Air Transportation Industry in Australia: Market Analysis and Competitive Landscape

The air transportation industry in Australia is a crucial part of the country's transportation system, with domestic airlines generating approximately $15.1 billion in revenue. The industry is dominated by Qantas Airways and Virgin Australia Holdings Limited, which offer scheduled domestic flights, freight transportation, chartered services, and operations of terminals. The market is mature, with moderate growth expected in the coming years. The industry is influenced by factors such as crude oil prices, household income, and customer sentiment. The major suppliers in the industry include aircraft manufacturers, petroleum product suppliers, catering services, and airport operations.

3. Service of the market. Presently, Virgin and Qantas
continuously battle for winning over the market because both the
firms gain high revenue within Australia.
3.1. Description
Air Transportation always has a great role in the lives of the humans, especially in the
country Australia which is huge in landmass. Irrespective of the other option in
transportation, the constraints in time will need an individual in choosing air transport over
them. People usually travel both ways domestically and internationally. The domestic
industry has given a lot to the Australian market. The amount is approximately $15.1 billion
(IBISWorld, 2015). There are multiple routes where the domestic airlines operate the
aircraft’s since 95 years in few routes. Because of the landmass of Australia, the usage of the
flights is very common. Companies like Qantas Airways, Virgin Australia Holdings limited
seizes huge share where Qantas leads the business. Some of major actions the business
performs are:
Transportation of the passengers while using domestic flights that are scheduled
The airport always has a particular schedule every time. Domestic airlines are run in Sydney
and international airlines uses two of the airports because of the huge number of flights they
have. A passenger shipping takes place in the major cities and number of distant area of
Australia.
Because of more population in the cities of Australia, the demand for the number of services
is elevated due to which high number of flights is
originated in these cities. Destination for the
tourists in distant places has a huge collection of flights which people can decide from. Main
aim for the airlines is to give service to travellers.
Freights Transportation with usage of domestic flights
Freights in Australia majorly uses roads, railway and sea transport because of the cost,
although, air freight is also one of the good and quick transport of the goods.

Chartered services
This industry offers charted air flights for various other companies. These flights happen to
occur at any time as they have no schedule at all and can transform with the situation of the
industry. These services are accessible on more or less all the airports in Australia which
consists of locations like distant locations as well and where domestic flights are scheduled
only when it seem to be necessary. Every flight (charter) has its own crew member who will
give their service during the flights.
Air transport operations of terminals which are not the part of airports
The airline production takes care of the terminals which are actually not the part of the
airport. This might involve the terminals where continuous evaluation or repair is done. On
the whole, this industry has a great down fall of the revenue in the year 2008-2009 while
global finance crisis. Because of this, international travels came into the priority for
companies than to travel domestically. A few of the users also decided to choose
teleconferences and various other contact options instead of the air transport because of
the lofty costs. Nevertheless, the business started improving due to the oil prices decrease
which led to the heavy discounting with the competitors. Presently, the industry’s annual
growth is 2.5% with 2.3% growth is expected in the coming 5 years and also it has the
revenue of the $15.1 billion with Qantas Airways because they are the chief investor of
60.3%.
Services which are given is divided into 4 parts and frequently is regular in all the service
providers. Within these major income collectors are the tickets which are sold for the air
tickets and that are rewarded by the passengers. The separation is rooted due to the
excellence and the service given by the industrial opponents.
The key services which are involved are:
i) Full Fare
ii) Lower fare
iii) Freight
iv) Other
The bar mentioned chart below shows the input of each service provided to the business.
i) Full fare
The travellers who use transport for their business trips majorly prefer to go for full fares on
their tickets as such tickets have offers of flexibility to change the flights whenever needed
and also business lounges are made for such travellers to use. The passengers who uses full
tickets have come down since the past few years because of the high discounts given on
stumpy fare tickets.
ii) Low Fair

Because of the monetary disaster, client of this industry has started using low fares
tickets in a more than normal. The usage of the low airfare is rising day after day and
that is mainly due to the discounts done in Qantas and Virgin Airways.
iii) Freight
Freights cover 7.2% of the whole revenue of this industry. With the rise in the market share
in terms of the online shopping, the usage of the freight transport is increased. However, air
freights are expensive options to choose from and time constraints are also there but it also
helps in the revenue contribution to the industry.
iv) Others
The income source for the domestic flights consists of the booking, baggage charges,
termination and late price. These prices for the excess luggage and late fees are only a
metter of the change, though it is predictable in getting a rise in income because of the
booking done online.
3.3. Adoption of service
With the help of the IBIS information, it is known that the service is very tough to accept as it
is see, there are multiple opponents in the industry. With this, the people who run this
industry share huge difference in share holdings too. The chart shows the acceptance of the
service is little tough because of the high costs needed for implementing the services.

Showing product and service adoption chart
i) Value added and Value Proposition
Australia has enormous mass of land in which the total population lives in very limited
places of the whole country. Long distance in the country will absorb a lot of time in the
case when the road is used, sea or even rails. Hence, domestic airlines there play a vital role
in the smooth transportation of the individual and saving a lot of time for the people who
travel. It is also very easy to choose this transport if compared with the other options.
Though, the cost of travel may be more as compared to other transports. Airways like
Qantas have both full fare and low fare flights. There is not much of the variance in the
services which are provided during the flights in past days. Though, customers can upgrade
themselves for full fare travels if they want to use better options.
ii) Complexity
The service is easy in understanding because mostly all the services given in the industry
have been highly standardized. It is common that full fare customers always get to
experience the seats which are spacious, services in catering and business lounges. On the
other hand, the customers who have low fares seats get to experience less if compared with
the passengers who paid full fare. With the standardization of the services, the airline
industry shares the same manual of instructions since check in till emergency.
iii) Compatibility
If the customer’s perspective is taken, the services which are provided can be adopted
simply by all the people because of the availability of the prices travel tickets. Though, the
production of the service that is given is very pricy. The industry always tries to give the best
experience to their customers. Hence, the flights are scheduled for the distant locations and
also the flights are increase as per the cities while managing the standards of the service.
iv) Trail ability
There are no trailable services because the consumer then will have to repay for the
services even when they travel for the first time. No refund is given if once the services are
delivered because most of the users are usually satisfied with the services given.
Nevertheless, there are always feedbacks taken and considered by the firm. Price is one of
the reasons as to why the users holds their plans for travel and business trips as the
business would prefer teleconferencing.

5. Strategic Analysis
5.1. Analysis of Market
5.1.1. Size of the Market
The report of IBIS states that a market which is addressable for the local airlines is $15.1
billion where Qantas holds the major marked of 60% of the whole returns. It can be said that
the marketplace is aggressive and it has not many choices accessible for the new entrants in
the market. The complete market is roofed geologically on the same time with the firms
which run both metropolitan and regional flights as per the requirement of the users. The
graph below shows the contrast between the businesses in the combination with the people.
The airport at South Wales is taken to be the biggest revenue generator in Australia. Though,
there are many companies which prefer to have their headquarters in Queensland and
Victoria as Sydney brings in the most of the international flights as compared to the domestic
ones. Queensland is growing as a destination for tourists and attracts more firms in the state.
Both these places are low in terms of the population with the requirement for the air
transport. Because of the flexible arrangement and fewer flights for Melbourne compared to
the Sydney airport, firms favour this place.
5.1.2. Market Trend
The market is at the maturity stage of the life cycle presently and that means that the
expansion of the market is moderate as compared to the aggressive market in the industry.
This industry has already experienced the growth of 2.5% per year since past five years and
expects it to grow further more to 2.3%. The industry currently pays out an average of 17.2%
on the salary to their employees with a total profit of 392.7 million dollars.
The business had fully developed quickly in history in 1900s and early 2000s even when
Ansett Airways went for insolvency. When the airways corporation closed, it has opportunity
to Qantas airways and virgin in the introduction of the low fares and a number of the
destination with the flights like Jet star, Virgin etc. Low fare airlines introduction contributes
to the Qantas Airlines that operates at the huge costs that time with all the 3 airlines raising
the amount of the shares of passengers.

As most areas have been covered because of the networks of the flights, an increase in the
ways is expected the least. Market place is presently favouring the two companies while other
smaller firms are leaving.
5.1.3. Market Economics
a) Influences in income Instability
The firm is always anticipated to show the moderate level of the instability in the market.
The industry also has the volatile range when there was downfall in the economy in the year
2008-2009. The fares went up with the airlines in popular router for the customers.
Some of the influences for income instability are declared under.
i) Prices of Crude Oil
One of huge influences which put the firm to the risk is the cost of the crude oil when it
comes to the rising of the targets revenues. For example: 20% of the industry is accountable
for the prices of fuel usually. In such situation, if the oil prices rises up then the firm is
expected to rise up the prices of the tickets too so that they can cover up with the losses.
Most of the firms are unable to do so as prices increased for covering up the oil prices and
this contributes to the growth which is negative. When the prices increase, there is decrease
in users. Though, the prices if they go up, the airlines try to manage the same price level
after the prices of the crude oil decreases.
ii) Tourists
The traveller who makes a decision to travel during the night is a huge failure for the
industry as they are in loss of the demand. Though, because of the establishment and the
increase ion the number of flights which goes to the tourist locations, air travel is always
expected to rise up their contribution in the revenue generation. In addition to that, the
establishment between the distant places is the key cause for the benefits to the firm.
iii) Household flexible income
More customers can be there if the economy stays stable. When the income of the families
will be strong, the holidays will be more without the hesitation of spending the money.
iii) International travel Linking
This type of sector consists of the travellers which tend to associate their flights with the
domestic ones when the international flights are not accessible. The transitions can easily
add to the income in the huge amount with the rise up in the travelling.
iv) Sentiments of the users

This is one of the most demanding factors because of the emotions related to the customers
and they are totally unpredictable. It is found that the users who are more emotional will
travel to the larger distance places and vice versa. According to IBISWorld, buyer emotions
are anticipated to reduce in 2014-15 which may work as a danger to market.
b) Market Profitability
The profit of the market influences the causes of the volatility in the revenue. The
companies Qantas and Virgin are the major firms in the Australian market which causes
great competition for the prices for the lower fares. However, the industry profit has risen
up in the past five years with expected profit of 2.6% in 2014-15. The company was able to
reduce the labour needs and reduced the amount of the staff where the price was cut down
from 19.1% to 17%. In the same way, the unstable oil costs have been at risk to the firm.
The trends in the market for profit are with the users spending on the full fare trips as
compared to the low prices.
5.2. Competitive Analysis
5.2.1. Suppliers
5.2.1.1. Description
a) Suppliers
Major Supplier Supplied Items
Aircraft
Manufacturing and
Repair Services
-Aircraft manufactured and supplied to the buyer within
given time frame
-Maintenance for aircraft coordinated
Petroleum Products
Wholesalling
Jet fuel provided by the supplier for the aircraft
Catering Services In-flight meals supplied in required amount
Non-Scheduled Air
Transport
Prior to offering full service, test flights are conducted in
new routes to support domestic airlines industry
Airport Operations Services at the airport like check-ins, security checks,
refuelling, aircraft maintenance and other functions (air
traffic control)
b) Issues of supply for the huge supplied items

If the items are supplied which are needed in the given time, then only the industry can run
itself. EXAMPLE: The test route is set and the outcomes published by the Non schedules
transports run assertive then the firm would decide to buy some more flights and would
need them quickly. This is the situation in which firm always run at the risk of having the no
delivery of the services on time and if needed the items that are supplied is not of the same
quality. Though, many stuff are supplied in the given time with the excellence.
Additional concerns with major supplier may comprise of supply of in-flights foods on time
value hike of oils.
Operation of the Airport always will have the vital role in the delivery of the quality services.
On the contrary, the services which are provided inside of the airport are standardized for
the airports.
5.2.1.2. Competitive Influences
The appendix concluded in having the attractiveness of the market which is favourable with
respect to the suppliers. The competitiveness in the suppliers comes in terms of the quality
provided on time. Therefore, the service is expected to be done on the time for the
consumers and it should be done smoothly. Operations on the Airport, for example, can be
the factor which reduces the market attractiveness up to some extent in case of the delivery
not done well. The attractiveness is decreased due to the delays in the flight and rough
services.
Threats for the forward integration are unlikely in the suppliers because every supplier runs
a certain section of the industry. Cost of switching in the suppliers could be an easy option
due to the cheaper market demand. For importing the manufacturing products, the reason
for doing this is the cost of it is reduced when it is imported for doing the same in Australia.
The prices of the oil on the other hand are the key influence which can be caused due to
switching from one supplier to other. The low the price of the oil is, the improved it is for
the firm to run as bulk of each firm cost of running is reliant on crude oil prices.
5.2.2. Customers
5.2.2.1. Description
The market which is addressable in total of 15.1billion dollars is developed by the industry
from which 60.3% is held by Qantas Airways Limited. The customers in the business could
be divided in terms of the demography, geography and the usage rate of service.