qantas case study hr

How did Qantas improve its human resources management?

When it comes to organisational transformation a few key things can set a company up for long-term success. one of these is dynamic human resources management that ensures initiatives and strategies are executed from the ground up. in the lead-up to the annual ahri awards, we spoke with one nominee about how he’s harnessed company-wide innovation to achieve tangible outcomes..

In 2012, Qantas was facing critical challenges. Increased competition from domestic and international airlines, record fuel bills, and a high Australian dollar had resulted in significant losses for the company. Ian Jackson, head of international operations, was an integral part of the team that developed a wide-reaching strategy that has resulted in the transformation of the business, outstanding financial results, high customer feedback and record levels of engagement. In advance of the AHRI awards this Thursday, he shared his human resources management journey with us.

What’s needed to implement a sustainable strategy?

“My role was to lead the development of a strategy and collaborate with other parts of the business to develop a strategy which wasn’t just focussed on costs, but was very critically focussed on our people and the customer.”

In the face of challenges such as achieving a 30 per cent reduction in headcount while with the need to balancing short-term strategies around cost, and long-term strategies around people and culture, Jackson believes that communication, along with strong business partnering, were his keys to success. He maintains that placing emphasis on customer operations was crucial to the financial success of the organisation, as well as developing a workforce with an intrinsic drive to do better year on year “because they feel connected to the strategy and seeing the benefits delivered.”

Another initiative Jackson considers critical was transparency and visible leadership at every level of the business “in terms of what we’re aiming to achieve and how success looks” – even through challenging periods.

“Difficult times were being experienced over various points over this program,” he explains. It was about “acknowledging that, but also acknowledging when we’ve still managed to meet or exceed the targets we’ve set for ourselves.”

Incorporating training, technology and recognition

Underpinning the entire strategy of performance and culture the company has been working towards over the past three to four years is the ‘creating great’ program, which is now entering its third iteration. The one-day training program, which cuts across all teams – from cabin, airport and ground operation teams – has ensured that an integrated approach moulds every facet of employee training .

The next step for Jackson and the Qantas team was bringing those lessons back to the workplace using technology that has been integrated into to day-to-day operations. Over the last three years, Qantas has enabled all front-line duty managers and customer service managers – on aircrafts as well as at airports – to use iPads. Known as the ‘red app’, this technology connects employees to “everything from channels on customer feedback to channels we push to them, to communication around how we’re performing. We’ve used that as a tool to keep directly in touch with our front-line people, even when they’re in 23 or 24 of our remote airports around the world,” Jackson says.

Finally, the culmination of each strategic element was a robust recognition program linked to accountability and the overall outcomes in terms of performance. For example, cabin crew who excel against key performance indicators receive rewards such as lounge access or an invitation to a two-day residential leadership development program.

“Everyone right out to the front line, as well as the partners within the organisation who are helping enable the strategy, are really clear on those targets are met and that there’s recognition, rather than being a continuum without that opportunity to pause and reflect.”

The key factor for success

For Jackson, the one thing he’s seen embedded in all levels of the company during the past years – from human resources management – is the concept of authentic leadership . It’s a mindset that has helped Qantas’ people understand strengths and weaknesses, both individually and from a business point of view, and has also ensured their people have felt comfortable with company-wide change.

“They knew we had a strategy that was robust and that despite what may come it would deliver over time – and it has,” Jackson says.

As for his thoughts on being nominated at the 2016 AHRI award s?

“I think it’s genuinely great recognition for a collaboration between the human resources team and the business. It has clearly delivered great customer and commercial outcomes for a number of years now and I believe will fundamentally continue to do so,” he says.

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Strategic management – group report: qantas case study analysis.

1     Executive Summary…………………………………………………………………. 3

2     Introduction…………………………………………………………………………….. 6

3     Strategic Management and Strategic Competitiveness…………………. 8

4     Business-level strategy……………………………………………………………. 10

4.1     Current……………………………………………………………………………. 10

4.1.1     Qantas and Porter’s Five Forces…………………………………… 11

4.1.2     Current Geographical External Environment…………………. 14

4.2     Recommendations……………………………………………………………. 15

4.2.1     Recommended Geographical External Environment………. 15

5     Corporate-level Strategy – Diversification………………………………… 17

5.1     Current……………………………………………………………………………. 17

5.2     Recommendations……………………………………………………………. 20

6     Corporate-level Strategy – Mergers and Acquisitions…………………. 23

6.1     Current……………………………………………………………………………. 23

6.2     Recommendations……………………………………………………………. 25

7     Corporate-level Strategy – International…………………………………… 27

7.1     Current……………………………………………………………………………. 27

7.2     Recommendations……………………………………………………………. 29

8     Conclusion…………………………………………………………………………….. 32

1        Executive Summary

This report examines Qantas’ strategic management and how these strategies increase Qantas’ ability to sustain competitive advantage and achieve above average returns. The Qantas group strategy is to deliver sustainable returns to shareholders with safety always being their first priority (Qantas Airways Ltd, 2015c).

At a competitive strategy and business level Qantas’ unique position as Australia’s largest and longest established airline has not been sufficient alone to sustain competitive advantage. With the pressures of the post Global Financial Crisis economy and increasing new entrant competition in its external environment Qantas has had to establish new competitive strategies including development of a cost lead airline JetStar alongside its value oriented premium service in Qantas. In addition the internal resource based environment as focused on rationalising core competences and developing an approach that resists the competitive forces of the market (Porter 1979) fending off the rivalry of existing competitors through price wars, reducing costs by engaging suppliers, building their loyalty program strength to combat threat of new entrants and develop clear differentiation that is difficult to imitate to ward off product substitutes. Business level recommendations include further stabilisation of relations with unions to contain personnel costs along with a focus on the continued distinction between its cost lead strategy and the value differentiation of premium services.

Corporate strategy has seen Qantas focus on the development of its 5 segment diversification with further development of secondary subsidiaries to smooth revenue and profit generation and limit risks and dependencies on any single business unit. This has been effective stable growth in profits generated by the Loyalty and Freight segments have successfully supported Qantas through recent challenging industry and economic conditions restoring returns to stakeholders. Corporate strategy recommendations include capacity and resource distribution to maximise profitability in the five business segments, evolution and alignment with corporate vision and core brand values to ensure realisation of strategic synergies and consideration of the vertical integration of a travel insurance business line leveraging Qantas’ 10.8 million market reach and travel buying cycle relationship with its customers. Caution is recommended in over diversification of areas such as Loyalty where Qantas may be at risk of crating unnecessary risk and complexity expanding outside its core competences.

As with most companies, Qantas has had limited success in its mergers and acquisitions, with the majority in the last ten years not achieving above average returns and creating greater stakeholder value. This includes expansions in their freight interests, extended travel booking services and even more diverse analytical consulting services in the Red Planet business. Failures can generally be attributed to poor due diligence, a lack of realisation of synergies and limited integration success. With the limited success Qantas must consider several divestments in order to return to core value creation for its stakeholders. There are growth opportunities in leveraging resources for the vertical expansion of air based freight services through acquisition along with international opportunities to grow through acquisition into developing regions such as Asia.

Qantas’ international strategy is supporting growth into new markets, in particular reducing barriers to entry in Asia in the form of foreign ownership limitations by leveraging partnership and alliances. These entities, while minority owned, form the basis of a home office lead global strategy building growth in the rapidly expanding Asian middle class market. To ensure this regionalisation is successful Qantas should consider a transitional strategy to increase local responsiveness and address the cultural and political complexities that will increase rapidly as they increase scale and market power in these regions.

2        Introduction

Qantas Airways Ltd is the third oldest airline in the world and was established in 1920. The Qantas group has grown to comprise five major segments generating over $15.8 billion in revenue that include Qantas Domestic, Qantas International, Jetstar Group Qantas Loyalty and Qantas Freight. Their group strategy is to deliver sustainable returns to shareholders with safety always being their first priority (Qantas Airways Ltd, 2015c). The airline has had to adapt too many changes in the external environment following the global financial crisis (GFC) in 2008. These changes have had a very drastic impact on the company’s internal operational environment as will be explained. To address these changes Alan Joyce, Qantas CEO, focused the airline on core business competences to help them sustain their competitive advantage and restore returns to profitable levels.

Under the burden of large capital commitments having ordered 115 new aircraft in 2005 (Hanson 2010), Qantas rationalised many of its resources and capabilities outsourcing 7000 jobs overseas in an effort to reduce costs and offshoring engineering and maintenance work to third parties that have an excellent safety record that limited the risk of damaging Qantas’ reputation as the safest airline in the world. The rationalisation of operations and focus on core competences restored profitability as the broader industry began to recover and Qantas now operate profitably across the group after several years of losses in their three airline segments.

This report examines Qantas competitive, business-level, corporate-level and international strategies to establishing the theoretical strategic management foundations to Qantas current situation. The report provides recommendations based on Qantas current context identifying appropriate strategic management principles that can be applied to sustain competitive advantage and achieve above average returns.

3        Strategic Management and Strategic Competitiveness

The essence of strategic management is to establish a unique market position that addresses the five forces of competition (Porter, 1980) minimising threats and capitalising on opportunities. To do so companies need to scan the external environment and identifying signals to changes in the environment, monitor identified trends and generate projections. The application of the I/O model pursues above average returns through targeting an attractive industry and implementing a strategy that is determined by that industry.

In turn the company’s internal environment must be aligned to address external opportunities and threats. Applying a resource based model internal analysis examines what is valuable, rare, costly to imitate and non-substitutable (VRIN) (Barney, 1991) to make strategic decisions in respect to its resources, capabilities and focus on core competences in an effort to create sustainable competitive advantage. The company can then assess its value chain (Porter, 1985) and make decisions on what competences create the greatest value for its customers and its ultimately stakeholders.  As resource can often be imitated or substituted over time however it is difficult to sustain competitive advantage based on resources alone thus the importance of strategy to address the external environment. This leads to decisions on mergers and acquisitions then need be made to take advantage of economies of scale and earn above average returns on its products and services. International strategies also can help the company like Qantas take advantage of locations nearer to high demand and high growth markets (Hitt, et al., 2015).

Qantas unique position in the market has not been adequate to sustain competitive advantage alone. Its well establish and valuable position in the market has attracted competitors who have sort to imitate and provide substitute products, that seek to emulate Qantas products and services and also undercut them through cost lead strategies. Following the Global Financial Crisis where Low Cost Carriers (LCC) addressed changes in the external environment of customer price sensitivity and Qantas was forced to respond through establishment of it’s JetStar Group creating its own LCC imitation. Qantas do have substantial resources that address the four VRIN criteria, the most significant of which is their intangible brand asset and associated loyalty being Australia’s long-standing national carrier. Qantas focus attention on core competence surrounding this resource and leverage its capacity to sustain competitive advantage.

4        Business-level strategy

Qantas must understand its strengths, weaknesses, opportunities and threats, as well as its resources and capabilities from its internal conditions where competitive advantage can be achieved (Nandakumar et al 2010). The below reviews Qantas’ ability and success at deploying its resources to achieve a sustainable competitive advantage over their competitors and earn above-average returns by integrating and coordinating a set of commitments and actions.

4.1       Current

Firms have to develop their business level strategy based on how they will deploy their resources to compete in a specific industry or market section (Raphael 1986). This helps form the core strategy that the firm chooses to achieve its competitive advantage.  Another important factor in the foundation of a successful business level strategy requires understanding the customer value proposition. To create customer value firms have to satisfy three aspects:

• What will be the proposition, in terms of product and service about customers’ needs and satisfaction
• To which customer segment will the product be served
• How will the firm use its core competencies to satisfy the costumers needs

(Lecocq 2015).

Qantas use the NPS (Net Promoter Score) program to understand whether passengers will advocate for them. The feedback is passed on to frontline employees in order to improve service delivery and is used by the business to inform strategic decisions and to improve travel experiences.

To create competitive advantage, firms can evaluate different business-level strategies that can match with the course of action pursued by the company. The strategies are:

• Cost leadership: the production of the low per-unit cost from a product.
• Differentiation: the production of goods or services within an acceptable cost which produce unique products in the industry.
• Focus strategy: the production of goods and service that is determined to satisfy a specific customer segment.

Competitive advantage growth occurs when firms create value for its products that exceed the firm’s cost to creating it (Porter 1985). Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors, with equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation.

Qantas has achieved competitive advantage using the integrated cost leadership/ differentiation strategy. This is evident due to Qantas’ longevity and unique position (in global terms) in being able to cover a diverse (business and leisure) national market with a diversity of products and services that reflect different services levels. This strategy is driven by its route segmentation, where Qantas differentiate the service provided by the type of traffic to reduce operational cost. The results are the business outcomes of increasing revenue and (return to) profit, route growth and continued, sustained cost reduction (Whyte and Lohmann 2015).

4.1.1      Qantas and Porter’s Five Forces

Qantas addressed each of Porter’s Five Forces (Porter, 1979) it faced to achieve its dominant market position and deliver upon its business level strategy.

Rivalry within Existing Competitors

The high volume of competitors in the aviation industry produces a fierce competition between them, in which the rivalry is strong due to the crowded marketplace. Rivalry is manifested through price wars, regular and long discount cycles, regularly adding new products, large marketing campaigns and service improvement. Qantas has achieved a competitive advantage against competitors as they have developed and maintained a larger diverse market with a diverse range of unique products.

Bargaining Power of Buyers

Most buyers tend to be price sensitive and will shop around for better prices or better value (Porter 2008).  The primary buyers in the aviation industry are middle class individuals or business professionals.  They command significant buyer power because they are able to move freely between airlines.   Buyers can easily hold a number of frequent flyer loyalty accounts, so this is no longer as effective in keeping buyers loyal to the product or service.  Because of this, Qantas has its two major brands; Qantas (for product differentiation) and Jetstar (for best value). Qantas’ strategy has to be mindful as to not cannibalise its own market, leading to customer confusion and a loss in revenue opportunity in customers choosing to fly with the wrong brand.

Bargaining Power of Suppliers

Qantas is a highly recognized brand around the world which makes it a trusted company in the eyes of the suppliers. During the last year, Qantas worked with many of its suppliers to reduce operational cost and preserve their current margins. As many suppliers are dependant on Qantas, most begrudgingly complied.  Where supplies hold key strategic assets (eg. jet fuel, airliner construction), airlines have little bargaining power over prices, however, the industry can negotiate contractual outcomes over a number of years.  Most other airline industry suppliers are not critical and operate in a competitive environment where the industry players can switch suppliers with little effort and recourse. Unlike other competitors, Qantas relies heavily on unionised labour to run its operations.  Unions have significant influence and power over Qantas as key resource suppliers.

Potential New Entrants

The barriers to entry in the aviation industry are high due to the need for large capital outlays to enter and compete in the market. There are many airlines in the market (ranging from large national carriers to small regional carriers), the industry operates on fairly low margins (due to constant price competition and price reporting), and experiences volatility with jet fuel. This makes the industry quite unattractive for new entrants to successfully enter and compete against existing operators. Furthermore, Qantas has developed a highly successful loyalty program, through brand development, which helps them preserve their customer base and complicates the task of new entrants even further.

Product Substitutes

Train and road travel are the main substitutes locally, however, with heavily reduced prices (where a domestic air ticket can cost less than the taxi ride to the airport), the airline industry will be able to demonstrate significant value (time saving, convenience, comfort) over road or rail based travel.  Qantas’ integrated cost leadership/differentiation strategy helps to reduce the possibility of customers switching to substitutes.

4.1.2      Current Geographical External Environment

Qantas needs to develop core competence in integrating horizontal acquisitions and building a business outside of Australia.  External market trends show growth in Asia and Africa and Qantas needs to be closer to those markets in order to offer new customers its safety record core competence.

Air New Zealand and Qantas, have several times claimed that Emirates is dumping capacity in the trans-Tasman market, seeking only to cover its marginal costs and in the process driving down fares to levels unprofitable for competitors (Mullins 2014). Another problem in aeronautical relations with Australia involves the imbalance in benefits from the air service agreement, with the benefits heavily slanted in Emirate’s favour (Mullins 2014).  Qantas has complained that the operations of sixth freedom carriers – SIA as well as Emirates – have been responsible for a sharp fall in its market share of international traffic to / from Australia. Emirates is seeking to double flights into Australia in the future which will threaten Qantas’ geographical advantage.  The UAE maintains an open skies policy and so it could offer Qantas the opportunity to set up a hub in Dubai (Mullins 2014). But this might well be something of an empty gesture given that Qantas would still need fifth freedom rights to operate beyond Dubai. As a third / fourth freedom carrier Qantas also complains that Emirates simply diverts traffic, but more than 80 per cent of the passengers Emirates currently carries in and out of Australia are flying to / from cities not served by Qantas, for example Paris, Zurich, and Vienna ( Airline Business 2006). But because a third / fourth freedom carrier cannot match the sixth freedom carrier’s economies of route traffic density, it is bound to be at a competitive disadvantage, due to the geographical accident of its home country’s location (Mullins, 2014).

The argument of location and Emirates dumping capacity is a serious concern especially, even with the hub location and the brand image of Qantas safety record.

4.2       Recommendations

The analysis has identified the bargaining power of suppliers as a primary threat.  Qantas’ main operational workforce is unionized; the job cuts to outsourcing and the continuous reductions of jobs has frightened the unions. This resulted in a significant strike in 2009, with more than 300 cancelled flights and the loss of brand reputation.

The recommendation is to create a much closer relation with the unions in order to reduce the possibility and impact of future strikes that can affect the profit and reputation of the company. The establishment of enterprise agreements that contain rising personnel costs are critical to maintaining profitability and competitiveness for the airline.

Qantas also need to continuously monitor and respond to potential market cannibalization. Passengers can easily take advantage of lower fares by using Jetstar with potential brand loss to Qantas (Whyte and Lohmann 2015). Qantas has experienced the reduction in sales of its flagship product as the result of the introduction of Jetstar as a low-cost alternative. This strategy affects sales volume and market share which could result in the erosion of value differentiation in their premium service Qantas products.

4.2.1      Recommended Geographical External Environment

The recommendation is to perform a study on the feasibility of setting a horizontal integration into airline operations in Dubai taking advantage of the access to new customers and marketing the core competence of perfect safety record that cannot be easily copied. According to Handley (2012), “Mounting anecdotal evidence suggests that there are sizable resource (human and physical) related implications associated with many outsourcing initiatives. Surprisingly, relatively little empirical research has been conducted which addresses the capability issues that accompany the disposal of organizational resources by outsourcing firms”.

Virtually all preferential trade agreements (PTAs) are between geographically contiguous countries. Those that are not tend to be based on former imperial relationships, which have been diminishing in importance. Given the relationship between proximity and PTAs, there is little distinction between preferential trade and ‘regionalism’ (Ludema, 2002). This is a double edged sword for Qantas. It means that it will be very difficult for the airline to setup a trade agreement or merger with a powerful geographically positioned operator, but if one can be setup then that will open up new opportunities for strong relationships from their new and now preferential location in a location like Dubai.

5        Corporate-level Strategy – Diversification

The value of corporate strategy is largely determined by the degree to which the businesses under the company’s management are of greater value than if they were managed by a competitor or independently (Campbell et al 1995). Thus an effective corporate strategy generates aggregate returns across the portfolio than they would be without (Kenny, 2011), contributing to the companies competitive advantage and ability to generate above average returns (Porter, 1980).

5.1       Current

In FY 2015 the Qantas Group generated $15,816 billion in total revenue (Qantas Airways Ltd, 2015a). This was generated across 5 main segments or business units as highlighted in figure 1.1. Qantas operate with low levels of diversification in a dominant business strategy (Hitt, Ireland, & Hoskisson, 2015) with 84% of revenue generated through its passenger airline business focusing on a core set of capabilities and competences to generate above average returns (Porter, 1987) in a single industry market.

Interestingly from a segment profit contribution perspective there is less dominance of the passenger airline business with Qantas Freight and Loyalty generating 35% of the company’s EBIT tipping their strategy into more moderate diversification with its related business units sharing product, technology and distribution linkages (Hitt et al., 2015).

Figure 1.1 FY15 segment contribution $ millions (Qantas Airways Ltd 2015a)

Analysing the segments reveals that revenue contributions (figure 1.2) have remained relatively stable over time, however profit levels (figure 1.3) of the passenger airlines are far more volatile. The profit from freight and loyalty show stable levels of increasing return providing support for the other segments (Matusik & Fitza, 2012) when they are challenged by internal and external influences creating sustained value and returns for the Qantas Group.

Figure 1.2 Annual revenues by segment (Qantas Airways Ltd 2015a)

Figure 1.3 Annual EBIT by segment (Qantas Airways Ltd 2015a)

In addition to the economies of scope and value created through Qantas’ diversified segments, they also achieve market power against price competition. Through successfully establishing services in both premium service and Low Cost Carrier (LCC) airlines they have mitigated risks of revenue loss, a value neutral benefit, and blocked competition through price competitiveness. Achieving this airline within airline strategy is a rare occurrence with only a limited number of successful cases globally, with the main success factors being customer segment alignment, clear differentiation, vertical integration and realised back end synergies (Gillen & Gados, 2008).

From a resources perspective, Qantas also derive value-neutral benefits through both their tangible and intangible resources. As an example in anticipating the effect of the low Australian dollar increasing international passenger travel, Qantas are redeploying aircraft from reductions in their domestic demand (Qantas Airways Ltd, 2015c) ensuring continued high returns on capital invested (Kaul, 2012). Qantas is also leveraging it’s strong, established brand credibility across many of its diversified businesses. One key example is the attraction of its Loyalty products to external companies not only for the audience reach but also for the reputational association with Qantas.

Qantas also operates several other diversified business lines including – Q Catering, QantasLink, Engineering and its in-flight magazine.

5.2       Recommendations

Qantas should continue to strengthen the advantages gained through their existing diversification strategy of the five major business segments. Multiple revenue and profit sources, especially from Loyalty and Freight, will continue to smooth the variable returns from the passenger airline segments addressing uncertainty in the external environment (Matusik & Fitza, 2012) of the aviation industry. Continued aircraft and operational capacity allocation across the airline segments will maximise the Qantas groups’ economies of scope and create value due to the synergies between these segments (Campbell et al., 1995).

As the Qantas Group grows it is critical that each business segment remains strongly aligned with the corporate vision and core brand values continuing to develop stakeholder value and strong return on investment for the entire group, not just profit for the segment (Kenny, 2011). Synergies must continue to be assessed and developed as each segment evolves to maximise value creation.

Opportunities have also been identified for further diversification into a vertically integrated travel insurance business. At present Qantas provide travel insurance options through third party insurers via their online booking service with Qantas receiving a small referral margin. Analysis should be undertaken into the viability of leveraging the Qantas brand and unique customer touch point in the travel buying cycle and its 10.8 million member reach to upsell its own Qantas Travel Insurance at full margin. The new products could be underwritten and supported by an experienced insurance partner to limit the risks of establishing an actual insurance business that is outside of Qantas core competences (Prahalad & Hamel, 1990) focusing on retail only. Careful consideration should be given to the negative effectives of over diversification in order not to divert attention from organic growth focus on existing segments (Kenny, 2011). However a moderately unrelated level of diversification often outperform highly related business units which is why travel insurance has been identified as a strategic fit with the appropriate due diligence.

Qantas Loyalty segment with its high profitability, stable revenue growth and 10.8 million customer reach should be developed thoughtfully. There are a growing number of subsidiary operations within the Loyalty segment adding an expanding secondary level of diversification that could lead to over-diversification and investment in highly unrelated businesses (Palich, Carini, & Seaman, 2000). One of the Loyalty subsidiaries that requires further examination is the Red Planet consumer analytics and consultancy business incorporating the acquisition of Taylor Fry. While immediate synergies can be identified in the monetisation of the loyalty database and consumer transaction history, the choice of taking this to market via an internal consulting agency is questionable. There is limited overlap in the resources, technical knowledge and operational capabilities (Campbell et al., 1995) of Red Planet and Qantas nor is their apparent value created by Qantas that produces greater returns than Taylor Fry had as an independent entity. A more appropriate model to consider would be to license the Qantas data asset to experienced third party consulting firms, increasing the scale of return through recurrent licensing income and enabling diverse value creation without the increased overheads and capability development.

6        Corporate-level Strategy – Mergers and Acquisitions

Companies pursue mergers and acquisitions for a range of regions to increase the stakeholder value of the acquiring company. Reasons include growth, market expansion, eliminate competitive threats, operational synergies, or to diversify (Gaughan, 2010). However while the apparent benefits are obvious more acquisitions have reduced shareholder value than created it through lack of effective corporate strategy (Porter, 1987). A Price Waterhouse Coopers survey (2014) found that only 65% of acquisitions achieve their strategic goals and 49% achieve their financial goals with success through to an operational level only being achieved through “sustained commitment to integration (2014, p. 6).”

6.1       Current

Qantas has incorporated mergers and acquisitions into its corporate strategy over the last twenty years that have seen it increase market power, diversification, vertical expansion, restructured its competitive scope and expand capabilities.

In 2008 Qantas embarked on a merger with JetSet Travelworld Limited to pursue vertical expansion in the travel services market. Qantas anticpated growth of $3 billion a year in revenue and $800 million in profit through the integration of Jetset’s capabilities with the Qantas Holidays business unit (Qantas Airways Ltd, 2008). The Jetset venture has failed to achieve these returns after numerous ownership restructures and further mergers to incorporate greater market power and reach, which saw Qantas controlling share reduce from 58 to 28 percent. The travel services group, now called Helloworld, continues to produce profit losses with declining revenue, having failed to capitalise on the benefits of vertical integration with Qantas and create additional value.

Qantas entered into a joint venture with Australia Post in 2003 acquiring Star Track and Australian air Express (Supply Chain Digital, 2012). It is an interesting example of the establishment of core competence in corporate strategy as the initial structure failed to create sufficient value for either stakeholder. In 2012, under the pressure of $25 million in group losses, Qantas sold its 50% share in Star Track to Australia Post and purchased 100% of Australian air Express. This focused Australia Post on their core capabilities in parcel delivery and in turn Qantas on air freight.

Red Planet was created in early 2014 as a subsidiary business to Qantas Loyalty analytical consulting services (Qantas Airways Ltd, 2015c). The aim of the new business unit is to leverage Qantas frequent flyer and transaction data, empowering consumer insight with a view to becoming a leading digital media, analytics and research service business. To increase capability and experience in this field, Qantas acquired Taylor Fry in February 2015 a company that generated revenue of $12 million in FY14 with its origins in insurance actuarial data analysis. The underlying logic of the acquisition and diversification is in leveraging Qantas’ 27 years of experience in analysing its loyalty data for internal purposes, with the CEO Martin Fry highlighting strong synergies between Qantas Loyalty and Taylor Fry (Qantas Airways Ltd, 2015b).

Ultimately these mergers and acquisitions have created very limited value for Qantas to date consuming capital investment and distracting strategic focus.

6.2       Recommendations

Qantas are faced with the challenging decision of several divestments with possible loss write-downs due to returns not exceeding capital invested. However due to a lack of understanding of the industries it was getting into, poor due diligence and failure to realise the identified synergies through effective integration (Kenny, 2011) these acquisitions have failed to create competitive advantage and generate above average returns (Porter, 1987) within the Qantas Group.

Based on the continued lack of returns after several restructures and waning investor confidence Qantas should divest 100% of its stake in Helloworld/Jetset unless it can establish a way to align the vertical synergies of the two businesses.

The Red Planet diversification and Taylor Fry acquisition should be reviewed with a critical eye. There are serious questions here on the over diversification of the strategy, the highly unrelated nature of the line of business and the legitimate overlap in complementary capabilities. The capabilities of a professional consulting firm are vastly different in structure, resource and competences and it is difficult to establish how this can be adequately overcome to provide material value creation.

In the freight business segment, Qantas should look to strengthen synergies in aircraft resources and logistics while pursuing further growth and market power through horizontal acquisition of compatible airline freight businesses. The economies of scope and costs efficiencies in further acquisitions are likely to see profitability grow substantially along with growing revenue streams. Potential acquisition targets could include international targets to take advantage of aircraft capacity distribution overseas. Thorough assessment of acquisition targets should be undertaken identifying quantifiable synergies (Jeffery S. Perry & Thomas J. Herd, 2004).

Finally the JetStar Group should consider a merger or acquisition to support its international strategy of expansion into the Asian regional airline markets (Frazer, 2015). Difficulties in competitive barriers to entry including government regulation, airport slots and speed of expansion could all potentially be addressed through an appropriate M&A strategy. Expansion into the Asian market is also likely to mitigate some of the fluctuations in its dominant passenger airline income stream with varying regional cycles and fluctuations in international markets offsetting local cycles.

7        Corporate-level Strategy – International

Continuing with the analysis report in the case of Qantas in the global airline industry. Now we are going to focus on the corporate level international strategy used by the company to venture the sale of goods and service out of the domestic market. We are going to understand the benefits that drive Qantas to decides to establish an operation out of their border areas, and the trend and risk that Qantas evaluated to choose the correct corporate-level strategy.

7.1       Current

Qantas started its expansion into the Asia market after a liberalisation move that gave to the company the opportunity to create a partnership between different investors. Establishing a majority shareholding in Jetstar Asia with base in Singapore, and gain competition in a market with many start-up airlines (Whyte, R, Lohmann, G, 2015, p143).

The benefits of expanding into the Asian market driven by the entry of market conditions where the demographic and market characteristics of the region have created competitive opportunities. The Asian regional market represents a substantial population size with demographic of a large middle-class, increasing leisure activities and the absence of competitive transportation helps the continuous growth of the industry (Lawton, T, 2005).  At the same time, the market conditions in Asia are creating opportunity with the liberalisation of the bilateral services agreement improving the competitive conditions between airlines (Fu, X., Oum, T.H. & Zhang, A. 2010 encouraging airlines to compete and create operational efficiencies at the same time.

This makes entry into the Asian market highly attractive for Qantas creating the opportunity for increased market share, revenue growth, and higher return profit margins due to increased economy of scale and lower salary costs in the Asian region.

Qantas operates a global strategy where the home office takes decisions to allocate domestic products in the international market. Reflecting a price lead competitive strategy to develop rapid growth in the region, Jetstar’s CFO stated that the product approach was as simple as “destination, price and offer to stimulate demand (Whyte, R, Lohmann, G, 2015, p 145).” To establish market entry into Asia Qantas has leveraged its alliance partnerships, but should also examine opportunities for acquisitions or mergers to increase above average returns.

The Alliance entry mode is a strategy where two or more companies work together to deliver the same product. Peter Drucker (1996) stated “The greatest change in corporate culture, and the way business is being conducted, may be the accelerating growth of relationships based not on ownership, but on partnership”  (Elmuti, D. & Kathawala, Y. 2001, p 205). Qantas international business created an important alliance with Emirate Airline to provide a major numbers of destinations in Europe, moving its hub to Dubai. This alliance will provide reciprocal service to many destinations, creating a benefits-sharing model. Qantas also has many other alliances where they codeshare seats. This strategy allows Qantas to enter many different markets with a limited invested capital (Dean Elmuti Yunus Kathawala, 2001).

Qantas have developed international partnership with companies in Asia to overcome foreign ownership limitations which create barriers of entry for Qnatas just as Qantas is protected in Australia from majority foreign ownership. Partnerships include – Japan Airlines and Mitsubishi Century and Tokyo Leasing Corp, where Qantas owns the 33% of Jetstar Japan, JetStar Asia where Qantas owns 49% with Westbrook Investment who own 51% and 30% share in Jetstar Vietnam with Pacific Airlines who own the 70% (Whyte, R, Lohmann, G, 2015, 144).

Qantas have also expanded focus on international long-haul development acquiring up to 110 AirBus A320 aircraft to support growth over the next 10 to 15 years (Qantas Airways Ltd, 2011a). This strategy seeks to capitalise on the opportunity created through a growing international market and attraction to travel to Australia due to the favourable foreign exchange rates. Qantas are further supporting this expansion through increased partnership commitments with its One World Alliance having invested $400 million in upgrading its international lounges for use by both Qantas and One World members (Qantas Airways Ltd, 2011b).

7.2       Recommendations

This international strategy and expansion into Asia supports the diversification strategy from Qantas. The expansion of the Jetstar into the Asian market brings a unique and differentiated product to the local market based on technology, marketing, or specialised management focused specifically on this new market (Montgomery, C & Singh, H 1984). The establishment of market power through aggressive growth in the region and leverage of existing knowledge assets will create competitive advantage.

Qantas should continue to strengthen its global strategy developing regional business unit strategies from its home office as this has successfully created advantages and growth to date. However Qantas should also consider adopting a transitional strategy as they expand their international strategy to developing countries. The opportunity for regionalisation to target a rapidly growing middle class in regions such as India and China, who have a strong propensity to travel internationally, is likely to require increased local responsiveness to pursue profitable growth in those markets (Lyles, Saxton, & Watson, 2004). Qantas should leverage its strategic strengths to enter these markets leveraging experience and knowledge (Si & Bruton, 1999)in strategic alliances and partnerships which will overcome foreign ownership barriers and limit political and economic risks (Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004). Qantas should also examine opportunities for suitable horizontal acquisitions in target regions along with the establishment of wholly owned subsidiaries where foreign ownership restrictions are not a barrier. In managing this regional expansion Qantas will need to thoughtfully develop its management structures to support successful integration of different cultural and institutional practices and align them constructively with the central vision and direction of the company. Qantas must also consider the scale of their international strategy to avoid negative consequences of over expansion and complexity.

As Qantas expands its long haul international operations, Qantas should implement more fuel efficient aircraft by changing their fleet for the new generation of B787 to create cost efficiencies. The cost of the fuel in the total expenditure amount of the company is equivalent to more than 25% of the total cost for Qantas. The company has reduced in $500 million the cost of fuel during 2015 FY, due to the cost of fuel which has decreased in comparison to 2014 FY (Qantas Airways Ltd, 2015b). Qantas should review its network and schedules to re-assign aircraft according to performance maximization.  Under this consideration, Qantas could reduce the economic risk that it could be generated by the uncertainty of fuel price in the future.

Qantas has to increase their product value in foreign markets where high competitors and recognized airlines operate, to create advantage competitiveness. In the international business, the competitiveness between airlines is high. The number of new entry airlines and star up companies related to the opening of the Asia market created a high volume of airlines that operate in a high competitive market. The high-cost base in routes where the high range of possibilities exists due to the high volume of supply in a high-demand market.

8        Conclusion

Qantas have successfully operated their business in its developing forms for almost 100 years. Driving their continued success will depend on their strategic management ability to sustain competitive advantage and achieve above average returns through competitive business level strategy and corporate strategy including diversification, mergers and acquisitions and international strategy.

Globalisation and the competitive landscape will continue to create competitive and environmental forces, both external and internal that will require Qantas to establish strategies that determine its place and focus in the industry it competes in as well as addressing changing factors in the political, social, economic and technological environment. Resource based strategy is also critical to Qantas business strategy ensuring that they create differentiation and value from the internal environment to generate above average returns. These strategies must in turn be cohesively linked with the overall vision and mission of the company to generate sustainable competitive advantage and ongoing returns for stakeholders.

Qantas relationship with its customers is critical to its business strategy and they must continue to find new ways of satisfying their existing customer needs while anticipating and capturing emerging customer requirements in response to industry, environmental and competitive changes. Qantas must continue to build differentiation between them and their competitors establishing whether it does things differently or does different things to differentiate. Qantas has successfully run a dual business level strategy, a rarity in the airline industry, in developing a cost lead airline business within a value lead differentiation business.

Qantas corporate strategy value is determined by the degree to which the businesses under the company’s management are of greater value than if they were managed by a competitor or independently. The effective establishment of the five diversified business segments has generated aggregate returns across the portfolio that are greater than those they would generate if the businesses were independent. This has contributed to the company’s competitive advantage and ability to generate above average returns. The continued development of business units that leverage synergies across core competences of the Qantas group will ensure continued profitability and value creation. Qantas must be careful however of over diversification given their low to moderate level strategy. Expansion into businesses that our outside its capabilities should be avoided, combining instead a strategic partnerships to integrate third party skill sets complements a range of vertical and horizontal mergers and acquisitions. Mergers and acquisitions to be targeted should provide Qantas with advantages that include increased market power, reducing entry barriers, cost of development, competitive scope and development of new capabilities that complement existing.

Internationally Qantas have identified significant opportunities for horizontal, regionalised expansion into new geographic markets. Qantas must consider revision of their globalised strategy into a transitional strategy that addresses local responsiveness and efficiency. Given the barriers to entry in foreign ownership in many of these countries it is important Qantas establish deliberate strategies such as partnership alliances to overcome these limitations to growth. Qantas must also provide the appropriate management focus and specialisation to this international expansion ensuring that cultural and regional complexities are managed effectively.

The cohesive linkage of all of these strategic elements is critical to the success of Qantas strategic management approach. Ensuring they apply competent leadership to integrate the strategies with operations with the overall strategic mission and vision will ensure sustained competitive advantage and achievement of above average returns for stakeholders.

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How Qantas Became An Australian Icon

Table of contents.

The Qantas Group markets its brands - Qantas and Jetstar - mainly in the transport sector, offering regional, domestic, and international flights. From Qantas Freight to Qantas Frequent Flyer, the company has a broad portfolio of subsidiaries. Registered initially as Queensland Aerial Services Limited (QANTAS), its reputation is based on safety, operational reliability, engineering and maintenance, and customer service.

The company's history shows the importance of branding and how it can be used to transform from a local service provider to a globally recognized enterprise.

A few key facts about Qantas Group:

● Founded in the Queensland outback in 1920,  Qantas is the world’s second-oldest airline  (behind KLM). 

● In response to COVID-19 pandemic, capacity was reduced by 94% as a result of the steep decline in passenger traffic in Q4 2020

● Qantas International operated more than  750 flights  per week before March 2020. 

● For its amazing record of firsts in operations and safety, Qantas ranked highest among 385 airlines, beating Qatar Airways, Air New Zealand, Singapore Airlines, and Emirates on the annual list of  AirlineRatings.com .

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Channeling military flight experience into a business

'The story of Qantas is the story of modern Australia,' the airline's chief executive Alan Joyce said succinctly. Like that of many other flagship airlines, the story began shortly after the First World War when aviation had already proved itself in the hands of the military. It was also logical that a continent of countries would need to connect its far-flung cities by air, as would the fifth continent with the outside world. The importance of the latter is not insignificant: in her anniversary address, Joyce recalls that the first plane once made 31 landings in 12 days from London to Australia and that the first non-stop passenger flights between Europe and Australia were recently made.

During World War I, Gallipoli veterans Paul McGinness and Hudson Fysh met while serving in Palestine with the Australian Flying Corps. A project for the first flight from Britain to Australia was completed by McGinness and Fysh, who carry out a land airfield survey between Longreach and Darwin. Thus, their idea of using military flying experience for civilian use was born.

In November 1920, the two war veterans registered a company, Queensland and Northern Territory Aerial Services Ltd, and drove around Darwin to find possible landing sites. In the first year, they started to introduce people to flying with walking flights and then began to expand the network, initially with Avro 504K biplanes.

Western Queenslanders responded enthusiastically to Qantas' first air routes by purchasing shares and flying frequently using the airline’s services. The founders pioneered a new form of travel, which eventually became much more than an airline. NT in Qantas was their plan of flying overseas via Darwin, which was their primary entry point. A route network was soon developed from joyrides and charter services operated from western Queensland, Australia.

Joyrides: As the name implies, joy ride flights are for pure entertainment. While back in the early 20th century, airplane capabilities were limited compared to today's highly maneuverable aircraft. The scenic views and aerobatics were enjoyed by many at the time.

In 1922 Qantas was already operating with passengers and as a mail distribution service. In 1924 the Australian Prime Minister flew with the airline because a storm had damaged the Winton-Longreach road. To further developed its revenue streams, Qantas operated the first Flying Doctor air ambulance service. The original Qantas became one of the few airlines to build its own aircraft (DH50) in 1926. 

DH50, the first Qantas-manufactured aircraft

De Havilland Aircraft Company built this large biplane at Stag Lane, Edgware, in the early 1920s, one of the company's first successful designs. At the rear of the aircraft, the pilot sat in an open cockpit, while three passengers sat in an enclosed cabin in the center of the fuselage. It won praise for its handling characteristics as well as its performance. Passengers and pilots alike loved it.

A slightly enlarged cabin, a larger radiator area, as well as other modifications made to the De Havilland DH50A, marked its first production version. The National Airline QANTAS acquired a production license for the type following the delivery of nine DH50As to Australia. De Havilland modified a British-built Qantas DH50 in Queensland to fulfill the requirements of the Australian Inland Mission and became an aircraft used by the Royal Flying Doctor Service of Australia. A total of 38 planes have been manufactured over the years of this type.

Key Takeaway #1: Building on years of experience

The founders of Qantas built their initial services on years of experience gained in the military. Even the flight zone was the same one they already knew! The duo started small but had the vision to pioneer civil aviation and slowly built their company. 

An important lesson from the Qantas story is to leverage your hard-earned experience, market knowledge, and the tools you have access to. Many startup founders make the mistake of venturing into completely new market areas that they have no idea about, rather than using the professional experience they already have. 

During and after the Second World War

Qantas Empire Airways went abroad in 1935 and flew the first service between Brisbane and Singapore with DH-86. Later, in the golden age of seaplanes, the company began service between Sydney and Singapore. The prestigious short type, the Empire, with its comfortable main deck and high passenger comfort, was used on this route.

Qantas, mainly based on the founders’ military experience was heavily involved in different scenarios during the Second World War:

● After the declaration of war in 1939, Qantas continued to operate in Singapore and within Australia, despite some aircraft being transferred to the Royal Australian Air Force.

● During the second east-west air crossing of the Pacific Ocean, 19 Catalina flying boats were brought from the United States to Australia by Qantas crews in 1941. 

● When Japanese forces occupied most of Southeast Asia in February 1942, Singapore's operations ended. 

● The Dutch East Indies were evacuated to Australia via Qantas flying boats. 

● Japanese aircraft shot down two Qantas Empire flying boats in early 1942.

● The Qantas hangar and flying boat maintenance facilities were destroyed in the first Japanese air raid on Darwin on 19 February 1942. A flying boat from the Qantas fleet narrowly escapes destruction. 

● From Mount Hagen in New Guinea, 78 people were evacuated by a Qantas DH86 aircraft in May 1942.

The first steps in building the company brand

During the Second World War, only a few air routes were left - one of them was Qantas maintaining a link between Perth and Ceylon using Catalina seaplanes. Catalina flying boats covered 5,600 kilometers nonstop in 28 to 33 hours of nonstop flight. The passengers were presented with membership certificates from the "Rare and Secret Order of the Double Sunrise." 

"Sublime Order of the Longest Jump" was awarded to passengers of Liberator aircraft in 1945. After the war, the Liberators were the first to carry the Kangaroo silhouette, followed by DC-3s, and 4s flying mainly internal routes. Qantas maintained its military charter flight capacity to Japan in the Korean War to create a revenue stream.

The peak of the radial engine era was the beautiful Lockheed Constellation, which also opened the Kangaroo Line between London and Sydney. At that time, the route network included Hong Kong and Tokyo, and Beirut and Frankfurt in 1952.

Key Takeaway #2: Brand development 

The history of Qantas tells us that even in the most desperate of times, during World War II, the company worked doggedly to build a brand and maintain maximum service levels. After the Japanese bombed Qantas' infrastructure system, the company could have closed its doors, but instead, it carried on and maintained some civilian lines. These aircraft featured the company's logo, the iconic kangaroo, and helped build the company's image as a reliable, professional, and safe organization. 

Today, there is almost no market where you will not encounter some type of competition. There are national and global, smaller and more agile, and larger, corporate-like players targeting the same audience as your company. You need to stand out somehow, and the best way to do that is to build a brand with characteristics that your audience can identify with.

The age of aviation

The jet age.

Throughout the history of aviation, the Jet Age was defined by the advent of aircraft powered by turbine engines and the resulting changes in society.

Due to the jets' ability to fly longer and faster than older piston-powered propliners. Leaving Australia and flying across the Pacific and Indian Oceans, aircraft were able to travel non-stop to their destinations, making it possible to travel to long-distance destinations within a single day. In addition to carrying more passengers than piston-engined airliners, large jetliners also lower airfares, so people from a broader socioeconomic range could travel across borders. 

Qantas was among the pioneers in operating a lower-cost Tourist Class on various routes to bring the experience of flying to new audiences.

In addition to the advantages of the jet stream, the turbine-powered engines provided a smoother ride and better fuel economy compared to their predecessors. Among the exceptions to the jet-powered dominance of large airliners was the contra-rotating propeller turboprop design that powered the Tu-114 (first flight 1957). Although this airliner was able to match or even exceed the speed, range, and capacity of contemporary jets, its use in large aircraft was restricted to the military after 1976.

Qantas is recognized internationally for its engineering quality and safety record. First to offer a business class in 1979, and the first to introduce the slide raft in 1982, which has been a standard feature on all large commercial planes ever since. 

The Boeing - Qantas partnership

With the Boeing 707 in 1959 and later the 747 in 1966, the jet age halved flight times. During the 1960s, Qantas entered the jet age when it began flying Boeing 707s from London. The result was a marked improvement in journey times and an expansion of its global network. Two days after its inaugural flight from Sydney to San Francisco, the first flight departed London on 31 July 1959.

By flying from London to Sydney via San Francisco, passengers can save over 25 hours on their journey. In 1961, Boeing introduced a special version of the 707 known as the "V Jet". Equipped with significantly powerful engines, the V jet continued to enhance the experience of the London to Sydney line.

During this time, Qantas ordered airplanes from Boeing to serve on other routes, such as:

● Singapore

● The short-lived Fiesta Route - from the UK to Australia via Bermuda, Nassau, Mexico City, Acapulco, Tahiti, and Fiji 

Boeing’s jet engine airplanes empowered Qantas to become a truly global airline offering its flight services to all popular countries of Europe, the Americas, and the APAC region. 

Stewards and stewardesses

In Qantas' case, flight hostesses, in particular, became one of the airline's most visible, glamorous marketing symbols. But it wasn’t how it started. 

The wife of Qantas' founder, Hudson Fysh, was entrusted with the task of hiring the airline's first intake of hostesses. Patricia Burke was among nine "girls" selected by Mrs Fysh and her team from a field of 1,000 applicants from all over Australia.

They performed clerical duties on board and assisted stewards in serving meals to passengers. The captain personally directed them. As Patricia recalled in an interview with the  Sydney Morning Herald :  "We were trained very well in safety and loading procedures, shown how to serve passengers properly and we were taken on a familiarisation flight to Singapore in a seaplane. We didn't have to push heavy trolleys of food and drink up the aisles: that was left to the stewards but we did assist them to serve it. I was paid ten pounds a week but the stewards got more and tips as well. Hostesses were never tipped. It was not ladylike."

While the Flight Stewards Association of Australia represented the majority male workforce, as of 1957, the Aviation Hostesses Association was formed to represent local and international flight hostesses. With almost only female members and strong collective bargaining, the AHA was unique at that time.

The Airline Hostesses Association also played a significant role in supporting the Qantas Flight Hostesses' strike for career advancement and equal pay. The Hostesses of past eras were required to ‘retire’ at the age of 35 without having the option of applying for promotions such as Senior Flight Steward, Chief Steward, or Flight Service Director.

After decades of competition, the two representative organizations joined forces in 1992 and became one under the name Flight Attendants Association of Australia.

Key Takeaway #3: Pushing the limits of innovation

Throughout its more than 100-year history, Qantas has been at the forefront of innovation. Of course, one of the main drivers has been the long distance to other countries, which has led the company to look for cheaper solutions. Thanks to its partnership with Boeing, Qantas was one of the first airlines to offer non-stop flights and also invested heavily in research and development to improve safety.

Although being far from the most popular destinations seems to be a significant disadvantage compared to traditional European and American airlines, Qantas turned this into a growth engine. 

An alliance and privatization

Founding the oneworld alliance.

Alliances between airlines are now an integral part of travel. Star Alliance, SkyTeam, and OneWorld are three of the major airline alliances. For the airlines, there are benefits in terms of cost savings and operational efficiencies; for passengers, there are facilitations in routing and connections; and, of course, there are loyalty benefits for all airlines.

It hasn't always been like this. Pan American World Airways and Panair de Brasil operated routes to Latin America together as early as the 1930s. In the early 1990s, there were also several African airlines offering services in an alliance. However, it was not until the late 1990s that a truly global alliance began to emerge.

Oneworld was co-founded in 1998 by Qantas, British Airways, Cathay Pacific, and American Airlines. With Iberia Airlines and Finnair joining in the same year, the alliance became operational in February 1999. 

Oneworld targets the premium travel market and allows passengers to enjoy a wider route network than would be possible on their own. Airlines work together to keep costs down and achieve operational synergies. In 1998, the alliance carried 181 million passengers annually (to 648 destinations in 139 countries). 

As part of the alliance's launch, all industry personnel were involved in extensive communication and training programs. In addition, the slogan "Oneworld revolves around you" was used for a major advertising campaign.

Today, under the OneWorld alliance logo, 14 world-class airlines offer seamless service and connections to more than 1,000 destinations in nearly 170 countries and territories. Member airlines work together to ensure the perfect flying experience - from check-in to boarding. OneWorld also plans to open its own branded airport lounges at major hub airports. Recently, the alliance introduced a new form of membership. Thanks to OneWorld Connect, regional airlines can take advantage of the alliance's benefits. Fiji Airways is the first airline to join this program.

In addition to consumer services, OneWorld Alliance provides services for corporate clients. According to the Alliance’s website, companies enjoy the following benefits:

● With global coverage, OneWorld flies to and from the world's most important markets and has global support centers in those locales.

● There is flexibility with flights, fares, and product options. First Class, Business Class, and Premium Economy come with award-winning fully flat seats.

● The Global Corporate Program gives each member a single, dedicated OneWorld contact, which streamlines communication and contractual implementation.

● Single legal agreement and four-year commitment: Streamlined sign-up that only takes a couple of minutes. All OneWorld airlines share the same expiration dates.

● Corporate clients get perks that give frequent flyers an edge, such as lounge access to top-tier cards, priority check-in, pre-boarding, and preferred seating options.

The privatization process of Qantas

Qantas was first given access to the national domestic market as a result of the Government of Australia's 1992 sale of Australian Airlines. As part of the purchase, the company added the Boeing 737 and Airbus A300 to its fleet, although the latter airplane type was eventually retired. 

In March 1993, Qantas was privatized, with British Airways purchasing 25% of its shares for A$665 million. Profits increased by nearly 80% over the first half of 1995, allowing the Australian Government to sell its remaining 75% stake. Across the six months through the end of December, the company reported a net profit of A$129 million ($95 million), while sales was increased by 9.5%.

A 2% increase in yields across the network boosted performance. Despite a 10% increase in capacity, Qantas claimed that it had avoided diluting its load factors. Although earlier concerns about intense competition from privately held Ansett had arisen, the airline’s domestic operations have improved significantly. Operating profit for the domestic sector was $A51 million, as revenues grew by 24%.

During that time, Qantas highlighted that it started to see benefits from its alliance with British Airways, such as joint marketing and purchasing. In the wake of British Airways' purchase of 25% of Qantas, the remaining shares have been sold progressively later as the business has been reorganized and the top management has changed.

Qantas decided to proceed with the rest of its float in 1995. Public share offers were conducted in June and July of that year, earning the government A$1.45 billion. The remaining shares were sold in two phases in 1995–96 and 1996–97. 

The stock float attracted significant interest from investors outside Australia, who bought 20 percent, while British Airways purchased 25 percent. This meant Qantas became 55% Australian-owned and 45% foreign-owned once listed on the stock exchange. By law, at least 51% of the company must be owned by Australians, so foreign ownership is constantly monitored. However, the tense situation changed when British Airways sold its 18.5% stake in Qantas in September 2004 for £425 million, though keeping its close ties with the Australian carrier intact.

Key Takeaway #4: Offering services with your competitors

Of course, Qantas did not enter into an alliance with its closest competitors but saw the opportunity to join forces with similar airlines covering long distances. The ultimate goal was to create a network that would reach all parts of the world and generate contacts with members through consumer and corporate agreements. Under a single brand umbrella, member companies provide services that they could not provide without each other, resulting in an increase in revenue. 

The present and future of Qantas

Airplanes, the most important assets of any airline.

The most vital asset of any airline is its fleet. Qantas has been a pioneer in implementing new technologies and integrating the newest airplane types into its fleet for more than 100 years. Let's take a look at Qantas' current aircraft!

In contrast to 1970, when the company had 28 airplanes (mainly Boeing 707s), Qantas and its subsidiaries operated 297 aircraft as of November 2018. Qantas subsidiaries operate the majority: Jetstar Airways aircraft made up 71 of the fleet, 90 were operated by various QantasLink airlines, and six by Express Freighters Australia. Over the years, Qantas has always favored Boeing aircraft over products from other suppliers, but the other major civil aircraft manufacturer, Airbus, is also represented in the fleet.

Airbus A320

The Airbus A320 is a twin-engine, single-aisle, narrow-body, medium-range passenger aircraft developed by Airbus in the late 1980s, primarily to compete with the Boeing 737 and its various successors, the McDonnell Douglas DC-9. Digital electronic steering was used for the first time on a passenger aircraft. To date, over 4,400 aircraft have been delivered, making it the second-largest passenger aircraft ever built.

Airbus A330

The Airbus A330 is a wide-body, high-capacity passenger aircraft for medium- and long-haul flights made by the European airline Airbus, competing mainly with the Boeing 777. It was developed in the 1990s in parallel with the Airbus A340, which is why the two aircraft share many systems: They have the same wings (two engines on the A330 and four on the A340), the same fuselage structure, and the same avionics.

The main motivation for the development was the airlines' desire to use a twin-engine aircraft for certain long-haul routes, which was not much smaller than the three- and four-engine aircraft used until then. Twin-engine aircraft did not exist for ocean-going flights. It was not until the 1980s that engines were developed that were reliable enough to meet the safety requirements on transcontinental routes.

Airbus A380

The Airbus A380 is a twin-engine, four-engine wide-body passenger aircraft manufactured by the European company Airbus. The A380 is currently the largest passenger aircraft in the world. It first took off from Toulouse, France on April 27, 2005, and made its first scheduled flight on October 25, 2007, between Singapore and Sydney on behalf of Singapore Airlines. Its size quickly earned it the nickname "Superjumbo".

The Boeing 717 is a narrow-body twin-engine aircraft developed by McDonnell Douglas under the designation MD -95 as a successor to the third-generation DC-9. The first Boeing 717 entered service in 1999, and production of the series was completed in 2006. The aircraft has a maximum capacity of 117 passengers, a range of 3,820 km, and is powered by two Rolls-Royce gas turbine engines.

The Boeing 737 is the world's most popular medium-range narrow-body aircraft. By December 2011, it had more than 7,000 orders (6,000 were delivered in April 2009). By November 2019, it was the most ordered and most produced commercial airliner ever, with 15,156 orders and 10,565 deliveries.

Boeing announced the B737 on February 19, 1965, a twin-engine jet-powered turboprop aircraft for short-haul routes to complete the family of passenger aircraft. The 800, which Qantas also used, could carry 160 passengers in a typical two-class configuration and 184 in a single-class configuration.

B787-9 Dreamliner

The Boeing 787 Dreamliner (development designation 7E7 or Y2) is Boeing Commercial Airplanes' latest twin-engine, long-range, mid-size, wide-body aircraft designed and manufactured in the United States. Its various versions can accommodate 242to 335 passengers in three classes. It is the first passenger aircraft to have a large portion of its fuselage made of composite materials. It is designed to consume 20% less fuel than the Boeing 767.

The main focus in the development of the 787 was to reduce the weight of the aircraft. The aircraft is made of 80% composite materials. In the 787's onboard systems, the most striking feature is the new efficient electronic architecture, which replaces the previous compressed air and hydraulic components with electric compressors and pumps and eliminates pneumatics and hydraulics in some subsystems (e.g. engine starters or brakes). Another new feature of the 787 is the electronic wing heating system, which heats the wing surface electrothermally, replacing the previous hot air heating system.

En route around the world - Qantas’ currently available flights

Subsidiaries

The company is also engaged in a broad range of subsidiaries and related businesses, including holiday and travel operations, in addition to the business of transporting passengers and cargo.

● QantasLink: A network of 56 metropolitan and regional destinations across Australia are served by it on over 2000 flights each week.

● Qantas Loyalty: Through its Qantas Frequent Flyer and Qantas Business Rewards programs, Qantas Loyalty is an innovative data-driven business that drives customer and partner loyalty.

● Qantas Freight: Every day, Qantas Freight flies more than 4,000 air freight items to more than 500 destinations around the world. 

● Jetstar: Is a low-cost airline network with destinations within Australia, and also New Zealand (both completely operated by Qantas Group), and multiple co-operated companies, including Jetstar Asia, Jetstar Pacific, and Jetstar Japan.

● Jetconnect: Is a New Zealand-based subsidiary of the Qantas Group that offers trans-Tasman services. The company also provides cabin crew to Qantas for flights to Australia and around the world.

Qantas and COVID-19

A 3-year plan was outlined in June 2020 to guide Qantas Airlines through the COVID-19 crisis.  

The recovery plan focused on three immediate actions:

● Reinforce the financial resilience of the company through a $1.4 billion equity raise. 

● With the ability to scale up as demand grows, the proper workforce size, fleet size, and other costs should be considered. 

● Streamline all operations to reduce costs and improve efficiencies. 

The grounding of some 200 Qantas and Jetstar aircraft means the loss of at least 6,000 jobs and extended stand-downs for thousands of employees. 

Key Takeaway #5: How to cope with crisis

The history of Qantas teaches us that the more successful a company is and the longer it has been operating, the more crises it has to deal with. COVID-19 hit all airlines around the world hard, forcing them to cease operations completely. Qantas was also forced to cease operations, but it has created a plan that reflects the present and considers the future. 

Marketing above the clouds

How qantas’ logo changed over time.

During more than 100 years of operation, between 1920 and today, Qantas’ logo and name were changed several times. 

The brand today

Qantas strives to emphasize reliability, safety, quality customer service, operational efficiency, and innovation as part of all its marketing efforts. Globally, the brand is strong and represents Australian culture. As the slogan says, "The spirit of Australia" captures exactly what the company’s brand is about.

Pricing strategy

In its pricing strategy, Qantas can utilize its diverse portfolio of subsidiaries, and offer wide price ranges for a vast amount of destinations. Most of Qantas' passengers are frequent  business travelers . Qantas charges a premium price for its flights because of the aircraft's comfort and contemporary entertainment facilities. Its marketing mix has a premium pricing strategy that incorporates cost, benefits, and quality service value additions. In offering 'refunds', Qantas develops trust and loyalty in its target market. 

Qantas advertisements

To market itself, Qantas uses several media channels such as TV, print, and online. The Qantas frequent flyer program is regarded as one of the best loyalty options because it offers a wide range of facilities to Qantas' frequent flyers and maintains the balance between retaining and acquiring customers. 

Through its Aboriginal and Torres Strait islander initiative, Qantas promotes the arts and culture of Australia, showcasing its 'spirit of Australia'. Qantas has developed into a premium brand around the world for its sophisticated, hi-tech facilities and safe production standards. Qantas services and touring options are trusted by millions, who remain loyal to their brand name. One of Australia's national sports is rugby, which is sponsored by Qantas and helps with brand recognition. 

The LGBTQIA community is openly supported in its campaigns, which earned the organization a positive image. These activities are aimed at developing a brand personality that the customers can relate to, especially since they are geared toward well-qualified and open-minded customers.

Most notable Qantas advertisements:

●      I hate Qantas : From 1962- 1992, Qantas advertised with a gruff koala who lived by the slogan "I Hate Qantas".

●      The Flying Kangaroo:  In the 80s, no great advertisement worked without a theme song.

●      Standing up:  A recent commercial with actor Hugh Jackman, who became a Qantas Ambassador.

Key Takeaway #6: Pricing with a strategy in mind

Qantas has always strived to offer a diversified service portfolio complemented by a diverse pricing strategy to ensure maximum profit. The service provider uses subsidiaries to offer low-cost flights for shorter routes, while Qantas' mainline services have been created with a luxury image in mind to enable higher fares. 

Final thoughts and key takeaways of Qantas Group’s story

Growth by numbers, key takeaways from qantas' story.

●      Building on years of experience:  Stories like AirBnB's are hard to follow - most successful founders leverage their existing experience and market knowledge rather than venturing into uncharted territory. The founders of Qantas used their experience gained as military pilots to launch a new airline in Australia.

●      The importance of brand development:  A company can only sell products and services if customers resonate with its brand. Quality, safety, and professionalism have been part of the Qantas brand for more than 100 years. The team at Qantas did not even stop building the brand when the company was forced to participate in World War II.

●      Pushing the limits of innovation:  Qantas pioneered aviation technology and safety. The company always spent a significant portion of its budget on manufacturing, innovation, and R&D activities. 

●      Offering services with your competitors:  The Australian company partnered with similar companies around the world to offer complementary services and gain access to new markets and customers. Use partnerships to develop business and increase profits. 

●      How to cope with a crisis:  Qantas created a plan that ensured the integrity of the company and prepared it for future expansion. One of the key takeaways from this story is that you should always prepare for the future while dealing with current challenges.

●      Pricing with a strategy in mind: Qantas is a master at using different pricing strategies that complement each other. Embrace the Qantas mindset in your market and consider how you can offer different packages and how you can target customers that you can do more business.

Throughout more than 100 years, Qantas Group has made an extraordinary journey that holds many takeaways for present entrepreneurs. Although the company is not at its peak due to the global pandemic situation, the team already has plans on how to ensure the future growth of the airline group. Alan Joyce, CEO of Qantas, is already eyeing the newest aircraft types from both industry-leading manufacturers that will ensure a quicker-than-ever connection between Australia and even the most distant places on the globe.

Qantas Airways HRM Case Study

Added on   2019-09-26

About This Document

Qantas Airways is Australia’s largest airline. Issues similar to these present an HRM gap in the responsibilities that were being delivered. The reports present insights into the challenges being faced by the HR Planning at Qantas discussing the HR functions that must be addressed so as to face these challenges. You can also check " Case Studies Of Qantas Airlines " where you will know about " Qantas Marketing ".

   Added on  2019-09-26

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Human Resource Management Assignment : Qantas Airlines lg ...

Analysis of qantas airlines: market position and competitive analysis lg ..., challenges faced by qantas airlines in global business environment lg ..., managing people in british airways: challenges and hrm strategies lg ..., research proposal on 'assessing challenges of qantas airways' lg ..., human resource management lg ....

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Completed orders: 0, requirement, 1. introduction, 2.    discussions, 2.1 current hr challenges in qantas , 2.1.1 job analysis and design, 2.1.2 change management, 2.1.3 performance management, 2.2 addressing these challenges, 2.2.1 job analysis and design- training and communication model., 2.2.2 change management- engage the stakeholders, 2.2.3 performance management- reward practice and feedback mechanism, 3. conclusion, 4. references.

Question: QANTAS HRM-CASE STUDY

Qantas Airways is Australia’s largest airlines. The Qantas Airways Group has been seen to have an extensive commercial and ownership links having a high number of regional carriers. It has an alliance arrangements and code-sharing along with international carriers via the One World Alliance. Qantas is the second largest among the all the five airline alliances which are the groupings of all the allied airlines underpinning the globalization of the airline industry. The ‘airlines’ was found in November 1920 and began as international passenger flights in 1935. The name for the airlines comes from "QANTAS," an abbreviation for its original name, "Queensland and Northern Territory Aerial Services," and has been nicknamed as "The Flying Kangaroo." Qantas Airlines is also a founding member of the Oneworld airline alliance. (Qantas, 2016). A very strong international equity link is present between the British Airways and Qantas. Additionally, Fiji' Air Pacific has it's 46.2 percent interest with Qantas. A nationwide, full-service scheduled air services are only being provided by the Qantas Airways. Since the collapse of Ansett group, the domestic share of Qantas has reached approximately 70 percent of the travel market from a mere 55 percent. It has a human resource management operating in the four major areas of the company, namely, business segments, shared services, corporate, development, and learning. Despite the roles being entrusted on HRM by the organization, grave cases of accidents as well as strikes from the dissatisfied workers allegedly for getting meager salaries. Issues similar to these present an HRM gap in the responsibilities being delivered successfully. The reports present insights into the challenges being faced by the HR Planning at Qantas discussing the HR functions that must be addressed so as to face these challenges. The volatility of the company is being affected by a large number of variable which has been discussed in the study. The paper begins with a discussion of the various challenges and then the step towards addressing the issues have been discussed in the paper.

The Qantas Airways has a solid history in the business years related with transportation of passengers and mails. With an expansion of operations in 65 domestic and 27 international destinations, it serves around 30,000 employees. It has a human resource management operating in the four major areas of the company, namely, business segments, shared services, corporate, development, and learning. The HRM in the corporate level is seen to be highly responsible for remuneration and benefits, the international and industrial relations of the airlines along with its competitors as well as management. The HR teams are also responsible for collaboration with the various other business segments for ensuring successful delivering of the strategies helping the organization to gain competitive advantage. (Emerging Issues in Human Resource Management) The major responsibility of the organization lies with the human resource. The major work areas and responsibility include supporting remuneration, managing the compensation of the employees, managing workers records, and recruitment processes along with coming up with the strategic plans regarding the staff traveling, schemes and schedules. Under the development and learning level, various training programs are given to the employees for helping them to deliver all their works effectively.

Qantas Airways have an inefficient hiring team, and HRM has been making mistakes in choosing a right candidate. Although the organization has a heavy training and recruiting program and the company, have been investing in the job analysis as a well-designing process. In 2008, the company was involved in the in-flight incident causing a serious injury to the 129 passengers owing to the spacious commands. Additionally, the training is not seen to be highly productive since 2006 recruitment. The pilot of the organization was seen not to be acknowledging towards the issues and decided to overshoot the particular destinations by a range of 150 miles. It has been alleged that the captains of the organization are not competent in nature and further lack knowledge regarding shall recovery and use of stick shaker which led to serious accidents. According to various researches, the organizations like Qantas Airways invest a great deal of money on training with the belief that this might be helpful in gaining competitive advantage in the local as well as global (Jackson, Schuler, and Werner, 2011). Although training is offered to the employees so as to motivate the employees and in 2009, it was seen that around $10 million staff training centers were opened by the organization so as to build their economies of the scale. But even with success in the industry, the HRM is highly ineffectual and has asserted that they need to forge a highly beneficial relationship with their employees and staff. (Qantas aims for better customer service with $10m training center, 2009). Various changes to outsourcing working rules and regulations, cutting of costs have been administered in the organization, yet the situation is seen to be worsening. These issues are seen to be intensified despite the job design and analysis strategy of the organization. ("Qantas' HR policy crashes to earth," 2011)

The Qantas Airline was first owned by the government which did not perceive profits and efficiency as their primary goal. In 1995, the privatization of company, various management policies were adopted for overcoming the external and internal influences of the company. The organization is going through diverse external and internal factors, demanding on the changes in the HR management in order to increase their profits. The organization has been maintaining the authoritarian hierarchical structure with the autocratic form of leadership with strict rules and procedures. This had led to major disputes especially among the employees (mostly pilots and engineers) demanding improvements in the wages as well as working conditions (Paton, R. A., & McCalman, J., 2008). The issues have been irritating various employees, and Qantas Airways has been administering various strikes leading to the grounding of the entire fleet of the airlines. Qantas Airways has seen to be highly participative in the mergers and acquisitions of the firms in the recent years so as to gain global competitiveness. This has led to either elimination of layers of the managers, merging with other organizations, outplacing the workers and even to closing facilities. The issue has been prevalent in the organization leading to the human consequence of the change. Qantas is facing consequences like loss of loyalty, unfulfilled cost savings estimates and related issues. Additionally, the major change company went through was its training which was facilitated by their HRM in the apprenticeship program.This has forced the organization to cut jobs by reducing the number of employees. A change management was adopted by the organization in order to face similar issues, but the employees were not ensured successful remuneration. It was highly embarrassing on the part of a reputable brand where change management failed to take care of the employees (Janda, M., 2013).

The Qantas Airways has been making profits but lacks a meaningful performance management so as to provide recognition and rewards to its employees on the basis of their performance. The employees are unaware of what their organization gives in return for their exceptional work. The Qantas Airways has been considered as an important lynchpin in order to define a proper aviation job owing to the fact that it is a market leader. The organization has been seen to sack 5,000 full-time employees and has replaced these employees with around 9,000 part-time workers. These part-time workers do not work for Qantas. The organizations have been seen to give statements that it might not hire the new full-time employee, and no full-time employees have been hired since 2011. However, the Qantas-owned subsidiaries like Qantas Ground Services (QGS) like Aerocare have been hiring new employees. The working conditions and pay off the QGS employees have been crippling. The organization has failed to recognize the personal accomplishments of the employees thereby failing to work accordingly in the upper management. The organization, consequently, might face the lack of eagerness, joy, and enthusiasm in the working environment. (Sheldon, T. & Sheldon, T., 2015).

In their official website, Qantas Airways has asserted that “Qantas is committed to providing meaningful jobs with competitive salaries and superior benefits." Furthermore, the organization alleges that the organization "provide targeted, quality training to the Qantas group and assists in the development of skills".  (Qantas, 2016) But the organization has failed in providing both the claims and the HRM needs to revisit their training and communication model. The organization should move from the marketing approach of making profits and should rather focus on their employees and their needs. A new and well-defined hiring and recruitment procedure must be established in the organization along with a need training model. This new training model will include focus group sessions and workshops where the employees must be asked to present their grievances and to give their ideas towards providing a solution. Additionally, this communication must be asked to focus on the learning, teamwork, safety, innovation as well as productivity.  A right training must be provided to the pilot, and HRM should invest the most in this department. Therefore, the HRM needs to come up with HR strategic oriented communication model which can help in guaranteeing all the needs and requirements of the employees. This way the paramount issues affecting the company would be discussed easily.

There is a need for the organization to come up with an urgent action plan. All the stakeholders and the board of directors must discuss the methods on the recent crisis. The HRM must be asked to carry out process that can engage all the stakeholders and important people to give them an insight towards the salary and training issues being handled. They must be told about the change in communication as well as training model so as to keep the changes employees-oriented. The employees must be interviewed so as to inquire about the area that requires change. Whole organization must be provided the information regarding the change. (Cameron, E., & Green, M., 2015).  Once the HRM finds a perfect fit between the training and communication model, the organization needs to come up with a tactical plan on managing the HR roles so as to avoid more scandals. Once employing the change management plan, it is imperative for the HR to be involved in the day to day operations in order to align them with the needs and requirements of the employees. These changes must be highly transparent in their strategy, and the operational and strategic agenda must be communicated effectively. This will ensure that the needs of the employees are being met, and their issues are heard in the organization without being posed to operational challenges. The mission and goals of the change management plan must be shared with the shareholders in order to make them believe that the changes are taking place for correcting the company's reputation.

There is a great need to come up with a performance management plan so as to follow up with the performance of all the staff members. The performance management facility will help in improving the relationship quality among all the staff members. Furthermore, sharing of expectations as well as building an environment of mutuality and openness is required in Qantas. Qantas should focus on talent management so as to maintain its leadership in the competitive market and further to perform outstandingly.  The HR must motivate their employees so as to make sure that the high quality of work is being delivered. This will result in the lower number of accidents and remuneration issues in the organization. Furthermore, the attitude of the changing staff members must be noticed, and a proper training must be given on how to have a positive mindset and attitude. These steps will help in enhancing the working spirit of the workers and will motivate them. HR of the Qantas Airways must adopt a well-defined reward practice and feedback mechanism in their culture.  In order to adopt talent management strategies, the communication of objectives and goals along with performance expectations must be improved in all the levels of the organization. The following strategies must be adopted for employing a well efficient talent management (Bititci, U. S., Carrie, A. S., & McDevitt, L., 1997)

Developing the existing talent pool

Attracting talent visibility

Maximizing employee satisfaction

In Advanced planning for succession

Acting immediately upon the reviewed performance 

The report discussed the dominant challenge being faced by the HRM of the Qantas Airways. Therefore there is a need for the HR of the organization to develop a sound organizational as well as cultural structure with the help of strong interpersonal skills towards their employees and staff. A proper training must be provided to the employees in order to familiarize them with ideas related to globalization of the HRM so as to gain competitive advantage. All the challenges being faced by the organization can be managed by the HRM by adopting to HR practice directed towards encouraging a rigid recruitment as well as selection policy, empowerment to the employees, training and development to the entire workforce, managing the knowledge, efficient talent management and foster innovation. If the organization follows all the above aspects of the HR practices efficiently, the efficiency of the organization can improve, and all the issues can be eliminated. 

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1.    Sheldon, T. & Sheldon, T. (2015). Qantas Might Be Profiting, But Its Staff Are Barely Getting By - New Matilda. New Matilda. Retrieved 16 September 2016, from https://newmatilda.com/2015/10/23/qantas-might-be-profiting-but-its-staff-are-barely-getting-by/

2.    Qantas | Book airfares on Australia Pacific's Best Airline. (2016). Qantas.com. Retrieved 16 September 2016, from https://www.qantas.com/

3.    Janda, M. (2013). Qantas critics says management failures damaging airline. ABC News. Retrieved 16 September 2016, from http://www.abc.net.au/news/2013-12-06/qantas-critics-says-management-failures-damaging-airline/5139050

4.    Jackson, S., Schuler, R., & Werner, S. (2011). Managing human resources. Cengage Learning.

5.    Qantas aims for better customer service with $10m training centre. (2009). NewsComAu. Retrieved 16 September 2016, from http://www.news.com.au/national/back-to-school-for-battered-qantas-staff/story-e6frfkp9-1111118695362

6.    Emerging issues in Human Resource Management: Pramod Vernia publishes and IBH publish (p) Ltd.,

7.    Bititci, U. S., Carrie, A. S., & McDevitt, L. (1997). Integrated performance measurement systems: a development guide. International journal of operations & production management, 17(5), 522-534.

8.    Paton, R. A., & McCalman, J. (2008). Change management: A guide to effective implementation. Sage.

9.    Cameron, E., & Green, M. (2015). Making sense of change management: a complete guide to the models, tools and techniques of organizational change. Kogan Page Publishers.

10.    Qantas' HR policy crashes to earth. (2011). Theaustralian.com.au. Retrieved 16 September 2016, from http://www.theaustralian.com.au/business/business-spectator/qantas-hr-policy-crashes-to-earth/news-story/350a60a3aa2d0beec22600d07a4ccead

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Home » Management Case Studies » Case Study of Qantas Airlines: Business Model and Strategies

Case Study of Qantas Airlines: Business Model and Strategies

The Aviation Industry has been one of the most dynamic industries in our history. From the development of the machines to the formation of a viable business model, the trials and road to success has been filled with little success and numerous examples of failure. One of the best examples of success in this volatile industry would be Qantas Airline. For nearly one hundred years, Qantas is one of the world’s oldest , most successful air carrier operations. Invoking a business model that has proven constant transformation and change is inherent to their success, Qantas has established itself as a global provider of commercial air services. The Qantas story is of success and adaptation to the ever-changing dynamics of the aviation industry. Many airlines have come and gone throughout the history of aviation, yet Qantas has endured, this case study will explain how they achieved sustainability when so many others have failed.

Business Model and Strategies

Qantas Airlines, throughout its 100-year history has continuously changed and evolved its business model to suit current needs and have an unprecedented preparedness for future operations. The airline is continuously upgrading its fleet and has not shied away from bold fleet changes. For example, QANTAS had at one time in their history been the world’s only operator with an all Boeing 747 fleet conducting international world-wide flights. QANTAS is currently branded as QANTAS – for international and domestic services, and JetStar, for Australian domestic services and has a mixed fleet of Boeing 747’s and Airbus models including the A320, A330, and the A380.

The ability to reinvent themselves and remain a world class provider of international flights services is because of the ever-developing business model and the company’s willingness to make change . These transformation programs are inherent to the successful business model and why QANTAS has survived such a volatile aviation industry.

Leigh Clifford, Chairman for QANTAS Airlines has stated in the company’s annual performance report for FY15/16 that “The Group has increased net free cash flow, grown return on invested capital and further strengthened its balance sheet , remaining in an optimal capital position throughout 2015/16. I’m especially pleased that we have been able to return more than $1 billion U.S. dollars in cash to shareholders over the past 12 months. Over the same period, earnings per share have almost doubled to reach 49 cents.” (2016 -QANTAS Performance review)

Embracing transformation has been the mantra of QANTAS since its infancy. This mentality and ability to changes is fortified through the strong leadership of the company. CEO Alan Joyce exhibits the traits of the QANTAS pioneers. He stated in his 2016 address on performance that “Transformation is making Qantas’ cost base competitive. Just as importantly, it’s changed the way we work. We’re a far more agile company. We’ve accelerated our adoption of new technology, digital platforms and data analytics. And we’ve fostered a culture that encourages diversity, inclusion and innovation. Qantas is a very different company from just a few years ago. Together with our well-balanced Group strategy, transformation means we’re resilient enough to perform in all market conditions and outperform many of our peers.”

The Qantas “Group” is the totality of all the endeavors, including QANTAS International and Domestic, JetStar Domestic, QANTAS Loyalty, and both domestic and international cargo operations. The expenditures total enormous amount of outgoing cash. The aviation industry is basically in the business of selling seats, QANTAS sells the entire experience and profits for its efforts. Expenses for catering, fuel, and maintenance are all costs associated and take away from that seat sale. The reduction of these costs are top priorities to the financial leadership and QANTAS has succeeded. A total reduction in 3% of the total fuel costs over one years is outstanding. With newer, more fuel-efficient aircraft like the A380, seat capacity and sales exceed the fuel costs and profits are made, if seats are filled. QANTAS as increased passenger revenue steadily for the past two years along with the reduced fuel costs and prices of oil world-wide.

The QANTAS team has been able to not only turn a profit in an industry where most others attempt to “break-even”, they have made huge sums of cash. The company is thriving, the stockholders receiving a return on their investment, and employees reinvesting in the company. They seem to be doing everything right in all aspects of the business. The international division of Qantas recorded $512 million dollars in profits FY 2016 and Qantas Domestic did even better with a record $578 million. These profits are in addition to the $452 million and the $346 million recorded by JetStar and Qantas Loyalty.

As stated in the Annual Performance Report for FY 2016, “Operating cash flows of $2.8 billion saw a strong increase from the prior year, reflecting cost and revenue benefits realized through the Qantas Transformation Program, and lower Australian fuel prices. When adjusted for the principal portion of operating rental payments, Funds from Operations were $3.1 billion. Net capital expenditure of $1 billion included investment in replacement fleet such as the Boeing 787 for Jetstar International and customer experience initiatives including airport lounges and the continuation of Airbus A330 and Boeing 737 cabin reconfigurations. Qantas generated $1.7 billion of net free cash flow in the period facilitating net debt reduction and returns to shareholders of $1 billion in the financial year.” (2016 – QANTAS Performance Report)

What this all means for the financial stability, is a record underlying profit of $1.53 billion dollars for FY15/16. For QANTAS that is a 57% increase since FY 2014 and is expected to increase over the next fiscal year. In addition to record profits, a debt reduction plan has been set in motion. Expenses and operating costs continue to rise, yet the aggressive approach to reducing fuel costs has also paid its dividend for the airline. Fuel consumption costs have been reduced by 3% in just one year.

The Chairman, CEO, and Board of Directors statements are best summarized using the introduction published in the Company’s 2016 Annual Performance Report, it reads as “This exceptional performance reflects the strength of our Qantas Group strategy, with record results and increased margins for Qantas Domestic, Qantas International, the Jetstar Group and Qantas Loyalty, and Group-wide return on invested capital of 23 per cent. Total underlying earnings before interest and tax (EBIT) in the domestic market – across both Qantas and Jetstar – rose 30 per cent to $820 million, and total underlying EBIT from the Group’s international operations was $722 million, up 107 per cent.” (2016 Qantas-Performance Report)

The modern age aviation company template lies in the metrics and performance standards of QANTAS airline. Remarkably in an era of failing and defuncted air carriers, they have managed to not just make a few dollars, but made record profits in a world-wide recession. They have accomplished this through two Australian domestic air carriers offering the same destinations and different services. One with traditional services and the other a low cost no frills carrier. This has given name recognition and brand loyalty throughout the population. QANTAS has also established their brand as the industry leader in long haul international travel around the globe. Top tier services, impeccable safety records, and a command of the passenger experiences has made their brand world renowned and associated with aviation excellence. Industry acclaims and record setting financial performances are the benchmark for quality and profits. Every airline, both domestic and international carriers, should take a hard look at the metrics and performance standards established and follow their lead. It does go to show that a deregulated airline can make a profit and not just strive to meet the break-even mark. QANTAS and their transformation mentality that has proven time and again to work. The company will continue to thrive and be the example and standard bearer for all air carriers. The transformation process into the next iteration of aviation excellence will continue as their gold standard and operations way of being an aviation leader.

Fleet Management and Route Structure

The Qantas fleet structure is one of the most dynamic in the industry. Historically Qantas is known for frequent and dramatic changes to their fleet mix, type, and designs. At one point Qantas was the world’s only sole service provider using the Boeing 747. A bold move that met the demands of the time and the decision served them well. According to Alan Joyce, the companies continued transformation is an ongoing process and will continue to evolve as the market and demands change. On February 23, 2017 Mr. Joyce briefed the company’s first quarter performance and highlighted the importance of his commitment to transformation. “Three years ago, when we launched our $2 billion Qantas Transformation program, we wanted to make the Qantas Group a strong, sustainable business. A business that could generate returns through the cycle – in good times, but also in tougher conditions. Our first half performance shows that we continue to deliver on that promise.”

The current Qantas fleet is a diverse mix of airplane capabilities solely produced by the Boeing Corporation and the Airbus Corporation. Having limited themselves to two manufactures, repair costs, maintenance, and product support per model has a reduced overall cost. These consolidated and reduced costs allow Qantas to procure and operate the higher end qualities that come in these models. These are not bare bones transport airplanes like South West. Their fleet is a top tier luxury airline passenger experience. The overall average age of their fleet is approximately 10.8 years, which is young in aviation terms. They are also one of the first airlines to offer services in the Airbus A-380 and Boeing 747-800 which are current production models. They are the front runners at providing services with these monumental aircraft.

Their oldest models are 737-300’s with an average age of 30 years amongst that type. Qantas also does not lease their airframes, they are the owner/operators of their fleet. The constant upgrading and new purchases keep them as a world leader in international services.

Qantas has established routes from Australia to the rest of the world, including destinations like New York, Los Angles, Singapore, Japan, and China. These routine and scheduled routes meet current demands as well as do the regularly scheduled routes operated domestically by Qantas and JetStar. The future schedule is much harder to predict and Qantas is always on the watch for new routes and new service locations. Both international brands, Qantas and JetStar are being marketed to emerging markets around the world. Alan Joyce provides his insight into the international markets and the future routinely. Recently he was quoted “Where Qantas International has added capacity, it’s been directed to Asian markets where demand is strong. Asia was also a bright spot for Jetstar. Jetstar’s international operations had a strong result off the back of growing demand between Australia and places like Indonesia and Thailand. And the Jetstar airlines in Japan and Singapore improved their performance again. The Jetstar Group overall reported another record half year profit, helped by a strong domestic performance.” These emerging international destinations are being addressed and services and fleet adjustments are being made to service these destinations.

The Qantas scheduling situation is unique due to the many destinations serviced and what airframes service certain places. There are passengers that want to fly on the A380 for the novelty, not just the destination. Qantas has recognized this and promotes these flights on this special airplane. The scheduling and marketing of these flights aids in the filling these enormous airplanes.

The Qantas route structure is also unique and has been tailored to the capabilities and location of their operation. Sydney, Australia is most the HUB for all domestic and International flights. The spokes are each point A to B destination in both modes. However, with the longevity and distance of each flight to reach its destination and return almost make the route structure like a point to point operation. They are servicing their entire continent and worldly destinations from Sydney. There are very few flights that continue to other destinations after their initial transoceanic trip. Location has dictated the HUB and the spokes have become the single point destination and return. Their maintenance and overhaul facilities are also located in Sydney with some locations throughout the world for ease of maintaining a flying fleet. Having an airplane grounded in China with little to no maintenance support does not work out, but major work and services are planned for the home location.

The Qantas overall operation provides a unique set of challenges and demands from fleet choice, scheduling long haul flights, and their location and service destinations. The company has continually met these challenges head on with the ability and willingness to be fluid and prepared for change. It is the “transformation” mentality echoed from the leadership down that facilitates the success experienced year after year. Being on the of the world’s most profitable and oldest airlines providing both domestic and international services under numerous brands, Qantas has set a benchmark for success and service.

The Queensland and Northern Territory Aerial Services (QANTAS) has a rich and storied history which started close to one hundred years ago. Throughout their history, Qantas has transformed their business model several times. They have even changed their entire fleet on several occasions. However, one thing has remained constant throughout, which has been to provide a top tier world class flying experience. Their marketing strategy has evolved over the years and kept pace with the times, but pure customer satisfaction for each passenger remains paramount to the company. In the early years, word of mouth was the only way to advertise, and satisfied customers provided the positive communications needed to expand the business. Fast forward to today and that word of mouth advertising still has its place and it works. Qantas is known as that top tier international carrier throughout the world, and the bottom line remains customer satisfaction and a positive flight experience.

Qantas’ product has remained the same since their inception, the flight experience. It boils down to the selling of seats on an airplane in most cases, as it should. Qantas has the same result in mind, selling seats, yet tackles the problems in different ways. One example would be their airplanes and the products to whom they are very specifically marketed. Instead of marketing the airline directly, Qantas has marketed the experience and considers each paying customer’s price point. They have accomplished this through a multi-carrier plan, meaning two separate airlines providing domestic services at different price points. According to CEO, Alan Joyce, “The Qantas Group’s main business is the transportation of customers using two complementary airline brands – Qantas and Jetstar. We have built a reputation for excellence in safety, operational reliability, engineering and maintenance, and customer service.” Qantas Domestic and JetStar are both airlines operating domestic services in Australia and are both owned by Qantas. JetStar offers a no-frills approach to travel and offers significantly lower prices to these locations. Qantas Domestic however, offers the traditional upscale full service flight experience that they are known for to the same destinations at a higher price. This has enable the customer to choose either cost over services or vice versa. This marketing method still addresses the product, which is selling seats, yet provides the customer with options based on their budgets and needs.

Qantas international’s product marketing is handled slightly different. The product here is still the selling of the seat, but when the Qantas method is applied, things change. Again, it is the overall experience that is the focus for this airline. Qantas’ fleet choice is number one on the marketing list, with ships like the Boeing 747-800 and the Airbus A-380. People travel and choose destinations, just to fly on these machines, according to Qantas leadership. Comfort and ease of travel are essential to Qantas. Wider seats and inflight entertainment along with more non-stop international destinations than any other airline make their product more enticing to travelers. Qantas relies heavily on the established “name and reputation” of their airline for repeat customers. Brand recognition and loyalty maintain their market share bring in additional customers over time. Convenience and ease of travel are the standards established for the international traveler by Qantas. This unmatched service and available destinations set them apart from the other carriers.

The second “P’ in this marketing discussion must be price. The cost of a ticket is the key to this business. Priced too high, customers will not fly. Priced too low, the airline cannot sustain operations. Most fares charged by Qantas are determined by the market, and the market fluctuates. Qantas additionally determines their price points based on what other airlines are charging. This pricing strategy keeps Qantas competitive and in-line with the market shares. For their domestic/international no frills airline brand, Jetstar, Qantas has employed a price penetration model which offers the lowest possible price for every flight. Qantas International and Domestic also offers a full fare prices which offers customers flexibility. This flexibility for paying full fare allows the customers to change, modify, and/or cancel their reservation at no additional costs. This incentive for the business traveler is an incentive most will not overlook. The multiple pricing methods used by Qantas offer a wide range of options for customers through both their domestic and international brands. One additional option employed by Qantas is a cost margin method, where the price set for fare is figured by the cost of the conducting the flight with a full complement and an additional add-on strictly determined as profit.

For the 3 rd “P” in this discussion, Promotion, is an essential part of any business. Word of mouth may have been sufficient 80 years ago, but in today’s day and age it is simply not enough. With technological advances, internet availability, and mass media, exposure to advertising is plentiful. Qantas currently has three major marketing campaigns underway, mostly limited to the Australian region. Their current “Welcome Home” campaign is aimed at domestic travel and bringing people closer together using the Jetstar brand. This campaign has been hugely successful and is expected to continue through the summer 2017. Additional promotions, including web advertising and search promotions are also used by Qantas. This being fees are paid to search engine facilitator ensuring the Qantas Brand is located first on searches and adds are associated in side-bar advertising on web pages. Since the advent of social media, Qantas has established accounts on all of the most popular platforms like Twitter and Facebook to keep their customers informed and feeling as they are part of the team. Along with traditional advertising such as newspapers, magazines, radio, and television, Qantas has embraced the handheld generation. They also announce changes and improvements through the social media outlets. On February 23 rd , Qantas Tweeted “Qantas has revealed its next generation Premium Economy seat, which will debut on the airline’s fleet of Boeing 787-800 Dreamliner’s from October. Wider and with more functional space overall, the new seat has a unique recline motion that provides a class-leading level of comfort.” This type of advertisement reaches each subscriber instantly and allows for real time feedback from its customers.

The final “P” in the puzzle is place. In the Qantas story, the place is arguably the most important and the roots to its success. The place can mean several things, such as the place it all started, the place where flights originate, and lastly the place where flights go. These places are equally important. Qantas is a world leader in International Travel as well as Australian first and largest Domestic provider through the Qantas and JetStar. JetStar also provides a low cost International option for customers on a budget. The Qantas brand is truly global and amongst few airlines of such scale and worldwide influence. Qantas’ international routes cover the globe and offer services to destinations including Dubai and the Middle East, Europe, South Africa, South America, Asia, and North America. Qantas conducts business all over the world and code shares a portion of the business, except in Australia.

This concludes the four “P’s” of marketing and how Qantas Airline applies the principles needed to be successful. The Qantas product is top tier, the prices are competitive, the promotions are realistic, relevant, and current, and the places speak for themselves. Qantas is known for transforming their fleet and business model to keep ahead of the industry pace and be that trend setter they have always been.

International Operations

Qantas is considered one of the world’s top tier international air carriers. They have perfected international operations out of necessity due to the isolated location. Qantas does provide domestic services throughout the Australian continent, however, the main source of revenue and the bulk of their operations are geared towards providing the world class flying experience their customers have become accustomed to. Qantas’ base of operations is Sydney, Australia and they have been servicing international destinations since pre-WWI.

Their current fleet for their primary international long haul flights consists of the two of the world’s premier largest aircraft. The Boeing 747-800 has been in Qantas service since its introduction, as well has the Airbus A-380. The international services provided by Qantas has been recognized and awarded in numerous forums. They were awarded the Best First Class at the 2012 Australian Business Traveler Awards. Additionally, their fleet boasts Cleaner and more efficient than ever before, “burning 17% less fuel per seat than today’s largest jets and producing around 60% less carbon dioxide than the average family car, per passenger kilometer.”

Qantas is one of the world’s most recognized airlines and a founding member of the OneWorld® alliance. It serves almost 80 destinations in 20 countries. As the only Australian airline in any global airline alliance, it offers an extensive domestic network besides serving points in Asia, the South Pacific, Europe, North and South America and Africa. As a participating member in the OneWorld alliance, Qantas customers can reach just about anywhere in the world. The code sharing and affiliations has made Qantas on of the only airline truly capable of sustaining long haul operations on a regularly scheduled basis. With destinations in the U.S., Europe, Asia, and the Middle East, Qantas’ has the global reach. Routes extend from Las Angles to London to Dubai to Sydney. “Qantas code-shares with OneWorld partners American Airlines, British Airways, Finnair, Japan Airlines and LAN, and has additional commercial agreements with Aer Lingus, Air Niugini, Air North, Air Tahiti Nui, Air Vanuatu, Alaska Airlines, Alitalia, Asiana Airlines, Bangkok Airways, China Eastern, China Southern, El Al, Emirates, Fiji Airways, Jet Airways, Jetstar, and Vietnam Airlines”. (OneWorld 2017)

The relationships developed through the OneWorld Alliance has elevated the level of service expected and greatly enhanced the capabilities of Qantas. The benefits of such an alliance has increased sales, filled seats, and ensures more return customers. The level of service for international flights is a tiered system for both models of airplanes flown. Qantas offers four cabin classes on most of its long-haul international flights, including First Class, International Business, International Premium Economy (on flights operated by Boeing 747-400s and Airbus A380s) and International Economy. Frequent flyer programs and the benefits shared amongst alliance partners streamlines the system and enhances customer satisfaction .

Qantas’ primary business is providing the pinnacle of the international flight experience. This is echoed throughout the company and reinforced from the top down. Affiliations are chosen specifically to extend the range and service of the Qantas brand. The code shares, the One World alliance, as well as the Qantas brand are closely monitored by the leadership and Qantas believes in remaining in a transition and transformation phase of their business model, according to the company CEO. They are constantly reevaluating the processes, services, routes, and destinations to remain a world leader. Their fleet is constantly being upgraded to a premier level and operations refined to provide the customer the best possible experience. Without the OneWorld Alliance and the code sharing agreements, Qantas would still provide the long-haul operation, however it would be point to point, most originating the Sydney

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Case Study – Qantas (Operations)

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The History Of Qantas

The Operation of Qantas

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