Introduction
Qantas airways Limited is the national carrier for Australia with its headquarters located in Sydney. The main hub of the carrier is at Sydney airport. It is well known for being the largest in Australia as well as being the oldest to have continuously operated in the world. Qantas operates Jetstar, a low cost carrier which has proven to be a great success. The airline has succeeded in the operation of this two differing airline brands which have been termed to be very strong yet very distinct.
Qantas is among the worlds most prominent full service airlines. Having operated for over 90 years now, it has been grossly profitable and also has been growing at good rate with improvements on its premium standards in its products and also services.
At the same time Jetstar has grown over the few years and has been in operation from domestic flights in Australia to flights within intra-Asia and now across the Asia pacific. The airline has been garnering a lot of profit and it is also among the best low cost airlines in the world (Jetstar Airways 2006).
Strategies
The main competitor of Qantas domestically is virgin blue with its brand of “a new world carrier”. The chief advantage of Qantas is that it has been able to meet the needs of its entire customer base in a profitable manner. The main reason as to why the airline decided to engage in the dual band strategy varies in aspects.
Australian aviation industry is the most liberalized in the world today. Some airlines started the low cost airline business earlier on in the year 2000. The companies in this case are virgin blue and impulse. This was after other entrants had tried to get into the market prior to them. This called for a dire need to protect the position of the company in the market, such that it could be able to maintain a competitive position in the market. This was fallowed by the acquiring of Impulse just before it was declared bankrupt, thus having an upper hand over the competitors.
After the collapse of Ansett and the halting of international travel owing to the September 11th attacks, the company increased its domestic base and the customer number increased as well. At this time, the competitors being still small and the market share being so large, maintenance of the domestic share proved a bit expensive to Qantas thus the need to go low cost came into the limelight.
Jetstar came up to compete with Qantas in low cost routes that would also have an impact on the profits of Qantas. The biggest issue was to surpass the notion that this was bound to fail, as it had been so in other prior competitors.
In the company’s strategy, Jetstar was based on principles which were learnt from the past failures of the other carriers. In the first place, the airline was bound to have different industrial arrangements and management of operations. In this way, the operation of the airline was veered off the full service boards.
This was supposed to be a totally low cost carrier and not a bridge between the two, as was the case of Australian airlines. At this stage, the company went ahead to introduce a domestic price which was 15% less than that of virgin blue and an international price 20% less than the cheapest competitor (Gregg 2007).
Efficiency in this case was enhanced through the simplification of products and overheads through the use of overheads and also products. Structures in the workplace were established which would be able to suit the operation of the new carrier. These structures were on the industrial relations, pilot rates and also the hiring basis of the employees.
The other strategy was optimization of the group returns other than a collaboration of the two airlines. In this case, there was maintenance of the group oversight of both airlines and a subsequent network of the two which would in turn optimize the group returns.
To avoid the low cost airline interfering with the parent airline, a special committee was established to coordinate the operations of the former. If there were to be any differences in the opinions of the two airlines, the subject was left to the top individuals. The competition between the two airlines has give place for the two airlines to be responsible for setting of their prices based on their own grounds (Rochfort 2009).
Another strategy was a continued investment on products and services. Qantas being the core of the group has been vested with much interest having successfully been ranked among the best airlines in the world. It thus has been continuously supported with credible investment on quality of service to the personnel. This has made the airline to enjoy over 50 percent of the domestic market share, and has an upper hand over its competitor, virgin blue, by surpassing it with over 35 percent premiums.
In the international field, the strategy has worked well in that it was able to make a good start by making over $3 million within the first few months. This has though been met with opposition by those who see it as a way of demeaning conditions posed by Qantas (Simpliflying 2010).
Challenges
At the same time, the company has faced some challenges in the market. A new company, Tiger has emerged, virgin has adjusted its product and made new introductions, more low cost models which are long haul are emerging, privatization of airports and expansion of hub carriers. This can only be controlled by being flexible like transitioning some routes to a lower cost, switching domestic and also the international capacity and being completely low fare through Jetstar (Warne 2006).
Risks
Some of the risks that the company is bound to encounter include the prospective low earnings. This is mainly due to the uncertainty in the cost of fuel and also an increase in the capital expenditure. This however has been supported by the dual system and the strength in the liquidity of the company which keeps it with an upper hand as compared to its chief competitors. The other risk is the increase in competition from some of the key routes. The timing of its recovery is also uncertain, thus making it more risky.
The effective deployment of Jetstar to some of the New Zealand and Japan routes go hand in hand with the maintenance of its risk profile. This gives it the advantage of having maximum profits in cyclic lows. This has been effective in the way Jetstar has grown to be a leading flight in these leisure routes (Standards and Poor’s 2010).
Importance of Jetstar
The focus on Jetstar is more important in that it has and will help the company to maintain its lead in the market shares, both in the domestic and in the international arena. This will enhance an effective competition in cost and thus the Asian leisure travel will have overly grown. With this factor being successful as it is deemed to be, earnings for Qantas will improve in the near term which will be advantageous to it in case the business travel remains stagnant.
References
Gregg, P. (2007) World Low Cost Airline Congress 2007. Web.
Jetstar Airways (2006) Jetstar move to single brand and distribution approach to support growth in Asia. Web.
Rochfort, S. (2009) Qantas revs up Jetstar expansion. Web.
Simpliflying (2010) Australia’s Qantas Airways – the world’s most agile airline brand? Web.
Standards and Poor’s (2010) Qantas Airways Ltd. Web.
Warne, D. (2006) Qantas to finally offer inflight broadband. Web.