Running head: QANTAS GLOBE MARKET ANALYSIS

Qantas globe market analysis

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QANTAS GLOBE MARKET ANALYSIS

Qantas globe market analysis

Qantas Airline Company has managed to develop its brand in Australia since its inception
in the year 1920. Currently, it stands as the largest domestic and international airline in the
country and even competes with other global airlines. The company operates two airline brands
that complement each other namely; Jetstar and Qantas. Other subsidiary airline businesses
under Qantas include Qantas Frequent Flyer as well as Qantas Freight Enterprises. The combined
Qantas and Jetstar domestic market share is 65% and the company is trying to secure a similar
market share in the global market though completion is very stiff. The company enjoys a large
network alliance with its ports strategically located to suit the customers preference. This
prestigious company is ranked among the 10 most profitable airlines in the world and this
ranking implies it has the capability to compete globally. It travels to more than 180 destinations
worldwide and covers 44 countries thereby establishing it as a competitor in the global markets
(Aulenbach, 2007, P.4).
The performance of the airline company raises concern on whether its majority-owned
status limits its capabilities to compete globally. Given that it is a global brand, there is a need to
ensure that the marketing mix and strategy used by the company is effective to enable it compete
globally. Qantas is affected by other macro-environmental factors which, if not take seriously,
can impair its ability to compete effectively with other international companies. The microenvironment of the airline consists of major players like customers who are the core focus of the
airline, employees, shareholders who control its operations, and the media. These players have
influence on the operations or profitability of the business therefore keen attention is paid to
them. The micro-environment factors are affected by macro-environmental factors and this

QANTAS GLOBE MARKET ANALYSIS

subsequently influence the performance of the company in the global market (Aulenbach, 2007,
P.4).
Qantas marketing mix
The products offered by the airline company are tailored to meet needs of customers and
also to suppress products of its rivals. Products like Frequent Flyer Scheme, Qantas Club
Services, and City Flyer Express services are targeted to offer services to corporate businesses.
The company also targets travelers who want to make private or personal trips through high
quality and premium airline services. There are low-cost flights offered by the airline and all
these products intend to increase the market share for the airline (Forsyth, 2005, p.21). With
respect to price, the airline uses various variables to determine the fare charged on the customers.
One of the key factors that influences the prices charged is competition whereby the airline
company considers prices charged by rival airlines. These market prices are also determined by
the demand supply forces therefore fluctuation of prices is sometimes inevitable. Qantas also
uses the cost plus margin approach whereby they calculate the production costs and then add a
profit margin onto the established costs (Forsyth, 2005, p.21). Promotion strategy of the
company involves advertisement through agencies like magazines, television, billboards,
newspapers, posters and radios. Personal selling is conducted through the sale representatives
who sell directly to businesses, travel agents as well as government departments. Publicity is also
achieved through press conferences, news releases and they also sponsor sporting events such as
rugby, swimming and netball (Somers et al, 2011, P.303).Placement of the companys services is
done through direct and indirect channels which assist in the distribution process. The direct
selling points are Qantas Holidays travel centers which sale tickets directly to customers while
the company has also bought other outlets including Jetabout, Viva and Jetset to facilitate

QANTAS GLOBE MARKET ANALYSIS

distribution. While selecting the sales agents, Qantas only considers the intermediaries with good
financial strength, distribution skills as well as market reputation. Further, the company uses the
internet and call centers to facilitate ticket sales especially for customers who are far (Forsyth,
2005, p.21).
Macro-environment factors affecting Qantas competitiveness
Australia is a tourist destination and Qantas has played a major role in linking tourists
from various areas. This is one of the factors that have motivated the airline to grow into the
international business and even enjoy brand loyalty among its customers (Somers et al, 2011,
P.303). One of the uncontrollable factors that have influenced business for the global airline
company is fluctuations of exchange rates. Exchange rates influence the behavior of consumers.
Fluctuation of the Australian dollar currency in relation to the US dollar, the Euro or the UK
pound affects the potential of Qantas to compete with other global companies. This is especially
witnessed in international flights because it is in these international flights where different
currencies are used. Customers are part of the micro-environment and exchange rate fluctuation
influence their travel demands. For instance, appreciation of the Australian dollar against foreign
currencies may imply that travelers to foreign destinations would increase while depreciation
would reverse the trend. Qantas does not have any control over the behavior of the exchange
rates and therefore if such rates become unfavorable then the revenues for the company also
become affected (Qantas, 2006, p. 7). The fluctuation always has a short-term effect on Qantas
earnings and it has to create ways of absorbing costs so that it is able to maintain influx of
customers. This struggle may make the company to become unsuitable in competing with other
global companies like Fly Emirates and Virgin Australia which operate in the same markets.

QANTAS GLOBE MARKET ANALYSIS

Another macro-environment factor that affects the performance of Qantas is the change
in aviation policy within the airline industry. The continuous change in aviation policies has
made Qantas to experience difficulties in operations especially in the domestic markets. For
instance, the rival competitor Virgin Australia airline has received favorable considerations from
the government that reduces its risks of facing losses. The latter is owned by three governmentbacked airlines that form the majority owners and the aviation policy still allows it bilateral
flying rights. Virgin Australia has foreign shareholders that inject financial resources even if
Virgin Australia reports business losses. This gives the rival undue advantage over Qantas and
even creates pressure on the airline to cut costs and compete effectively. These policies that favor
Virgin Australia gives the airline ability to achieve growth even as it experiences loses while at
the same time Qantas strives to absorb costs and limit the risks of getting losses. Growth within
Qantas is compromised because the company struggles to achieve profits and create value for the
shareholders who are part of the micro-environment of the company. Such policies create uneven
opportunities for all the airlines and forces Qantas to focus on matching the local competition
instead of concentrating to expand its share in the international market (Media Release, 2014,
p.1). Another instance when the company experienced inefficiency due to impact of aviation
policy was in the year 2011 when the Transport Workers Union, the Australian Licensed
Engineers Association and the Australian International Pilots Association carried out an
industrial action against the company and grounded flights of the company. The company lost
revenues and its operations were stalled while it struggled to redeem its brand by carrying out
recovery initiatives (Media Release, 2012, p.4).
Economic health is another factor that impacts on the performance of Qantas business.
The well-being of both Australian economy as well as other foreign economies has direct

QANTAS GLOBE MARKET ANALYSIS

implications on revenues earned by the company. When the incomes of internal citizens increase,
this results to a subsequent increase in the local travels because the people have more disposable
incomes. Similarly, the performance of foreign economies has direct impact on Qantas because
tourists make more visits when they have favorable income.
The economic crisis in Europe had an impact on the Qantas revenue during the year 2011
when the profit reduced by $215 million compared to the previous year (Media Release, 2012,
p.4). The company depends on the revenue and profits to pay salaries of employees and when the
revenues reduce then they pay the employees remuneration out of losses. The performance of
economies is a factor that Qantas cannot influence but it has serious effect on the performance of
the company. When the economy deteriorates, the company has to focus on how it can reduce
resource expenditure while aiming to increase profits as well (Czinkota & Ronkainen, 2013,
p.579). Sometimes, the airline is forced to withdraw from some international airlines routes

because the economic health of such routes cannot sustain business. For instance, Qantas had to
withdraw from the Bangkok-London and Hong Kong- London routes because they had become
uneconomical (Qantas, 2006, p.5). Economic health also has effect on the internal employees of
the company because they start to demand higher wages which Qantas cannot sustain. It
therefore forces the company to lay off certain workers or eliminate certain units in order to be
able to reduce costs and sustain operations.
Global fuel prices also have very significant effect on the performance of Qantas
businesses. Even though the company emulates rivals companies in pricing flights, most of the
times it uses the fuel prices to fix prices for its various destinations. Global fuel prices do not
affect individual companies but rather the whole airline industry and the companies only differ in
the manner they cushion customers against additional costs. Qantas is sometimes forced to fix

QANTAS GLOBE MARKET ANALYSIS

fare prices above the competitors thereby driving away customers who select travel options that
cheaper. Hedging is sometimes an option to maintain business but at times such hedging is overburdened because it consumes profits of shareholders (Media Release, 2014, p.5). This is the
incidence which occurred in the year 2013 when the increase in fuel costs influenced Qantas to
increase prices way above the competitors like Emirates who were surcharging such costs on the
customers. Qantas increased prices but could not maintain such price increase because it was
losing customers to less expensive rivals and therefore it cut down the fare prices by 30%
(OSullivan, 2013). If Qantas does not create effective strategies that can enable them match fare
costs with those of the competitors, they are likely to lose market share to competitors like Virgin
Australia which receives regular extra-funding from foreign shareholders.
Competition is another macro-environmental factor that has relevant influence on Qantas.
The airline industry in Australia faces competition both locally and internationally. The common
competitors for Qantas include Singapore Airlines, Emirates and Virgin Australia which also
have similar capabilities to compete globally. Some of these competing airlines are more favored
by the aviation policies while some have a strong hedging capacity. Qantas does not have the
ability to manage these policies that favor the competitors and therefore they have to play along
without losing their competitive advantage. Qantas CEO acknowledges that the competitor
capacity in Australia has increased by 46% since the year 2009 while the global capacity has
increased by 21% (Media Release, 2014, p. 1). This continuous increase in airline companies
creates a very competitive environment that threatens growth of existing airline companies like
Qantas. Some of these competing companies specialize only in specific segments of the airline
industry thereby reducing the profit potential for Qantas in such segments. It also gives the

QANTAS GLOBE MARKET ANALYSIS

customers a variety of affordable choices to select from thereby weakening the companys brand
loyalty which it has established since its inception.
Additionally, natural disasters also reduce Qantas ability to compete with other global
companies in the airline business. Occurrences like earthquakes, tsunamis and floods limit
operations of the airlines in the respective destinations where they occur. This also affects the
revenue earnings in such areas because operations are grounded and customers from such areas
opt not to make travels. Reduction in revenues implies that profits are also not realized by the
company hence investments of the company get wasted. This also reduces the companys ability
to compete effectively in the global markets because its earnings fluctuate adversely while those
of competitors in other areas flourish. This incidence occurred in the year 2011 when Qantas
experienced a loss of AUS $ 140 million due to cyclones and flooding in Queensland. This loss
was also attributed to the tsunamis and earthquakes in other foreign destinations like Japan
(Malkin, 2011).
Conclusion
The financial sustainability of Qantas has been questionable in the recent past and this
has raised concerns as to whether it should be majority-owned Australian Company. Virgin
Australia, which is a close competitor to Qantas, is also a majority-owned company though it is
owned by foreign shareholders. Qantas offers airline services to the Australian market and also
participates as an international airline company. This company is affected by various macroenvironmental factors like fluctuation of exchange rates, aviation policies, economic stability,
global fuel prices, existence of industry competitors and occurrence of natural disasters. These
factors affect the marketing mix strategies employed by the company thereby reducing its ability

QANTAS GLOBE MARKET ANALYSIS

to compete globally. This discussion has outlined how each of these macro-environmental factors
affect the micro-environmental factors and the ability of the company to compete effectively.

References
Aulenbach, S. (2007). Business deconstructed-Qantas Airways Limited. Munich, GRIN Verlag

QANTAS GLOBE MARKET ANALYSIS

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Somers, G., Cain, J., & Jeffery, M. (2011). Essential VCE business management. Units 1 and 2
Units 1 and 2. Cambridge, Cambridge University Press.
Forsyth, P. (2005). Competition versus predation in aviation markets: a survey of experience in
North America, Europe and Australia. Burlington, Ashgate.
Qantas, (2006). Qantas Airways Limited. Inquiry into Australias Service Industry, 1-18
OSullivan, M. (2013). Qantas to raise fares blaming higher fuel costs and fall in Aussie dollar.
Retrieved from http://www.smh.com.au/business/qantas-to-raise-fares-blaming-higherfuel-costs-and-fall-in-aussie-dollar-20130730-2qxb4.html
Media Release, (2014). Qantas group financial result. Retrieved from
http://www.qantas.com.au/infodetail/about/investors/2013HYMediaRelease.pdf
Media Release, (2012). Qantas announces profit results, response to economic conditions.
Retrieved from http://www.afr.com/rw/2009-2014/AFR/2012/02/15/Photos/db4897385830-11e1-bac6-c3e836982fa9_QAN_01268976.pdf
Malkin, B. (2011). Qantas cuts routes and staff after natural disasters. Retrieved from
http://www.telegraph.co.uk/finance/newsbysector/transport/8415521/Qantas-cuts-routesand-staff-after-natural-disasters.html
Czinkota, M. R., & Ronkainen, I. A. (2013). International marketing. Mason, OH,
South-Western Cengage Learning.