Executive Summary
In April 2013, Qantas and Emirates made an alliance that was anticipated to lasting for a decade. Qantas aspired that the alliance would help it to counter the fierce competition that had prevailed in the global aviation industry. Two years down the line, the alliance has resulted in benefits and challenges. Qantas is still struggling.
While strategies such as a change of route from Singapore to Dubai and the codeshare agreement have benefitted both passengers and shareholders, there is a need to review the alliance agreement and amend it where relevant to fit the current performance of the companies in the market.
Introduction
In April 2013, Qantas and Emirates formed a non-equity alliance with one of the objectives being to unite towards expanding their network coverage. Initially, Qantas had joined several alliances such as One World Alliance to give clients a wide range of travel options.
Qantas’ goal has always been to maintain an impressive shareholder value in the global market. One of the means for achieving such goals was through creating an alliance with Emirates Airline, which is one of the best airlines in the globe. Emirates Airline also stands out in the alliance. Nonetheless, the alliance has witnessed various challenges.
Aims/Objectives
This paper seeks to assess the Qantas-Emirates coalition with respect to production and operations management.
Scope
Specifically, the paper offers:
- My advice concerning risk and rewards of the Qantas-Emirates Alliance
- Operations management implications for the Qantas-Emirates Alliance
- My advice concerning the future of the Qantas-Emirates Alliance
- Recommendations concerning the way forward for the alliance
Qantas-Emirates Alliance Assessment
By forging an alliance, both Qantas and Emirates were going to face several risks and rewards. In the case of Qantas, the international airline company has suffered many losses. Any strategic alliance is anticipated to preventing further losses.
Globalisation and the amplified demand from the middle-class clients have increased and altered the nature of competition in the aviation industry. Thus, a change in the marketing and operations management was essential. Emirates Airline, which is a global giant in the aviation industry, flies to several destinations unlike Qantas (Hornett 2012).
According to Baker (2012), one of the rewards for joining with Emirates will include a better competition positioning in the global market and increased access to international destinations. One of the provisions for the Qantas-Emirates Airline is that Qantas will transfer its flight hub from Singapore to Dubai. This move presents a number of risks and rewards. Over the years, competition has been growing in the Singaporean route.
Hence, the move to Dubai route will avert competition while at the same time lowering the operations costs. Due to its financial struggles, the company needs to invest in all platforms that can cut its operations cost such as the alliance.
Mules (2013) says that the codeshare agreement is likely to reward Emirates than it benefits Qantas, depending on how the idea will be implemented. The codeshare will allow the companies to sell tickets on each other’s flights. Since Emirates has a higher customer base than Qantas, it is likely to have more sales in relation to Qantas.
Thus, Qantas must be ready to face this risk. Furthermore, Qantas will have to incur an extra cost of moving from Singapore to Dubai. This move is a huge risk considering Qantas’ financial challenge. Despite Qantas-Emirates Alliance being a good agreement, Qantas should have reconsidered its stopover destination. For instance, Cathay via Hong Kong would have been a great route (Kingsley-Jones 2013).
Operations Management Implications for the Qantas-Emirates Alliance
The alliance comes with drastic implications for the passengers, as well as stakeholders. For the clients, one of the major changes is the route change. Through the alliance, Qantas has dropped its Singapore-Frankfurt route. Instead, it will have A380 flights stopovers at Dubai.
This strategy will help passengers to move easily to other destinations such as Europe and Africa via Emirates through the codeshare agreement of the alliance. Nonetheless, the company will retain some of its daily flights travelling to Hong Kong and Singapore (Kelly 2013).
Furthermore, the alliance will help Qantas and Emirates’ passengers to enjoy services of both airlines under one umbrella since they will have a wider platform to earn and redeem their points. Passengers will be assured of quicker trips to Europe and an interesting airport, namely Dubai. Passengers stand to benefit from the alliance.
While the alliance will eliminate competition between Emirates and Qantas, there is an increase in airfares due to the reduced competition (Caswell 2012). Investors from Qantas are assured that the alliance by Qantas and Emirates will see the former move its stopover to Dubai to reduce the operations cost since trips from Dubai to European destinations will be shorter than from Singapore to Europe.
Furthermore, the codeshare agreement will reduce the labour costs for both Emirates and Qantas since services that would have been served by one company in a given destination will be served by another company while still enjoying the benefits. For instance, Emirates’ passengers who travel to Australia will be served by Qantas Airways, hence saving in the operations and labour costs (Kelly 2013).
Advice concerning the Future of the Qantas-Emirates Alliance
Qantas has recorded losses of up to $450 million. While improvements have been made since its alliance with Emirates, it still maintains the loss trend. Emirates must ensure that it is in the right alliance. One of the objectives of the production and operations management is to ensure that the company offers services that are of proper quality, quantity, and time conscious.
The services have to adhere to the policies and goals of the company. The instability of Qantas may harm the alliance, particularly the codeshare treaty. Qantas has recently retrenched over 5,000 employees in an effort to cut down on operations. Reducing staff members may result in poor service delivery, thus harming Emirates through the codeshare agreement (Rhoades 2014, p. 32).
In the case of Qantas, it is evident that Emirates Airline is a giant in the aviation industry. It might appear that the contract marginalises Qantas. For instance, Qantas now gets less revenue from clients who travel to most European destinations from Australia because passengers are taken to Dubai where they take Emirates to their European destinations.
Qantas only receives a commission through the codeshare agreement. For a struggling company, Qantas needs to maximise on output while minimising input. Thus, Qantas-Emirates Alliance needs to be re-evaluated (Hutchinson 2013).
Conclusion
This paper has evaluated the Qantas-Emirates partnership with respect to production and operations administration. So far, the situation on the ground seems otherwise in the case of Qantas-Emirates Alliance. Nonetheless, the future remains uncertain for the alliance if Qantas keeps on struggling.
Recommendations
To keep up with the competitive global aviation industry, Qantas needs to work closely with its competitors. On the other hand, to maintain a huge share in the global market, Emirates needs to work closely with other airlines to reach its diverse network of clients.
However, before and after joining an alliance, the companies must ensure that they are in a gain-gain agreement. Hence, both companies’ management departments need to review the situation to ensure that the alliance is not part of the downfall.
References
Baker, C. (2012) Qantas Makes the Jump. Asian Aviation Magazine. 10(8), pp. 16-17.
Caswell, M. (2012) Qantas teams up with Emirates and ends BA tie-up. Business Traveller (UK/Europe Edition).1(1), p. 8.
Hornett, G. (2012) Dubai to benefit from airline pact. MEED: Middle East Economic Digest. 56(37), pp. 18-21.
Hutchinson, A. (2013) Qantas and Emirates team up to route flights through Dubai. Travel Trade Gazette UK & Ireland. 3045(1), p. 5.
Kelly, E. (2013) Emirates and Qantas Take Off. Asian Aviation Magazine. 11(4), p. 8.
Kingsley-Jones, M. (2013) Legacy carriers ponder Gulf tie-ups with caution. Airline Business. 29(7), p. 8.
Mules, R. (2013) The Long Haul: The QANTAS – Emirates Alliance. BusiDate. 21(3), pp. 2-4.
Rhoades, D. 2014. Evolution of International Aviation: Phoenix Rising. Vermont: Ashgate Publishing, Ltd.