Business Studies Qantas Case

Study
CHAPTER 4

2. Situational Analysis
Swot Analysis of Qantas
Strengths:
Extensive network / part of the One world alliance
Excellent airport locations and facilities
Globally recognised brand name and logo
Excellent safety record probably the best in the world (not
one death on a Qantas flight)
Operational excellence: Qantas has twice won the
Cumberbatch trophy for engineering excellence.
Weaknesses:
Speculation that British airways will quit its $1.3 billion stake
in Qantas.
Higher labour and other operating costs than its competitors
An ongoing disputes between Qantas management and
militant unions
Opportunities:
For its new international budget brand, Australian Airlines
Taking advantage from the Ansett collapse by hiring new staff,
expanding routes and purchasing / leasing more aircraft
Developing further E-commerce operations
Threats:
Strategies of its main competitors especially Singapore
Airlines and Air New Zealand (international) and Virgin Blue
(domestic)
Increase in government regulations to protect its smaller rivals
Rising fuel costs
Further fall in Australian dollar
Further weakening in the international market / economy
As a result of Ansetts collapse, Qantas is currently in the growth
stage domestically (with increased sales, revenue and market share)
but in the decline stage internationally. In response Qantas has
planned to hire more staff and increase the Qantas fleet by 15% by

long-term leases and purchasing new aircraft. Also by establishing a

discount airline called Australian Airlines.

3. Marketing Objectives
Being a public company listed on the ASX, Qantass main marketing
objective is profit, both in the current and long-term periods. Its goal
is to provide a satisfactory return to shareholders and to generate
enough profit in reserve to fund growth and the gaining of new
aircraft.
Qantass other marketing objectives include the following:

Increased sales of passenger tickets

Increased market share in the airline industry

Growth / new routes, and corporate size as there are cost

advantages in being bigger

Decreased operating costs, especially labour costs.

4. Marketing Strategies
Market Segmentation and Selection of the Target Market
Market segmentation is the process is the process of dividing up the
total range of potential or current into smaller discrete groups to
facilitate analysis and planning. This enables Qantas to:

Better meet the needs of all its customers, to compete more

effectively and to attain financial goals more readily
Better tune the marketing mix to particular groups in the
market, so the product can be refined, prices set, place of
sale determined and promotion better focused for each
market segment. EG: Economy, Business and First Class
travellers.

Qantass market segmentation is complex because each segment

has distinctive and different needs and expectations, such as the
desire for stopovers, the ability to pay fare levels and expectations
in terms of in-flight service and comfort.
Qantas mainly uses behavioural segmentation to select its target
markets. Buyers are distinguished according to trip purpose, for
example: business and leisure / non-business travellers.

However, there are many reasons for travelling either business or

leisure.
The business segment is broken down even further into routine
business (normal point to point business travel), conferences /
seminars and emergency business which reflects passenger needs
and benefits sought.
The leisure segment is broken down into holiday (inclusive of tour
segment, multi-destination touring segment and weekender
segment) and visiting friends a relatives.
Formulating the Marketing Mix: The 4 Ps
(i)

Product

As the airline industry has become much more competitive,

airlines like Qantas have focussed on product planning. Qantas
designs products to attract and hold customers from a particular
market segment and to do so profitably.
The generic products of Qantas are the provisions of a seat
(passenger) or a container (freight).
The passenger side of the product:

Schedulings basic features: time of departure or arrival,

number of stops or direct flights and the aircraft type. In
November 2000 announced that it would spend $4.6 billion
on new planes over a 10 year period including the purchase
of Airbus 380

Qantas enhances its basic product by having the best

connecting airline on a preferred basis with its One World alliance.

Comfort based features include lounges, in-flight meals and

drinks, in-flight entertainment and seat width.

A $300million Total Entertainment in-flight system is currently

being
installed on the Qantas international fleet. On 14th
February 2002, Qantas announced q $50 million lounge upgrade.
Qantas is also installing self serve kiosks from mid 2002 which will
allow customers to cheek in and choose a seat in less than one
minute.

The Qantas Frequent Flyer Scheme (FFS) with more than

2.6 million members and over 100 programme partners is
used by Qantas to retain customers, increase market share
and fill otherwise empty seats. The Qantas FFS also

provides a large database of specific customer information

thereby providing additional valuable direct marketing
opportunities.
Qantas re-launched its programme globally in September 2001
offering a minimum of 1000 points for any flight, the removal of the
five-year expiry period and other benefits. On 12th November Qantas
launched Qantas flight Upgrade that sends the departure times to
frequent flyer customers using mobile phone short text messages.

The freight product is enhanced by Qantass handling efficiency,

routing and frequency.
Qantas freight has recently launched two new Internet tracking
facilities: follow me tracking that enables customers to receive
regular status updates on their freight shipments. Secondly City to
City tracking Which enables customers to receive automatic status
updates on a pre-defined group of airway bills nominated by the
user.

Other aspects of the product for Qantas include:

-

Intangible benefits such as its history and safety

record; and
Brand name: Qantas is one of Australias leading
brand names and it is a powerful marketing tool. The
brand name, kangaroo symbol and logo, Spirit of
Australia, clearly identifying and distinguishes it
from its competitors.

Qantas is increasingly developing the whole airline as a corporate

brand along with a corporate personality.

(ii) Price
Price is the crucial element in any marketing plan. Price is the
variable, which can be changed quickly and as often as required. In
the past prices were regulated by the International Air Transport
Association (IATA) and two Airlines Agreement which had a formula
for all fares based on flag fall and distance.
Price methods used by Qantas include a combination of:

Cost plus margin: Qantas determines the cost of production

and then adds a margin for profit.

Market: the market, where the demand is matched with

supply, determines most fares at Qantas.

Competition based: watch what other airlines such as

Virgin Blue are doing.
Since the Ansett collapse, Qantas domestic flights have
been influenced by a lack of competition. They are not
forced to be competitive as earlier in 2001 when Ansett
was the second carrier along with Impulse. Qantas will face
more competition now that Virgin Blue and Patrick
Corporation have merged. Qantas still face serious
competition on its international routes. Pricing strategies
employed by Qantas include:

Price penetration: Qantas will use such a strategy for its

new low cost Asian Airline to be launched this year as
Australian Airlines. Qantas will initially charge the
lowest possible price for this service.

Full Fares: for those waiting flexibility (important for

business travellers) as full fares can be refunded and
changed.

Promotional Fares: these are not advertised as a

discount on the full fare i.e. 20% off, but are quoted as
a price. They are usually offered in the economy cabin
at times of subdued demand of to match competitors.

Other promotional fares can be conditional such as:

Minimum stay away: minimum stay of seven days

and the Saturday night away rule. These are
unattractive to business travellers who want to stay
away during the weekdays only

Departure time limitations: defines the period of

departure, which allows Qantas to offer low cost
fares outside peak demand periods.

Packages are sold as part of an inclusive holiday,

which includes hotels, meals and transfers.

Loss leading: Qantas in the past has entered new routes

and introduced low fares to gain initial market share.

(iii) Promotion
Promotion is the means by which an organization communicates its
products and its image to the customer.

Promotional strategies include:

a) Advertising: Qantas uses advertising agencies to create media
advertisements in television, radio, magazines, newspapers,
brochures, posters in travel agencies and billboards. Qantas is
using less blanket advertising and more direct marketing,
which is cheaper and very targeted especially to corporations.
The disadvantage of media (blanket) advertisements is that
many people receiving the message are not the target market
unless that advertising is purely for image or brand
recognition.
b) Sales promotions particularly in periods of subdued demand
c) Personal selling based on sales representatives who sell
directly to travel agents, businesses and government
departments.
d) Publicity to enhance the image of Qantas includes new
releases, feature articles, press conferences and interviews.
They also sponsor a number of sports such as rugby union and
swimming and netball. They also sponsor environmental
causes such as clean up Australia day, and charities such as
CARE Australia, Star Light Childrens Fund and World vision,
and cultural activities like the Art Gallery of NSW.

(iv) Place
The product must be easy to border the purchase, no matter how
good the product, the selling will be controlled. Distribution to end
customers is achieved by Qantas in two main ways, direct and
indirect:
a) Direct (sale of products direct to the customer)

Direct sales via its own retail outlets. Qantas has

a network of wholly owned Qantas Travel Centres called
Qantas Holidays (the largest travel wholesaler in Australia).

Telephone sales centres;

Airport ticket sales; and

The Internet is emerging as a significant (LOW

COST) channel for promotional fares.
b) Indirect (using intermediaries)