St Leonard's College



Unit Four – Outcome OneQantas Airways Ltd Founded in the Queensland outback in 1920, Qantas has grown to be Australia's largest domestic and international airline. Registered originally as the Queensland and Northern Territory Aerial Services Limited (QANTAS), its main business is the transportation of customers using two complementary airline brands - Qantas and Jetstar. Qantas’ airline brands operate regional, domestic and international services and employs over 30,000 people with approximately 93 per cent of them based within Australia.Qantas vision statement:To be a great airline that champion’s the Spirit of Australia’ and are:? Together;? Genuine;? Inventive;? Optimistic; and? ExperiencedQantas mission statement:We are Australia's leading premium airline and we are dedicated to being the best. We aim to meet your expectations every time you fly and so we continue to invest in our business and will always strive to provide you with an exceptional level of service.'History – The Qantas StoryThe Qantas story is inextricably linked with the development of civil aviation in Australia. It begins with fragile biplanes carrying one or two passengers in open cockpits and progresses to the new Airbus A380s flying some 450 people half way around the world in a day.But, it is a story of human endeavor, not just machines. A few determined individuals overcame formidable obstacles to establish the Queensland and Northern Territory Aerial Services Ltd (QANTAS). Supported by committed staff and loyal customers, the airline persevered through war and peace to serve the nation and build an enterprise. The Qantas story is about the people who have created its exciting and productive history - its staff, its customers and the excellence of its business partners and key suppliers...Today, Qantas is widely regarded as the world's leading long distance airline and one of the strongest brands in Australia. Qantas continues to provide outstanding service to its customers and is at the forefront of the international civil aviation industry.The future holds many challenges for Qantas - maintaining safe operations and world class product standards while building a viable and competitive position long term for the airline.Read more here: Link to Key Knowledge in Unit 4: Area of Study 1 - Theory of ChangeKey performance indicators as sources of data to analyse the performance of businesses, including percentage of market share, net profit figures, rate of productivity growth, number of sales, rates of staff absenteeism, level of staff turnover, level of wastage, number of customer complaints and number of workplace accidentsFinancial PerformanceRevenue and Net Profit FiguresIn 2017/18 Qantas reported an underlying profit before tax of $1.6bn (up from $1.401bn in 2016/17) – the highest performance in its 98-year history.Key financial performance indicators for Qantas in 2018 are summarised below. Of note, the company’s Domestic services were the two most profitable airlines in the Australian market. Revenue for its domestic airline services has grown by 35% in the past two years. While revenue from international airline services has decreased by 10% over the past two years, it has increased by $72M over the past 12 months.201620172018ChangeRevenue (millions)$16,200$16,057$17,0605.3% Qantas Domestic (millions)$567$645$76835% Qantas International (millions)$445$327$399- 10% Jetstar Group (millions)$452$417$4612%Net profit (millions)$1,029$853$980- 4.7%Passengers carried (000)52,68153,65955,2734.9%Source: 2018 Qantas Annual ReportShare PriceQantas’ share price (see chart below) has experienced a steady increase over the past 5 years, from $1.27 per share in 2013 to $5.83 per share as of 10 November 2018 (a growth of more than 450%). -63518732500Percentage of Market Share61 international airlines operated schedules to/from Australia as at February 2018. International flight traffic (i.e. the number of people travelling to or from Australia) for the year ended Dec 2017 was 39,616,000 passengers (up 5.3% from 2016). Domestically, 40,619,162 passengers travelled throughout 2017 (also up 5% from 2016).International traffic market share by carrier in 2017:Read more here: PerformanceCustomer Satisfaction Rating (September 2017)-4233358314200New research shows Qantas Airlines is Australia’s most satisfying domestic airline with a customer satisfaction rating of 83.2% enough to beat key rivals Virgin Australia on 77.6% and stablemate Qantaslink on 72.7%.Investing for future performanceThese strong financial foundations mean Qantas can continue investing in the future. The primary focus for Qantas outlined in its 2017 and 2018 Annual Reports is to improve the experience for its customers, as well as to continue to grow the return on investment for its shareholders.Some initiatives Qantas is looking to roll out over the coming years in order to achieve these objectives include:Upgrading its Airbus A380 fleetThe Airbus A380 fleet will receive a major upgrade, with plans to install next generation seats from 2019 onwards. This refit will also improve the overall economics of the aircraft through smarter use of space and an overall increase in premium seating.Introducing Wi-Fi capabilities in its domestic aircraftQantas is accelerating the rollout of inflight Wi-Fi across our domestic A330 and 737 aircraft. This follows a successful trial that showed very positive customer feedback and potential productivity gains in flight planning and disruption management.Qantas is partnering with Foxtel, Netflix and Spotify to enhance its catalogue of entertainment, with customers able to access these usually paid subscription services for free* during flight.* Foxtel only, Netflix and Spotify require paid subscriptions beyond a 30-day free trialWelcoming the DreamlinerQantas are welcoming the game-changing Dreamliner into Qantas International — an aircraft that will open up unique routes, such as Perth–London direct, and deliver significantly lower operating costs.right5588000Project SunriseProject Sunrise is a feasibility study conducted by Qantas in conjunction with Boeing and Airbus. By 2022 Qantas hopes to have established a direct route from the East Coast of Australia to London and New York, while cutting journey times by up to four hours. Introducing Passport-free TechnologyIn November 2018, in partnership with technology provider SITA () Qantas commenced a trial of new state-of-the-art technology at Brisbane airport, which allows customers to upload their passport to their mobile phone.“Customers have told us that they want to move seamlessly through the airport without having to present travel documents at every stage of their airport experience,”?Qantas Head of Product Strategy and Development, Phil Capps said.“WHAT’S UNIQUE ABOUT THIS TECHNOLOGY IS IT ALLOWS CUSTOMERS TO SECURELY STORE THEIR PASSPORT DETAILS ON THEIR MOBILE PHONE WHICH IS MATCHED TO THEIR FACE VIA CAMERAS WHILE MOVING THROUGH THE AIRPORT.”Key principles of the Forcefield Analysis theory (Lewin)According to Lewin’s theory, there are two types of forces which coexist in business change: Driving forces (which push the change to occur); andRestraining forces (which hinder the change process and stop it from occurring successfully).right28786700By identifying these forces, business managers can assess the situation and develop a plan of action to enable change to occur successfully.For change to be successful, driving forces need to overcome restraining forces. If restraining forces are greater than or equal to driving forces, the change will not occur and the business will maintain its ‘status quo’.By conducting a forcefield analysis, businesses can:Weigh up the pros and cons of a change to determine whether it is worthwhile;Identify driving forces and implement strategies so strengthen them;Identify restraining forces and plan/ implement strategies to minimise their influence (or eliminate them).Driving forces for change in business, including managers, employees, competitors, legislation, pursuit of profit, reduction of costs, globalisation, technology, innovation and societal attitudesDriving forces are those that initiate change in a business and support/ encourage a business to move towards its set objectives.23743235720700Driving forces can include:ManagersEmployeesCompetitorsLegislationPursuit of profitReduction of costsGlobalisationTechnology innovationSocial attitudesDriving forces applied to QantasDriving forces at QantasManagersSenior management are responsible for setting the strategic vision and direction of the business.Qantas senior management have announced plans to roll out expanded Boeing 787 aircraft fleet by the end of 2020 and establish new long-haul routes (East Coast Australia to London and New York) to differentiate itself from rivals.Management have decided to invest in the Qantas Group Pilot Academy to develop its future workforce. Industry figures show that global aviation will need up to 790,000 ore pilots by 2030.Management implementing an ongoing ‘transformation program’ which has delivered $463 million in benefits in 2017-18 and is expected to deliver a further $400 million in 2019. This was in response to increasing cost pressures (e.g. increasing fuel costs).23412453683000Competitors Increasing competition in the domestic airline industry from rivals such as Virgin have pressured Qantas to compete more on cost and reduce its CASK (cost per available seat kilometer).Increasing competition from international rivals – international airlines now account for 25% of Australian ‘traffic’.Virgin Airlines took control of Tiger Airways in 2013-14, and plans to expand Tiger’s fleet of aircraft from 11 to 35 from 2018 onwards.Pursuit of profitAs with most companies, profit and shareholder returns is a key driver for Qantas management. Every strategic and operational decision made is done so with the pursuit of profit in mind.Qantas made a full-year net profit of $980 million in the 2017-18 financial year (up from $852 million in the previous period).The growth in net profits was a result of adding an additional $1bn in revenue (up to $17.06bn) and comes despite rising jet fuel prices.Read more here: Technological innovationRapidly evolving technology – e.g. Wi-Fi, self-service check-ins, is becoming increasingly available to airlines, compelling them to adopt these technologies or risk falling behind the competition.Social attitudesSocial attitudes in relation to the environment and sustainability have driven Qantas to ‘act responsibly’. 80 per cent of Qantas Frequent Flyers say they expect businesses to combat environmental issues.Qantas has 800 staff across its network engaged in the ‘Qantas Group Green Team’ focused on driving improvements in:fuel efficiency (target is 1.5% average annual improvement in fuel efficiency each year to 2020). As of 2018 Qantas has improved fuel efficiency by 7.5% compared to 2009 levels.electricity and water consumption (target is 35% and 20% reduction in electricity and water use respectively). As of 2018 Qantas has achieved a 25.1% and 11.6% reduction in these areas.waste-to-landfill (target is 30% reduction in waste-to-landfill by 2020). As of 2018 Qantas has achieved a 25.7% reduction in its waste-to-landfill compared to 2009 levels.fuel consumption – in 2018 Qantas was ranked as the worst major airline for fuel efficiency by the International Council on Clean Transportation (ICCT), using 64% more fuel per passenger-kilometer than the top ranked Hainan (China) and ANA (Japan). For reference, Virgin Australia ranked 6th in the study, 6% below the top-ranked airlines. This is driving Qantas to invest in long-haul flight technology and biofuels to lessen its environmental impact.-18415301752000-317518415000Read more here: and Restraining forces in businesses, including managers, employees, time, organisational inertia, legislation and financial considerationsRestraining forces are those forces that work against the change, creating resistance which stops the change (i.e. restrains it), preventing the business from moving towards its set objectives.Restraining forces can include:ManagersEmployeesTimeOrganisational inertiaLegislationFinancial considerationsRestraining forces at QantasTimeRapid pace of change in global airline industry and technological advancements – constant pressure to evolve means the airline cannot take on every opportunity or advancement.Research and development of new technology and aircraft, and long-haul routes is a long-term strategy for Qantas. The benefits of this research and investment might not be realised for a number of years, if not a decade. This can restrain the business from pushing ahead with these innovations due to constant pressure from shareholders for financial returns.Financial considerationsIncreasing fuel costs (up to $4bn annually) make it difficult to cut operational costs and compete with lower-cost competitors (Virgin, Tiger, etc.).The cost of replacing ageing plans in its 285 aircraft fleet (average age of 10 years, which is high for the industry compared to competitors such as Singapore Airlines) is very expensive.The cost of a Dreamliner is $281 million. Qantas has placed an order of four Dreamliners to fly from Melbourne and Sydney to Los Angeles, at a cost of AU$2.2bn.Employees Qantas will need to amend its enterprise bargaining agreement with pilots before Project Sunrise can be realised. Pilots may restrain against long-haul flights upwards of 20 hours due to concerns over fatigue, safety and work-life balance.Rumours continue to persist late in 2018 that Qantas will be looking to implement 2500 redundancies (on top of the 5000 redundancies implemented in 2014 to save $5bn).LegislationLong-haul flights (i.e. from Sydney or Melbourne to London) are a key focus for Qantas, however if these routes are to become a reality (the technology is predicted to be ready by 2022), aviation safety regulators will need to adjust current rules and regulations around fatigue management.The two key approaches, lower cost and differentiation, to strategic management by Porter’s Generic Strategies (1985).Competitive advantage refers a business acquiring or developing an attribute or combination of attributes that allow it to outperform its competitors in the same market/industry, by providing superior value from its goods and/or services than its rivals based on cost, quality, or speed of delivery.Being the most efficient producer, where the business can reduce costs and at the same time charge similar prices to competitors; orBeing the most efficient producer, where the business can increase market share through charging lower prices.Differentiation strategy:Lower cost strategy:For a business using the generic strategy of ‘lower cost’ to develop a competitive advantage, the aim is to become the lowest-cost producer in the market and gain a competitive advantage through the reduction in operating (i.e. production or delivery) costs.right117475Costs can be lowered through:Achieving economies of scale (e.g. bulk buying supplies)Offering high-volume, standardised goods (e.g. IKEA)Introducing automation and other technologiesImplementing waste minimisation strategiesPurchasing lower-cost materialsGlobally sourcing materials, or using overseas manufactureDownsizingIn the lower cost approach, a competitive advantage comes from being able to maximise profits by:070697For a business using the generic strategy of ‘differentiation’, the aim is to make its goods/services unique to those offered by competitors by developing attributes that consumers finds valuable/appealing. Differentiation can be achieved through:Investing in Research & Development, allowing the business to create new, unique, innovative good/service offeringsBeing a ‘good corporate citizen’ (i.e. CSR)Specialising in a specific area which is expert and uniqueEnhancing quality of the good/service (e.g. quality of output, enhanced customer experience)Effective marketing (i.e. branding and advertising).In the differentiation approach, a competitive advantage comes from maximising profits by:Increasing market share by selling a good/service of value to customers and unique in the market; orBeing able to charge a higher price (i.e. increase profit margins) for goods/services which are unique (i.e. very difficult to substitute your good/service).Porter’s Generic Strategies Applied to QantasEvidence of lower costTargeting $400 million in annual savings over the next 3 years (i.e. $1.2bn) by adopting new technology which will make it more efficient both on the ground and in the air.Replacing older aircraft (Boeing 747) with new, more advanced Boeing 787 which is more fuel efficient – 20% saving in fuel consumption compared to the 747.Increasing its aircraft utilisation so that its planes are less ‘inactive’.5,067 reduction in staff in 2014-15 and a further 1500 jobs cut from its Head Office in 2017, and 1000 jobs in 2018 via voluntary redundancy programs.Introducing ‘next gen check-ins’.Negotiating better contracts with suppliers.Assessing and mapping aircraft engineering processes to make them more lean/efficient.Reduce cost per available seat kilometer (CASK) – was 18% higher than Virgin 3 years ago and is now only 3% higher.Utilising smaller aircraft which are more flexible – less seats to fill, therefore can add additional frequency of flights and enter smaller markets.Read more here: Evidence of differentiationTrialing passport-free check-in, allowing customers the unique experience of being able to upload their passport to their mobile phone and utilise facial recognition technology to match to their face as they move through the airport. This eliminates the need for long queues at check-in, improving the overall customer experience.Project Sunrise – conducting a feasibility study into new aircraft technology to establish the capacity for a direct route from the East Coast of Australia to London and New York, while cutting journey times by up to four hours. Cabin interiors will include bunk beds, child care facilities and even a gym.Introducing in-flight Wi-Fi capability on domestic flights to improve the customer’s in-flight experience. Qantas aims to roll out Wi-Fi technology to its international flights in 2019. While this technology is widely used throughout America and Europe, it is relatively new to Australian airlines. Qantas has also partnered with Foxtel, Spotify and Netflix to expand its catalogue of entertainment available to customers; some content of which is provided free during flight.4127500000Branding – Qantas brands itself as ‘the spirit of Australia’. It is known as ‘The Flying Kangaroo’ and uses these branding techniques to symbolise its strong Australian heritage and history.Loyalty program – Qantas established its Qantas Frequent Flyer program in 1987 and continues to reward members with benefits, rewards, etc. that enhance the quality of its service. Qantas also offers its Business Rewards program for business travellers, and has an exclusive ‘Chairman’s Lounge’ for ‘notable business heads’Innovation – Qantas is investing heavily in next-generation aircraft which will allow it to offer unique, long-haul flight destinations (e.g. Perth to London) not offered by other carriers. It is also investing heavily in Research and Development to identify new and innovative products and services (e.g. invisible check-in) ................
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