The Problems of Qantas Airlines - Case Study Example

Qantas Airlines Executive Summary Qantas Airlines is one of the leading airlines of Australia. In this report, the problems faced by the airlines in the recent have been investigated. The introduction section shows that company is one of the profitable airlines of the world and has expanded its network to 182 destinations of the world. In year 2009, company reported a positive profit, when most of the other airlines were reporting losses and declining sales. However, one major concern which has emerged for Qantas Airlines is the declined profitability of the airline in 2010. The secondary research highlights that air travel quality concerns, declining international air passengers as a result of global financial crisis and increasing fare competition are the major factors which can be considered to contribute to declining profitability of Qantas airlines. Three hypotheses have been developed which will be investigated in the proposed research study. The methodology section highlights that both the qualitative research approach (analysis of secondary data and interviews) and the quantitative research approach (analysis of data collected through questionnaires) will be used. It is expected that the identified factors in the secondary research will be the actual reasons of the declining profitability of the airline. However, through primary research we may identify other factors, if any. Introduction The market structure of the airline industry is changing because of the ever increasing competition in this industry. If more and more investors are investing in this industry by looking into the profitability, then there are various concerns which they actually analyze after entering into the industry. Therefore, studying the problems which airlines usually face is very significant and that is why I have selected airline industry for my research. The proposed company to conduct the research study is Qantas Airlines, which is an Australian airline company. The history of Qantas Airlines dates back to the history of the development of the Australian civil aviation industry. The airline is the second oldest airline of the world and it was founded in Queensland in 1920 (Qantas, 2010). Today, the airline is recognized as the leading long distance airline of the world and the strongest airline in the Australian airline industry (Qantas Airlines). Today, company has employed around 32,500 people and carries passengers to 182 destinations in 44 countries. The operational statistics of Qantas Airlines show that in 2010, the number of passengers served by the airline is 22,540 which is less as compared to 23,622 passengers of 2009. Moreover, the financial performance of the company has been good in 2010 and company reported a net profit after tax of $116 million (Qantas, 2010). The declining profitability of the airline has become the major concern for the management of the airline. Secondary data According to Qantas (2010) statistics report, the competition in Australian domestic industry has increased and the focus of airlines has increased on fare levels. The focus of airlines on fair levels has increased the flexible range of fairs for the travelers but has reduced the yield of airlines in domestic air travel over the past 30 years. The traffic statistics of Qantas shows that as compared to the equivalent month in 2009, the revenue passenger kilometers1 in 2009 has increased by 5.4 percent and 8.8 percent increase in passenger traffic has been seen, however, still, the revenues of the company are falling in the current year (AAP, 2010). It gives an idea that if the passengers of airline have not declined then fare competition may appear as one of the factors affecting the profitability of airline. On the other hand, Qantas Airline is being considered as one of the few airlines which have remained profitable even during the economic downturn when International Air Transport Association has forecasted $US 9 billion as a net loss of aviation industry in 2009 (Wikinvest, 2010). In the recent few weeks Qantas is also facing quality control problems. The company is facing significant engine troubles in its new A380 fleet. Passengers are facing more delays such as cancellation of flights because of electrical fault. Mark Ritson in his column says that Qantas is using crisis to build brand. The argument of Ritson is based on the fact that CEO of the airline Alan Joyce considers recent quality control problems as a way to improve positive safety culture (Ritson, 2010). Therefore, the declining profitability of Qantas airline appears to be a major problem for the company. It is very important for the airline to investigate whether the fare competition, global financial crisis or quality are the serious concerns to control the declining profitability of the airline. Methodology The proposed research study is the descriptive kind of research, in which the recent problems faced by Qantas airlines will be analyzed. In the proposed research study both the qualitative and quantitative research methodologies will be used to investigate the hypotheses. The secondary research will be conducted to identify the problems and challenges faced by Qantas airlines. The secondary data will be used to develop hypotheses. The information from electronic sources such as official website of the airline, other authentic online sources and financial reports of the company will be collected. To test the hypotheses primary research will be conducted. Two primary research tools including interviews and survey will be conducted to collect the primary data. The interviews with the senior employs of the airline will be conducted. The aim of conducting interviews is to collect the information on the recent problems identified through secondary research. A questionnaire will be developed that will be distributed either by hand or by email to 75 above employees of the company. The management level employees will be given participation in the survey because they will have more information and knowledge. The participants will be randomly selected from the management team of Qantas airlines. A standardized questionnaire will be developed and distributed to the participants. The questionnaire will be divided into four sections. In the first section, the information on demographics of the participants will be collected including gender, designation, qualification and experience. In the second section, a Likert scale from 1 to 5 will be provided to answer 10 questions. The questions asked in this section will be related to nature of competition in Australian aviation industry and profitability of Qantas Airlines. In the third section, the questions related to global financial crisis (passenger traffic) and profitability of Qantas Airlines will be asked through Likert scale. In the fourth section, Likert scale based questions will be asked on air travel quality, brand image and profitability of Qantas Airlines. The data collected through the survey will be organized on Excel sheet. For data analysis purpose, the frequency analysis will be used and other statistical tools will be also used to interpret the findings. Based on results drawn from primary research and secondary research, the hypotheses will be proved or disproved. The independent variables for the proposed research study include competition (fare competition), global financial crisis (passenger traffic) and air travel quality. The dependent variable is the profitability of Qantas Airlines which will be measured in terms of net profit after tax, sales and passenger traffic. Brand image is an independent variable when its relation will be analyzed with profitability of Qantas Airlines and it will be a dependent variable which it will be analyzed with air travel quality. Hypothesis Following are the hypotheses that will be investigated in the proposed research study. These hypotheses have been developed in the light of problems and challenges faced by Qantas airlines in the recent days. The decline in the profitability of Qantas Airline is the result of the airfare competition among domestic airlines The profitability of Qantas Airline has declined during the global financial crisis because of the decline in air passenger traffic The declining air travel quality of Qantas Airline is threatening the brand image of Qantas Airline thereby, affecting its profitability Report layout The proposed research study will be documented in the form of a research report. The report will be divided into chapters. Before chapter one, the executive summary of the report will be given, which will be a short summary of the research report. In the chapter one, the introduction to the company will be given. In addition, the research objectives, hypotheses, research questions and scope and limitations of the study will be also discussed in this chapter. In the second chapter, the literature review will be given in which the secondary data will be given and evaluated. In the third chapter, the data collected from the primary research will be presented in graphical, tabular or text form. The Fourth Chapter will be the analysis part of the report, in which the analysis of the primary data will be done. In the same chapter the hypotheses will be analyzed and tested. Chapter Five will be the concluding chapter and recommendations will be also given in this chapter. In the end the bibliography will be presented which will cover the sources used in the research study. Bibliography AAP. (2010, December 1). Qantas flying more passengers, but the numbers dont add up to more revenues. Retrieved December 14, 2010, from http://www.adelaidenow.com.au/business/qantas-flying-more-passengers-but-the-numbers-dont-add-up-to-more-revenues/story-e6frede3-1225963847182 Qantas Airlines. (n.d.). History. Retrieved December 13, 2010, from http://www.qantas.com.au/travel/airlines/history/global/en Qantas. (2010). THE QANTAS GROUP AT A GLANCE. Retrieved December 13, 2010, from http://www.qantas.com.au/infodetail/about/FactFiles.pdf Ritson, M. (2010, December 2). Qantas Using Crisis to Build Reputation. Retrieved December 14, 2010, from http://www.marketingritson.com/documents/ritson011210554.pdf Wikinvest. (2010). Qantas Airways LTD (QAN-AU). Retrieved December 14, 2010, from http://www.wikinvest.com/stock/Qantas_Airways_LTD_(QAN-AU) Read More