For approximately the past 20 years, since the deregulation of the Australian Aviation industry, the Australian Domestic Market has been profitable. The past half year has brought to light the first negative effects of fierce competition between Australia's airlines the Qantas group and Virgin Australia Holdings Pty Ltd (VAH) (which will be further referred to in this document as Virgin Australia) in the form of loss which can be seen in the below figure.
In recent years, the Australian Domestic market has been predominantly a duopoly style market with Qantas Group and Virgin Australia being the main competitors contributing to market share. Virgin Australia entered late after deregulation and offered the first real competition to Qantas Groups monopoly hold of the marketplace, beginning first operation in 2000 as Virgin Blue. Qantas held a monopoly position in the Australian market up until 2000, as a FCC (Full Cost Carrier). After deregulation and the end of the two airline policy, Qantas group could now bring in a LCC (Low cost carrier) in 2003 to service a newly developing market of leisure travel. Virgin Australia made the call to compete in the same market by creating their own LCC in 2007, Tiger Airways. The Qantas Group for many years has occupied around 65% market share, with Virgin Australia and Tiger market share growing each year.
In the past year, according to BITRE data, there has been an increase of 1.7% for the amount of total passengers carried on the Australian Domestic network. Accompanying the increase in total passengers carried was an appropriate increase in RPK (Revenue Passenger Kilometres) at 2.0% and an increase of ASK (Available Seat Kilometres) at 3.2%. This data tells us that the past year ...
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...ding Qantas and Virgin profits. 2014. At capacity: Too many seats grounding Qantas and Virgin profits. [ONLINE] Available at: http://www.smh.com.au/business/comment-and-analysis/at-capacity-too-many-seats-grounding--qantas-and-virgin-profits-20140228-33phq.html. [Accessed 08 April 2014].
Business class is the battleground. 2014. Business class is the battleground. [ONLINE] Available at: http://www.smh.com.au/travel/blogs/travellers-check/business-class-is-the-battleground-20140303-33wr5.html. [Accessed 08 April 2014].
Domestic aviation activity. 2014. Domestic aviation activity. [ONLINE] Available at: http://www.bitre.gov.au/statistics/aviation/domestic.aspx. [Accessed 08 April 2014].
Domestic Aviation Activity Annual. 2014. . [ONLINE] Available at:http://www.bitre.gov.au/publications/ongoing/files/domestic_airline_activity_2012_2013.pdf. [Accessed 08 April 2014]
The following value chain, which focuses on Spirit Airlines, is representative of most of the firms in the Ultra Low-Cost Airline industry. Spirit is the industry leader in many areas such as operational efficiencies/cost structure, aircraft fleet management, brand/network and growth. The firm, however, trails industry foes in areas such as customer service and operational reliability and recoverability. While most in this segment pursue the cost-leader competitive strategy, Spirit has demonstrated the most effective model to date – whether the model is the most sustainable remains to be seen.
One of the many influences that affect Qantas is the presence of globalisation, which has heavily affected the airline both positively and negatively. Globalisation is a process which refers to the increased integration between different countries and economies as well as the increased impact of international influences on all aspects of life and economic activity. Globalisation is responsible for the removal of many trade barriers and the increased level of competition that Qantas has been exposed to. The increased levels of competition has increased consumer sovereignty and forced Qantas to implement strategies to gain a competitive advantage in order to redirect consumers towards their business. Qantas has implemented a cost leadership strategy as a response to globalisation and the influence of cost based competition. One way that Qantas achieved this was by using Globalisation itself to the business’ advantage. Globalisation ha...
The commercial aircraft industry had experienced a significant change during the deregulation of domestic airlines in 1978. The deregulation resulted in an increase in air travel, intense airfare competition among carriers, the entry of low-cost and low-capacity airlines. This increased competition shifted the focus of aircraft manufacturing from performance to low cost and from service to price.
Albers, S. B. (2009, March 13). crisis of Qantas. Retrieved May 14, 2014, from Qantas crisis: http://wenku.baidu.com/view/31572f48cf84b9d528ea7a56
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
• Qantas had to make an increased profit and pay a dividend to its shareholders which increased over the years of management
In order to get a comprehensive analysis on SIA's financial statement analysis , we compared SIA's 5 financial year ending(FYE) results with the industry's average and 2 of its main competitors Cathay Pacific Airways and Qantas Airways . Cathay has been trailing closely to SIA in terms of first class cabin service and profitability for years. Qantas has long been dominating the highly profitable Kangaroo route and is ranked 5th in the world by Skytrax's survey . Please refer to appendix for the actual figures for every analysis below.
As American airlines were well established airlines compared to people express, and hence people express were new in to the market and wanted to do more business compare to all other 5 top airlines at that time, so people express started to sell their tickets at much cheaper rates than compared to all other airlines. Bob Crandall, a senior vice-president of the American Airlines said that charter planes were flying from New York to California at such a less amount of money, that American Airlines were not able to sell their seats less than the charter airlines, because they can’t cover the cost of the Airlines management which includes their staff, the fuel, services which they would be offering inside the plane. American Airlines were almost running on average their most of the flights were flying empty. Crandall with his team wanted to come up with this solution and wanted know whether they can feel those empty seat with less rates, but as the People Express fares were much more cheaper. Crandall thought that why people will go for high rate charges if they are getting low charges, and he also suggested if we change our rates to fill our empty seats than the revenue which they would be generating from the low charged empty seat will be almost equal to zero, which means they would not be making any profit.
The main opportunities that the scheduled air transportation will have in the next five years are the possible decrease of TSA agents at airports, technology increasing the safety and comfort of the flights for the passengers and ...
In my discussion I will use the Australian airline industry to present how oligopolies operate, and to show the different behaviours and strategies that arise from the interdependence of firms. I will mainly concentrate on the domestic airline market in Australia. The domestic airline market consists of a duopoly of two firms, Qantas and Virgin Blue. Since Qantas and Virgin are the only two Airlines supplying domestically in Australia, they account for all of the profits in the market and consequently they are in direct competition with each other. Because only two firms are competing, each firm must carefully consider how its actions will affect the other, and how its rival is likely to react. Thus, strategic considerations regarding the behaviour of competitors in this duopoly are essential in order for Qantas and Virgin to set prices.
Several weaknesses in airline operations were identified as the causes of the RM1.3 billion loss. These included esclating fuel prices, increased maintenance and repair costs, staff costs, low yield per available seat kilometer ("ASK") via poor yield management and an inefficient route network.
In an attempt to capture market share, many airlines in India are flying below their cost, thus incurs heavy losses.
This issue has great impact on Tiger Airways, many steps or tactics been taken by them to improve their reputation as well as gaining more profits and reducing losses. The consumer behaviour towards services provided by Tiger Airways was affected by some problems that seem to be risking the lives of their passengers. This explains the loss of immense profit that led them into losses. In gaining back the confidence of their customers, they made many promotions by offering much lower prices and deals which includes hotels as well. For example, their customers could rent certain hotels at cheaper price and save up their travelling expenses. In short, Tiger Airways is struggling to get out of the pothole after suffering three consecutive losses so that they do not have to end their business.
When an airline does not have a sustainable competitive advantage, it does not have any properties of differences from there competitor and turns to a dangerous price war. The sustainable ...
There are other ways in which airlines customers are segmented. The airline services are divid...