The Business Case Analysis: Qantas Airways
Qantas is recognized as the world's leading long distance airways which was established in Queensland in 1920, being the second oldest airlines of the world. Today, the airways provide flight services across a network of 173 destinations in 42 countries covering all over the world with approximately 35,000 employees. The Qantas group also offers subsidiary businesses such as budget airlines, Jetstar, and other businesses in specialist services: Qantas Catering and Qantas Holidays (Qantas, 2010). To analyze the changes and challenges that Qantas confronts in the marketing today, we should identify the range of products and services available by using Marketing Mix concept. Then, we will analyze the opportunities that may be available over the next 5 to 10 year by using SWOT Analysis.
Lake (n.d) indicated that the marketing mix, or called as 4 Ps, is the combination of marketing elements that are used to serve customers and company goal. The company offers are controlled by the following variables in marketing: Product, Price, Place (Distribution) and Promotion. For Qantas Airways case, their marketing mix can conclude as follow:
- Place or Distribution channel
Qantas offers a wide range of products and services including premium brand, Qantas, and low cost brand, Jetstar. Qantas has divided in to international and domestic flight. In term of international flights, Qantas offers first, business, premium economy and economic class, which passengers receive different services of seat, dining, and amenity collections as they paid. In case of Domestic flight, Qantas offers two travel classes: Business and Economy. Domestic inflight services include meals, snacks and audio-visual entertainment. Qantas' Cityflyer provides passengers travelling between Brisbane, Adelaide, Canberra, Perth, Melbourne and Sydney added more flights and seats than other airways with extra services such as complimentary newspapers on morning and complimentary wine and beer after 4pm weekdays.
Jetstar is a low cost airline in Asia-Pacific and Australia. In Australia, its operation is entirely owned by Qantas Group. In Asia, the Qantas Group has extended the brand with their investments in Jetstar Asia (based in Singapore) and Jetstar Pacific (Vietnam). As a result, Jetstar's operations have covered 50 destinations across South East Asia and Asia Pacific.
Moreover, Qantas also offer non-flying businesses, which are and Qantas holiday and Qantas catering, making perfect products and services for traveling customers and other airlines businesses.
The prices of flights are different according to the distance of destinations and the class of seat customers selected. Especially, for Jetstar, its prices are competitive with other low-cost airlines that make enormous profits to the company. As its prices are versatile, customers can make a decision based on the services Airlines offered. In addition, for Qantas holiday, it also offers ‘Price Promise' program that customers can get guaranteed low prices on transfers, car hire, hotel or activities when they book on Qantas.com. Qantas will match price rate and give 1000 extra points to customers who find another website which provide better rate than Qantas.
Customers can book their flights via various different channels which are Qantas.com, Telephone sales, Qantas travel Centers, Qantas airport locations and other travel agencies. Customers also can manage their flight via the website and their mobile phone.
There are many kinds of promotions to encourage sales such as discount air fare, buy one ticket get one free tickets, upgrading seat and loyalty program: Frequent Flyer member.
Frequent Flyer program is very popular in airlines industry. Qantas offers three levels of memberships which are Silver, Gold and platinum, excluding Bronze entry level. Each membership has different privileges: Qantas Club and business/First counters, additional kilograms for baggage allowance, point bonus, priority check in and so on. The higher membership level the better privileges members can receive and earn awards.
After we identified 4 Ps for Qantas, we will analyze the SWOT analysis to better understanding the organization. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and Weaknesses are internal factors that the company can control, while Opportunities and Threats are external possibilities which need more company efforts: support opportunities, or prevent and reduce threats.
- Strong corporate image
- Frequent Flyer Program
- Excellent customer service
- Corporate social responsibility
- Versatile businesses
- A lot of flight and routes
- Dual brand strategy
Qantas is the leader airways in Australia domestic and international and renowned as the second oldest airways. Moreover, the company is outstanding in strategic markets which are Asia-pacific and Western Europe.
Qantas Frequent Flyer program, the most popular and largest airways loyalty program in Southern part of the world, possess approximately 6.8 million customers with more than 400 partners. This is an important marketing strategy to retain customers and crate brand loyalty to new passengers.
Qantas is devoted to offer passenger with a wide-range of outstanding services. It employs more than 700 international customer service managers and supervisors. Over 1,600 First and Business flight attendants were selected by their product knowledge and extensive service experience and trained to offer a premium service to passengers. Also, many flight attendants are multi-lingual. They can speak a number of languages such as French, Italian, German, Korean, Japanese, Spanish, Mandarin, Cantonese, and so on. Furthermore, Qantas also has recognition for using inflight defibrillators and also on-board airplanes provide physician kits which include medication and medication.
Qantas are worried about the concern of environment changing and are dedicated to manage its operations and development in an environmentally sustainable approach.
They have launched the program ‘Fly Carbon Neutral' program to evoke people concerning on reducing carbon emissions that passengers can contribute small amount of money to offset their flight emissions.
The Qantas group established the Qantas Environment and Fuel Conservation group to responsible for environment issues. They have decreased aircraft noise around airports, provided suggestion on acquisition assessment of new aircraft and new businesses, applied environmentally practices and performance, and to name but few.
In addition, the company also donated to support various ‘not-for-profit' programs or organizations such as Great Barrier Reef Foundation, Flora and Fauna International, Clean up Australia Day, and so on.
Apart from its main business, Flying Activity, Qantas also has invested in non-flying activities which are food catering, travel agency, airport and aircraft engineering that enable them to increase the company's profits and represent new opportunities to its present business.
There are many routes covering worldwide provided by Qantas. Qantas group operate approximately 5300 flight a week including nearly 60 cities domestically and over 900 fights per week in 173 destinations in 42 countries. This help the Airways is recognized in many countries and expand its market share.
Qantas Group can cover a wide group of customers because it offers premium brand, Qantas, and low-cost brand, Jetstar. This creativity allowed Qantas to take advantage of target budget passenger and premium travelers to boost its profits and fulfill level of operation.
- Employees relationship
- Dependence on single market
- Spiraling costs
Qantas had conflicts with its engineers in reaching an agreement on a wage dispute earlier in 2008. However, compromise was finally completed with a predictable annual wage raised between4 to 5.8 %(Brigden, 2009). This is an important issue if it occurs again; employees will have negative trust to the company that brings negative effects to overall operations.
In spite of expanding to international region, Qantas still depends on the domestic market for its main revenues. This over-dependence on single market leaves the Airways vulnerable to any politics situation or economic depression and in Australia.
Although in 2008 Qantas group has provided strategies to reduce the impact of increasing fuel costs, it was forced to cut down other operations cost such as jobs and flight capacity to continue competitive position in the market.
- Open Skies Agreement
- Asia-Pacific potential market
- Utilization new technology
- Strategic Alliance
There were many efforts between Australia and other nations such as the US, New Zealand, and so on to approve an open skies agreement. As a result, it has created new opportunities to operate unrestricted capacity over any routing they choose and with as many flights as they desire in beyond markets.
According to Datamonitor (2009), 'The Asia-pacific airlines industry had been growing at a healthy rate over 2005-2008, but showed a decline in 2009. This will increase once again in 2010...'Experts also predicted that the industry's volume is likely to increase to 794.3 million passengers by the end of 2013, showing a compound annual growth rate of8.6% for 2008-2013 period. Therefore, there will be enormous opportunities to increase company revenues and profits.
Technology is improving nowadays. The Airways can utilize it in many ways including increasing the service to customers and improving aircrafts design. In November 2009, Qantas reveal the project, which will begin in the mid-2010, to renovate domestic airport check-in times for passengers at Cityflyer ports across Australia. The membership cards including intelligent chip that can transform the data inside into personal boarding passes linked to the bag tags, and allow passengers to swipe their card on a reader and pass to an easy baggage drop. Non-frequent flyers will also satisfy with major upgrades to their check-in by using hosted kiosks and rapid bag drop.
The growth of strategic alliances is expected to bring about several returns including an extended route network, more frequent flights and Frequent Flyer passengers and cost and efficiency benefits.
- Excessive competition
- Aviation Security issue
- Shortage of pilots and staff
- Congestion and Airport capacity issue
Low-cost airlines have become the main competitor of Qantas. Craigie and Bekiaris (2010) stated that Air Asia commenced flight between the Gold Coast, Perth, Melbourne, and Kuala Lumpur. In addition, Tony Fernandes, Air Asia CEO, said that Air Asia is going to start flying into Sydney by midyear of 2010. Besides, Air Asia X also provides cheap flight to London from Kuala Lumpur. This enhanced on the whole competition in Asia-pacific and Europe region. The competitors of Qantas are not limited only Air Asia, the other low-cost airlines such as Tiger Airlines and Virgin Blue also have offered the same routes as Qantas or Jetstar.
According to the event of 11 September 2001, it decreased the demand for air travel because of the raised concerns about safety issue. Then, the cost of travel was raised as a result of the requirement of arriving earlier for departure, the increased rate of delays follow-on security breaches, and new protection surcharge (Coughlin, C.C. et al, 2002). Qantas also has flights service between Australia and the US, so the airways have been affected directly by the increasing in security cost.
Pearson (2008) indicated that approximately 19,000 pilots will need to be trained yearly until 2026 to meet estimated demand as airways grow agreeing to International Air Transport Association (IATA). As a result, it is important to note airways regulators will confront the challenge of training pilots better and faster which need more cost to absorb.
Because the industry developed rapidly, a problem of airport capacity is possible, limiting the total number of airplanes flying to Australia as occurred in other parts of the world.
All things considered, after studied both marketing mix and SWOT analysis, I would like to recommend the company to improve its operations as follows:
- Focus on both domestic and international markets to diversify the risk of domestic economic, politics, social situations.
- Offer new promotions to passengers. For example, when it nearly reaches the date the flight taken place, company should discount air fare if those flights have remained too many seats to offset the cost of operations per flights. Consider about employees relationship, providing proper training, wages or benefits and number of working hours.
- Use new technology and well-trained employees for improving airlines services.
- Find new alliances and retain the relationship of current alliances that can share benefits to the airlines.
- Continue ‘company social responsibility' and ‘Saving Environments' projects to maintain good company image.
Brigden, Cathy. (2009). Journal of Industrial Relations. Unions and collective bargaining in 2008, 51(3), 365-378.
Coughlin, Cletus C. & et. Al. (2002). Review. Aviation Security and Terrorism: A Review of the Economic Issues, 84(5), 9-16.
Craigie, J. Bekiaris, M. (2010). Money. Qantas gets cosy with AirAsia, 2(120), 16-16.
Datamonitor. (2009). Airline Industry Profile: Asia-Pacific. Airline Industry Profile: Asia-Pacific, 1-32.
Lake, Laura. (n.d). Developing Your Marketing-4Ps of Marketing. [Online] Available from: http://marketing.about.com/od/marketingplanandstrategy/a/marketingmix.htm [Accessed 5 May 2010].
Pearson, David. (2008). Wall Street Journal-Eastern Edition. Airlines Face Shortage of Pilots, 251(95), p. B11A.
Qantas. (2010). Qantas Fact file. [Online] Available from: http://www.qantas.com.au/infodetail/about/FactFiles.pdf [Accessed 5 May 2010].