Airlines all over the world have been coupled by major changes and the Australian airline industry was no exemption. The changes were caused by global changes and characterized by mergers of major international airline, deregulation, privatization, strategic alliances and increased competition.
Deregulation is the removal of laws and restrictions governing the operations of an industry and giving it the liberty to operate independently without government intervention.
As put in Geoffrey (1998, p.47) Australia needed to deregulate its airline industry to promote growth in the sector due to the opportunities that would come as a result of open skies.
The process of deregulation by the Australian Government of the airline industry began in 1970 as put in Schulte& Ying (2005, p.182). The government felt the need to liberalize the airline industry due to globalization and the need to increase competitiveness internationally. In 1970 the government removed the restriction on parallel air fares and the rules regarding discount fares were made more liberal (2005, p.182).
The campaign for deregulation was instituted majorly to protect the consumer who was being negatively affected by the restrictions by the government as put in Grimm and Milloy (1993, p.259) especially due to very high fares for pleasure travelers because discounts were only offered in the economy. The services offered to the customer were also substandard.
DEREGULATION IN AUSRALIA’S AIRLINE INDUSTRY
The deregulation process ended thirty years of controls by the Australian government on fares that the carriers could charge airline passengers, restrictions on airplane importations, new entrants into the market and controls on capacity as argued by Grimm and Milloy (1993, p.259).
According to Schulte& Ying (2005, p.182) prior to the deregulation the Australian airline industry had only two players one private company (Ansett) and the other government owned Australian Airline and Qantas agreements that governed the airlines one to promote growth in the infant industry and the other to eliminate monopolization.
The deregulation process full impact was felt in the 1990 when the government fully liberalized the airline industry as put in the (BTCE) Bureau of Transport and Communications Economics (1991, p.1).
This lead to removal of trade barriers such market entry, capacity controls and importation regulations as put in Grimm and Milloy (1993, p.259), and removal of fare restriction which was regulated by Commonwealth’s Independent Air Fares Committee (IAFC) as put in Bureau of Transport and Communications Economics (1995, p.3)., .The deregulation process had impact on both to the airline industry and the consumer.
IMPACT ON AIRLINE INDUSTRY
As put in Bureau of Transport and Communications Economics (1995, p.2) after deregulation the number of passengers using airlines increased especially in the domestic market. This can be attributed to the decrease in fares after the deregulation. This positively impacted the industry because of the increase in the market in turn lead to increased profitability and growth.
The deregulation process also brought about increased competition in the airline industry. Prior to the deregulation there were only two players in the Australian airline industry, Transnational Australian Airlines and Anesett. After the liberalization other players joined the market due to the removal of new entrant’s barrier by the Australian government. The first entrant was Compass airlines just one month after the deregulation commenced as put in Grimm and Milloy (1993, p.259). This lead to increased competition between the players and brought major benefits to the consumer such improved services and reduced fares As put in Bureau of Transport and Communications Economics (1995, p.2).
The deregulation brought growth in the carriers. Due to the increased demand for airline services the carriers expanded their carriers by introducing bigger airplanes that could carry more passengers. This reduced their cost of production. Due to increased economies of scale and they were also able to provide improved quality of service and reduced fares as put in Xiaowen et al. (2010, p.24-41).
Deregulation lead to strategic alliances and this brought about growth in the of the carriers international business. Liberalization of the airline increased traffic intensity both domestic and international markets. This created the need for strategic alliances with other international carriers in order to provide ease in entry into international market and reduce operational cost as argued in Xiaowen et al. (2010, p.24-41).
IMPACT ON THE CONSUMER
The consumer was able to enjoy improved service quality from the carriers. They also enjoyed decrease in fare prices due to increased competition that lead to the fares that were prior to the deregulation process controlled by the Commonwealth’s Independent Air Fares Committee (IAFC) being controlled by market forces.
The consumer also enjoyed a variety of options for airline services due to the new entrants into the airline industry after the deregulation and increase in frequency of service. Frequency of service allowed the consumer the flexibility of travelling at desired time and ability to book flights on short notice.
Qantas the second oldest carrier in the world was founded and launched 1920 in Queensland. Its headquarters are in Australia. It offers its services to domestic and international markets as put in Qantas (2010, p.1). The government of Australia acquired Qantas as an international airline in 1947 to serve the international market exclusively.
According to Qantas (2010, P.5) the airline has grown and serves forty four countries with one hundred and eighty destination domestically and internationally. It is the world’s eleventh largest airline.
Its main business is offering services to airline passengers. It has two major divisions that is, Qantas and Jetstar. The airline is divided into three groups that is, consumer and marketing, commercial and operations Qantas (2010, P.1).
According to Qantas (2010, p.4) after the deregulation of the Australian Airline industry by the government in October 1990, the government sold forty nine per cent of its shares in Qantas Airlines. Twenty five percent of the forty nine percent shares sold by the government were sold to British Airways. According to Qantas (2010, P.4), in 1992 the government sold the rest of it shares in Qantas and the process of the privation was completed in September 2004 making it a publicly owned corporation. The shares were sold to institutions and private investors. This lead to a need to change the way the corporation was operated in order to meet the expectations of its new owners.
STRATEGIES BY QANTAS AFTER THE DEREGULATION
As put in McDonald and Millet (1999, p.2) airlines all over the world have under gone major changes since the gulf war and globalization has prompted many governments to liberalize the airline industry. This has seen transformation in the industry characterized by privation mergers, increased competition on an international and domestic level. To cope with this change airlines have had to adopt competitive strategies in order to survive in the market.
The privatization of Qantas and liberalization of the airline industry in Australia prompted it to engage in development strategies as the liberalized market offered more opportunities for growth and expansion.
Qantas has engaged in continued restructuring, expansion strategies and cost cutting strategies, human resource development strategy and global strategy that have turned into a market leader. Some of the strategies adopted and implemented by Qantas after the deregulation include;
EXPANSION AND RESTRUCTURING STRATEGY
Qantas Entry into the Domestic Market
Prior to the liberalization of airline industry in Australia Qantas only served international markets. After the deregulation the restriction between domestic and international markets was removed according to Grimm and Milloy (1993, p.259).
This gave Qantas an opportunity to venture into the domestic market in 1992 as put in Qantas (2010, p.4). Qantas entered the domestic market through purchase of Australia Airlines in 1993 as put in McDonald and Millet (1999, p.3). This gave it an opportunity to penetrate the domestic market. When Qantas was the international flag carrier it only served international markets. Purchase of Australia Airline enabled it to gain a competitive edge in both the international and domestic market.
This strategy has been very successful as Qantas serves fifty three destinations in its domestic market.
Table 1: Destinations for Domestic Destination Served By Qantas as viewed in Qantas (2010, p.8)
|Australia(53)||Canberra. Asbury. Armidale. Ballina/Byron. Bay, Coffs Harbor, Dubbo, Lord Howe Island, Moree, Newcastle , Port Macquarie, Sydney, Tamworth , Wagga Wagg, Barcaldine, Biloela , Blackall, Brisbane , Bundaberg , Cairns, Charleville , Cloncurry , Emerald, Gladstone, Gold Coast, Hamilton Island, Hervey Bay, ,Horn Island ,Longreach, Mackay, Maroochydore , Moranbah, Mount Hotham, Mount Isa ,Proserpine, Rockhampton, Roma, Townsville, Weipa, Adelaide , Olympic Dam, Port Lincoln, Devonport , Hobart|
Qantas Acquisition of Impulse Airlines
According to (2010, p.4) Qantas airlines acquired Impulse airlines in 2001 when impulse terminated its services due to the highly competitive environment. Impulse operated as a fully owned subsidiary under the Qantaslink brand until it was re-launched as Jetstar in 2004. The decision to purchase jester was a wise one because has been a success because Jetsar has grown and has its own has brands that is, Jester Pacific and Jestar Asia Qantas( 2010, P.5-6).
Since jester was launched in 2004 it has grown to become the largest carrying capacity in Asia and pacific markets with very affordable prices for air airfares as put in Smith (2011) hence the acquisition was a success.
Qantas Acquisition of Australian Airlines
Australian Airlines was a government owned flag carrier for domestic routes before the deregulation in 1990. After the deregulation Qantas acquired Australian airline in 1992. The acquisition was a strategy to help Qantas to pioneer the domestic market because prior to the deregulation it only operated international routes. However they withdrew it from the market in 2006 in order to focus on their main brands, Jestar and Qantas.
After the government sold twenty five percent of its share to in Qantas to British airways it made a capital injection in Qantas which enabled it to purchase Australian airlines as put in McDonald and Millet (1999, p.4). The capital injection also enabled Qantas to purchase a large capacity airplane for its domestic routes which lead to further reduction in costs.
COST CUTTING STRATEGY
According to McDonald and Millet (1999, p.2) Qantas adopted the cost reduction strategy by mainly targeting to reduce its staffing cost. This was achieved through negotiations with labor unions to avoid the negative publicity that arise if the strategy was implemented internally. The strategy also entailed the reduction of Qantas staff. After the acquisition Australia Airline, Qantas faced a major challenge of trying to merge the cultures from the two corporation as put in McDonald and Millet (1999, p.80) this created the need to restructure the human resource and the only way this could be achieved is through retrenchment of some of the staff. This left Qantas with a smaller group of the human resource that was customer oriented and could help Qantas meet its objective of consumer satisfaction on a smaller budget.
According to McDonald and Millet (1999, p.4) after sale of twenty five percent of its share to British airways the government made a capital injection into Qantas that enabled it to purchase a large capacity airplane to operate its domestic market, this helped reduce cost and helped Qantas to obtain economies of scale. This in turn helped the corporation to improve the quality of its service and reduce its air fares.
As put in Real’s (2011, p.9) Qantas in an aim to cut cost amid rising cost of fuel has entered into discussions with companies producing renewable sources of fuel. It aims to obtain five percent of its fuel from alternative sources by the year 2016. This will help reduce cost of fuel.
HUMAN RESOURCE DEVELOPMENT STRATEGY
In order to restructure the organization structure Qantas undertook employee development strategy as put in McDonald and Millet (1999, p.18). This strategy was aimed at changing the organization culture to a more productivity oriented one. This was achieved through emphasis in a customer oriented culture by the new management of Qantas. This was also characterized by team building exercises that were aimed at merging the cultures of the two airlines that is transnational airline and Qantas. Management also focused on entrenching the organizations new objective that is attainment of productivity through focusing on customer satisfaction into the every day operations of the airline. This strategy was a success a Qantas is the leading brand in Austria.
FLEET MAINTANANCE AND UPGRADE STRATEGY
In order to ensure that it is offering quality services to its passengers Qantas has adopted a fleet maintenance and upgrade strategy as put in Qantas (2011, p.70). This is aimed at ensuring all the aircrafts are safe, noise emissions are minimal, the fuel consumption of the air crafts is cost effective and the aircrafts have passenger comfort especially for their long distance aircrafts. This strategy has helped Qantas to reduce cost especially through ensuring effective consumption of fuel and cost reduction through large capacity air crafts that has enabled Qantas achieve economies of scale.
This strategy implementation entails regular renewal and maintenance of its aircrafts. According to Qantas (2011, p.7) the corporation has pre-ordered its aircrafts in the year 2000 that were to be delivered as shown in the table below.
Table 2: Showing Pre- Order Delivery Schedule as viewed in Qantas (2011. P.7)
|DATE OF DELIVERY||MODEL OF AIRCRAFT|
|November 2000||12 A380s, 13 A330s, 6 B747-400ERs|
|January 2005||7 Bombardier Q400s|
|December 2005||up to 115 B787|
|August 2006||4 A330-200s|
|October 2006||8 A380s, 4 A330-200s, 5 B737-800s|
|January 2007||2 Bombardier Q400s
|March 2007||B787 firm orders increased to 65|
|July 2007||B787 firm orders increased to 65|
|October 2007||12 Bombardier Q400s|
|November 2007||up to 188 narrow body aircraft, including 68 A320/A321s and 31 B737-800s
|June 2009||B787 firm orders reduced to 50|
|August 2009||4-5 A330-200s|
|July 2010||7 Bombardier Q400s|
This strategy ensures that Qantas is able to take advantage of new technology in the market and avoid costs associated with maintenance of old aircrafts.
According to Qantas (2010, p.8) Qantas Airline has adopted a global strategy in an aim to acquiring more market share and attainment of growth in the organization. Qantas Airlines was a government owned flag carrier for international routes and had a niche in international markets this gave it the advantage it needed when penetrating the global market. It achieved this through strategic alliances with other international airports to gain entry into international markets. To pioneer the domestic market it acquired an Australia airline which was the national flag carrier for domestic market before the deregulation. This gave Qantas a competitive edge in the domestic market which was a new territory for the corporation.
The airline serves one hundred and eighty two destinations in forty four countries as summarized in the table below.
Table 3: showing global Destinations for Qantas as viewed in Qantas (2011, p.8)
|Africa (1)||South Africa|
|Americas (5)||Argentina, Canada, Chile, Mexico, United States|
|Asia and Pacific (20)||Australia, China , East Timor, Fiji, Hong Kong , India, Indonesia, Japan, New Caledonia, New Zealand, Norfolk Island Papua New Guinea, Philippines , Singapore, South Korea, Taiwan, Thailand, Tahiti, Vanuatu, Vietnam|
|Europe (14)||Austria, Czech Republic, Denmark,
France, Germany , Hungary, Italy, Netherlands, Norway, Poland, Spain Sweden, Switzerland
|Middle East (4)||Bahrain, Jordan, Lebanon, United Arab Emirates|
|Australia(53)||Canberra, Asbury, Armidale, Ballina/Byron Bay, Coffs Harbor, Dubbo, Lord Howe Island, Moree, Newcastle , Port Macquarie, Sydney, Tamworth , Wagga Wagg, Barcaldine, Biloela , Blackall, Brisbane , Bundaberg , Cairns, Charleville , Cloncurry , Emerald, Gladstone, Gold Coast, Hamilton Island, Hervey Bay, ,Horn Island ,Longreach, Mackay, Maroochydore , Moranbah, Mount Hotham, Mount Isa ,Proserpine, Rockhampton, Roma, Townsville, Weipa, Adelaide , Olympic Dam, Port Lincoln, Devonport , Hobart|
According to Qantas (2010, p. 10) Qantas Airline has worn eight awards in Australia for its brand quality which is characterized by excellent customer service, reliability, safety and operational success.
This has been achieved through ensuring that the aircrafts used by Qantas are regularly maintained and renewed to ensure safety for the passengers.
Qantas also offers a range of in flight services such as entertainment, dining and before flight services such as seat reservation and products such as pajamas slippers and skin care products to ensure that its customers are comfortable and satisfied Qantas (2010, p. 10). This strategy has been a success evidenced by Qantas being a brand leader in Australia and winning eight awards for its brand.
The Australian Airline deregulation in October 1990 was the beginning of a more liberalized airline industry in Australia. It ended price controls and trade barriers by the government. This resulted to growth in the industry, increased competition, better services for the consumer, reduced fare and increased frequency of service. After the deregulation Qantas adopted a number of strategies to take advantage of opportunities presented by the liberalized airline industry. Some strategies implement include restructuring strategies cost reduction strategies, brand strategies and aircraft renewal strategies.
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