Introduction

The Qantas airline is the oldest airline in the Western world and was founded in 1920 as
Queensland and Northern Territory Aerial Services Ltd. Qantas Airways Limited, Australian
(from which the name Qantas was derived). Taxi services and leisure flights became his first
operations. That being said, its scheduled air services were expanded to Asia, Australia,
America, Europe and New Zealand at the beginning of the 21st century. The offices of the airline
are in Sydney. The first scheduled service among Charleville and Cloncurry started in 1922 with
the addition of other local routes in the following years. In 1934, Qantas and the Imperial
Airways (the later BOAC) of England founded Qantas Empire Airways Limited, operating from
Australia to England in Brisbane-Singapore. In 1947 the government of the Australian
Commonwealth acquired Qantas and named the Australian flag carrier. In the same year, Qantas
started to operate regularly on the "Kangaroo Path" via London. It flew to all continents in a
decade. In 1967, the term Qantas Airways Limited was introduced. In 1992, Qantas purchased
Australian Airlines, Ltd. to become the largest airline in the world.

The following year it was privatized by the Australian government.

Like most other airlines, in the early 21st century Qantas encountered financial problems, which
resulting in decrease in hiring and closure of certain flights. In 2002, Australian Airlines started
running an overseas subsidiary carrier, but it closed four years later. In 2004 the low cost airline
Jet star was unveiled by Qantas to operate on the budgetary segment.

Qantas airline Economic impact before COVID-19:

The Qantas Group's economic output reflects 0.7% in Australia's total gross national product.
This is an essential part of a particular industrial group's overall economic operation. The Qantas
Group's activities accounted for roughly 0.4% of GDP, with a substantial exposure to Australian
GDP alone across half of the sectors included under the ABS IO tables and approximately one-
third of the direct economic contribution to coal mining.

 In contrast to the commercial activities of the Qantas Group's operations, it plays an

important part in the transport of visitors to and from Australia. The increased net added
 revenue of $10.4 billion to the Australian economy is projected at FY 2016, combining all
domestic and foreign tourist expenses for visitors travelling in Qantas and Jet star.
 Comparing these findings 2014-15 State Satellite Tourism Accounts TRA, it is apparent that
almost one out of eight workers funded directly or indirectly in the tourism industry is due to
the expenses of those travelling on the Qantas Group airlines.
 In the foreign and domestic marketing of Australian tourism the Qantas Group also plays an
important role in foreign, especially through its commitment to tourist destinations in the
state and territories. As the national carrier, important role play in the economy of Australia
by the Qantas.

Deloitte Access Economics was mandated by Qantas Group to determine the Qantas Group
contribution to the Australian economy in FY 2019, which covers Qantas, Jetstar and Qantas
Freight. The study concluded that the Qantas Group in 2019 provided the Australian economy
with an overall gross added value of $12.8 billion and 55.312 FTE employment directly and
indirectly. The Qantas Group's overall economic output contributed 0.7 percent of Australia's
Gross Domestic Product (GDP). The activities of the Qantas Group accounted for 0.4% of GDP,
taking into account the direct contribution alone.

The Qantas Group also plays a key role in promoting travel by transporting visitors to and from
Australia. The combination of domestic and foreign tourism expenses on Qantas and Jet star is
projected to contribute $13.1 billion to the Australian economy in gross value added, supporting
106,005 FTE employment. The Qantas Group also plays a major role in regional Australia. The
operations of the Qantas group are projected to have provided metropolitan Australia with 5,879
workers and a net value addition of $1.6 billion in FY 2019.

Contribution of Qantas Group's in economic for FY 2016 is classified as indirect and

direct components. The first calculates the added importance of the Qantas Group directly from
its activities to Australia's economy. Indirect contribution of Qantas Group identified its
spending on intermediate inputs to the Australian economy. Direct contributions Although
income is more frequently recorded in financial account, the added benefit is a more accurate
assessment of the contribution of a company to the overall economy, as the profit generated by
the upstream industries is netted. Consequently, the direct contribution isolates the value
provided by Qantas Group. The return on investments, also known as the Gross Operating
Surplus (GOS), is based on the calculation of continuing operating benefit and expenses prior to
the impacts of interest, tax, depreciation and amortization.

The contribution to work was determined by consolidating the payment of salaries or other
incentives given to the workers. Indirect impact measurements include calculating the indirect or
flow-on contribution from the operations of the Qantas Group. This is the added value produced
in the upstream economic sectors that provide inputs to the activity of the airline. The flow-on
contribution is dependent on the investment of Qantas Group in these industries and the income
and wages produced therein. 2 The contribution of Qantas Group to Qantas Group's direct
economic contribution in 2016 was $6.8 billion (Table 2.1). Similar to the investment made by
the company unit Qantas for the financial year 2015, a portion of this economic added benefit
amounted to 77% of the overall direct contribution. The Jet Star accounted for 20% of direct
added value, while the direct contribution of Qantas Freight was 3%. The direct economic impact
of the Qantas Group has risen by $882 million or less than 15 percent since the 2015 financial
year, representing the Qantas Group's enhanced profitability. About 57 percent of the direct
value added to Qantas Groups is attributed to labour profits. While the airline industry may seem
intensive in cash, this division of value added means that a significant proportion of the earnings
produced by the operations of the airline flow to employees.

The Globalization Impact on the Airline Industry:

Air travel is a wide and flourishing market. Globalization may be identified by means of webs of
communication, transport, and commerce as the integration of national and local economies,
culture and societies. The present age finds globalization to be the main driver in nearly all
companies because of their influence or the foreign sector. The global aviation sector's emerging
prosperity plays a major role in economic growth, tourism, global migration and the impacts of
globalization. Which allows for broader contact with the globe, the opportunity to discover new
markets and prospects for jobs for citizens of the countries where international companies are
located? Globalization is the mechanism through which a company expands and operates across
foreign borders.
The tourism industry is an indispensable element in airline travel. Market globalization is a big
growth factor in the airline sector. People move to other places for both recreational and
commercial interests, which results in an annual increase of 7 percent in air travel. Due to the
globalization of the industry, the participants would develop into multinational consumers who
seek global suppliers. This adds to an increase in corporate travel because of the global
investment, distribution process, sourcing, and consumer presence of businesses. Therefore, air
transport's participation in promoting international exchange is prodigious. Aviation brings
another economic advantage to aviation by offering customer protection for individuals and
taking into consideration the environmental impact such as air quality, pollution and noise close
to airports. Since air travel was extremely demanding, it has doubled passenger numbers since
the 1980s and risen by 45 percent over the last decade. Globalization has a major marketing
effect. That is how a company distributes the goods to foreign consumers more easily and
provides openings for jobs in the country to which it has migrated. To understand the impacts, it
is necessary to explore globalization, marketing (particularly market segmentation), global
marketing policies and Qantas's general background.

Bankruptcy and consolidation Covid-19 Impact on Qantas:

 In the global airline industry Covid-19 Impact.

 Axis Qantas: 6,000 workers despite subdued demand for travel and a three-year recovery
strategy
Covid-19 has put on the worst thoughts for the airline industry. The effect of the falling demand
was even greater than the combined financial crises of 9/11 and 2008. One of the most
demanding sectors to be operated in was the rapid effect of the pandemic, which included not
just abrupt market drops but also many cancellations in reaction to travel advice and
government-wide social distancing norms. While the main effects of the pandemic during March
for most airlines would still be considerably more serious in Q2 2020. In addition to having their
sales halve in current year, the global aviation sector is forecast to lose more than US$ 84.

Though we've already seen a few airline collapse or shut-off files (see table below), even more
are struggling to survive and employ a number of steps involving substantial fleet size
contraction, the shut-down of unprofitable branches, lay-offs, and increased health and safety
measures in order to win their future flyers' trust.

After a bankruptcy protection file with Avianca airline and LATAM Airlines in June this year,
Qantas Airlines revealed only last week that it plans to cut 6,000 of its 29,000 strong employees
in the face of declining demand). In addition to grounding 100 aircraft for around 12 months, the
airline is also expected to lift US $ 1.3 billion (Australian dollar 1.9 billion). This change
contrasts entirely with its correspondence in May of this year that it said it had sufficient
liquidity to see it until December 2021. Qantas has furthermore cancelled all flights until
October, following the latest declaration by the Australian Government that the boundaries of the
country will stay sealed until next year. The airline has already established a 3-year turnaround
strategy, which focuses mostly on cost savings. Qantas is planning to slash A$15 billion
(~US$10.3 billion) in 3 years' spending to deliver A$1 million (~US$0.7 billion) in annual
savings by 2023.

Due to the fact that Australia has a much better flow than the majority of countries that have the
virus, although at the same time Chief Executive Officer Alan Joyce revealed the rehabilitation
plan for the airline: "The Qantas Group has been in a better position than other companies in this
crisis and we have some of the best opportunities for a recovery, namely in the domestic market,
but According to the above, the remaining 6 Boeing 747 airlines will be withdrawn automatically
6 months before the initial timeline.
Although airlines such as Fly Be and Avianca, which recently shut down operations or filed for
bankruptcy, have already been plagued by a certain kind of financial strain, the true scale of the
Covid 19 pandemic is evident when one of the strongest airlines in the world, such as Qantas,
requires a dramatic redesign. Most experts expect that in another 5 years or so the airline sector
will rebound to pre-pandemic stages. With a growth rate of ~4.1 percent in 2019 (to affect
passengers of ~4.5 billion), passenger growth in 18 years will double. With the effect of Covid-
19, though, this is likely to last up to 25 years to the 9 billion passenger plateau. Liquidity is
currently the word of the day, not just for the aviation sector but for other companies around the
globe. After a strong decade of development within the airline industry, profit margins remain
poor as well as large disparities in the margins amongst airlines in various regions. Although
most airlines appear to have enough cash reserves to meet fixed costs for a few months, the rapid
fall in demand and further confusion over being able to secure sufficient liquidity to fund the
existing costs is likely to cause a few more airlines to collapse.

“Governments will find themselves in a precarious position, with the following possible
outcomes:”

 “Allowing struggling private airlines to fail”

 “Provide them with some form of liquidity to survive the storm”

 “Nationalize (similar to the way Alitalia was taken over by the Italian

government in March 2020)”

Whereas governments in the US and Europe are closer to offering their airlines bailouts, Latin
American countries are comparatively less disposed to provide assistance to their companies
(much like the case of LATAM). In brief, the most obvious thing to do is to get the majority of
airlines, including some that are comparatively stronger, converted into smaller airlines, at least
on short notice. So sustaining lower demand needs a number of airlines to restructure and to
become more lean and agile in the new-standard post-Covid environment.

Fuel hedging on airlines in 2020

In principle, airlines could be among the highest recipients of the oil price slump, since the cost
of fuel has been the biggest cost segment in the last decade for airlines, sometimes accounting
for 30-40% of the overall expenditures for operations. Whilst there is no doubt that airlines
would profit from the recent steep fall in oil prices (over 50 percent from the high last year) in
the long run, hedging contracts and foreign exchange uncertainties in the short to medium term
will make things much harder.

The International Air Transport Association expects airlines to generate a collective net profit in
2015, which amounts to some $25 billion and lower energy prices are a major driving force
behind increased profitability. Since the global airlines' 40-year net after-tax profit margin is
about 0.1%, soon materialized income would be critical for much-needed capital and debt
management and for fleet modernization and product upgrades.

Furthermore, several airlines (and their customers) have to be vigilant, given that lower fuel costs
are being achieved at a lag of time owing to future fuel purchasing practices designed to shield
both the airlines and their buyers. Qantas is no different; in the first half of 2015, airlines
expecting just A$30 million to profit from falling fuel costs, as part of an overall fuel bill of
around $4.5 billion. Not really a massive saving in costs (still) that might lead to gains or
ultimately lower prices.

Fuel hedging is also one illustration of airlines' risk reduction techniques. Danger exposure
associated with fuel price instability, currency swings and interest rates is generally covered by
airlines that use various forms of financial instruments.

Fuel Hedging Updated 2020:

The Qantas Group operates at present on a seat available mile base around 5% of its pre-crisis
domestic passenger network and about 1% of its foreign network. The Group operates 13% of its
domestic and 6% foreign networks on a flying hour basis, which comprises charters for the
resource industry at 75% of pre-Corona virus levels and commercial flying aircraft as freight
forward. In the conditions, the current domestic and trans-Tasman flight cancellations will now
be extended from the end of May to the end of June 2020 by Qantas and Jet star. International
cancellations of flights will be continued until the end of July 2020.

The fuel needs of the Qantas Group were 100% met for much of FY20, resulting in substantial
benefits in the first half of the year but some hedge losses as fuel demand plummeted, though oil
prices fell due to the corona virus crisis. The Group closed its over-hedged spot in early April
until September 2020. This prevented the steep drops in oil prices that happened in the second
half of April and reduced the Group's vulnerability to more refuse losses substantially. The
remaining Brent crude oil hedging Group is in complete options until September 2020, with no
chance of any further hedge losses. As of now, both foreign exchanges and fuel hedging have a
currency outflow of A$145 million between now and the end of September 2020. The Group has
a covering after September, most of which are in open choices, and a base layer of collars. These
collars are prone to market price changes but are predicted to be successful since they are likely
to correlate with increased Group flying operation. No margin call commitments apply to the
hedging of the Group.

Financial data:
Following financial information are used to calculate the productivity ratios for Qantas Airline.
Table 1: Financial information
data 2017 2018 2019 2020
Total operating revenue in 1730 1573 395 1608
2017
Available seat kilometres 150,323 152,428 151,430 111,870
(asks)1
Total revenue 16,057 17,060 17966 14257
Total operating cost 1446 15247 16358 13862
Number of employees 29,596 30,248 30179 25000
Fuel cost 3039 3,232 3846 2895

Productivity Ratio

“Cost of Available Seat Mile””

“Cost of Available Seat Mile” The unit cost calculated in cash is measured by kilometers to run
per seat for each kilometer. The smaller the CASK, the better it will be to gain income. In order
to obtain the CASK, direct operating costs are separated by the seat required. CASK is critical
for the cost efficiency of airlines. This is important if airlines want to know the competitiveness
and survival of the business. CASK is one of the most critical conditions to consider as it impacts
the economic health of the aviation sector. The smaller the CASM, the more cost-effective and
reliable the carrier. The findings indicate that the ratio was lower in 2017 and that the trend
between 2018 and 2020 was growing. This shows that profits from Qantas fell between 2018 and
2020.

Table 2: “Cost of Available Seat Kilometer”

2017 2018 2019 2020

CASM 0.010 0.100 0.108 0.124

“Revenue per Available Seat Mile””

 Revenue per available seat mile (RASM)” Is a measuring unit widely used to compare different
airlines' production. The operating income is divided into usable seat miles (ASM). The greater
the RASM the more the airline in question becomes more efficient. Revenue is in cents and not
restricted only to ticket purchases when other considerations are taken into consideration in
quality and profitability. The findings show that the income of seat kilometers accessible in 2017
is strong, but that the pattern is declining in 2018 and in 2019, whereas the RASM rise in 2020
indicates Qantas having greater profitability.

Table 3: “Revenue per Available Seat-Kilometer”

2017 2018 2019 2020

RASM 0.012 0.010 0.003 0.014

“Revenue per employee”

Revenue per employee is an important method for analyzing the efficiency of workers in a given
company. Ideally, an enterprise wishes to get the best income per employee since a larger
proportion means higher efficiency. Revenue per employee is often indicative of the use of a
company's human capital investment – smartly in the development of highly efficient employees.
High-income companies per employee also profit. The workforce ratio for the years 2017 is
0.058, 2018 is 0.052, 2019 is 0.013 and 2020 is 0.643. This means the REP will be more
successful by 2020 and Qantas by 2020.
Table 4: “Revenue per employee”

2017 2018 2019 2020

RPE 0.058 0.052 0.013 0.643

“Fuel cost per mile”

A typical measuring unit to compare the performance of different airlines is the fuel cost per
usable seat mile. The cost of fuel for an airline is divided by usable seat miles (ASM). The
smaller the FCM, the more cost-effective and reliable the airline is in general. The fuel costs
show a rising trend between 2017 and 2020, showing a lower efficiency of the airline than the
previous years.

Table 5: “Fuel cost 2017 2018 2019 2020

per mile”X

RASM 0.012 0.010 0.003 0.014

CASM 0.010 0.100 0.108 0.124

RPE 0.058 0.052 0.013 0.643

FCAS 0.020 0.021 0.025 0.026

Reference:

Annual report 2017

Annual report 2018

Annual report 2019

Annual report 2020

https://www.televisory.com/blogs/-/blogs/qantas-airways-announces-firing-of-6-000-employees-
implications-for-the-airline-industry

https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/2
020HY/Qantas_Group-Market-Update-Increasing-resilience-for-long-term-recovery.pdf

https://theconversation.com/explainer-fuel-hedging-and-its-impact-on-airlines-and-airfares-
36773

https://www.britannica.com/topic/Qantas
https://www.123helpme.com/essay/Discuss-The-Impact-Of-Globalization-On-The-
PCJCPPSUD2R

https://www.123helpme.com/essay/The-Impact-of-Globalization-on-Qantas-Airlines-
227775#google_vignette