Operations

Role of Operations

Cost leadership Qantas main costs are staff (26%), aircraft operating e.g. maintenance (20%), fuel (25%), depreciation (9%), marketing (4%), IT (3%) and other (11%). To gain cost leadership, Qantas must find ways to minimise costs, and targets cost reductions of $1.5 billion over the next 3 years. Therefore Qantas aims to use the least amount of inputs to deliver one output. This can be achieved through: Economies of scale. Qantas has tried achieving this by being in the Oneworld Alliance, and by being a part of the alliance they have expanded route networks and streamlined processes, therefore improving customer service, increasing passenger volumes and reducing costs through economies of scale. Qantas can also negotiate lower fuel costs due to needing much greater quantities of fuel than its competitors. Standardising its services to destinations. Adoption of advancements in technology to reduce labour costs. Making waste reductions. In 2011 Qantas achieved reductions in its electricity, water and waste due to recycling, energy efficient lighting, water saving devices, and energy efficient material.

Differentiation of product/service This approach does not mean competing on cost but by adding features to differentiate its product/service from its competitors. Qantas is the largest Australian airline offering comprehensive domestic and international coverage Jetstar is for price conscious customers while Qantas is a full service airline. Offers business and economy on domestic flights and First, business, premium economy and economy on international flights. Has comfort based features such as the Skybed, lounges, online check in and self-service kiosks this differentiates the product.

Interdependence with other key functions Because of its central role, operations at Qantas must be performed in coordination with other business activities. Human resources, finance and marketing exist because of and to support the operations function. However, operations cannot succeed without their contribution to and direct participation in the transformation of inputs into the final outputs. Operations uses employees as a major input for their processes, and human resource managers provide the following services to them: Recruitment of staff Pilots to baggage handlers and cleaners, a hierarchical recruitment, encapsulating the many roles that infuse to operate the business Training and development. When Qantas receives new planes, such as the Boeing 787, there will be a need to train pilots, maintenance crew and cabin staff to effectively integrate the new craft, allowing their employees to perform their job properly and effectively, and operate the business existing junior pilots need to be programmed for development training to widen the number of craft they are accredited to fly; maintenance staff need to maintain their accreditation through periodic refresher training It is the role of HR to aim to retain staff through motivation benefits and negotiated monetary rewards. Due to the extensive amount of time and money spent in acquisition and training, it is only natural for Qantas to want to retain their staff. The finance department monitors, records and analyses the financial transactions, providing regular and periodic reports on the financial performance for operational management and decision making. Also operational activities such as purchasing and leasing new planes rely on funds. The marketing function connects operations with the customer by providing the market requirement. Operation in turn affects marketing decisions by determining the constraints and capabilities in pricing, promotion, product design, etc.

Influence of Operations

Globalisation Globalisation has increasingly outsources some of its functions such as maintenance and IT to lower its operational costs. Additionally, globalisation has enabled Qantas to access new markets overseas, with more than 70% of its assets geared to the global market. To maximise their growth potential, continuing to give returns to customers, provide its services to customers and to spread the brand, expansion into overseas markets are essential. This can be seen through their intention to set up a new premium airline in Japan and another low cost airline in Asia to take advantage of growth in that region. Although globalisation has raised some benefits for Qantas, it has also introduced overseas companies which compete for cost leadership and increase competition, with 70% of the 40 airlines which fly to and from Australia receiving financial assistance from their governments, distorting the market and making it hard for Qantas to stay competitive.

Technology Qantas has decided to use the new A380s which have greater capacity and are more fuel efficient. Additionally, the A380s provide comfort based features such as flight entertainment systems as well as upgrades to business class in terms of allowing them to use laptops and send emails and texts during flights. Qantas spends about $300 million a year on training and any significant technological changes require staff to be retrained, therefore increasing the cost of this. An example is when the airlines reservation was shifted onto Amadeus and therefore 10000 staff needed to be retrained.

Quality Expectations Constant pressure is placed on Qantas to ensure customer expectations are fully met, and if possible, exceeded. This has been achieved through maintaining its high level of service and upgrading their comfort based features such as online check in, inflight entertainment, self-check in kiosks and specially designed menus to cater for the quality aspect of the business There is a pre-existing consumer desire, which Qantas must meet it is an essential expectation of the quality the notion of customer loyalty

Cost-based Competition Qantas has attempted to minimise their costs through introducing new technology, seeking alliances, outsourcing, reforming human resource practices and restructuring. These changes have affected the current stakeholders as seen by their aim to outsource maintenance jobs resulting in industrial action. Qantas faces significant competitor growth in all markets which impacts on their market share and profitability This means an ongoing focus on cost minimisation Many of Qantas competitors have significant cost and structural advantages such as lower labour rates, lower rates of taxation, cheaper financing, lower airport charges due to the global market that each organisation is competing within Qantas has been under some criticism as of late with the quality of its services with increased safety incidents and the shutdown of its services in the battle with the unions in 2011

Government Policies The domestic airline industry has been deregulated for some time, however recently, the Federal Government has been increasing access to Qantas protected international routes for airlines like Delta, Virgin, Emirates, Etihad, Qatar etc In 2008, Australia and the US signed an Open Skies Agreement which removed restrictions on Australia and US services between the two countries The Federal governments new policy the Fair Work Act has increased Qantas operating costs, due to supporting workers. The government basically screwed Qantas over by letting its competitors to access Qantas protected international routes, therefore making these routes less profitable. Due to the implementation of the carbon tax, Qantas is likely to receive hundreds of millions of dollars in expenses - $23 per tonne of carbon dioxide produced effecting full domestic airlines The carbon price does not apply to international flights. Flights to and from Europe will be affected by the European Union's Emissions Trading Scheme.

Legal Regulations Qantas is subject to regulatory control of the Civil Aviation Authority and is required to hold operating licenses The regulations all three levels of government implement affect Qantas by increasing their costs and trying to increase conditions of employees. Examples include: Restricting foreign investment to 49% under the Qantas Sales Act 1992. Regulations on labour such as OH&S, anti-discrimination and workers compensation. Being economically regulated by the ACCC, and being knocked back on its attempt to create an alliance with Air New Zealand.

Environmental Sustainability Due to growing public concern and awareness there has been pressure put on Qantas to maximise its use of renewable resources as well as recycling non-renewable resources to promote conservation environmental impacts become more transparent, and is therefore central in Qantas concern to remain environmentally stable For Qantas, the Boeing 787 and Airbus A380 on order are significantly more fuel efficient than the ones replaced responding to environmental concerns and presenting a positive brand image

Ethical and Social Responsibility Due to increasing social expectations in terms of businesses acting morally, there is pressure on Qantas to take into account the consequences of their actions on stakeholders and ensuring those decisions are socially and morally responsible. Examples include: Having a health surveillance program to constantly monitor workplace conditions. Donating $2 million to charitable causes in 2011. Implementing a Reconciliation Action Plan, a program which focuses on employing Indigenous Australians.

Operational Processes

Inputs Transformed resources are the items which are changed by the operations process, and in terms of Qantas, include: Materials - Includes raw materials used such as fossil fuels and intermediate goods such as the food ingredients for their catering services. Information Qantas uses information when the data they gather is analysed and used directly in the process of the business, such as the bookings made by customers are used to determine which aircraft to use and which services to offer. Customers Qantas transforms their customers from changing their location point from where they start and their new destination. Transforming resources are resources which perform the changes in the operations process, and consist of: Human Resources, used by Qantas to operate and maintain machinery and equipment used for processes, as well as to manage certain business department. For Qantas to be successful, they need to ensure that HR employs and retains high quality staff by providing good wages, working conditions, benefits and motivation. Facilities Facilities such as aircrafts, maintenance bases, and spare parts holdings. To be competitive, Qantas has to ensure that its facilities are located, designed and fitted out in optimum circumstances.

Transformation Processes 4Vs The 4Vs evaluate a business effectiveness in reaching its requirements to decide how much or what quantity of output to produce: Volume How much output is produced. Qantas must be able to quickly adjust to inevitable changes, with not being able to produce enough leading to loss of sales which producing too much leading to wastage. Variety The mix of outputs produced. Due to being of high volume for the majority of Qantas services they use the standardised approach, saving costs on processes. Variation in demand How demand changes over time. Qantas must always be ready for both predictable changes such as seasonal fluctuations as well as being able to adapt to demand decreases which are usually unpredictable such as terrorist attacks and the SARS epidemic this accords with the economic state Visibility How much of the process can be seen by the customer. Qantas obviously has high visibility due to there being customer contact throughout the whole process. Sequencing and Scheduling Sequencing is the order in which tasks must be performed. Scheduling accounts for the time duration of each of these tasks. Qantas flight schedule allows customers to see departure and arrival times. Qantas uses Sabre Air Flight Suite Systems which automate their flight scheduling, putting more flights on certain routes at certain times, making sure that each flight has pilots, cabin crew, catering, and airport and engineering support. Technology, task design and process layout: Advancements in technology is embraced at Qantas due to facilitating increase productivity, as well as replacing human capital. This includes online check ins and online bookings. Task Design is the breaking down of the full transformation process at Qantas into individual tasks to be performed, allowing for them to analyse and assess the number of operative staff required, the skills they need, whether training is necessary, etc. Qantas has an optimum process layout where machines and equipment are grouped together by function, enabling Qantas to utilise space and labour efficiently and eliminate bottlenecks. Each part of Qantas operations has to be monitored and controlled to ensure that the plan is adhered to, and if there is any discrepancy between planned and actual results detected, corrective action is taken.Outputs Customer service Customer service refers to how well Qantas meets the needs of its customers, and continues to focus on delivering the highest levels of customer service. To monitor their level of customer service, Qantas uses its Closed Loop Feedback Program, which enables direct feedback from 11000 frequent flyers.

Operational Strategies

Performance Objectives Qantas needs to ensure to consistently produce high quality services which reach customer expectations, and this is achieved through keeping the aircraft clean and tidy, friendly staff, and making sure their website is user friendly. Qantas has introduced many operational strategies to increase the speed of their service, including online check in, check in kiosks and Q Bag Tags. Qantas measures its dependability through on-time departures (83.8%) and on-time arrivals (83.1%), and although these statistics are higher than their competitors their dependability has severely decreased due to mechanical failures and industrial disputes. Due to the continually changing market environment Qantas must be flexible through either expanding or changing the products offered, changing the volume of the product, or by changing the delivery times. Jetstar is an example of this, being Qantas response to the competition of other low cost carriers. Customisation is the process of giving Qantas customers more options by varying their product, and Qantas does this through their membership in the Oneworld Alliance where it can offer services to more than 680 destinations in 134 countries. Qantas aims to keep their cost low with respect to their other performance objectives, and this is done through implementing cost cutting strategies. Qantas measures their cost effectiveness though productivity, and has a load factors of 80% in 2011, which views well against its competitors.

New Product/Service Design and Development Competitive pressure and emerging demand in the market make it necessary for a business to develop a new product or service, with Qantas upgrading and updating their existing services to maintain their competitiveness and productivity. In July 2012 Qantas launched Jetstar Japan to take advantage of growth in the Asian aviation market.

Supply Chain Management Supply chain management refers to controlling the supplies through Qantas whole operations process from sourcing inputs to outputs and how they best reach the consumer. Qantas aims to achieve efficiency and cost effective through managing a good supply chain, meaning that they aim to reduce inventory, increase transaction speeds and increase customer satisfaction. SCM has four key components: Sourcing A business must forecast the quantity and quality requirement for every input needed in the operations process, and must choose suppliers based on dependability and flexibility. Global Sourcing Due to the expansion of globalisation, Qantas has increased its level of global sourcing, being of lower costs and lead times being able to be potentially shorter if the products were not offered in Australia. There are also some risks to global sourcing such as exchange rate fluctuations and different legal regulations. Qantas has employed some pilots in New Zealand, some cabin staff in Asia at lower wages paid and some engine maintenance carried out in Malaysia, all have cost benefits. E-commerce E-commerce has allowed Qantas to make providing its services more efficient, providing for real time information on quantity, quality, availability, source and pricing of all goods and services to be able to be instantly accessible, as well as providing the option for payment through electronic funds transfer. Logistics For Qantas this is the task of having all physical inputs in the quantities needed in the right place at the right time for the operations process to take place undisrupted.

Outsourcing Outsourcing is the use of external providers to perform a part of Qantas operations process. There are various advantages and disadvantages that outsourcing brings to Qantas. Advantages of Outsourcing for Qantas: Saving in the cost of labour due to not having to hire the people for that function. Saving in the costs of factory space and machinery. The other business being able to achieve better economies of scale than Qantas. Access to higher levels of skill which Qantas currently does not have access to. Disadvantages of Outsourcing for Qantas: There is a dependency on the other party for supplying the inputs, with failure to do this causing major internal disruption and expense. This can be seen through the shutdown of their check in system in November 2011, controlled by a business they outsourced to. Qantas has less ability to control the Quality of the inputs. Damage to public image as a result of publicity about jobs going offshore, as seen recently. The costs of the expense of redundancies and setting up the outsourced function may be higher than the savings they will make.

Technology There are decisions that Qantas needs to make in terms of technology due to airline technology being complex and continually being advanced and updated. There are two main categories, and the business needs to find a balancing point between the two: Leading edge This technology is the most innovative or advanced during the time, and successfully integrating it into the market can have very significant effects in competitive advantage and being able to charge premium prices. There are also high risks to implementing leading edge technology, including the lack competency of technical support for it during that time, as well as the decision to adopt the technology may be before it has fully been developed and adapted for the purpose intended. Established technology Technology that has already been developed and widely used, examples including CAD, CAM and electronic funds transfer. Due to these items being tested over time it attracts no risk, though will not improve competitive advantage.

Inventory Management Inventory refers to all the inputs, unfinished goods and outputs held by the business at a point of time, and the extent to which a business holds them is an important operational decision, due to the significant costs which are associated with them. Qantas needs to ensure that they do not hold excess quantities of stock to not impose additional costs on production, though enough to not disrupt customer demand resulting is loss of sales.

Quality Management To maintain its quality, Qantas needs to ensure that it manages its functionality, appearance, and reliability to ensure they satisfy customer expectations, if not exceed them. For many years Qantas has marketed its Qantas brand as a premium, full service airline with a perfect safety record, as well as Jetstar being a no frills low cost airlines. During 2011 Qantas marketing plan received a battering due to mechanical breakdowns and the sudden shutdown of all services with consequent serious loss of customer satisfaction. There are three aspects to quality management at Qantas, including: Quality control Qantas carries out programmed inspections at the key stages of Qantas services, to ensure the process is meeting specified standards. If it does not, corrective action is taken to bring it back to standard, trying to solve the root cause of quality problems at Qantas. Quality assurance Qantas has implemented a minimal level of satisfactory quality at all stages of production, continually monitoring actual results in comparison to pre-determined standards. It attempts to broaden the organisational responsibility for quality at Qantas. Quality improvement Qantas aims to improve their quality over time, and this is achieved through reducing errors, finding better ways to perform tasks or trying to provide higher quality services at the same cost.

Overcoming Resistance to Change There are a range of factors which encourage or even force Qantas to make necessary changes in a business operation. By responding to change, the business must review the current business model and find greater efficiencies. The business has to be dynamic, to synchronise with the dynamic business world. Change is necessary for business survival, though implementing change may be difficult because of financial and human restrictions. Financial resistance to change occurs in Qantas due to the immediate costs of changes, and this consists of: The cost of new equipment, accumulating to multiple billion dollars on expenses, including new and more efficient aircraft, which have projected costs of $22 billion US between 2011 and 2018, and new passenger and surveillance screenings resulting in over $1 billion since 2001. Redundancy costs to reduce staff can accumulate significant costs for Qantas. There are significant costs that incur due to retraining. By adopting a new reservation system, introducing a new business class, and annual security training and engineering and maintenance for new aircrafts, Qantas needs to spend $300 million on training alone. Due to the acquiring of new aircrafts Qantas needs to reorganise its maintenance operations to seek increased capacity and efficiency. Human Resistance to change can affect Qantas due to the impact these changes have on stakeholders: Inertia An unenthusiastic response of some managers, staff and owners can be associated to change due to fearing what will happen. Psychological distress may be caused due to a change in skillset, thinking that their current skills may no longer be required, meaning they will need to learn new skills. This give rises to feelings of personal insecurity and inadequacy.

Global Factors Global sourcing is the sourcing of any task or component in the Operations process from a location that incurs cost advantages, such as China, or to access new technology that is currently not accessible in the home country. Qantas employs New Zealand pilots and cabin staff in other countries to receive a cost advantage, as well as intending to set up a new low cost carrier based in Asia to reduce production costs and compete with other Asian carriers. Globalisation gives the opportunity for lower production costs due to larger production in another country. In terms of economies of scale Qantas has decided to have maintenance of the new A380s carried out in Asia, due to Asian labour rates being lower, though due to these decisions trade unions attracted publicity which resulted in 2011 due to jobs being exported. Due to increased competition and new technology Qantas must be continually informed of global developments and continually test for their application to current operations. By using this data and information it allows management to be more informed for potential input or changes in the operations process. Due to being a service based business few tasks which could be termed R&D are actually carried out, since most of the research and development is done by Boeing and Airbus.Marketing

Role of Marketing

Interdependence with other Key Business Functions Finance depends on marketing to generate funds for developments of marketing strategies. Marketing strategies are judged through the use of financial criteria such as sales, market share and profitability analyses, and then can take appropriate action. It is the role of human resources to employ staff to uphold the service for the business that will satisfy customers. As staff greatly affects the effectiveness of Qantas marketing strategies, the marketing department is aligned with HR in developing job descriptions and designing training programs because its a serviced based business staff are directly involved the execution of the product Through the use of sales promotions, the marketing department can help Qantas boost sales in non-peak times therefore helping smooth operations at Qantas in times of fluctuations in demand.

Influences of Marketing

Ethical and legal aspects (Trade Practices Act 1974 (Cth) Qantas has an ethical responsibility to its customers and an even broader responsibility to society as a whole in the marketing of its products. Qantas advertising, promotional and marketing material must comply with the consumer protection laws like the TIPA. All material is reviewed by the Qantas Legal Department before publication to ensure compliance. Qantas aims to produce environmentally responsible products. It has introduced boxed meals which substantially reduce waste and has also introduced lighting and air conditioning improvements using solar energy, reducing its greenhouse gas emissions. Qantas has also extended its participation in noise abatement committees and has become a key partner of LandCare Australia Qantas advertising, promotional and marketing material must comply with consumer laws, and all their material is reviewed by the Qantas Legal Department before publication to ensure compliance. Qantas aims to be environmentally responsible, and this has been seen through introducing boxed meals which substantially reduce waste as well as making improvements to its lighting and air-conditioning allowing them use solar energy as power. Qantas has made some recent marketing decisions that have been challenged as illegal and unethical, including: ACCC = Australian competition and consumer commission Ambush marketing at the Sydney 2000 Olympics, linking itself to the event even though it was not an official sponsor. Has received a warning from the ACCC due to leaving out previously hidden extra charges and levies which werent published prior. Fined $61 million by the US Department of Justice in 2007 and $20 million by the ACCC in 2008 due to colluding with other airlines to fix fuel surcharges on its cargo flights to the US. Qantas was forced to improve their website by the ACCC to ensure its customers were adequately informed about restrictions on award redemptions.

Processes of Marketing

Situational analysis

StrengthsWeaknesses

65% domestic market share. Globally recognised brand name and logo. Recent lowering of costs and efficiency gains. High risk nature of airlines. Higher labour and other operating costs than other competitors Recent safety incidents tarnishing the Qantas image.

OpportunitiesThreats

Developing further E-commerce operations. Continually evolving aircraft technology. Creating a new premium airline based in Asia. Further weakening in the international economy. Further increases in fuel costs. Competitive challenges, both domestically and internationally.

Qantas main competitor in the domestic market is Virgin Australia, launched in 2000 which currently claims about 33% of the domestic aviation market. Virgin Australia has formed alliances with Etihad to cover the Middle East, Europe and New Zealand, and this has been effective due to the loyalty programs they have in place for them and their partner airlines, attracting customers to fly on their airline to receive benefits. Virgin Australia also operates overseas services more cheaply than Qantas by doing deals on fares and sharing facilities. Tiger Airways has also joined the domestic airline in December 2007, offering fares as low as $2. Qantas responded with using Jetstar to match their airfares though this caused pressure on their domestic earnings.

The marketing strategies Qantas employs depends on the stage of the airfare in the Product Life Cycle. Introduction Jetstar Pacific (May 2008) Promote heavily, penetration pricing, building brand awareness and setting up appropriate distribution channels. Growth Jetstar Encouraged brand loyalty through Frequent Flyer Scheme, expansion into routes and purchasing more aircrafts. Maturity Qantas Redesigning packaging/modifying market strategies to remain competitive.

Market Research Qantas uses market research to gather and analyse information to allow them to make appropriate marketing decisions. First Qantas identifies information needs, through gathering information on customer needs, attitudes, and brand preferences. Qantas uses both primary and secondary sources of data collection. Primary data is collected through ongoing surveys of passengers in flight, complaint monitoring and mail based surveys. Secondary data Qantas uses includes government statistics, airline magazines and reported interviews with competitor executives. Qantas then analyses and interprets the data, and one example of this is replacing cold food boxes with hot breakfasts and dinners in response to the surveys.

Market Objectives Qantas main marketing objective is to build 2 leading complementary brands, Qantas the premium airline and Jetstar the low fares airline. Its other objectives include: Maintain domestic market share of 65% Match capacity with demand by sustaining loads around 80%. Increase internet sales Increase customer service standards.

Identifying target markets Market segmentation allows Qantas to better meet the needs of all its customers, compete more effectively, and to better tune its marketing mix to particular groups in the market so that it is optimised. Qantas mainly uses behavioural segmentation to select its target markets, and distinguish them between business and non-business travellers. For the business travellers, the market is the segmented again between routine business and emergency business travellers. For non-business travellers, the market is divided into holiday and visiting friends and relatives. Due to changing customer requirements Qantas has established a number of new airlines with its own target market, to ensure they appeal to different customer segments and therefore target more people.

Marketing Strategies Positioning is the image that Qantas projects in relation to its competitors. Qantas brings attention to its service through using positioning strategies such as: Positioning in relation to its competitors Launching no-frills carrier, Jetstar, to arrest erosion of market share to Virgin Blue. Positioning in relation to a target market Qantas has concentrated on securing the lucrative corporate/business market through its lounge upgrades and Frequent Flyer Scheme.

Qantas has implemented product strategies to better satisfy customer needs through improving upon the attributes and benefits of the product. This includes: Scheduling Features The introduction of the Qantas City Flyer Express service which means that there are flights every half an hour in peak periods. Comfort based features Overhauled its food menu inspired by Neil Perry. The implementation of a $300 million Total Entertainment in-flight system on the Qantas international fleet. Launch of its new international Business class costing $300 million, featuring improvements in the quality of their product. Qantas Frequent Flyer Scheme Has 8 million members and 500 programmer partners. Is used to retain customers, increase market share and fill empty seats. Brand name Qantas brand is a powerful marketing tool due to its wide recognition. Qantas has made the design of its flying kangaroo logo modernised and more contemporary. This brand has recently been tarnished due to a combination of industrial action and mechanical problems.

Qantas uses multiple pricing methods including cost plus margin, market and competition based. Qantas also uses a variety of pricing strategies for different branches of the Qantas group, such as penetration pricing for Jetstar, full fares for those who want flexibility, promotional fares which are offered in the economy cabin to sustain loads around 80%. Qantas has used loss leading through Jetstar when it first launched in May 2004 to gain initial market share, as well as using it again on their Sydney-Melbourne route for as low as $19 to coincide with Tiger Airways entry.

Promotion is used by the business to communicate its products and image to the customer. Qantas utilises the promotion mix to achieve this. Qantas uses advertising agencies to help create media advertisements for television, radio, magazines and newspapers. An example of this is Qantas relaunch of I still call Australia home in 2004, at an estimated cost of $10 million, making its debut in the opening ceremony of the Athens games. Qantas has launched a multimillion advertising campaign in 2009 aimed at luring back its key business customers, and in 2010 announced a 3 year $44 million advertising campaign. Qantas has been trying to move towards using more direct marketing than blanket advertising, due to being cheaper and much more targeted to corporations. Qantas uses sales promotions in periods of subdued demand. AT the launching of Jetstar Qantas sold 100,000 tickets at $49 to increase the market share of Jetstar. Personal selling is used to target travel agents, businesses and government departments. Publicity is used to enhance the image of Qantas through media releases and feature articles. Also, Qantas supports and sponsors environmental causes such as Clean up Australia Day to achieve this. In the communication process Qantas has employed the actor John Travolta as a brand ambassador.

Distribution is achieved by Qantas in two ways, direct and indirect. Qantas distributes directly through its own retail outlets Qantas Holidays, as well as buying into Viva, Jetset and Jetabout which reduced the likelihood of the owner entity selling competitor tickets. Qantas uses intermediaries such as American Express, Flight Centre and Harvey World Travel to distribute its tickets. Qantas is selective about who resells their products and only choose intermediaries that have a good reputation and financial strength. Qantas has reduced commission rates paid to travel agents for selling their product to cut costs as well as encourage internet booking.

Qantas spends more than $300 million a year on training staff to ensure they have a very positive interaction with customers. Also, Qantas provides a uniform for all staff to improve their professional appearance.

Qantas implements effective processes to ensure its service is provided in a timely fashion. Qantas has introduced Q Bag Tag allowing passengers to check in their baggage without attaching temporary baggage tags, making the process much faster. Other strategies used by Qantas to improve its processes include online bookings, online check ins, and mobile check ins. In November 2011 Qantas experienced a check in system malfunctioning resulting in a drastic loss of efficiency.

Qantas is continually developing upon their physical evidence to exceed customer expectations, as outlined in the comfort features.

E-marketing Qantas uses e-marketing through the use of emails to send out FFP balance emails as well as special offers, and uses its websites to allow customers to book flights, find about flight details and the latest product innovations. Qantas has recently ventured into Social Media as a form of marketing through Twitter and Facebook, holding competitions and information their customers about the latest innovations.

Global Marketing Qantas uses the same brand and logo globally, and due to its strong global brand it allows them to increase their international revenue and growth, as well as protecting them from international competition. Qantas standardises most elements of its marketing mix such as product design and brand name, allowing them to achieve economies of scale. The One World name and logo appears on all member planes and ticketing, helping Qantas to improve its corporate image in new markets. Because of this alliance Qantas can capture a greater market share and of the premium customer segment. Qantas plans to use a customised marketing approach with Jetstar Japan, adjusting its marketing mix to suit this particular global target market. From this, the airline is likely to adopt a more culturally sensitive style, making menus focus on Asian dishes and flight attendants being fluent in Japanese. Due to many unforseen events occurring in the airline industry environment, Qantas has implemented a systematic base for continual monitoring, controlling and adjusting of its market activities through developing financial forecasts such as past sales data and statistical models as well as comparing actual and planned results through analyses. After this, Qantas takes corrective action if appropriate. Examples of this include revising their marketing strategies by lowering prices to stimulate demand, reducing flight frequency, and cancelling and delaying orders for planes when it forecasted a 6% growth in 2009 but experienced 1.9%. In response to significant losses in 2011, Qantas undertook a comprehensive audit of its international operations.Finance

Role of Finance

Interdependence with other key business functions Finance depends on marketing to generate funds, and finance is in charge of allocating the business funds to marketing strategies such as Qantas new lounges, check in facilities and new carriers flying into China. Human resources require funds to remunerate staff as well as to fund effective human resource strategies such as training and development, spending over $300 million a year on staff training. Operations also require funds such as to increase their budget on capital expenditure from $2.5 billion in 2012 to $2.8 billion in 2013.

Influences of Finance

Global market influences Prior to the GFC Qantas benefited from strong global economic growth that increased demand for its services, resulting in a net profit of $970 million in 2008. The 2009 GFC caused rapid revenue decline, leading to an 88% fall in net profit. Qantas quickly responded by cutting flying capacity, restructuring, and deferring and cancelling orders for new planes. The current global uncertainty of the economy affects Qantas by: Lowering its equity valuation Increasing the costs of borrowing Lowering economic growth in most developed countries.

Processes & Strategies of Finance

Profitability Profits in the airline industry are relatively low due to being: Highly capital intensive. Extremely competitive in terms of price discounting strategies. High costing variable costs such as fuel and labour. Frequent unfavourable events such as terrorist attacks (2001), SARS (2004) and the global financial crisis. Sharply fell in net profit in 2009 to 0.69% and since then has steadily recovered to 3.7% in 2011. Return on equity ratio followed a similar trend where it fell from 17% in 2008 to 1.7% in 2009, though recovered to 9% in 2011. The profitability of Qantas is attributed to the growth and performance of Jetstar.

Cost Controls Qantas reduced costs by over $4 billion in the last 8 years, and aims to reduce a further billion in the next two years, and this has been achieved through: The outsourcing of business functions. Replacing Qantas with Jetstar on some international routes. Attempting to secure more competitive fuel costs through hedging.

Revenue Controls The total revenue of Qantas grew by 8% in 2011, and strategies have been implemented to control revenue including: Reconfiguring planes with more economy class seats in response to the current fall in demand for premium seats due to the GFC. Maintaining competitive pricing through discounting on airfares to preserve loads of 80%. Targeting new markets through the expansion of Jetstar due to its profit domestically to places such as Asia. Planned launching of Jetstar Japan in 2012. Implementing fuel surcharges to recoup the large loss due to the sharp increase in fuel prices.

Liquidity Currently, the current ratio is at 0.9:1, a decrease from last years 0.93:1 Qantas deliberately operates on a negative working capital deliberately due to using its cash reserves to pay for long term debt, to reduce the expense of interest costs. Qantas has facilities in place, including a standby facility of $300 million, to draw cash when needed to pay their creditors and dividends to shareholders, if they were to ever fall into financial shortfall. In comparison to competitor current ratios, Singapore Airlines is at 1.6:1 while Air New Zealand is at 0.81:1 Qantas manages working capital through the: Control of their current assets and liabilities. Increased its leasing of aircrafts, buildings and equipment, therefore freeing cash which can be used elsewhere in the business. Considering to sell and lease back some of their terminals they own.

Gearing Due to the capital intensive nature of the industry Qantas is quite heavily geared and from 2010 to 2011 Qantas gearing has increased from 104% to 112%. Due to decreasing interest rates and a favourable aviation operating environment, Qantas launched an ambitious fleet renewal program causing the gearing to increase from 2008, carrying more risk though having more potential to make a higher amount of profit. In recent years Qantas has shown its concern in its debt levels due to the global economic recession due to having their credit rating reduced meaning a decrease in their competitive advantage, and this was shown from their response of a $500 million share issue in 2009 making their source of funding less reliable on debt. Therefore depending on the current situation Qantas is in they would choose from a variety of sources of funds including cash, equity, debt and lease finance.

Efficiency Due to the airline industry being attributed to low profits and high costs Qantas has a relatively high expense ratio. Since 2009, Qantas has been steadily decreasing its expense ratio to 97% at 2011, which reflects better than some airlines though not to others, an example being Singapore Airlines that has 91%. The airline industry also uses the Revenue Seat Factor Ratio as an indicator of efficiency, measuring the percentage of total passenger capacity utilised by passengers. This ratio has been steadily residing from 81% in 2010 to 80% in 2011, and compares favourably to competitors such as Singapore Airlines 79% and Air New Zealands, 82%. Qantas has tried to improve their efficiency by: Using more fuel efficient aircrafts such as the new Airbus planes, reducing fuel expenses due to using 25% less fuel per passenger. Expanding the amount of internet bookings, resulting in a lower cost of sales. Reducing overhead costs due to improved economies of scale.

Ethical issues related to financial reports Financially Qantas safeguards its ethical and legal behaviour through: KPMG auditing their accounting data. Professional Accounting Bodies such as the Institute of Chartered Accountants who have a joint code of behaviour. Accounting standards that need to be followed. ASIC which ensures compliance with the Corporations Act. The ASX which has included in its listing rules disclosure requirements and other regulations which companies must comply with. Qantas ethics towards their shareholders was questioned during the failed takeover bid by APA in 2007. Commentators criticised Qantas management of their actions due to: Qantas management supporting the bid enthusiastically, talking down Qantas future prospects. Senior Qantas management receiving significant bonuses from APA if the bid was successful.If APA were successful, Qantas would currently be in severe financial difficulty, due to a key member of them collapsing in 2008 with debts over $1 billion.

Global Financial Management Exchange rates Fluctuations in the domestic currency expose changes to Qantas in terms of the purchasing of fuel, operational expenditure and capital expenditure, often purchased in other currencies. The appreciation of the Australian Dollar reduces the amount Qantas pays for these expenses. Also, Australians are therefore more likely to travel overseas, though there are less overseas tourists willing to travel to Australia. Interest rates Interest rates affect Qantas expenses as increases in interest rates increase. Hedging/derivatives Qantas uses hedging and derivatives to minimise the impact of financial risk, therefore protecting its capital base, reducing the probability of financial distress, and minimising the cost of capital. Qantas uses derivatives such as forward exchange and options contracts to hedge future fuel purchases, future interest payments and future capital expenditure payments. Qantas has hedged about 54% of its fuel needs for 2011, mostly in the form of options; allowing Qantas to not be completely locked in though can take advantage of any fall in fuel prices. Airline capital expenditure is 85% hedged until 2012.

Human Resources

Role of Human Resources

Interdependence with other key business functions Finance helps human resources through remunerating staff as well as funding their strategies such as training and development, as well as affecting staff levels and the level of industrial disputes due to cost cutting actions such as outsourcing and cutting flights. The right staff must be employed and trained to create a service which satisfies Qantas customers, therefore impacting on marketing positively. Human resources affect the efficiency and quality of the output in operations. Also training is required during the introduction of new operations technology.

Outsourcing By using subcontractors, Qantas can create cost savings, access greater expertise and improve its competitiveness. Qantas has already outsourced these functions: Jetstar outsourced its entire call centre operations to Melbourne Operator Sales Force. Outsourced its domestic voice, data and domestic services to Telstra. Outsourced its data centres to IBM. Qantas has also adopted the use of global subcontractors to access cost savings, though this has had a negative effect due to industrial disputes. Examples include: Outsourcing its maintenance jobs to Singapore and New Zealand. Outsourcing its IT applications support and maintenance to 2 companies in India. Outsourced its entire reservation to a Munich based company called Amadeus.

Influences of Human Resources

Stakeholders Qantas management Qantas has a higher cost base than its competitors due to being locked in rigid union agreements and the accelerated deterioration of the airline industry, they have recently reformed its employment relations practice to cut costs and improve labour flexibility. Some examples of actions they have performed include restructuring its organisation, outsourcing more functions, relocating staff overseas and hiring more casual staff. Through these actions Qantas has taken a relatively confrontational stance with the unions. Employees Qantas employs over 32,000 full time employers consisting of pilots, other flight crew, and cabin crew and ground and admin staff. They are currently concerned with job security, levels of pay and working conditions, and have heavily supported union action. Employees have been angry at Qantas reaction towards industrial relations and the length of time it takes to end some disputes. Unions Employees of Qantas are represented by 16 different unions including the Australian Manufacturing Union, Australian Services union and the Australian Workers Union. They play a role in controlling and resolving industrial disputes and negotiating new enterprise bargaining agreements, assisting employees. They are the key insinuator of industrial campaigns against Qantas actions to reduce labour costs. Employers Associations Qantas is a member of the Australian International Airlines Operation Group and makes sure that both domestically and internationally the concerns of Qantas are represented to the government and to the community. Government organisations Governments implement employment relations legislation, important legislation governing Qantas such as the Fair Work Act, Corporations law, WH&S Act and Workers Compensation. The government has administered departments to enforce these policies, including the AIRC, Federal Court and Employment Advocate.

Legal Influences The government implemented the Fair Work Act in 2009. Although some aspects of WorkChoices were retained such as existing laws on industrial action and the restriction on union right of entry in workplaces, the legislation still impacted Qantas. This is due to the act implementing a safety net of 10 minimum conditions regarding leave, hours of weekly work, notice and redundancy pay. There are also new rules that will impose penalties on Qantas if it is proved they have refused to bargain in good faith. Overall the Fair Work Act has increased the labour costs of Qantas. Qantas must comply with the Work Health and Safety Act to ensure the welfare of its employees. Its WH&S program has led to an 80% reduction in injuries since 2001. Key features of this program include an integrated safety management system, a fatigue risk management program, and an employee recognition program. Qantas is legally obliged to take out workers compensation insurance to protect employees against Qantas complies with Anti-Discrimination Legislation and investigates all claims of discrimination and all managers undertake regular training to ensure they understand how to identify and prevent discrimination. Qantas also complies with the Equal Employment Opportunity Workplace Act, and has taken measures in management to support women in executive roles, with the percentage of 29.9% of women in senior positions, an increase of 7.8% from 2010, as well as a 27.3% of women on Qantas Board, a 7.3% increase.

Economic Influences The level of the economic activity in Australia and the rest of the world fluctuates, and impact on Qantas HR. The demand of labour is determined by the demand of services. Due to the GFC, there has been a severe contraction for Qantas services, particularly in international and premium level, as well as an increase in competition globally. Because of this Qantas had to reduce staff members to reduce costs. Executive pay was also frozen. Improving economic conditions saw an increase of staff numbers in 2011, though Qantas have hinted at more redundancies in 2012 due to continued economic uncertainty.

Technological Influences Generally, Qantas undergo technological change due to external forces, such as new security systems, or to maintain competitiveness. Technologies implemented include the Dreamliner and A380, new in-flight entertainment system, new online check in and new self-service kiosks. Due to having these new technologies Qantas has had to retain staff, though this is beneficial for long term profit. Through technology Qantas needs to retrain staff to learn new skills to utilise the technology at their full extent, as well as making some labour positions redundant.

Social Influences More part-time and casual workers have been employed to reduce costs and improve their international competitiveness, which has been a contributor of the reduction of $4.4 billion worth of expenses in the last 8 years. This has allowed Qantas to be flexible in coping with peaks and troughs in demand. Qantas has now outsourced many functions such as IT, call-centre operations and maintenance. There has also been an increase in the participation of women, comprising of 42% of Qantas total workforce with 29.9% of female employees occupying senior roles. Qantas has responded by implemented further family friendly practices such as building child care facilities and a keep in touch program for staff on maternity leave. This has led to very high retention rates of women returning from maternity leave of 97% and 100% in 2010. Due to population shifts Qantas has a more culturally diverse workforce. Qantas management has tried created a workforce free from discrimination and promote tolerance.