Australian Airline Industry - Essay

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Table of Contents Identify a market for tourism or hospitality services in the Asia Pacific region that is essentially oligopolistic in nature. Analyse the pricing and supply strategies of the key firms operating in this market. Introduction This report explains the theory of oligopoly and discusses how Australia 's airline industry provides a solid example of an oligopoly market. It uses case studies of Qantas, Jetstar, Virgin and Tiger airlines to demonstrate how they all need to employ profit-maximising strategies that take into account the likely response to the strategies of other firms. Airline Industry Overview Australia 's airline industry can be classified into three broad categories:  domestic trunk route airlines…show more content…
In the absence of effective economic regulatory oversight of the industry, it has the potential to evolve into a Qantas monopoly. High capital and set-up costs have traditionally contributed to high entry costs and have increased the market power of the airlines currently holding the top position, impeding competition. Should such circumstances continue to prevail over the longer term, it raises the issue of whether Australia 's domestic market is really big enough to sustain competitive supply and whether a lightly regulated oligopoly is still appropriate. Pricing strategy Budget air carriers have revolutionized domestic travel in Australia, making low cost travel a year-round reality for holidaymakers and business travelers alike. Both Jetstar and Virgin blue’s pricing strategy will be analyzed and discussed in this section. Low cost carriers open a totally new product: no frills, no food, no drinks, no spacious seats, no travel agencies bookings, but a very low price (Barbot, 2004). This “low-cost revolution” (Doganis, 2001) has then greatly affected the full service traditional carriers, they will have to respond this phenomenon progressively. Jetstar and Virgin blue’s pricing strategy is fairly similar. Both airlines are low cost carriers, they reduced the operating cost by cutting off unnecessary service and charging

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