Quantas Airways-Strategic Analysis of Airlines Industry in Australia

SWOT Analysis of Qantas Airways Ltd

 

Strategic Evaluation of Airlines Industry in Australia

Swot analysis

Strengths

·         Leading industry presence – Qantas Airways Ltd is the absolute leader in Australia with a 51% value share in air transportation. It holds also a strong position in Australasia and in key strategic markets such as Asia-Pacific and Western Europe.

·         Vigorous dual brand strategy – the introduction of low-cost carrier Jetstar in 2004 was key to enhancing the company's overall growth in the national as well as international markets. The initiative allowed Qantas Airways to capitalise on both ends of the market and target budget as well as premium travellers.

·         Strong Frequent Flyer Programme – one out of every four Australians or approximately five million people are members of Qantas's Frequent Flyer Programme. This is an essential marketing tool not only to retain consumers but also and, most importantly, to create brand loyalty among new ones, particularly as the airline expands abroad.

·         Wide geographic offer – Qantas Airways currently offers 143 destinations: 57 in Australia and 86 abroad (including code share services), flying to 36 countries around the world. By the end of 2008, it expects to introduce its first non-stop flight to South America and capitalise on the growing tourism flow between the region and Australia.

·         Industry benchmark – non-stop investments on the latest aircraft technology available by Qantas not only guarantee the delivery of a superior customer service through well-trained personnel but also and, most importantly, the reduction of operating costs and environmental impact as the airline grows.

·         Customer Service Focus – Qantas is committed to providing consumers with superior service that is in line with its current investments. The purchase of A380 aircrafts, for example, have led to the construction of a new customer service Centre of Excellence that will provide an enhanced training programme for over 18,000 staff members across the Qantas Group.

·         Sustainability – Qantas is committed to minimising the environmental impact of its operations. New aircraft acquisitions have all been made with that in mind, exceeding current environmental regulatory standards for emissions and noise.

·         Multifaceted business – although flying people is a priority, Qantas is also engaged in distinctive non-flying activities such as foodservice, travel retail, freight, airport and aircraft engineering. All of them represent substantial growth opportunities to its current business.

Weaknesses

·         Safety procedures – local aviation authorities as well as passengers flying Qantas are increasingly concerned about safety issues following three recent incidents involving Qantas aircrafts. In 2008, the most serious one was a hole created in the fuselage of a Qantas flight between Hong Kong and Melbourne. Fortunately, no one was hurt in all three incidents, but if the company does not appropriately address current concerns, it is most likely to lose sales in the short term.

·         Spiralling costs – despite having a number of strategies in place to minimise the negative impact of rising fuel costs, Qantas was forced to cut jobs and flight capacity in 2008 to maintain its competitive positioning.

·         Single-market strength – despite focusing on the expansion of premium international routes, Qantas still relies on the domestic market to remain competitive. This leaves the airline vulnerable to any economic recession in Australia.

·         Labour relations – Qantas has had problems in reaching an agreement with its 1,700 engineers on a pay dispute earlier in 2008. This is very concerning, particularly given that such disputes often threaten to disrupt flights and hurt overall operations.

Opportunities

·         Asia-Pacific region potential – experts believe that for the first time in history, air traffic is shifting to Asia, particularly to China and India. Hence, within three years or so, the Asia-Pacific region is set to become the single largest market, presenting an enormous opportunity for growth for Qantas.

·         Open Skies Agreement – continued efforts to consolidate the Australia-US open skies agreement is expected to create new opportunities for growth and fierce competition as it edges open one of the most lucrative and protected routes to Virgin Blue and Qantas. Singapore Airlines has not been granted permission to fly from Australia to the US.

·         Low-cost international flights – although Jetstar complements Qantas's existing international operations, there is great opportunity to add long-haul flights from Australia to Europe via Asia with B787 and A380 aircrafts.

·         Strategic alliances – the continued expansion of strategic alliances is likely to bring about numerous advantages including cost and efficiency benefits, an expanded route network, more frequent flights and Frequent Flyer opportunities.

·         Lucrative Trans-Pacific Route – the signing of an open-skies agreement between the US and Australia is likely to increase the number of travellers on the Trans-Pacific Route and, consequently, competition. This, however, does not present an immediate threat to Qantas as it could merge with strong APAC players and diversify away from its dependence on the Australian market.

Threats

·         Pilot/staff shortages – industry sources believe that another 1,800 pilots will be required to fulfil future industry growth. In Australia, however, the number of pilots is declining due to a general lack of interest.

·         Tightened airport capacity – as the industry develops further, a shortfall in infrastructure capacity is likely to limit the total number of aircrafts flying in and out of Australia.

·         Lack of security – following the terrorist attacks of 11 September 2001, security became a major concern and back in the spotlight over and over again. It became one of the biggest challenges airlines face in a chaotic industry, given that measures need to be genuine, efficient and consistent worldwide to avoid confusing consumers.

·         Strict environmental regulations – although not yet a major concern for Qantas, given that new aircraft acquisitions exceed current environmental regulatory standards, it is clear that the future calls for more strict regulations in every single aspect, particularly when it comes to greenhouse gas emissions. The aviation industry currently contributes 2-3% of CO2 emissions globally.

·         Fiercer competition – low-cost carrier, Tiger Airlines, commenced flights from Melbourne to the Gold Coast and Rockhampton late in 2007. This has enhanced overall competition in the region, particularly after the new carrier ran all of its 12 routes. Virgin Blue, on the other hand, has capitalised on the opportunities presented by the recent open skies agreement to enhance its route network and, as a result, competes head-to-head with Qantas on new international routes.

Source-Euromonitor International-Company Profile- Qantas Airways Limited 2009

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