Dissertation Writing Help on Qantas Airways and Emirates-Strategic Alliance-Mergers and Acquistions in Airline Industry
The article discusses the strategic alliance between airline companies Qantas Airways Ltd. and Emirates to increase their network coverage. The alliance aims to enhance Qantas' competitive positioning, maintaining its market dominance within Australia and enhancing its global branding. The airlines combine operations and aspects of marketing as part of a major restructuring being undertaken by Qantas. A Swot analysis of Qantas is also provided.
Introduction
On 31st March 2013, two Airbus 380s flew over Sydney Harbour to mark the beginning of the QANTAS Emirates alliance whereby the two airlines combine operations and aspects of marketing as part of a major restructuring being undertaken by QANTAS.
Qantas is an Austrialian icon. Think QANTAS, think flying kangaroo, 'I Still Call Australia Home', think the Sydney Harbour Bridge and Uluru, the Twelve Apostles, the Great Barrier Reef. QANTAS has its origins in 1920 when it began operating as Queensland and Northern Territory Aerial Services Limited. QANTAS pioneered the ‘Kangaroo Route’ to London via Singapore in 1947, which became the main way Australians would travel to Europe. It is Australia’s leading domestic and international air carrier.
QANTAS’
Transformation Plan
QANTAS
is undergoing a period of significant transformation in the face of a growing
and changing global market. Growth in Asia is seeing
rising demand from emerging middle classes, as well as significant growth in
competitors. Global forces are posing challenges for QANTAS with the impacts of
a strong Australian dollar and high oil prices. Globalisation is
subsequently having a profound impact upon QANTAS’ competitive situation,
creating the need for rethinking marketing management
and operations strategy, to ensure success in the
future, especially in terms of the ‘long haul’ component of its business. This
involves strategies to shore up QANTAS’ competitive positioning and turn
a loss making international business into a powerful global aviation company with
a significant competitive advantage.
QANTAS
has adopted a range of extensive and at times controversial strategies to
ensure that the company remains relevant and cost effective in the aviation
market for the long haul….. QANTAS announced a five year transformation plan in
2011, with the strategic goal of becoming ‘one of the world’s best premium
airlines, setting global standards for long haul travel while delivering
attractive returns to shareholders’. This includes a major restructuring of its
business announced in June 2012, involving separating the management of the
domestic and international arms of the company, significant job cuts, global
outsourcing, efficiency measures and cost reductions, and the broadening of strategic
alliances.
The
primary strategic goal for QANTAS international is long-term shareholder value.
The strategy is operations and marketing focused
with financial goals the ultimate aim; and implications for finance and human
resources. The strategy targets four pillars identified by management:
Pillar
1: Focus on the Customer Experience
Pillar
2: Strengthen Asia with regards to flight frequency and Asian destination
routes
Pillar
3: Deepen and broaden alliances to target global gateways
Pillar
4: Ongoing business improvement incorporating disciplined financial management
Strategic
Alliances
A strategic
alliance is an agreement between two independently owned businesses, to
join forces to achieve specific goals, involving the alignment of specified services
or activities, in order to take advantage of economies of scale to the mutual
benefit of each business.
Types
of Strategic Alliance:
An
equity strategic alliance, involving partial
ownership of equity in another business.
A
non equity strategic alliance, involving an agreement to
cooperate in activities such as operations and marketing
A
joint venture, involving combining the assets of the partner firms in an
independent project
Generally
an alliance should create reduction in costs and improved customer service,
leading to greater profitability for the businesses involved. Alliances often result
from a crisis faced by one or more of the parties.
QANTAS
Emirates Alliance
QANTAS
is involved in alliances and partnerships with a number of
other businesses. For example, QANTAS was a founding member of the One World Alliance
of 12 major airlines, one of the biggest global aviation alliances,
in 1999. That alliance gives customers access to a much broader
range of air travel options, frequent flyer rewards and benefits than a single
airline could deliver. The QANTAS Emirates Alliance is
the latest and biggest such agreement entered into by QANTAS. It is a
non-equity strategic alliance which centres on combining forces to
increase the network coverage of both airlines, e.g. customers who fly
with QANTAS are now able to fly to an increased number of destinations such as in
the Middle East and North Africa. Other benefits to QANTAS customers will
include greater flight frequency, i.e. flights leaving more often;
access to more airport lounges; expanded loyalty programs and an
enhanced customer experience. The QANTAS Emirates Alliance
seeks to enhance QANTAS’ competitive positioning,
maintaining its market dominance within Australia and enhancing its global
branding in the international aviation market.
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Features
of the Commercial agreement signed 6/9/2012 by Alan Joyce (QANTAS) and Tim
Clarke (Emirates) to create this alliance include:
- 10 year partnership (five years
only approved by the ACCC)
- Aim to provide the world’s best
airline service, including integrated network with coordinated sales,
pricing, scheduling and benefit sharing, increased flight frequency and
access to airport lounges, loyalty programs and excellent customer service
- QANTAS European flight hub moved
from Singapore to Dubai
- Match key customer benefits across
airlines; where there is a difference in customer benefit, the higher
benefit will becomes the standard across both airlines
- Airbus 380 daily service to London
will travel via Dubai Terminal
- Increased choice of flights to
Europe via the QANTAS Emirates codeshare agreement, so a passenger might
book through QANTAS, and fly Sydney or Melbourne to Dubai with QANTAS, and
Dubai to London or other European destinations with Emirates
- Will create the world’s largest
combined A380 fleet
- QANTAS Frequent Flyer members will
be able to earn and redeem frequent flyer points/skywards miles across the
airlines, thus expanding frequent flyer benefit
- Shared baggage policy will see the
baggage allowance raised from 20kg to 30kg for QANTAS passengers (except
to the Americas)
- QANTAS
to introduce ‘Dubai connect’, giving customers hotel accommodation, meals,
transfers for flights with stopovers of between six and 24 hours for First
and Business class, and between eight and 24 hours for Economy and Premium
Economy class.
- Chauffeur hire car service for
First and Business class
- 14 daily QANTAS operated or coded
flights to Dubai from Adelaide, Brisbane, Melbourne, Perth, Sydney; only
two stops for regional travelers to Europe (e.g. from Port Macquarie to
Madrid).
Why
Emirates?
There
are a number of reasons for QANTAS to choose Emirates as an alliance
partner:
•
One of the best airlines in the world with a reputation as a quality aviation
service provider
•
All wide-body fleet
•
Broad international network coverage which complements QANTAS’ presence in the
Americas, South Africa, Asia and domestic/regional areas
•
Dubai to replace Singapore as QANTAS’ hub for Europe, allowing a restructuring
of the Asia network
•
Asia no longer just part of the ‘Kangaroo Route’, but a source and destination,
e.g. increase ‘dedicated capacity’ to Singapore, change times of flights to
Singapore and Hong Kong to facilitate an increase
in ‘same
day’ connections throughout Asia; Emirates have an extensive Asian network
already
•
Will complement relationships with other airlines such as American Airlines,
and the Oneworld Alliance American Airlines, LAN, South African
Airways and China Eastern
•
Withdrawal of QANTAS from Frankfurt services, which have been underperforming,
will be helped by this alliance which
will help QANTAS to continue to service this area via Emirates.
Prospects
For QANTAS
QANTAS’
domestic business is performing strongly, with combined profits for QANTAS
Domestic and Jetstar of $600m announced in 2012. It is the international arm of
QANTAS, the so called ‘long haul’ flights, which is in need of transformation
to turn from a loss maker ($450m in 2012) to a profit maker. By forging an alliance
with one of its competitors, Emirates, QANTAS hopes to transform
its international business as part of a successful renewal strategy for the
long term. Short-term impacts of the agreement so far include the $50m cost incurred
in shifting operations from Singapore to the Dubai base. On the
other hand, the airline experienced a 600 per cent increase in sales on flights
to Europe, and a 700 per cent increase in bookings from Emirates passengers to
travel on QANTAS domestic flights, in the first nine weeks of operation of the alliance
compared to the sales figures in the same period 2012. QANTAS
believe that this indicates they are already improving their competitive
position. QANTAS plans to pursue the development of more partnerships in Asia,
for example in May 2013 the company expanded their code-share agreement with
the airline China Eastern which offers passengers 18 direct flights to China
per week. As QANTAS seeks to increase its use of strategic
alliances and create a competitive advantage,
clearly QANTAS is in it for the long haul. ACCC Approval The QANTAS Emirates
alliance could not have proceeded without the approval of the Australian
Competition and Consumer Commission (ACCC). The ACCC’s approval was granted
because they were satisfied that the partnership will benefit stakeholders,
especially customers, by improving operating efficiency and delivering better products
and services in the aviation market. Examples cited by the ACCC included
increased frequency of flights and number of destinations available under the
one flight code, enhanced connectivity, scheduling and access to frequent flyer
benefits. The ACCC granted approval for a five year period agreement, rather
than the 10 year period proposed by the airlines.
While
the ACCC gave its assent, its Chairman, Rod Sims, stated that he did not
believe this alliance is crucial for the success of QANTAS into the future, as it
provides “material, but not substantial, public benefits”; he also expressed
concerns over the implications for the Trans Tasman (Australia to New Zealand)
route, and has required that both airlines maintain their pre-alliance capacity
on the Trans Tasman routes to avoid price increases in that market.
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