benefits provided to the customer the company is going is going to hear good from the customers and receive positive feedback.

3.ATTRACT CUSTOMER: The company is going to increase the customers as the level of satisfaction among them is at peak , moreover they will engage other customers to be a part of qantas as the service provide is very good, ultimately boosting the customers ratio.