AF201

MANAGERIAL ACCOUNTING
SEMESTER 2, 2021

GROUP ASSIGNMENT

COMPANY: QANTAS AIRWAYS LIMITED

House: Greyjoy Group: 45

Student Name: (House: Greyjoy) Student ID:
Shivnil Achari (uploaded on moodle) S11183282
Sheenal Chand S11186230
Natasha Narayan S11184642
Anisha Naidu S11184633
Ashleen Chand S11184616
Mohammed Jamil S11184622
Vineel Kumar S11184952
Ashna Devi S11184805
Table of Contents

Executive Summary.................................................................................................................1

Vision and Mission Statement, Objective and Nature of Business Operations:................2

Impact of COVID-19 on the Company..................................................................................3

 Figure: 1.0.................................................................................................................3

 Figure: 2.0.................................................................................................................3

Organizational and Management Accounting Responses....................................................5

Effectiveness of Responses and Recommendation................................................................7

Conclusion.................................................................................................................................8

Bibliography........................................................................................................................................9
Executive Summary

The global economy has been impacted greatly due to the global pandemic of COVID-19
where the virus has become a threat to the health of humans. In addition, COVID-19 was
announced as a deadly pandemic by the World Health Organisation (WHO) on 11 th March,
2020 (Sohrabi, 2020). Therefore, the concerns have moved from the supply-side
manufacturing issues to the reduced businesses within the services sector. According to the
International Monetary Fund (IMF) the worldwide economy dropped by 4.4% in the year
2020 (Jackson, 2021). This virus has severely affected financial markets and the global
economy since there has been a significant rise in unemployment which leads to reductions in
income earned by workers and disruptions in the services as well as transportation within and
out of a country are among the consequences of the measures of disease mitigation that are
already implemented in most countries. Businesses are coping with these effects by moving
their services online and letting their employees work from home in order to still keep their
jobs. However, many companies have temporary laid off half of their employees, reduced the
salary of the owner and employees by decreasing the hours worked in order to decrease
expenses. The businesses are implementing all COVID-19 safety protocols into their normal
business procedures where the customers are required to be fully vaccinated in order to be
served. Effective vaccines like Pfizer, Moderna, Johnson & Johnson and Astra Zeneca are
quite crucial to ending the COVID-19 pandemic, hence it is greatly encouraging to witness so
many vaccines validating their purpose of development. These vaccines are a game-changing
tool, however, continuing to wear masks, physical distancing, cleaning our hands and
avoiding crowds is still important in order to stay safe.
In addition, this report is based on Qantas Airways Limited, which is one of the leading
airline company in Australia and in the world as well. Qantas Airways Limited was founded
by Hudson Fysh, Paul McGinness and Fergus McMaster in 1920 and it commenced its
operation from 1921. Moreover, in November 1920, Qantas Airways limited was listed as a
public company in the Australian Stock Exchange (ASX) market n currently has a market
capital of $10.52 billion. Also the company has a total of 203,171 shareholders with
1,886,044,698 shared issued (Limited Q. A., 2021).
Therefore, this research report will firstly, outline and summarize the company’s vision,
mission statement, objectives and nature of business operation. Secondly, it will discuss how
the company has been affected by the COVID-19 pandemic. The effects of the pandemic on
the company will be linked to the achievement of its vision, mission, objectives and in terms
of business operation. Thirdly, some of the organizational strategies will be discussed such as
organizational responses and management accounting responses that the organization has
implemented to address the issue identified. Lastly, it will evaluate the effectiveness of the
organization’s responses and the recommendations for business operation during the
pandemic and post pandemic.

1
Vision and Mission Statement, Objective and Nature of Business Operations:

Due to the COVID 19 epidemic, Qantas (Queensland and Northern Territory Aerial Services)
Airways Limited, Australia's largest airline and the world's second oldest, presently employs
22,000 people. Hudson Fysh, Fergus McMaster, and Paul Mc Ginness formed it on
November 16, 1920, and it commenced international passenger flights in May 1935. This
Australian public business is a global corporation that trades on the Australian Stock
Exchange (ASX), where Qantas now controls 70% of the domestic market in Australia. The
Qantas Group's business area is aviation, with its primary business being customer
transportation via the two complimentary airlines Qantas and Jetstar. Its airline brands
include freight services, air transportation, and loyalty programs on a regional, national, and
worldwide scale. Qantas Freight Enterprises to Qantas Frequent Flyer are among the group's
many subsidiaries, as are Qantas Group businesses such as JETS Transport Express,
QantasLink, Qantas Freight, Jetconnect, and others.
Moreover, the vision of the Qantas Group is to function as the world’s premium and best
airline together with exploiting its potential, expanding its competitive advantages and lay the
foundation for sustainable growth in the future. In doing so, the group is jointly committed to
maintaining the highest ethical standards, complying with all relevant laws and regulations,
and reflecting Qantas beliefs in everything they do.
The mission statement of Qantas states that they are Australia's premier premium airline and
that they are committed to becoming the best. They strive to exceed every customer's
expectation, which is why Qantas continues to invest in their business in order to provide an
exceptional level of service to their customers and to be a great airline that champions the
Australian Spirit by being genuine, optimistic, together, experienced, and incentive.
Furthermore, the Qantas Group's primary goal is to offer safe and dependable fundamental
services. These services vary from national and international freight transfers to the return of
thousands of Australians on special repatriation flights and regional city connections. The
Qantas Group strives to have a good influence on the community, reduce its environmental
impact, and maintain the highest levels of safety and integrity. In addition, Qantas Group
aspires to provide shareholders with a top-quartile total return when compared to the ASX
100 and global rival airlines.

2
Impact of COVID-19 on the Company
The COVID-19 pandemic has badly affected Qantas Airways Limited in its business
operations. Due to the COVID-19 restrictions such as border closures and travel restriction
Qantas Airways Limited has been affected severely since they mainly focused on service
through passenger travels and freight. This has affected the company’s revenue. According to
the financial performance of Qantas airline, in the year 2019 the revenue was $17,966
million, in the year 2020 $14,257 million, and in the year 2021 it was $5,934 million.
Figure: 1.0

Revenue for Qantas Airlines

17,128 17,966
16,057
14,257
million ($)

5,934

2017 2018 2019 2020 2021

years

Prior to the COVID-19 pandemic, the company’s revenue from the year 2017 to 2019 was
increasing. However, in the early 2020 the COVID-19 pandemic struck the globe through the
wide spread of COVID-19 cases thus also affecting Qantas airlines revenue from the year
2020 to 2021 as shown in figure 1.0
The major component that decreased the Qantas airlines revenue was the passengers travels.
This is mainly because the COVID-19 cases were being spread effectively through
international travels, the airlines around globe had to restrict flights to help in containing the
COVID-19 cases. The passenger’s revenue for the year 2019 was $15,696 million, $12,183
million in the year 2020 and $3,766 million in the year 2021.
Figure: 2.0

Passenger Revenue Qantas Airline

20,000
15,000
Million($)

10,000
5,000
0
2019 2020 2021
Years

passenger revenue Exponential (passenger revenue )

As shown in the figure 2.0 the passenger revenue decline from year 2019 to 2021. From the
year 2019 to 2020 a total of $3,513 million was decreased whereas from the year 2020 to

3
2021 the passenger revenue of Qantas airline decreased by $8,417 million. This is because of
the second wave of COVID-19 cases struck the country named the delta variant therefore,
there was a massive decline in the passenger revenue from 2020 to 2021.
Furthermore, COVID-19 has caused financial and operational challenges to the Qantas
Airline Group. Reality shows that customer satisfaction and loyalty is affected by the
pandemic to a greater extent as they are a large degree of a continuous success of the Qantas
Group, especially considering the huge contest for travellers that describes the avionics
business. Due to the restrictions being implemented on domestic and international borders in
the travel industry, health risks are being prevented. The company lost its customers due to
the cancellation of travels and refunding policies. The company also incurred higher cost due
to airlines/ fleet being in storage.
In addition, Qantas Airways operations are so advanced and involves collective effort of all
the employees in bargaining disputes. In order to implement recovery plans to overcome
disparities industrial actions such as work stoppage are taken into consideration. This
decision of work stoppage can lead to the regular operations being disrupted to a large extent.
However, the business is affected creating more reputational damage to the Qantas Groups.
Moreover, Qantas Airline has been facing multiple challenges in meeting their mission,
vision and objectives due to the global pandemic of COVID-19 since most countries had
closed their international boarders in order to stop the risk as well as contain this virus hence,
this makes it difficult for the company to continue its normal operations and carry out
international flights or transportation. Since the international boarders are opening back up,
the company has to now provide its exceptional level of service together with following all
COVID safety protocols.
The Qantas Airlines vision was to expand and exploit its potential to achieve advantages and
lay the foundation for sustainable growth in the future hence this was not entirely possible as
the revenue continuously declined from 2019 till 2021 as this was due to the impact of the
COVID-19 pandemic on the Qantas Airline Group. Their mission was to be the best airline of
Australia by meeting every customer’s expectation and provide exceptional level of service to
be a great airline. However, the Qantas airline failed to comply with its mission due to the
restriction in place for the travel industry. A certain percentage of its objective was
accomplished by the quarantine measures put in place for the safety of its passengers.

4
Organizational and Management Accounting Responses

Qantas Airways has been vastly impacted by COVID-19 in 2020 and 2021 as these effects
are evident in their annual reports. The company was badly affected by the pandemic in terms
of lower revenues, higher costs and loss of customers as discussed previously in the report.
To address the issues identified above, Qantas Airways has implemented a three-year
recovery plan as part of their management accounting response. The recovery plan started
from the 2020/21 financial year and will end in the 2022/23 financial year. In addition,
through the recovery plan, a total of $1 billion is targeted to be saved by the company over a
3-year period. This recovery plan consists of significant activity based saving as part of the
modern approach of management accounting response, that will focus on firstly, right-sizing
the Group's staff, aircraft, and various expenditures based on market forecasts, with the
potential to expand as flight resumes. Secondly, in a dynamic market, reorganization and
restructuring to provide continued cost reductions and benefits throughout the
company's activities. Finally, raise equity to increase the company's financial resistance to
recover and the advantages it brings.
In addition, as part of the cost management system, the company’s management accounting
responses are; process of determining the acceptable fleet age, which takes into account a
variety of criteria and differs by aircraft type. This covers the introduction of modern
technologies, the economy's desired growth, and rivalry environment. Thus, to retain
flexibility and respond to market conditions caused by COVID-19, the company has
deployed various strategies that includes; fleet redeployment, refurbishment, renewal and
retirement. Therefore, according to the 2020 and the 2021 financial report, in 2020 Qantas
Airways purchased three 787-9 aircraft and disposed one. While in 2021 the company
disposed four 747-400ERs fleet and they also purchased two fleet which will be utilized for
freight and network aviation.
Planning and controlling systems are an important component of the management accounting.
As a part of the strategy implementation, an organization needs to develop plans to direct the
organization to its goals and implement control systems to ascertain that the operations are
proceeding according to the plan. Planning and controlling systems offer a frame work to
generate shareholder and customer value by effectively managing the organizations’
resources. Therefore, management accounting response to resource management, to reduce
costs and increase revenues during COVID-19 pandemic, the company disposed 747-
400ERs, while it made Jetstar Aircraft operate as Qantas freight. “To further ensure
operational readiness, grounded passenger A330-300s airbuses were deployed as freighters to
support International Freight Assistance Mechanism (IFAM)” (Qantas, 2021).
Furthermore, as part of organizational strategies and, giving customer self-confidences in
booking their flights thus, providing more flexibleness in responses, the company is trying to
generate customer value by extending the ‘fly flexible’ program terms and conditions for
booking. It has also retained a high level of customer Net Promoter Scores (Qantas, 2021).
Also, to bring back its customers in 2021/22 and recovery of domestic travel the following
were the organizational and management accounting responses:
 Introduction of health and safety program for customers

5
  Introduction of new routes and lounges which also includes addition of capacity
 Deployment of A302s into Western Australia for meeting the strong market demands
Also, as part of the strategy/response, the company is trying to generate customer value by
extending the ‘fly flexible’ program, giving customer self-confidences in booking their flights
thus, providing more flexibleness in terms and conditions for booking. It has also retained a
high level of customer Net Promoter Scores.
In addition, Qantas Airways took strategies as part of organizational responses to empower its
employees by the following policies and plans;
 The Job Keeper Payment
 International Aviation Support Package
 Australian Airline Financial Relief Package

6
Effectiveness of Responses and Recommendation
The COVID-19 pandemic is one of the ongoing challenge as it has impacted the Qantas
Group in many ways and as a result, to overcome these worst trading conditions, there were
quick and early responses and strategies designed in the crisis by the group which was very
effective as a three-year recovery plan was set in place. This plan included a lot of hard
decisions and work which would make sure that the group would firstly carry on its activities,
then improve and repair quickly as well as retain flexibility. The plan is aiming to improve
the productivity, progress in its activities and provide positive cash flow in the last six months
of the financial year 2021 and onwards as this will give Qantas group confidence to perform
strongly to the changes in market condition. Therefore, the 2021 financial report of the
company showed the effectiveness of the three-year recovery plan as the company was able
to save a total of $650 million within a financial year. Moreover, the plan of fleet
management was completed in December 2020 and other plans such as, customer and brand,
employee engagement and Qantas loyalty is expected to be completed by 2022/23 financial
year.
Moreover, the coronavirus outbreak has impacted various companies, including Qantas. The
virus, which has resulted in global travel restrictions, has caused a catastrophic drop in travel
demand and activity, plunging global aviation into chaos. Qantas should focus on
strengthening its ties with state-owned carriers like Qatar Airways and Emirates, as they are
able to fly routes that a publicly traded company might not be able to. In April, Qatar
Airways, for example, flew around 45 percent of the traffic into and out of Australia, with
less than half of the seats filled. Finding finance at this difficult period has necessitated new
financial tactics for Qantas, one of which is a $1.9 billion share sale to investors. The
scenario is the same for Qantas' international flight planning, since there is no set date for
when and where all past flight routes will be resumed. In May 2020, Qantas announced that
25,000 of its 30,000 employees would be on standby at least until the end of June, however
this turned out to be wrong as limitations and the epidemic continued.
Furthermore, the following can be recommended to Qantas Airways in combatting the effects
of COVID-19. Firstly, restructuring of group’s business operations in delivering ongoing cost
saving in fuel consumption and efficiencies in a changed market which will provide new
opportunities to increase ramp up of flying as this will provide a stronger platform for future
profitability. Secondly, the rising market share of connecting flights on intercontinental
routes is partly due to the success of the hub-and-spoke model, which has contributed to the
emergence of mega hubs. The ability of an airline to provide a unique service to its
passengers, known as network privilege, is a crucial source of airline value creation because
it allows for the most connections with the fewest trips. Thirdly, right-size the company’s
pre-crisis labour force (reducing and retiring workers) and fleet across all parts of the
business together with having the expenses adjusted according to the demand projections
which will scale up flying. In addition, advanced analytics can help customers have a better
experience. Airlines can improve their customers' experiences by better utilizing existing
data. For example, operations control centers could change cruise speed dynamically,
distribute gates to reduce the distance passengers must walk between flights, and expedite

7
passengers with difficult connections through security to reduce stress during tight
connection times. Finally, strengthening the company’s financial resilience by recapitalizing
through an equity raising for recovery for the opportunities it presents as this will accelerate
its recovery from COVID-19 pandemic.

Conclusion

The COVID-19 has immensely affected every industry around the globe. With various forms
of COVID-19 vaccines rolling out the economy of each country is expected to return back to
some form of normalcy. Thus, Qantas Airways Limited, a renowned brand and company in
the aviation industry has a vision of functioning as the world’s premium and best airline
together with exploiting its potential, expanding its competitive advantages and lay the
foundation for sustainable growth in the future. The mission of the company is, meeting
every customer’s expectations and being the leading airline of Australia.
Moreover, due to COVID-19 the company was badly affected, making it impossible for
international flights due to boarder closures and lockdowns. Hence, the company’s revenues
in 2020 and 2021 was vastly impacted as it recorded $14,257 of revenues in 2020 and $5,934
in 2021. Also COVID-19 impacted customer satisfaction and loyalty, as implementation of
travel restrictions made company cancel all its international and domestic flights, as a result it
lost its customers.
In addition, to address the impacts of COVID-19, the company implemented both
organizational and management accounting responses. Qantas Airways Limited has designed
and implemented a three-year recovery plan as part of company’s management accounting
responses, that is expected to save the company a total of $1 billion. The recovery plan
included responses towards cost management, fleet management, customer and brand, Qantas
loyalty and employee empowerment. Also, as part of resources management the company
disposed few fleet to reduce its cost and deployed few fleets to operate as freight services and
for government. Furthermore, as part of organizational strategies, the company is trying to
generate customer value by implementing policies such as “fly flexible”. Also, the company
is empowering its employees by providing them with various relief packages.
The implementation of various organizational and management accounting responses has
shown effectiveness as this was evident in the 2021 annual report. With the implementation
of the three-year recovery plan, the company was able to save $650 million by the end of
2021 financial year whereas, other plans and strategies is expected to be by the end of the
2022/23 financial year. Also it can be recommended to the company, to restructure its
business operations, resizing the company’s labor force and fleet to reduce cost during and
post such crisis and strengthening the company’s financial resilience by recapitalizing
through equity.

8
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