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Jetstar also now gives customers with more expensive tickets priority boarding, although it plans to retain unallocated seating for reasons of efficiency. The airline buys the points from its parent but strategically recovers costs by prompting people to buy more expensive tickets and attracting back customers (Creedy, 2005). The carrier's frequent-flyer scheme has produced a revenue gain that offset its cost, such as big business routes, an immense amount of the business traffic that was lost (Creedy, 2005).
Virgin Blue's Strategy
Virgin Blue's competitive strategy is similar to Qantas, in that changing people's attitudes toward air travel is the key to growth of budget airlines. Virgin Blue has cut their costs by cutting extras on flights, such as paper tickets and free meals. The danger that Jetstar faces in cost-cutting is that the number of airline tickets sold may not outweigh the costs of the domestic carrier. Jetstar needs to make up in volume for the losses in ticket prices. Another danger that Jetstar faces in potentially losing customers is that it closes flights 30 minutes before departure but charges a fee of $50 for individual latecomers and $100 for families to book on another flight. This may be too harsh of a policy and research indicates that at the start and it had caused the airline several difficulties. For example, Jetstar lost customers as a result of this policy, and such customers switched to Virgin Blue because they were so angry and dissatisfied with the departure policy. However, Jetstar planned to win over new and old customers by adding new services to the Northern Territory, Perth and New Zealand by the end of the 2005 and early 2006. It continues to grow as it replaces its fleet of Boeing 717s with 177-seat Airbus A320s, and the bigger planes will allow it to reduce frequencies on some leisure routes and redeploy the aircraft to new destinations (Creedy, 2005).
Five Forces Model applied to Airline Industry
Michael Porter's Five Forces Model can be applied to the airline carrier industry, which consists of a group of firms that market products which are close substitutes for each other. Porter, in his theory, explains that there are five forces that determine industry attractiveness and income generating profit. The five forces are: 1) the threat of entry of new competitors, 2) the threat of substitutes, 3) the bargaining power of buyers, 4) the bargaining power of suppliers, and 5) the degree of rivalry between existing competitors. The threat of new competitors can be applied to the airline industry in that new competitors will always emerge, for example although now there are only a handful of airline carriers servicing the Australia area, more are sure to be formed. The threat of substitutes can be applied to the medium of the ticket sales on the Internet, because the cost of switching Internet providers and Internet sales in general is very cheap. The presence of this type of substitute products can lower industry attractiveness and profitability because it can limit price levels. The bargaining power of buyers is greater in the airline industry when there are few dominant buyers and products are standardized. Finally, the intensity of rivalry between competitors in the airline industry is at an all-time high. This is a result of the structure of the airline industry - since there are many equally sized competitors, the rivalry is more intense. It is in this instance where a company's success largely depends on its business plan, revenue models, core competencies, and competitive advantage.
SWOT Analysis of Qantas
In conducting a SWOT analysis of Qantas, the first step is to identify the company's resource strengths and competitive capabilities. Next, Qantas' resource weaknesses and competitive deficiencies must be identified. These results are then used to determine where the attractiveness of the company's situation ranks, as well as the attractive and unattractive aspects of the company's situation. The next step is to identify Qantas' market opportunities, and to identify external threats to the company's future well-being. All of these steps are then used to improve the company's existing strategy, where the market opportunities that are best suited to company strengths and capabilities are pursued. Weaknesses and deficiencies are corrected, and the company's strengths are used to lessen the impact of major external threats. One of Qantas' resource strengths is that the carrier has strong brand recognition in its name, as it is the second oldest airline company in the world. In 2001, Qantas re-branded its four wholly owned subsidiary airlines; Eastern Australia Airlines, Southern Australia Airlines, Airlink and Sunstate Airlines, into a single name, QantasLink. The creation of QantasLink is a strategic re-branding exercise, which allows Qantas to draw on the strength of the Qantas brand to enhance the marketing of the regional airlines and the destinations they serve to the rest of the world (Qantas Airways Limited, 2001). One of QantasLink's competitive capabilities is that it will offer a range of competitive airfares similar to those offered on the mainline Qantas domestic fleet as well as Frequent Flyer, lounge, oneworld, and through check-in benefits (Qantas Airways Limited, 2001).
Qantas' market opportunities are also strong, as its future depends on the moves and choices that the company makes in planning various mergers or acquisitions, research studies and new designs. Qantas implements research and design strategies that stretch out over the next several years, as a result of the nature of the aerospace industry. In late 2007, Qantas will open the doors to its glamorous new first class lounges in Sydney and Melbourne international airports. Designed by famous Australian born industrial designer Marc Newson (who's designed everything from airplanes to bags), the lounge, which is rumored to have cost around $20 million dollars, boasts features usually seen only in super-luxurious designer hotels (Demassi, 2007). The lounge will feature fine dining, a full concierge service, a day spa where 1st class passengers can indulge in facials and massages for free, and individual marble lined shower suites stocked with cosmetics and hair products. The first class lounges will also feature a library stocked with best selling books, magazines, newspapers and board games; and an 'entertainment zone' with plasma TVs and Sony play stations, as well as fully equipped workstations with internet access. According to Qantas' general manager, the services offered in our new lounges will be equal to those found in the world's best five star hotels and restaurants (Demassi, 2007).
Qantas has demonstrated that it has few external threats to its well-being, however, one worth mentioning is the internal scandals the company has faced that have received widespread public attention. The serious accident in Bangkok in September of 2002 caused Qantas to review its operational procedures and training. However, the depth of scrutiny, which has took place over the past years in performance reviews, revealed a number of areas in which the carrier could improve. As a result of these kinds of reviews, Qantas has emerged as an even stronger and more operationally proficient airline. Qantas cooperated with the Australian transport safety bureau in the detailed investigation of all factors surrounding the accident, and has used the accident positively in evaluating its internal threats to its well-being. Qantas admitted no wrong-doing as a company, and agreed to only accept responsibility for the conduct of its employees. As long as Qantas continues to carefully resurrect itself in this area, the company will remain successful. Thus, a SWOT analysis of Qantas indicates that the company is very strong in competitive capabilities and market resources, and does not face very many threats to market opportunity.
Finally, both Qantas and Virgin Blue have remained competitive in the airline industry and have managed to be able to continue to earn profits in recent years while most airlines have suffered. This is a result of their competitive strategies that they have employed. For example, both airlines benefited from Tourism Australia's ambitious See Australia campaign, and have build on the tourism campaign's strategy. The See Australia campaign, a $360m campaign created by Brand Architecture International New York and TBWA launched in May of 2000, promoting Australia as a desirable travel destination to the local and global market, and targets Australians who have been putting off taking their holidays from work. In addition, the television segment of the campaign highlights Australia's glamour destinations such as Sydney and Melbourne, with future plans to grow the attractiveness of destinations beyond the Sydney, Brisbane and Melbourne triangle (Shea, 2004). Since the campaign was launched, it has been very successful for both Qantas and Virgin Blue; the number of Australians who do not take vacations has dropped from 40% to 30%. Finally, experts and industry analysts predict the future of Australia's domestic travel will continue to grow, particularly in the budget travel sector (Shea, 2004). Competitive strategies such as these have allowed both companies to continue to earn profits in a declining industry.
Qantas believes that using knowledge, insight and to the full extent of their capabilities help…[continue]
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