International and Comparative Employment Relations - Qantas and Jetstar's Capabilities - Case Study Example

Executive summary The Qantas Group main venture is transportation of passengers using Qantas and Jetstar the two complementary airlines brands. There are three division of Qantas Group: Customer and Marketing, Commercial arm and Operations. Commercial group is in charge of commercial planning, sales and distribution, QantasLink and alliances. This report clearly brings out the groups capabilities, the competitive advantages and core competencies. Some of the strategies currently engaged by the company have been identified with an in-depth analysis of the same TABLE OF CONTENTS Executive summary 1 1.0 Introduction 3 1.1 Internal analysis 3 1.2 Current strategies 5 1.2.1Frequent Flyer Strategy: Increase of use strategy 6 1.2.2 Market Development Strategies 7 1.3 Evaluation of Frequent Flyer Program 9 1.4 Evaluation of market development strategies 11 1.5 Conclusion 12 1.0 Introduction In this report there is internal analysis of the Qantas Group where there has been identification of group’s capabilities, its competitive advantages and its core competencies. The Qantas Group current strategies including the frequent flyer program have been discussed. The strength and weaknesses in the strategies have been identified and possible ways of improvements has been suggested. 1.1 Internal analysis The Qantas Group main venture is transportation of passengers using Qantas and Jet-star the two complementary airlines brands. There are three division of Qantas Group: Customer and Marketing, Commercial arm and Operations. Commercial group is in charge of commercial planning, sales and distribution, QantasLink and alliances. Customer and Marketing is in charge of customer experience, inflight services, cabin crew in addition to marketing. Under operation there is Qantas aviation services and operations planning and control. Jet-star is the group’s low fares airline which is also in charge of the operations of Singapore based Jet-star Asia. Qantas Frequent Flyer and Qantas Freight are also under the operation of the Qantas Group. Qantas Group has a 27% share in Vietnam’s Jet-star Pacific and 46% share in Air Pacific. The Group is also in partnership with Australia Post. In the partnership include Australian air Express which is a domestic air freight operator Star Track Express which is a national road freight business (Qantas Airways Limited, 2010). Qantas has competitive advantages in the Australian market due it its massive resources. Qantas purchased Impulse airline where there was a commercial relationship term signed when the airline withdrew the operation of scheduled services in its own rights. There was the launch of Jet-star later in 2004 after Impulse had operated under QantasLink brand and livery as a fully-owned subsidiary of Qantas. Qantas was in 11th position in terms of Revenue Passenger Kilometers (RPKs) according to 2009 data of International Air Transport Association (IATA). (Qantas Airways Limited, 2010). 1n the years 2008/2009 there were 182 destinations in 44 countries in which Qantas group airlines offered its services that included 59 in Australia while 123 were in other countries that including those under operation of codeshare partner airlines with the number of passengers that were carried being 41 million. By September 2010 Qantas Group had 256 aircrafts and the number of employees were 32,500. (Bamber, 2005) Qantas Group aircraft engineering and maintenance organization is one of the largest that are operating in Asia-Pacific region. Qantas Engineering which is part of Qantas Airlines Operations has a reputation of operational excellence and safety with over 5,500 under its employment in maintenance section in major Australian towns and overseas locations (Herald Sun, 2011). Being one of the largest industrial organizations in Australia, Qantas engineering undertakes a variety of engineering, maintenance, training and support services and supply chain for aircrafts. There is continual transforming of the arm in order to ensure world’s best practice performance is delivered and with globalization and consolidation taking place in aircraft maintenance, repair and overhaul (MRO) the business aim is positioning itself as Qantas Group supplier of choice. Qantas Engineering offers its services for Australian Defence Force and other airlines even though Qantas Group is the major beneficiary of its services. For many years more than 80% of the Qantas aircraft heavy maintenance has been undertaken at Qantas facilities in Australia (Alan, 2004). In situation where the facilities are fully occupied, there is use of top tier overseas operations which have certification of the Australian Civil Aviation Safety Authority (CASA), Qantas and other national safety regulators are engaged. The supervision of all works is done by onsite Qantas engineers with the auditing of the facilities being done on a regular basis in accordance to Australian regulations. . 1.2 Current strategies There are several market penetration strategies which can be undertaken by a company. The penetration strategies include increasing usage of the product and increase the frequency of use of the product (Hooley, 2007). The other ways are increasing the quantity used and introducing new applications. The market development strategies include expansion of markets for the existing products, geographic expansion and targeting new segments. Companies use diversification as a growth strategy under which there is vertical integration, diversification into related businesses and diversification into unrelated businesses (Bruce, 2005; Kotler, 2003). Qantas has uses these strategies in different combination to ensure its continued good performance in the highly competitive industry. 1.2.1Frequent Flyer Strategy: Increase of use strategy Qantas Group has employed several strategies that have ensured there is increase in product usage and increased frequency of use. The Qantas frequent flyer program has the objective of increasing the frequency of use of the airline, recruit new customers and make the customers loyal to the airline service. It is the leading loyalty program in the whole of Australia and its membership is well over six millions and it has a global redemption network that supports Qantas Group. When compared to other similar programmes it has the uniqueness of being the Australian program that allows members to combine points earned through flying, credit or charge card spending grocery shopping into one account. As a tactic to ensure its success The Frequent flyer program is in partnership with over 400 companies. The program is such that when members are using charge card or credit that is eligible to earn Frequent Flyer points; points can be earned twice one being for the partner and the other with their card. When it comes to redeeming the points, numerous options are available including, upgrades, Qantas Club membership, Classic and Any Seat Award Flights. The other options available is redeeming for more than 1800 products and experiences that include over 100 gift vouchers available at Qantas Frequent Flyer Store. There is a high membership enrolment with the program with an average number per week being 11,000. There was an approximate of 3.3 million seats that were redeemed for travel across Qantas group with one out of nine travelling on award flight (Qantas Airways Limited, 2010). 1.2.2 Market Development Strategies The Qantas Group has engaged market development strategies by expanding markets for the existing products, by venturing into new geographical regions and by targeting new segments. Qantas is a premium full service that operates in Australia (Domestic) and outside the country (International). Qantas has a global network and it offers customers a variety of choice in terms of class of traveling as a way of serving sub segments within its customers that use the premium full service. The international Qantas service has four classes: first, business, premium economy and economy. Domestic Qantas has business travel class and economy travel class. Domestic inflight services include complementary meals and snack in addition to inflight entertainment. The Cityflyer service is a dedicated service for customers who use the Qantas service within selected cities in Australia is a tactic that has been used by Qantas to that has been used as in order to meet its objectives of increasing the number of customers and making them to be loyal to airlines service. The services that are offered by the Cityflyer are dedicated service desks, priority departure gates, and complementary newspapers issued to early morning travelers and bear and wine service for those who travel after 4pm weekdays. The launch of Jet-star was a strategy to tap into a new market segment. The objective was to provide a service that could be affordable to customers who could not afford the premier service or are located in areas that are not served by the premier service. To enable the airline make profit from the low charges by using economy of scale as a tactic where the low carrier operates on many routes at high frequency. The carrier commenced its service in 2004 and was to serve the local market at a low cost. The carrier has been expanding rapidly from then. Jet-star currently operates the Jet-star short haul service and Jet-star long haul service. The Jet-star short-haul service is dedicated to serve the Australian local market and to offer short haul international services. The Jet-star short-haul service has been expanding steadily and by the year 2010 a fleet of 36 single-class A320 and six A321 aircraft was under its operation and a further increase of fleet was expected in 2010/11 where eight A320s were expected to be delivered (Jet-star, 2004). This has been through increase of the number of destinations in the domestic market and the frequency of travel within the destinations. The Jet-star long haul was established as a geographical expansion strategy that would enable International travel at low cost and reasonable comfort. The service started in 2006 and by 2010 it was operating seven A330-200 aircrafts from Melbourne, Sydney, Cairns and the Gold Coast and four more aircrafts were expected to be added from late 2010 as a way of supporting future long haul growth before the fleet of Boeing 787 Dreamliners are introduced. The modern Boeing 787 Dreamliner is expected to be launched in mid-2012(Harcourt, 2004; CAPA. 2002). The jet-star long haul has the economy class and star class. The star class is inclusive of all meals entertainment options in addition to comfort and amenity packs. The star-class customers are able to earn Qantas Frequent Flyer points in addition to having access to larger baggage allowance and priority check in. In addition to Qantas and Jet-link Qantas Group started QantasLink which offers support service to Qantas domestic network through development of feeder markets that act as a connection to business in the region and leisure travelers with main cities. 1.3 Evaluation of Frequent Flyer Program The Frequent Flyer program can be seen to contribute a lot to The Qantas Group success. The fact that the program partners with over 400 companies helps in increasing the use of Qantas service. This is because of the fact that there is earning of points which can enable one to qualify for a ticket to fly when purchasing goods and services that are not related to flying. This is a way of promoting the culture of flying as a means of travelling. The program is flexible and customers are able to redeem their points in many ways. This is encouraging to the customers as they can make use of the earned points even when the points are not enough to enable them to earn a free flight. It has been observed that due to high demand of for redeeming points for flights most of the time customers end up redeeming their points in other ways. The Qantas group needs to open up other businesses where the customers will be eligible to redeem their points. This will not only promote the air travel but also will help in diversifying the business. Partnering with many companies that Qantas does not have control over may be sometimes a disadvantage. This may come about if the partner companies do not handle the customer with the same level of care given to them at Qantas. On the other hand if the companies have good service this will work in favor to the Qantas group. The fact that upgrade of class by use of points is a good way of introducing the customers to the various services that are offered. This helps in increasing the number of customers using the high class service. The program can also be used to introduce domestic low cost carrier users to premium service. This can be done by giving priority to the customers who want to redeem their points on the premium service and records show that they usually use the low cost carriers. The same can be done for the premium service customers who would like to redeem their points on the low cost carrier. This should especially target the foreigners who come to Australia on the Qantas premier service airline. This will work towards promoting the culture of foreigners traveling domestically whenever they are in the country and thus will increase the use of the low cost service. The Frequent Flyer Program has had challenges when it comes to redeeming the points that have been earned. The accessibility of the reward by customers has been a common problem as Qantas find it difficult when the customers want to redeem the frequent flyer seats (Tripodi, 2009). When the customers are not able to access the free seat there is likely to be lack of commitment to the airlines. There is need for Qantas to look for ways that the customers will be satisfied when it comes to redeeming their rewards. The customers can be encouraged booking for a free seat well in advance long before the travel date is due. This will increase the chances of the customer being given the seat. To encourage this Qantas should consider increasing the reward from the points depending on the period of time between the time the request of travel has been made and the time the customer would like to travel. There should also be more reward depending on flexibility of the customer with regard to date they would like to travel, the destination of travel, and the carrier they would like to use and the class of service they would like. This will help in making demand to redeem the free seat are evenly spread on the two carriers, in the different classes of travel and seasons of travel. A part from satisfying the customers, this will act as a way to promote the use of the variety of services offered by Qantas. The customers can also be encouraged to redeem their points through other ways other that than flying. This can be encouraged by increasing the rewards earned through shopping at Qantas partner companies. 1.4 Evaluation of market development strategies The choice of Qantas to offer international premier services and domestic premier services is a good market strategy. The international premier service offers high quality service that cannot be compared to that offered by the low cost carriers. High quality is very important for the international services because the competition is at international level. At the international level Qantas is competing with other international airlines which offer very high quality services. At international level Qantas is able to offer the high quality at a profit because the cost can be transferred to their customers. As long as the customer gets the services they have paid for chances of loosing them is low. Qantas understand that there competitors offer the services at a similar price. It is also a way of Qantas conforming to international standards. The premier services have been designed with full understanding who the customers are. The service offered by Qantas at international level need to be of high quality as it serves as a national symbol. The fact that the travelers spend a long time aboard on the international carriers means that they will have more requirements in terms of comfort. The customers need entertainment aboard and other inflight service. In international premier service it is recognized that that the travelers have variation in financial ability and the type of services required aboard vary. The premier first class service offers an exclusive cabin that has 14 fully flat beds has a dedicated service crew in addition ground service. The business class also offers special service like self service bar and service is offered by specially trained crew. The other classes which are offered are the business economy and economy each having a variation in the level of service both inflight and at the ground. The domestic Qantas premier service offers service to the customers who may not be satisfied by the low cost carriers. The provision of this premier service is also important due to the fact that some of the distances covered within Australia are long and they need special services during travel. Provision of this service is also away of making full use the facilities Qantas has invested in including using some of the aircrafts in domestic travel. Jet-link which is the low cost carriers has is a good venture that serves the domestic market. The Qantas group has been able to generate most of its revenue from this airline. The air line has many customers who would have thought of travelling by road but finds the air travel being a better option. To these customers their major concern is time used to travel and the services offered to them aboard may be of secondary importance. Because of the distance travelled by Jet-star being long Jet-star has chosen to offer some minimum service to the customers to ensure some level of comfort. Jet-star has also extended its service to other geographical regions outside Australia. 1.5 Conclusion From the market plan it has emerged that the airline industry is very competitive and survival in the industry depends on various factors. Qantas airline has been in the industry for long and experience accumulated in the years can be pointed out as a factor that has given it edge over other airlines. The company has been quick in seizing market expansion opportunities making use of the advantage of its resources and experience. The company is seen to have strategies that aim to increase the number of customers that use its services and make them loyal to the airline. The frequent flyer program which has been used as away to lure customers into loyalty has to some extent shown to be successful but much need to be done to increase its popularity otherwise it may soon be rejected by customers. There is need for the program to be evaluated in order to establish its success and the ways to improve it. There are several challenges which have been noted to face the industry including the high cost of fuel. Qantas has profit margin has drastically reduced owing to this fact. The investment in new planes that are fuel efficient can be used as a way of reducing the cost of operation. This will also be away of the number of planes available to enable the company increase its market share. Qantas has an image of offering high safety and quality services and entertainment and this could be owed to the fact that the company operates at international level where standards are high compared to the local situation. With the international standard experience of safety and service quality the company can have an edge over its’ local competitor who lack this exposure. References Bamber, Greg J., Russell D. Lansbury, and N. Wailes (eds). 2004. 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