Qantas Airways Company SWOT Analysis Report

SWOT ANALYSIS of Qantas Airways Australia

Qantas is an Australian airline group. The group's strong dominance in Australian domestic market enables it to take advantage of the local expertise to gain access to key markets as well as enhance the quality of its delivery services. However, increased competition from the growing number of low cost and low fare airlines could impact the group's market share especially in the Asian region.

Strengths

Strong dominance in Australian domestic market

The multi brand strategy allowed the group to position Qantas’ domestic network as ‘best for business and premium travel’ supported by Jetstar offering consistently low fares. The successful execution of the strategy is evidenced by Qantas and Jetstar continuing to be the two most profitable Australian domestic networks, maintaining its competitive position with 65% market share. This domestic strength was further reinforced by additional Frequent Flyer program product offerings through the acquisition of Wishlist, development of epiQure by Qantas Frequent Flyer and launch of CBA Diamond Direct, Woolworths Qantas card and the NAB Qantas Business card. Thus, the group's strong dominance in Australian domestic market enables it to take advantage of the local expertise to gain access to key markets as well as enhance the quality of its delivery services.

Diversified geographic markets

The group’s offers transportation services across geographies by using its two complementary airlines, Qantas and Jetstar which operates international, domestic and regional services. Qantas’ main markets are domestic and international traffic to and from Australia. The Qantas Regional Airlines Group, a wholly-owned group of subsidiaries including QantasLink and Network Aviation, services 57 metropolitan and regional regular passenger transport destinations across Australia and Port Moresby in Papua New Guinea, as well as 19 dedicated fly-in-fly-out charter destinations. Qantas offers passengers a comprehensive network product on its extensive domestic and international network and through its oneworld membership, accessing 24 bilateral codeshare
agreements over 870 destinations and 550 lounges.

Jetstar’s main markets are domestic and international traffic to and from Australia. Pan-Asian expansion has strengthened through Jetstar Asia, Jetstar Pacific and Jetstar Japan. New Zealand operations encompass both trans-Tasman and domestic New Zealand markets. Under freight business, the group’s Qantas Freight Enterprises operates in all international markets where the Qantas group flies and has dedicated freighter aircraft operating between Australia and Asia, New Zealand and the Americas, and Asia and the Americas. Hence, diversified geographic markets help the group to better adjust its business strategy according to regional demand pattern. This in turn supports the group in mitigation of business risk associated with operating in single geographic market.

Weaknesses


Industrial action disputes

Qantas’ business is highly susceptible to industrial action disputes. Within Australia, extensive industrial action and union campaigns to discredit the Qantas brand caused significant damage to the group in FY2012. For instance, the Transport Workers’ Union (TWU) attempted to use the bargaining process for a new enterprise agreement to dictate how certain parts of Qantas should be run including how Qantas utilizes employees of a Qantas subsidiary and preventing Qantas from accessing the sensible use of contractors. In this regard, the Fair Work Australia, in August 2012, mandated that Qantas is entitled to run its business free from union controls. The group still faces significant threat in the form of various financial and operational risks related to the extensive bargaining power of workers. In recent years, industrial action by three unions including the TWU cost Qantas A$68 million ($70.1 million), disrupted 70,000 passengers and saw 600 its flights cancelled. Hence, if the group fails to prevent further industrial disputes between its management and workers union in future, it could negatively impact Qantas’ brand image, overall operational and financial performance and jeopardize business stability.

Opportunities

Growing Australian domestic market

With declining international travel demand on its network the group has increased its focus on its domestic operations in the past few years to support business travel between major capitals and regional communities, as well as in the fast-growing intrastate markets of Queensland and Western Australia.

In this regard, in January 2013, the group announced an update to its fleet plan to capitalize on growth in Australian domestic markets. Under the new plan, Qantas would lease an additional five Boeing 717 aircraft and purchase three Bombardier Q400 aircraft, scheduled to start arriving from the second half of 2013.This expansion of fleet with 125-seat Boeing 717s and 74-seat Q400s would give the group much needed flexibility to pursue growth opportunities in a range of short-haul markets in its domestic region. Similarly, in November 2012, the group decided to deploy wide-body Airbus A330s on all weekday Sydney-Perth and Melbourne-Perth services to meet the growing demand for business and premium travel on the routes.The group also decided to fast track the refurbishment of 16 Boeing 767 (B767) aircraft with new interiors and individual in-flight entertainment as part of wider investment to enhance the domestic customer experience. Hence, an increased focus on the growing Australian domestic travel market would enable the group to better service the demand in the region which in turn could help it to enhance its domestic market presence and further drive  business growth.

Global aviation partnership with Emirates

To further strengthen its service in growing Asian region and to improve its network coverage across
Europe, the Middle East and Africa Qantas formed a new global aviation partnership with Emirates.
Under this strategic partnership signed on September 2012, Qantas will move its hub for European
flights to Dubai and enter an extensive commercial relationship with Emirates.The 10-year agreement would go beyond code sharing and includes integrated network collaboration with coordinated pricing, sales and scheduling as well as a benefit-sharing model. Qantas plans to launch daily A380 services from both Sydney and Melbourne to London via Dubai, as a result of this new service together Emirates and Qantas will offer 98 weekly services between Australia and Dubai. It will also provide strategic advantage as Qantas will be the only other airline operating to Terminal three and the new purpose-built A380 concourse at Dubai International Airport. The partnership would give Qantas customers one-stop access to more than 70 Emirates destinations in Europe, the Middle East and Africa. Hence, the new partnership with Emirates would expand range of travel options for Qantas’ customers, help build a strong international business, and further improve network coverage in the growing Asian region.

Expansion of Jetstar operation

Jetstar is highly focused to grow its Asian operations and strengthen its position as a pan-Asian carrier. Within Asia, the group in recent years has expanded its Jetstar branded franchises based in Singapore, Vietnam and Japan, with Hong Kong to be added in FY2013. The group also successfully launched Jetstar Japan in July 2012, five months ahead of schedule, with strong local partners Japan Airlines, Mitsubishi and Century Tokyo Leasing. In addition, the group has formed a strategic alliance with China Eastern Airlines for the establishment of Jetstar Hong Kong, which is equally owned by both the groups. Jetstar Hong Kong plans to commence services in late FY2013. Thus, Jetstar’s international network would leverage the growth of these Jetstar branded airlines to provide traffic flow between Australia and Asia and reinforce Qantas’ strong competitive position in the leisure travel markets across Asia-Pacific.

Threats

Competition from low cost airlines

The competition in the airline industry has been intensified with the emergence of low cost carriers especially in the East Asian region. The low fare charged by these budget airlines makes the group's
airline operation less competitive. In the long-haul market, the group faces competition from local operators in most geographical areas, including Middle East, China, and India. In the medium-haul market, low-cost carriers have established strong market positions and continue to grow. AirAsia, Tiger Airways Singapore, Firefly airlines, Mandala Airlines (Indonesia) as well as Lion Air (Indonesia) are major competitors to Jetstar in the low-cost market.

Further, as a result of increasing business travel, a number of customers are increasingly looking towards air travel options which allow them to minimize stoppage time at airports caused due to various reasons, including baggage handling and refueling. This has led an increasing number of business organizations to invest in private jets, which are jointly owned along with certain airlines, or completely owned. Therefore, increased competition from the growing number of low cost and low fare airlines could impact the group's market share especially in the Asian region.

Rising fuel prices

Jet fuel forms the main raw material used in the airline industry. The demand for petroleum and related products has historically been cyclical and sensitive to the availability and prices of oil and related feedstock. Historically, international prices of crude oil and refined products have fluctuated widely due to many factors that are beyond the control of companies like Qantas.

The cost of jet fuel formed a significant part of the total expenses for the group. Qantas’s jet fuel bill reached a record high during FY2012 which increased by A$645 million ($665.8 million) to A$4,329
million ($4,468.8 million) against FY2011.The group’s fuel bill in 2012 was 18% higher as compared
to FY2011.Hence, any increase in aircraft fuel costs could negatively impact the group’s operations which in turn would pressurize its margins and profitability.

Regulatory conditions

The airline industry is highly regulated. The regulatory landscape for airlines in Asia is complex, with
state-owned and government-supported carriers still dominant. Airlines are subject to extensive regulatory and legal compliance requirements that result in significant costs.

Qantas has operations in many parts of the world and operates in a highly regulated environment.  The group’s operations are subject to numerous domestic and international laws, regulations, and restrictions. Non-compliance with these laws, regulations, and restrictions could expose the group to fines, penalties, suspension, or debarment, which could have a material adverse influence. The group expects to continue to incur expenses in connection with complying with government regulations. Additional laws, regulations, taxes, and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising ticket prices, reducing revenue, and increasing costs. This in turn would increase obligations on Qantas and would adversely impact its margins.

If you want SWOT Analysis Assignments Writing Help, Contact Mahasagar Publications.