2013
[QANTAS AIRLINES:
STRATEGIC ANALYSIS]
EXECUTIVE SUMMARY
In this report we make a strategic analysis of Qantas Airlines and look at various factors
affecting the business. The report first looks at the background of the airlines where the case is
being built and various internal and external factors affecting the business. In the external
analysis, we would do an internal and external environment analysis which would help us in
understanding the influences that affect the business. We also conduct an internal analysis where
we identify the core competencies, key strengths and major weaknesses based on which the
recommendations have been made.
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TABLE OF CONTENTS
Executive Summary ................................................................................................................................................................ 2
1.0 Introduction .......................................................................................................................................................................... 4
1.1 Brief Overview ............................................................................................................................................................... 4
1.2 Report Objectives and limitations ............................................................................................................................ 4
1.3 critical Company information ................................................................................................................................... 5
2.0 External Analysis ............................................................................................................................................................... 5
2.1 Environmental Analysis .............................................................................................................................................. 5
2.2 International Environment .......................................................................................................................................... 7
2.3 Competitive Environment........................................................................................................................................... 7
2.4 Porters Five Forces Analysis ..................................................................................................................................... 8
3.0 Internal Analysis................................................................................................................................................................. 9
3.1 Core Competancies ....................................................................................................................................................... 9
3.2 SWOT analysis .............................................................................................................................................................. 9
4.0 Conclusion .......................................................................................................................................................................... 10
References ................................................................................................................................................................................ 12
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1.0 INTRODUCTION
1.1 BRIEF OVERVIEW
Qantas Airways limited is Australia’s largest airlines and is based out of Sydney. They dominate
the Australian Domestic market with around 65% market share and 18% travelling in and out of
Australia through them. Qantas is an acronym of Queensland and Northern territory Aerial
services. In the year 1992, the Australian government has sold its domestic carrier and has made
the airlines privatized which was later merged with British airways with its 25% stake in the
business became owned by the Australian got with an overall stake of 55%. Later with the
deregulation scenario unfolding and at the same time with the shutdown of Ansett Airways,
many low cost competitors entered into the market and this has intensified the competition
within the market. Qantas had to take some drastic steps to ensure that they put a hold on their
losing market share and at the same time they had to make sure that they find a way to woo the
customers back into their fold with some tough decisions that the management had to take.
1.2 REPORT OBJECTIVES AND LIM ITATIONS
In this report we aim to strategically analyze the market position of Qantas Airlines and the ways
in which the market share of the same may be improved. We would look at the external factors
that are affecting the business with the help of the environmental analysis and at the same time
we also have to look at how the industry has evolved over a period of time and the competition
and the factors that can influence the business from the perspective of the competition. We
would use all these data to understand the opportunities and the threats that the company has and
the ways to improve the market share. In this report we also would conduct an internal analysis
of the company and identify the core competencies that have helped the airlines in becoming the
market leader. We would also look at the value chain of the airlines where we would understand
various steps that can be changed to make the processes much smoother and non redundant. In
this report we would analyze the company by means of SWOT and look at the current strategies
that are being adopted by them and at the same time make various recommendations that can be
beneficial for them.
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1.3 CRITICAL COMPANY INFORMATION
Qantas operates out of Sydney as its major aviation hub and connects to all the major airports
across the world. In the event of competition from its customers they have ensured that they
improve the connectivity across all the major cities thus giving them an edge over their major
competitors. They have also expanded their line of business to other areas such as holiday
tourism and catering to improve the bottom lines and at the same time this has differentiated
them with respect to their competitors. They also have two subsidiaries by the name Snap Fresh
and Qantas Catering group who takes care of their catering requirements. They supply food
materials to all major airports in Australia and at the same time they have also started supplying
the food materials to others also. Qantas Holidays is also a subsidiary of Qantas who have been
offering exciting holiday options for their customers which has been one of the highlights of the
airlines as compared to its competitors (Bowman, 2007). Jet star is another major wing of Qantas
which has been focusing on offering low cost flight options for the customers and has been
mainly focusing on the Asia Pacific and Australian region. Other than this they have their own
airlines maintenance decision which has extended its services to the states defense and other
government airlines maintenance also. The company has been investing on new airlines over the
years and has brand equity built over trust from its customers and at the same time they have
managed to look at the customer satisfaction levels and the factors affecting the same and make
the necessary changes to match the same (Treacy, 2003).
2.0 EXTERNAL ANALYS IS
2.1 ENVIRONMENTAL ANALYSIS
Technological: Technologically the sector has been improving over the years and the
competition increased after the merger of Boeing with McDonnell Douglas and they have been
investing huge amounts of money in improving the technology and at the same time both Boeing
and the Airbus have been coming up with many new models. Not only in terms of the flying
experience have these companies improved. They have also made sure that they are equally
focusing on the in house improvements that have transformed the airline industry to be looked at
as one of the main means of transport. The airport terminals have been renovated and the flights
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have been made cheap over the period of time have all contributed to the growth of the industry.
With all these factors in picture airlines has become the substitute means of transport for many
travelers (Prahalad, 2000).
Economic: Qantas Airways has been affected by the financial crisis that has hit the market and
with the rise in the oil and crude prices and the instability in the economic scenarios across the
globe the airlines industry also would be affected for obvious reasons. The Australian
government has been supporting the carrier with many subsidies and cuts to ensure that the
nation’s primary airline carrier goes through without having to meet the same fate as Ansett.
There is a huge competition that they are facing from the low cost carriers and this has resulted
in them launching the Jet star. Another major blow for all the major carriers is that their first
class and the business class travel rates have come down drastically and this has been happening
over the last few years as all the major companies find reducing the business class travel as one
of the major means of reducing the costs for the company. The Airline operator’s n the other
hand has been reducing their costs by finding out the flaws in the system and reducing the
redundancies in an effort to reduce the operational costs (Porter, 2005).
Political: Australian government has passed many subsidies to help the Qantas Airlines to
survive in the industry and one of the potential things that can happen in the coming year’s s the
merger of Qantas with the British airways as this can help them in improving the network of
coverage that both the airlines can offer. This can also help them bringing down the operational
costs drastically by reducing the overall no of flights in the same region and can expand their
network to other areas where they don’t have enough networks. The political scene in Australia
is stable with stable government operating and the only cause of concern here is the economic
crisis that has hit the world economy that the airlines has to tide over with the help of the
government.
Socio Cultural: The Australian public has taken up airline travel as one of the important means
of transport and this change has lead to the growth of the industry. To add to this there are many
inlands in the island where there are no other transport system and the people are wholly
dependent on the airline travel. There are many industries in Australia where they are entirely
dependent on Airways to supply their goods. This makes the scene conducive for the growth of
the aviation industry in the country (Gale, 2006).
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2.2 INTERNATIONAL ENVIRONMENT
The issue of HIN1 Visa has affected the aviation industry across the world. There is a drop of
more than 18% in the travelling rates just because of the same reason. The competition from
other airlines like the Qatar Airways and the Singapore Airlines covering more routes and at a
lesser cost has forced the management of Qantas to think on the lines of changing their strategy
of operations. The companies across the world are forced to reduce the operational costs mainly
because of the fact that the crude oil prices has been volatile and it is linked to the political unrest
that is happening across the world. There are more takers amongst the customers who would take
up the air travel but the major change that we have seen over the years has been that business and
the first class travel has come down drastically (Porter, 2007).
2.3 COMPETITIVE ENVIRONMENT
Qantas has always been a premium airline offering the best in the class facilities to its customers
and they have that unique position in the Australian Markets. They have made use of this
positioning and have been doing well but with the reduction in the business class travelers
reducing and the customers being more price conscious they have lost that advantage that they
had earlier. They have faced severe competition from Qatar Airways and the Singapore airlines
in terms of price and their international travelers have dropped down by almost 4% in the last
one year (Ansoff, 2005). In the domestic travel scenario also they are faced with challenges from
the local competitors and they had to come up with Jet star which is a low cost option for the
customer. This has actually worked for them as the number of passengers opting for Jet star has
increased in the last three years. One differentiation that they had been able to make with respect
to the otters has been that the convenience and the premium service levels that they have
maintained inspire of the financial troubles that they had (Johnson, 2011). The in house
entertainment and the terminal services has been world class and Qantas has been improving
their service quality levels based on peer comparison and taking regular inputs from the market
(Hall, 2004). They have created a unique position for themselves in the market where they are
being looked at as the premium service provider and the customers for their service experience
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don’t mind getting them at a premium price. In terms of Cargo they face a huge competition
from Lufthansa and in this space the company has to ensure that they have a lot to do as they just
managed to grab the 10th spot amongst all the airline carriers. This is mainly because of the
pricing and the coverage that Lufthansa has to offer and the management has to take this up
seriously and work towards the benefit of the organization (Abell, 2000).
2.4 PORTERS FIVE FORCES ANALYSIS
Industry Rivalry:
There is intense rivalry in this field where the operators are competing with each other in terms
of price and at the same time the service levels have gone up thus making all of them to reduce
the operational costs to minimal levels to maintain the margin of operations. One of the major
differentiators in this field is the number of direct flights that are being offered where the major
players will have an edge but with the price factored into this calculation; this advantage is also
being taken out these days (Stalk, 2002). In terms of the relationships, even though there are
many airlines which have loyalty programs for the customers, the switching costs being low for
the customers they cannot dictate much in such circumstances.
Entry for New Players:
For domestic players the entry can be much easier in terms of licenses and the fact that in the
initial stages most of the other peripheral operations may be outsourced. But the capital outlay
involved and the time taken to break even in this case has held back many from entering into this
field. In terms of international routes the entry barriers are high and one need to plan out the
entry in this industry as the competition is so huge that it is so very easy to be sidelined in the
market.
Substitutes:
There are many substitutes for airlines especially in the shorter routes likes’ bus, train and other
land modes. This may not be true for the long distances anyways but with the advent of
technology there are many options like the net meetings, video conferences and video messages
that has been a substitute but not as effective.
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Power of Suppliers:
In terms of the supplier power the aviation industry mainly because it is polarized is huge. The
investments that these manufacture make for the suppliers and considering the high value orders
there is very little chance that they would move or can increase the prices to a great extent.
Another factor that affects the aviation industry is the fuel prices where the suppliers doesn’t
have much of a control and is decided by the political factors across the globe.
Buyer Power:
In aviation industry the buyer power is more as most of the routes are being covered by more
than one operator and at the same time there is a huge competition in terms of the prices which
gives sufficient power to the customers
3.0 INTERNAL ANALYS IS
3.1 CORE COMPETANCIES
Qantas has always been offering the customers the best in the class services and have upgraded
the fleet to the latest available in the market. Thus for them premium service to the customers
and the network across the world has been one of the core competencies that they have. They
have upgraded the in house entertainment to match the best in the class and also have improved
the terminal service offerings to the customers. They have been always looked at as a premium
brand and this has resulted in them charging a premium from the customers,
3.2 SWOT ANALYSIS
Strengths:

Premium Brand Value and recognition

Good Connectivity across the world

Excellent terminal facilities and in house facilities.
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
Zero Accident Record

Best in the class operational facilities.
Weaknesses:

Increased operational costs in comparison to competition

Disputes with major unions in the country.

Instability in the management with British Airways merger.
Opportunities:

Operations into more international routes and inland domestic routes.

Major overhaul in market share after the Ansett Collapse.

Better Online promotions and loyalty bonus for customers to increase the travels

Jet star operations to be increased on routes where price competition is huge.
Threats:

Price Competition reducing the operational margins.

Change in domestic policies to protect the new entrants.

Increase in the fuel costs and huge volatility of the same in the market.

Global economic crisis and weakening of AUD.
4.0 CONCLUS ION
Qantas has been the leading airline carrier in Australia and they have managed to build their
brand effectively over the superior services that are being offered and at the same time have also
made their presence in the low budget carriers with Jet star. In the past few years the operational
margins have been on a low mainly because of some of the global factors but the management
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was well aware of the situation and has been focusing on reducing the operational costs by
cutting down some of the features that has been considered not important for them. Overall they
are all set to rein the Australian air in the days to come provided the management is flexible
enough to make the changes and is flexible with its decision making based on the dynamics of
the market.
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REFERENCES
Hall. W. 2004, Review of research: Competency-based training and assessment, Adelaide,
National Centre for Vocational Education Research
Porter, M.E. 2006, What is Strategy? Harvard Business Review, Vol.74, No.6, pp. 57-76
Prahalad, C.K. 2000, The Core Competence of the Corporation, Harvard Business Review, Vol.
68, No. 3, pp. 79-91
Stalk, G. 2002, Competing on Capabilities: The New Rules of Corporate Strategy, Harvard
Business Review, Vol.70, No.2, pp. 57-70
Abell, D.F. 2000, Defining the Business: The Starting Point of Strategic Planning, Englefield
Cliffs, N.J., Prentice Hall
Ansoff, H.I. 2005, Corporate Strategy, McGraw-Hill, New York
Bowman, C. 2007, Competitive and Corporate Strategy, Irwin, London
Gale, B.T. 2006, Value-Based Marketing and Pricing, Customer Value Inc., Boston
Johnson, V. 2011, Exploring Strategy, 9th ed., Prentice Hall, Essex
Porter, M. 2001, Competitive Strategy: Techniques for Analyzing Industries and Competitors,
The Free Press, New York
Porter, M. 2005, Competitive Strategy: Creating and Sustaining Superior Performance, The Free
Press, New York
Treacy, M. 2003, The Discipline of Market Leaders, Perseus Books, New York
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