Australia’s prevalent air carriers are: Qantas Airlines, Ansett, Pacific Blue Airways, Airnorth, and Qantas’ lead competitor Virgin Blue. Qantas is distinctive in that the Group is Australia’s oldest, most recognized, and most on-time carrier.
All carriers are facing serious economic challenges from the rising cost of labor and fuel, government regulation, and competition between them. In anticipation for such trials, Qantas CEO Alan Joyce launched a five-year plan in 2011 to restructure Qantas’ domestic and international network in addition to expanding its already existing frequent flyer program for Qantas and its wholly owned subsidiary, JetStar. In Qantas’ 2013 mid-year report it realized an underlying profit before tax of $95 million.…show more content… For the mid-year report of 2014, Qantas reported losses reaching $252 million. Joyce claims this loss is due to “structural economic shifts exacerbated by an uneven playing field in Australian aviation policy” (Qantas Media Releases, 2014) in addition to the continued cost of the transformation. The “shift” that Joyce refers to is in regard to foreign investment in domestic airlines. For example, a significant percentage of Virgin Blue’s ownership is concentrated in three foreign airlines that have the support of their respective governments. Joyce’s argument is that the current Australian aviation policy allows majority foreign-owned carriers to operate domestically, which greatly distorts the Australian domestic market. In addition to Virgin Blue, these foreign-owned companies include Singapore Airlines, Ethiad, and a plethora of other minor carriers. All of these competitors receive substantial subsidies that put Australian-owned and/or controlled companies at a competitive and economic disadvantage.
Qantas has to rethink their marketing strategy to the customer while continuing to prioritize spending and downsizing costs. Joyce’s precarious and lofty goal is to have a $2 billion cost reduction as well as reducing the Group’s debt by $1 billion by the end of FY17. A major contributor to this plan is that Qantas aims to “re-assign aircraft to better match demand, defer aircraft orders, dispose of aircraft, increase fleet