Management of Qantas Airline - Case Study Example

Qantas Management Report Name Class Unit Report Summary to Management Qantas Airline RE: Letter to CEO This report will outline new goals that Qantas Airline needs to adopt in older to retain its market and also expand. The report has proposed expanding and restructuring LLC to new destinations, minimizing capital expenditure, expanding services to unmet and underserved areas, using LLC for holiday carrier, using LLC for long haul, offering flight transfer in the LLC sector as the new goals. To meet these goals, the company will have to increase their investment in technology, streamlining operations and utilizing low cost strategy, adopting free seating strategy to save time, introducing medium haul services, integrating holiday carriers with LLC and introducing services into unmet and underserved region. Through adoption of these strategies, the company will be able to achieve the new goals set. The airline industry is dynamic and competitive and there is need to act fast. I recommend that my report should be adopted and followed so that Qantas airlines can maintain their niche in the competitive industry. I have analyzed the airline internal and external position which made it possible to come with new goals. I therefore suggest that there is a need for the report to be implemented within short timeline to ensure that the airline is at par with changes in the competitive aviation industry. Introduction Qantas airline is an Australian carrier with the longest operating history. The airline has a reputation as one of the world leading airline and has a strong brand name. The company have been committed in creating a strong presence in the airline industry (Qantas, 2010). Due to the dynamic nature of the airline industry and increased competition, I have been asked by the company CEO to write new goals for the company and the strategies that should be used to achieve them. I will also justify why the new goals should be adopted. The report is going to cover new goals that should be adopted, strategies to achieve the new goals and their justification. Thus, the report will be divided into three sections which will deal with all the issues needed. The final section will explain the need to adopt the new goals to the management. New goal for Qantas Qantas airlines have to come up with new goals that are in line with their vision. The goals set should be attainable with the available resources and should have deliverables. I would suggest the airline to adopt the following goals. Expanding and restructuring their low cost carriers to all their destinations in a 2 year span. Though Qantas airlines have low cost carriers, they have not been able to offer services to all their destinations (Qantas, 2010). The low cost carriers in the airline are limited to several destinations locking other potential areas out. Low cost carriers have been a key development in the short haul flights. At the moment, the company have registered low profits in their Asian low cost carriers. The company main low cost carrier is the jet star among other of its subsidiaries. The company have to expand the LLC sector in order to reap the full benefits. The airline industry is dynamic hence the strategies that were used in coming up with then low cost carriers have to keep on changing. This goal should be carried out as an expansion plan for the airline. The company should include new products in their low cost carrier and make it stream lined. This should go in line with further slashing the costs and making sure that they are able to price many routes. Changing and enhancing business model in low cost carrier is vital for the airline. Minimising capital expenditure in short time frame Qantas have to make sure that there capital expenditure is low and reasonable. This will enable them to save revenue that can be used for expansion. A cost cutting scheme is very vital at the airline if it is to remain profitable. At the moment, the airline has been experiencing high expenditures which have been attributed to inefficiency. The cost cutting scheme is beneficial to the airline as well as its shareholders. Through efficient cost cutting measures, the company can increase their pre tax earnings by more than half. Saving on the capital expenditure will enable the company to increase their growth rate (Qantas Spirit of Australia). The airline should focus in expanding their services to the unmet demand in, unserved and underserved routes, key niche markets and variable routes by 2016. There are unmet demands in some areas while some routes are underserved. These are areas where there is demand or exists a possibility of creating demand (Kolar & Andrej, 2007). Some of the key niche markets have their demands unmet while others are poorly served. In some areas, demands peaks leading to poor services. These are areas where the demand can be predicted but there is low competition among the carriers. Introduction of holiday carriers in the low cost carriers (LLC) by 2015 Qantas airline should introduce a low cost carrier for holiday goers. Holiday carriers at the moment are being offered through holiday carriers. The low cost carriers have the capability to enhance the company holiday carriers section. The airline should work in eliminating holiday carriers due to their seasonality and work with low cost carriers (Qantas, 2010). The company can embark on using low cost carriers as holiday carriers and using them for their daily tasks when the holiday business is low. The goal is to come up with hybrid carriers in low cost carriers. Using low cost carriers for long haul The airline should consider transferring their low cost carrier into long haul market. This would enable the airline to enjoy high fleet utilisation and lower costs in personnel. This is a goal that the company should adopt in the near future after adequate research. The goal involves using low cost carriers in both short and long haul transport. Offering flight transfers in the low cost sector (LLC) in a short time frame At the moment, the airline offers low cost carrier through point to point services (Qantas, 2010). There are no flight connection services at the low cost carriers. The company should establish the services within a short timeline. This is a goal that should be set through consultation with all the stakeholders and after doing feasibility study. New strategies Qantas airlines have to increase their investment in technology. Use of intensive technology will enable the industry to adopt a hybrid model which needs more sophiscated technology. The use of technology in the hybrid model helps the industry in several ways. The airline will be able to move into a new service system that is customer focused. This is a system that has the capability for the airline future needs. Technology will also be able to evolve and support the airline as the scale of their business expands. As a hybrid carrier, there is need for technology that is able to set the business to focus on the changes. Technology has the capability to enable the carrier to propel their business (Kolar & Andrej, 2007). In order to expand the low cost carrier services, there is need to streamline the operations as well as maintain low costs. The company should aim at expanding beyond the current network so that they can increase their competitive landscape. This will help the airline with high profit margins. The airline has to optimise the assets in order to achieve the goal. The optimisation should also be carried through revenue management. The revenue should be gained through revenue benefits, restriction fee, low travel cost, appropriate forecasting, optimisation and appropriate route analysis. The company should also focus more on the competitor insight. This is a strategy that is based on getting the appropriate competitor data and analysing it so that the revenue utilisation decision is carried out well (Kolar & Andrej, 2007). In order to enhance the low cost carriers, the airline has to add the number of medium sized aircraft. The use of medium sized planes for LLC leads to reduced fuel use, few maintenance staff and reduces overall overhead costs. The use of LLC combines high density seating which leads to reduced unit costs in all sectors. To maximise time use, the airline can adopt ‘free seating’ philosophy. This is a strategy that will enable the airline to have customers board within the shortest time possible. The airline should consider implementing some of their low cost carrier hauls from large hubs (Qantas, 2010). Another strategy that can help the airline to operate long haul using the low cost carrier is extension of their services to include the medium haul services. This will act as the initial step towards establishment of long range haul using LLC. This is a step that will help the airline to adjust itself as it prepares for long haul in LLC. Most of the short haul routes frequented by the LLC are competitive (Qantas, 2010). The establishment of the medium haul and long haul will help in eliminating this problem. Transportation for leisure and holiday should be integrated into the LLC. These are seasonal services hence by combining them with LLC, there be maximum utilisation of resources. The holiday carriers have all the amenities on board unlike the LLC carriers. The strategy that can be employed in this case involves inclusion of the amenities on the LLC carriers that will be utilised when acting as holiday carriers. The amenities that need to be included are meals, non alcoholic drinks, entertainment, toys and reading materials. The strategy that is to be used should ensure that average costs are charged for the services. The airline should increase their efforts towards unserved, underserved and areas with high potential. At the moment, the airline has shown great steps in expanding their operations (Qantas, 2010). There is need to put more efforts towards expansion to new destination. The airline has expanded to Asia of late. There is a need to look for other potential market in the emerging economies. For example, India economy has been doing well which can offer new market for the airline. There is need for the company to adopt new marketing strategies that will enable them to survive in the competitive market. Reasons for recommending new goals The airline industry is highly competitive. There is a need to keep ahead of the competitors with new goals that will enable the company achieve a competitive edge. The use of hybrid model has been proved to save airlines a lot of revenue. The airline will be able to use low costs and optimise their equipments. There is need for the airline to make sure that their technology is advanced. The airline industry is very dynamic hence cannot rely on outdated technology. Information technology acts as the key driver in carrying out changes (Kolar & Andrej, 2007). The hybrid model is also technology intensive hence the need for technology changes. Another reason for new goals is the fact that the airline have been suffering from losses. There is a need to come up with new goals and strategies that can help the company in eliminating the losses and trying to generate more revenue. In 2010, the company reported a loss amounting to $21 million in the international network. There is need to evaluate the strategies and ensure that there is improved performance (Qantas, 2010). Conclusion Qantas airlines should adopt the set goals in order to maintain a market share in the competitive airline industry. The company should expand their LLC destinations, minimise capital expenditure, enter into new markets, introduce holiday carriers in LLC, use LLC for long haul and offer flight transfers in LLC. To meet the goals, the company should invest in advanced technology, increase their LLC, extend their LLC services to medium services, increase the number of medium sized planes and integrate holiday carriers with LLC. The company management should utilise the strategies recommended to achieve the goals. I urge the management to take the recommendations and implement them. This is due to fact that unless new goals are used, the airline will continue recording loss in the international market. Recent trends on the company performance are a clear indicator that there is need for change in the strategies. Thus the management should accept my recommendations and implement them as outlined to save the airline from loses. References Ghauri, P. N & Sarah, P 2008, Globalization. London: Dorling Kindersley. Kolar, T & Andrej, T 2007, ‘Marketing as warfare, revisited’. Marketing Intelligence & Planning. Vol.25, no. 3, p.203-216. Oxford College of Marketing website 2009, Porters fives forces model: Industry analysis model. Retrieved August 19, 2014 from http://blog.oxfordcollegeofmarketing.com/?p=343 Porter, M.E 1985, Competitive Advantage, New York, Wiley. Qantas 2010, FactFiles, Retrieved August 18 2014 from, http://www.qantas.com.au/infodetail/about/FactFiles.pdf Qantas Spirit of Australia. (n.d.). Procurement, Retrieved August 18, 2014 from, http://www.qantas.com.au/travel/airlines/purchasing-policy/global/en Appendix Swot analysis In order to analyse the situation at Qantas, there is need to perform SWOT analysis. The analysis looks at the strengths, weakness, opportunities and threat in a firm. This helps in understanding both internal and external situation in a firm. Qantas Airlines is utilising a hybrid model. Strength Qantas have a strong brand image and reputation. The airline has been under existence for over a decade making it one of the oldest airliners. The company have gained reputation as among the most customer favoured airline in the world. The company have a good image to the customers. Weakness Qantas airlines have been running under high operational costs. The expenditure has been taking a large part of the cost base. The company have been highly dependent on business and the charges from the first class customers. This makes them venerable to market fluctuations. Opportunities The company have high chances of success through the frequent flyer program. This is a program in which loyal customers were to be rewarded with shopping. The plan can be extended with other retailers which can encourage customers to be using the airline. Globalisation offers unlimited opportunities to the airline (Ghauri & Sarah, 2008). The company can also venture into using alternative oil which can reduce the capital cost. Threats The fluctuating oil prices pose a major challenge to the company. The increase in oil prices poses a threat to the low budget airlines. The airline industry is dynamic and subject to competition. Porter five forces analysis (Porter, 1985); (Oxford College of Marketing website, 2009) In order to further understand Qantas airlines internal and external environment further, there is need to look at the Porter five forces analysis. The porter five forces analysis will look at competitors’ rivalry, threat of new entrant, threat of substitute, bargaining power of supplier and bargaining power of buyer. Competitors rivalry There are numerous airlines worldwide which poses a threat to Qantas airline despite being leaders in Australia. Using the cost leadership strategy in the industry cannot be enough for the airline due to current competition. This is due to fact that most of the airlines have adopted the low cost strategy in their operations. There is need for Qantas to look at other avenues such as differentiation to be able to cope with current competition. Threat of new entrant Despite being the leader in the Australian market, there is threat of new entrants. Tiger Airways is a low cost airline that was able to enter into the market in 2007. Tiger airlines have been able to establish two bases in Melbourne. The barrier to new industry is not high. Qantas can work to create barrier to new entries through subsidiaries like Jet star. There can also be use of alliance strategy which ensures that new entrants are barred. Threat of substitutes Airplane saves time and can easily access remote areas where vehicles cannot be able. The substitutes like car or cruise ships are not a major threat to the industry due to advantages that are associated with airlines. Low cost airlines make it possible for the aviation industry to compete with other modes of transport. Air transport is comfortable, convenient and fast. Supplier bargaining power The main suppliers in the airline industry are the plane manufacturers and oil suppliers. The suppliers of the airplanes are few giving them high powers in the industry. The suppliers of the airplanes are Airbus, Boeing and Bombardier. The oil suppliers have also great power as compared to Qantas airlines. Buyers bargaining powers The buyers in the aviation industry have high bargaining powers. There are many low costs airlines globally that compete giving the buyers high bargaining powers. This makes Qantas airlines to offer low cost products at high quality which is done on impulse. Lower cost airlines are the main cause of the buyers having high bargaining powers. Read More