Qantas Airlines History - Essay Example

Running Head: Qantas Australian Airlines Qantas Australian Airlines [Institute’s Qantas Australian Airlines Qantas Australian Airlines were established in 1920 on the outback of Queensland, and are currently recognized as one of the leading airlines, both domestically as well as internationally (Qantas Airlines, 2010). Approximately 32,500 people are currently employed at The Qantas Group to this day and the airline offers its facilities across one hundred and eighty-two terminals in forty-four countries all over the world. In addition, Qantas Airlines (2013) is leading all the other airlines within Australia, for almost a decade, in terms of on-time flight departures as well as arrivals. The Bureau of Infrastructure, Transport and Regional Economics have regarded it as the most dependable and punctual domestic airline within the country and for the month of February 2014, Qantas Airlines has had less than one percent of its flights cancelled, which further goes on to show the exceptional performance of this airline (Gollan, 2014). Finally, for the year ended June 2013, Qantas Airlines has reported an underlying profit before tax of about $192 million along with a statuary profit before tax of up to $366 million (Qantas Airlines, 2013). However, even though the Qantas Australian Airlines has been showing a significant development in all its aspects, it has been through some major operational as well as strategic challenges over the past one decade due to a number of reasons. One of the leading strategic challenges that Qantas has faced over the past one decade is the management of the human resource at its organization (Qantas Airlines, 2010). Due to numerous factors such as a global economic recession, recent industrial disputes, rising fuel prices as well as a high level of competition, Qantas has found itself in a challenging position in terms of managing the expenses associated with its revenues. Not only does Qantas need to re-establish its current market presence, but also regain control over its financial statements through various cost-cutting measures. These involve dismissing as much as five thousand employees, as well as freezing the salaries of a few employees along with a complete route and a fleet restructure. Since 1947, Qantas has been operating as a government owned enterprise and since 1995, it was chosen as one of the airlines that were being deregulated in order to improve the Australian Airline industry (Qantas Airlines, 2010). Due to excessive deregulation, Qantas came across strong competition in the form of lower operating and labor costs amongst its competitors. One of its competitors, Virgin Blue had around thirty percent lower costs than that of Qantas (Millett, 1999). Furthermore, their marketing campaigns were far more aggressive than that of Qantas Airlines (2013), because of which Qantas had to confront the threat of losing its dominance within the Australian Airline industry. In order to respond to this challenge, a new Low Cost Carrier, with the name Jetstar was created in 2004. This airline was specifically designed for consumers looking for low-fare airlines, and incorporated in itself, many traits similar to that of the Virgin Blue. Furthermore, these airlines offered low wages to its employees along with a high level of administrative control. This move was essentially done to address the threat that Virgin Blue was posing to Qantas (Lansbury, 2011). This segmentation, eventually, was a success and brought about an increase in the yields of up to thirty five percent higher than that of the Virgin Blue. Furthermore, it strengthened the domestic operations of the Qantas Airlines as well as almost doubled the profits that arose from the domestic market. However, all of these moves have ultimately led to a low activity amongst the trade unions within this low-cost airline, in order to regulate the working conditions as well as the wages paid to the employees working within Jetstar, to achieve cost-savings. Apart from regulating the working conditions, since the election of the Federal government in 2007, there was an increase in the Australian Workplace Agreements as well as non-union collective agreements (Forsyth, n.d). Such agreements allowed the senior management to communicate directly with its employees, and hence avoid the process of the trade unions. Jetstar employed a number of strategies in order to curb its costs, which included using a combination of individual based agreements as well as non-union agreements, thus turning it into a more flexible operating base for a Low cost carrier such as Jetstar. Due to an increase in inflation, the fuel prices for the airline industry have been escalating on a daily basis. In order to combat the high prices combined with the increase in competition, Qantas has overtime developed strategies to deliver efficiency gains. Since its emergence into the market, Qantas has used a traditional ‘hub and spoke’ operational model, in order to provide a range of connections to the domestic as well as the international destinations, and thus generate higher passenger yields for itself (Forsyth, n.d). However, due to the escalating fuel prices, about seventy-five percent of the international flights had been unprofitable, combined with a risk to the viability of many of these routes. One of the ways through which Qantas addressed this issue was to transfer about twenty percent of its routes to its lower cost base, Jetstar. Jetstar, although generated lower passenger yields as compared to other airlines within Qantas group, was still able to make higher profits as it not only secured a high number of passengers, but also maintained low operational costs (Lansbury, 2011). Although, this was a successful tactic by the Qantas group as it resulted in a fifty-four percent growth in the revenue, there was criticism by some of the trade unions regarding this strategy. According to the unions, this was a short-term approach in order to protect the revenue, while hampering the service standards in the long run for the Qantas Group. Apart from this, there is an added risk of taking this kind of an operational decision that it may damage the efficacy of the market segmentation strategy that is employed by Qantas and Jetstar in order to distinguish between their high-cost and low-cost carriers. Apart from segmenting its markets into Qantas Airlines and Jetstar, Qantas has been employing an additional strategy in order to tap into a new market. It diversified its portfolio in 2005/06, through improving upon its freight operations and contributed $320 million towards improving its services involved in the transportation of exports between various countries. Qantas is offering access to over one hundred and thirty five countries globally, covered by the Oneworld alliance (Hawes, 2006). It not only transports goods overseas, but also provides various mail services as well as a unified transfer between the national and the international networks. Furthermore, Qantas has also started working aggressively with key tourism organizations within Australia, in order to increase tourism as well as passenger traffic within its airlines. Some of the organizations it has worked with would include Tourism Australia, the Australian Tourism Export Council, TTF Australia and the State Tourism Organization (Hawes, 2006). In addition to that, Qantas has been actively involved in marketing tourism within Australia as well as provided support financially for joint promotional activities for marketing Australia overseas. With a restructure like this, as well as the change in the kind of a market Qantas Airlines has recently tapped into, a series of issues could emerge in the long term. Qantas has previously, always been known as one of the leading airlines. By paying its workers low wages as well as cutting down on their costs through wage freezes, it is hampering the usefulness of its employees. Some articles published in the newspapers have affirmed that Virgin Blue has better pay scales as well as working conditions and has yet maintained the levels of profit in its organization, while also covering the same routes as that of Qantas. Qantas has also recently terminated some of its employees in charge of the safety as well as the quality of service. All of this combined could lead to a fall in the quality of the airlines as well as hinder their image in the Australian airline market as the leading airlines. Even though it might have attempted to address the challenges in the form of inflation, rising fuel prices as well as increased competition, it has still not developed a strategy to receive consistent revenue from its travelers. Qantas airlines do not only need to cut down on its costs, but also increase its revenue by working on its marketing strategies. Furthermore, this kind of a strategy is distorting its general image in the market. If this prevails, Qantas airlines might not only lose out its customers to other airlines, but its employees as well. References Forsyth, P. (n.d.). Low Cost Carriers in Australia: Experiences and Impacts. Australia: Department of Economics - Monash University. Gollan, M. M. (27, February 2014). Qantas to Slash 5000 Jobs in Bid to Save $2bn: experts react. Retrieved March 26, 2014, from The Conversation: http://theconversation.com/qantas-to-slash-5000-jobs-in-bid-to-save-2bn-experts-react-23754 Hawes, D. (2006). Response to Australias Service Industries. Australia: Qantas Airways Limited. Lansbury, T. S. (2011). Strategic Choice and Employment Relations in Australian Airlines: A case of convergence? Australia: Work and Organisational Studies, University of Sydney. Millett, J. M. (1999). A Case Study of the Role of Collective Bargaining in Corporate Change - Qantas Airways Limited. Research by University of Southern Queensland, 1-21. Qantas Airlines. (2010). The Qantas Group at a Glance. Australia. Qantas Airlines. (2013). Preliminery Final report Year ended June 2013. Australia. Read More