QANTAS AIRLINES: SUPPLY CHAIN MANAGEMENT ESSAY
Table of Contents
INTRODUCTION.. 3
History of the Company. 3
The Strategy of Qantas Over the Time. 5
Identify Qantas’s Current Mission and Goals. 5
QANTAS Internal and External Environment Analysis. 6
External Environment Analysis. 6
Technological 6
Economic. 7
Legal-Political 7
Socio-Cultural 8
International 8
Internal Environment Analysis. 8
Customer and Clients. 8
Competitor 9
Suppliers. 9
Labour Supply. 9
Government Agencies. 10
Opportunities and Threats for Qantas. 10
Opportunities. 10
Threats. 11
Strategies to be Pursued by Qantas to Stay Competitive. 12
Bibliography. 13
Appendix A.. 15
Appendix B.. 15
INTRODUCTION
The QANTAS carrier is regarded as the flag carrier of Australia which is an acronym for “Queensland and Northern Territory Aerial Services” and is nicknamed as “The flying Kangaroo”. Its headquarters is based at Sydney, New South Wales and the main hub is located at Sydney Airport.
It is the largest domestic as well as international airline in Australia and is considered to be the world’s leading long distance carrier spanning its services from Australia to North America and covering Europe too. The whole Qantas group has approximately 32,500 people and its services span across a network which spans 182 destinations in wide area covering 44 countries in the Middle East, Australia, The Pacific, Europe, Asia, the America and Africa (Qantas, 2012).
From Appendix A it is clear that QANTAS has great operational efficiency an that is why it has financial performance of $377 million as the underflying Profit Before tax and its Net profit After Tax was $116 million in the year 2010.
History of the Company
Qantas was established in the year 1920 in Queensland and it is ranked as the 11th largest airline and is the second oldest. It was formerly a government owned business and at that time it did not consider profits or maintaining efficiency as its prime goal. In the year 1993 it sold 25% stake to British Airways and in the year 1995 Qantas airlines was completely privatised. Thus it had to adopt management practices in order to overcome both the internal as well as external influences. That is why the narrow minded culture was also transformed into a broad minded culture.
The Birth of Qantas was conceived by Lieutenants Wilmont Hudson Fysh DFC and Paul McGinness DFC. The company started off with joy rides and air taxi flights. Australian aviation industry and the international aviation have grown manifolds with the help of Qantas (Qantas AIrways Limited : Fact File, 2010).
1928- First Flying doctor service
1931- First link with Imperial Airways
1943-Formation of Qantas Empire Airways Limited and started regular airline services for Australia-UK in December 1934
1935- First Qantas overseas flight by kicking off Brisbane-Singapore section
World War II- Qantas maintained and services vital air links, established ‘Double Sunrise’ non-stop flights across Indian Ocean, dropped supplies at tree-top level.
1947- Australian Government purchased Imperial Airways shares and first flight from Sydney- London started.
1950- Started own commercial services
1954- Began flying to Vancouver and San Francisco, U.S.
1958-Started Round-the-world services which was operated by Super Constellations
1959-Qantas entered jet age by buying the first Boeing 707 which was operated by non-US airline.
!967- rapid expansion was witnessed and it changes its name to Qantas Airways Limited and it ordered advanced B Models of Boeing 747
1989-Set world record for commercial jet Boeing 747-400 by flying non-stop from Sydney to London.
1992- Trans-Australia Airlines (TAA), the domestic airlines was named as Australian Airlines and was purchased by Qantas. Qantas became a fully privatised airline.
1995- Privatisation of Qantas was completed and its shares were listed on Australian Stock Exchange
2001- Qantas bought Impulse Airlines and Jetstar was launched in 2004.
The Strategy of Qantas Over the Time
Qantas used Cost Leadership Strategy in order to respond to the changing market conditions through creation of Jetstar, a low fare domestic airline in Australia. Cost Leadership Strategy involves the efforts of the organization to operate in more efficient manner so as to minimise the cost.
Qantas launched its first IPO in March-1993 in order to acquire investors for 25% stake of its company. Then it launched Jetstar as the low cost domestic airlines and its ‘two-brand strategy’ became the most remarkable and successful one to capture both international as well as domestic markets. It positioned itself in dual positions first as low fare airline and secondly a full service airline along with an offering of almost recession proof FFP stated the risk management strategies of Qantas (QANTAS: The Australian flag carrier undergoes a metamorphosis as it attains 90 years of operations, 2012).
Another key international strategy adopted by Qantas is has entered into 10 years alliance with Emirates to turn around its loss-making international operations. The international unit of Qantas was suffering loss due to low demand, high fuel costs, and growing competition so it entered in this alliance to make its international division strong and viable. Along with that Qantas is trying to revive international unit by cutting flights and focussing on profit-making routes (Qantas forms Emirates alliance as it seeks turnaround, 2012). The new international strategy of Qantas also lays emphasis on expansion in Asian market and it also plans to cut 1000 jobs and set several joint ventures in Asia. It will buy new six Airbus A380 the superjumbo and will eliminate all the unprofitable routes (McNamara, 2011).
Identify Qantas’s Current Mission and Goals
The main aim of Qantas is to meet the highest safety standards along with high standards of service, environment responsibility and citizenship. According to CEO of Qantas Allan Joyce, it keeps on continuously renewing its fleet so as to create low operating cost, enhance the fuel efficiency and it keeps on releasing new passenger planes to improve the comfort level of passengers.
The main goal of Qantas is to provide a great place to work for its staff, provide proper training and development opportunities to its employees and to harness their passion in best possible manner.
The visions of Qantas are to make their airlines the best in each class. The world’s best premium airlines Qantas want to be the best with their world’s best low fare airlines Jetstar. The main focus it lays is on safety first, excellent customer service, two strong yet complimentary brands, right aircrafts with right airports, and operational efficiency.
The short term mission of Qantas is to improve its environmental performances by implementing the measures like reduction of fuel, electricity, waste and water. They want to do so by using new technology and New Generation technology check-ins which involve Operational Plans. In order to achieve the organizational goals Qantas needs to follow Operational planes for short period. Which covers:
- Financial Plan ( covers monetary aspect)
- Marketing Plan( covers selling and distribution)
- Production Plan ( covers tech, machine and methods)
- Facilities Plan ( covers work layout and facilities)
- Human Resource Plan ( covers recruitment , selection and placement of people or staff) (Kayuputih, 2012)
QANTAS Internal and External Environment Analysis
External Environment Analysis
Technological
The aviations manufacturers got benefitted through technological innovation and which results in development of airways. IN the same manner the technological innovations have caused great impact upon the various operations of Qantas. The newer plans have the more capacity and seem to be more efficient. Once there was merger between the world’s third largest aviation manufacturers McDonnell Douglas with Boeing Airbus is the only major opponent they have. The two companies have been investing large amount in the research and development of new models (Hulten, Vistrom, & Mejtoft, 2009). Thus they have been able to develop two new and most advanced A380 and B747.In addition to this advancement new technology allows using internet in airplanes (Albers, Buhne, & Peters, 2009). All these attractive facilities for business class developed by Qantas enhanced the flying experience.
Economic
With the conversion of financial crisis into economic crisis Qantas will be definitely affected. That is why the global enterprises will reduce the spending on business travels (Greve, Nielsen, & Ruigrok, 2009).The event of 11th September also affected aviation industry and Qantas too experienced a decline of 30%. The bad situation of American as well as Japanese economy also affected the tourism and as well as business travelling (Bonn & Rundle-Thiele, 2007).
That is why in January this year the business class passengers of Asia Pacific fell by almost 24% while the decrees in business class in Europe was 22.2% which is a huge reduction for aviation industry (Graham, 2009). Furthermore the SARS outbreak also decreased the operations and the profits lowered by20% (2002-2003).
Legal-Political
Australian Government is trying their level best to help Qantas Airways to sail through tough times. There has been a potential merger between Qantas and British Airways which will accelerate the integration process of whole aviation industry (Duval, 2008).
This merger will reduce the wastage of fuel and resources which are done co-indecently. The combined route expansion will bring major revenue synergies as it will consolidate the Transatlantic, European and Asia-Pacific markets (Narasimhan & Talluri, 2009).
Qantas is subjected to the regulatory control of CIVIL AVAIATION SAFETY AUTHORITY and it has to hold the air operating licences. Various law variations under which Qantas operates are like protections of intellectual property, contracts and dispute resolutions. The foreign airlines have been given rights by Australian Government to travel across the country thus given the foreign airlines unlimited capacity to operate at all the international airports in Australia.
Australian Competition and Consumer Commission (ACCC) keeps a close eye on Qantas as it says that the Section 46 in Trade Practices Act needs more reforms and should be made stricter so that the market dominance abuse can be restricted.
Socio-Cultural
The aviation industry has great impact in the life of Australians. Without better connectivity provided by Qantas in the inland areas the life would become very difficult. In a recent article released by Australian government on the status of aviation industry it reported that Australian airlines are struggling to maintain their profit margins. Therefore the government gave a subsidy to numerous airlines of 11 million US dollars. The changing tastes, culture and fashion all have great impact on Qantas.44 countries opera6tiosn with different culture, legal aspect and wealth Qantas has started training its new staff in cultural sensitivity and now it aims to recruit 65% of its cabin crew which is fluent in foreign languages.
International
The outbreak if H1N1 influenza impacted the Qantas airways limited to great extent (Ewers & Dauelsberg, 2007). The epidemic got in control but it was just like the 1918 plague in Europe. The epidemic influenced the psychological feelings of the air travellers on both the domestic and international routes.
Internal Environment Analysis
Customer and Clients
Qantas is ranked the best airline in Australia but its price is much higher than other carriers. Passengers who choose Qantas receive VIP treatment. To obtain profit margins Qantas has mainly relied on distinguished class passengers and along with that the first and the business class passengers always remain flowing in large numbers which helps Qantas to achieve high profits (Schuster, 2009). But this advantage was not there for past many months because the economic crisis impacted the number of first class passengers and more people started opting for low cost carriers instead of high costing flights (Egri & Ralston, 2008).
The March revenues of Qantas fell to78.3% and the number of passengers also reduced to 3.21 millions. The decrease in the international passenger on the main route was by 16% while the domestic passengers fell by just2.6%. At the same time the number of passengers for its low cost airline Jetstar kept on growing (Shaw & Williams, 2009).
Competitor
The IATA announced the top rankers in the cargo traffic and international passenger’s category. On the top was Lufthansa with a total volume of 7.15 billion to-kilometres and the topmost passenger volume grosser was British Aviation with a passenger volume of95.47 billion passenger-kilometres. Qantas ranked tenth in this list. Moreover Jetstar is going to replace Qantas for operating the domestic routes of New Zealand
Suppliers
It has been said by Qantas that 97% of its fuel which is required for flying has been set securely for 2009 fiscal year with a highest price tag of 98 USD per barrel while the 50% of fuel required for 2010 fiscal year has also been stocked in securely whose price will also not go beyond 94 USD per barrel (Annual report 2008, 2008).
Labour Supply
There have been a very large number of job cuts in Qantas for past 2-3 years it abolished the recruitment of 1200 new workers, 1500 people were asked to leave and due to decrease in traffic volume it grounded its 10 airplanes (Dulebohn, Molloy, Pichler, & Murray, 2008). In order to improve the efficiency of the airlines and to reduce the cost Qantas again announced the cancellation of staff of 90 senior management positions. This is considered to be the largest management restructuring in any company (Smith, 2009).
There has been a warning from business analysts that further layoffs are expected due to delayed delivery of aircrafts which is inevitable in next three months in Qantas (Lewin, 2009).
The general strike which has been launched by the Qantas workers did have great impact on the working of Brisbane Airport’s international as well as domestic flights. But there are some good steps too taken by Qantas like it has agreed to give 6.6 million Australian dollars to the 5 billion pension plans employees in the coming 3 years.
Government Agencies
On the March of 2008 both Australia and United States agreed to sign a pact according to which they were to remove the restrictions on the ‘Open Skies’ aviation between the two nations which will result in dropping of cost of flights between the two countries along with giving better opportunities for development to both. This agreement helped people to get benefit of trans-Pacific air travelling at cheaper rates. But on the other hand this agreement leads to breaking of agreement where there was long-term monopoly of direct flights by Qantas and united Airlines.
The credit rating of Qantas was also reduced by Standard & Poor’s Rating services which reduced the rating from BBB+/A-2 to BBB/A-3. The outlook of Qantas thus looks on negative side due to major adjustment in pre-tax profit forecast of 2009 (Company Announcements Office Australian Securities Exchange, 2009).
Opportunities and Threats for Qantas
There are numerous opportunities still existing for Qantas as it possess major strengths in the aviation market of Australia and along with that there are major threats too which arise from its weaknesses. These have been analysed through SWOT analysis of Qantas.
Opportunities
Qantas has strong market position where it has 30% share in the world aviation market and it enjoys the major chink of 65% share in the Australian domestic markets. This helps it in providing growing passenger revenues. It flies to so many destinations worldwide spanning 44 countries which gives it huge international coverage and has a fleet of most advanced and modern aircrafts. This gives it an opportunity to expand worldwide as well as in domestic markets for example it can tap the Asia-pacific markets. . Moreover in the coming 10 years it is predicted that the global tourism industry is going to grow at the rate of 4.2% per year. This gives a great amount of scope of expansion in international arena to Qantas.
Moreover it has always invested in new technology to improve its efficiency with best airport locations and facilities it has eth opportunity to provide new international budget brands like Jet Connect and Australian Airlines. At the same time it has launched a budget domestic airlines jet Star With the help of these airlines it has the capacity to beat its competitor Virgin Blue in the domestic market. It can also plan to invest more for development of e-commerce operations to bring it to advanced stage. Qantas also believes in continuous evolvement of its aircraft technology that is why it keeps on investing in latest airbus and Boeings.
Threats
Due to its location in Australia it is entirely dependent upon this country and due to increased fuel prices the cost of travelling is going to increase inevitably. Qantas has poor inventory management which means it has poor turnover ratio. This indicates that Qantas is blocking its working capital in the inventories more in the form of fuel etc. This leads to threats like it’s too much dependency upon the oil markets and rising fuel costs. Qantas has poor return on average assets along with equity and investment. This indicates that the management of Qantas is very weak. If this trend continues the shareholders will lose their confidence and trust on the company portraying negative image of the organization.
This creates threats like it’s too much dependency on the economic cycle. There is major threat from its competitors in the low fare air travelling service providers. Qantas will also have to face air traffic control charges because more airplanes will fly in the sky which will indirectly increase the flying cost. Qantas is helpless as it has to pay the duty for fuel or environmental charges. This will result in deceased growth potential because Qantas mainly depends upon price simulating. Since the 9/11 incident it has much more safety obligations which also increases the operating cost.
Strategies to be Pursued by Qantas to Stay Competitive
The Differentiation Focus Strategy would be the best which Qantas can follow to overcome the threats and weaknesses that exist. Since the customers are ,much more bothered about the cost of air travel and they would like to pay the least so Qantas should apply Differentiation focus strategy where you can pass on the higher fuel prices or air traffic costs to the customers because the substitutes would be hard to find. The only trade-off of this strategy is that the market share in this case is limited to the size of the specific segment only. But with this limitation it has been found that the profits earned are significant. Thus if Qantas will follow the Differentiation Strategy the buyers or the customers will have less power of negotiation as they will have limited choice. Moreover the supplier would be able to pass on the increased cost to the customer. IN this case the airline will be better protected from entry barriers and competition because customer loyalty is bound to discourage the potential entrants. Developing brand loyalty by Qantas will definitely help them as customers will stay away from switching to rivals (Carter, Clegg, Kornberger, & Schweitzer, 2011).
Therefore Qantas needs to define strategy theory and develop strategy to enhance revenue and be profitable. Strategy has been defined as the process of determining the main long-term objectives and goals of nay organization and along with that following a course of action through allocation of necessary resources which are vital for achieving these goals (Rosenfield & Wilson, 1998). Here are basic strategic developments which Qantas should follow is increasing the revenue in the coming financial year by acquiring more customers through promotion, advertising and special offers.
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