Question One: Outline the methods of expansion used by the company.
Qantas which was founded in 1920 was first only a domestic airline. Eventually the company began travelling internationally and started expanding itself into the global market. Qantas today has become Australia’s national airline and one of the world’s leading long distance airlines.
To become one of the worlds’s leading airlines; Qantas expanded into the global market in numerous ways. Qantas became involved in global alliances for example: one world alliance – which is a global airline service bringing together 11 of the world’s biggest airlines. One world alliance helps to create loyal customers with frequent flyer points to help create airline recognition.
One world alliance is a part of Qantas’s code sharing agreements. A code sharing agreement is a commercial agreement that grants passengers access to two different airlines through one ticket. Qantas has used code-share to access itself into a bigger market without the risk of much loss.
Another example of the expanding methods used by Qantas was gaining possession of Australia’s first low frills airline Compass Airlines in 1997 after the company chairman was thrown into jail & also acquiring impulse airways in 2001. The merging of these two companies became the basis of jetstar airways.
Jetstar is one of the subsidiary companies created by Qantas apart from Qantaslink, Q catering & Qantas Freight etc which were all created as a response to competitor virgin blue airlines. One of the outcomes of the subsidiary companies was stated by Qantas chairman in an annual meeting stating “the subsidiary companies provided significantly improved returns...” These significant returns have kept the company Australia’s leading airline.
Question Two: Identify & justify at least two reasons why the company expanded into global markets.
Qantas’s expansion into the global market was initiated by many factors. Two of these factors were the limited domestic demand, and the need of cushioning the economic cycle through increasing economies of scale.
There was Limited domestic demand and growth potential due to the small Australian population and market size. This limited Qantas to a certain amount of service revenue from potential customers, thus forcing them to look to global markets. Realistically speaking, airline travel industry is global in nature as the world is covered with transnational corporations.
The most profitable route is Sydney-Melbourne and other carriers re-competing on this and other trunk routes between state capitals. Qantas successfully gained a significant amount of market share for the domestic market after their main domestic competitor ‘Ansett Australia’ collapsed on 14 September 2001. However, in October 2001 Virgin blue announced a major expansion in the domestic market to challenge Qantas huge 90% market share. This was a result of the deregulation of the domestic markets. Virgin blue was successful in their expansion and pushed Qantas back to a 60% market share. Virgin blue’s successful pushback has created a more constricted competition in an already limited domestic market.
This forced Qantas to take two very important actions. Firstly, to minimize competitive risk they created a new subsidiary budget airline called Jetstar Airways in an attempt to still hold significant market share. Secondly, Virgin Blue’s expansion made Qantas to look out of Australia, and towards the international markets. Qantas was swift to look towards untouched Asian markets to cater for their international airline travel and hopefully gain higher profits.
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