Q1 Executive Summary
Qantas Airways Limited 's core business is passenger transport, air freight services, sale of holiday tours and associated support activities including catering, information technology, group handing and engineering and maintenance (Qantas n.d.). As a consequence of the revised structure that commenced in December 2013, the Qantas Groups split its international and domestic operations into two separate corporate entities (Qantas 2014a). This has meant that Qantas is now considered to have a divisional organisational structure, being formed by five business segments: Qantas Domestic, Qantas International, Qantas Freight, Jetstar and Qantas Loyalty.
Conduct of Operations
The management function of the Qantas Group is to separate its international and domestic arms, each with its own CEO heading up operational and commercial functions, in order to ensure that they can independently run each business based on its specific priorities and market conditions (Flynn 2014a). Domestic operations
Qantas (2014a) says its group domestic operations generated EBIT profit of $30 million for the FY 2014. The company adopts a dual-brand strategy of two only profitable domestic airlines, Qantas domestic (including QantasLink) and Jestar. Whilst Qantas domestic is focused on offering their passengers the highest frequency of flights and a variety of routes to retain a yield premium, Jestar is working to sustain its low-cost case over its competition and serve price-sensitive consumers. Qantas continues to invest in products and services with the refresh of Airbus A330 and Boeing 737-800 fleets (Flynn 2014b), in order to continue to leverage its flexibility in the domestic market. Moreover, they 'establish relationships with manufactures to adjust capital expenditure in line with financial performance and right-size its fleet and network' (Qantas 2014a). Overall, the domestic division is trying to maintain its leading network and frequency advantage in the market, further increase their fleet utilisation and reduce their costs.
The Qantas international adopts a 'gateway' strategy to connect Qantas customers to key global cities in alliance with their partner airlines, which benefits customers through code sharing (Qantas 2014a). Also, its integrated network connects international flights with domestic and regional services via the main gateway points and assists in distributing inbound tourists throughout Australia. The continued development of Qantas' joint business agreement with Emirates airlines has strengthened its network of an additional 65 destinations. In recent times, as an enhanced presence in Asia, which is the world's fastest-growing region for air travel, Qantas has also formed codeshare agreements with China Southern and Bangkok Airways and offered direct flights from Australian to seven of the major Asian cities. The investments in lounges and on-board product improvements are continued to ensure that the Qantas customer experience meets the global standards. After posting huge losses of $497 million in FY 2014, Qantas has made the decision to shut unprofitable routes and fleet reconfiguration and sell assets in order to save costs (Sawyer 2014).
(b). Market conditions
Sources of revenue
Qantas’ primary source of revenue is through the sale of flight tickets. The earnings from offering other airline-related services such as freight revenue, on-board sales and other services like booking hotels and holiday tours also form parts of Qantas' revenue. In addition, Qantas earns money by leasing some of its aircrafts, as well as generating net foreign exchange gains.
Domestic market conditions
Firstly, the domestic travel market is facing the challenges of weaker consumer confidence and the shift in the mining boom from construction to production (Qantas 2014a). The resource sector slowdown, cautious business environment, and most...
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