Strategic Alliances in the Airline Industry

This paper analyses the strategic alliances in the airline industry in Australia, with a focus on Qantas Airways and its partnership with Emirates Airline. It includes a macroeconomic and microeconomic analysis of the external and internal environment, as well as a SWOT analysis of Qantas Airways.

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Strategic Alliances in the Airline Industry
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Table of Contents
Introduction.................................................................................................................................................2
Qantas Transformation plan........................................................................................................................3
Strategic alliances........................................................................................................................................3
Macroeconomic Analysis of the external environment...............................................................................4
Political....................................................................................................................................................4
Economic.................................................................................................................................................4
Social.......................................................................................................................................................4
Technological...........................................................................................................................................5
Legal........................................................................................................................................................5
Environmental.........................................................................................................................................5
Microeconomic analysis..............................................................................................................................5
Strengths.................................................................................................................................................5
Weaknesses.............................................................................................................................................6
Opportunities..........................................................................................................................................6
Threats.....................................................................................................................................................6
Conclusion...................................................................................................................................................7
References...................................................................................................................................................7

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Introduction
Concepts of strategic alliances have drawn a lot of attention from various scholars for
quite a long time now. The importance of strategic partnerships cannot be underscored for the
sake of businesses survival. In any industry, strategic alliances are a common phenomenon. In
their airline industry, their presence is significantly felt. This paper looks into the strategic
partnerships in the airline industry in Australia and attempts to understand it by analysing the
external and internal environment. Alliances among airlines have become a standard feature
recently. Some of the critical strategic alliances range from simple arrangements of code sharing
to terminal facilities, and marketing integration (Lin, 2013).
In this assignment, an analysis of Qantas Airways would be done and its strategic
alliances. The airline is among the leading Australian airlines that offer domestic and
international transportation services and freight services. Besides, Qantas Airways is associated
with the other brands such as Jetstar Asia, QantasLink and Jetstar Pacific (Passport, 2013). The
airline has a market share of 17.7% in Australia alone. Moreover, the company has taken strides
to achieve a competitive advantage by entering into a strong strategic alliance with Emirates
Airline. However, despite allying, management must take specific measures es, Qantas is faced
with numerous forces to deal with competitive markets in Australia.

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Qantas Transformation plan
Qantas airline is experiencing a significant transformation as it prepares to change the
face of its ever growing and a dynamic global market. In Asia alone, there is an increased growth
of passengers, and this can be attributed to the emerging middle class and growth in the number
of competitors. The global forces are a significant threat to Qantas. Hence, the management of
the airline sought to counter this competitive situation by rethinking its marketing and operations
strategies (Qantas Annual Report, 2016). The approach adopted by Qantas would ensure the
airline remains relevant in the aviation industry. In 2011, Qantas announced the transformation
plan that would make it one of the world's best airlines. This includes restructuring of its
business operations, job cuts, global outsourcing, and cost reduction measures and entering into
strategic alliances (qantas.com).
Strategic alliances
Strategic alliances involve entering into an agreement by two independently owned
businesses with the aim of joining forces to achieve a particular goal. The process consists in
aligning specified services to take advantage of the economies of scale to mutually benefit each
business. In 2012, Qantas entered into a strategic alliance with Emirates airline for a 10-year
partnership. This alliance aimed to provide the best airline services such as coordinated sales,
scheduling, benefit sharing, pricing, increased flight frequency, excellent customer service,
loyalty programs and access to airport lounges. There are many reasons as to why Qantas settled
on Emirates as its alliance partner (Business Traveler, 2013)
Emirates are regarded as one of the best airlines in the world today. Therefore, it has a good
reputation as an airline that provides quality aviation services.

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Macroeconomic Analysis of the external environment
The external environment of Qantas Airline can be analyzed by applying the PESTLE
management tool. The tool is crucial in identifying major strategic issues that may affect the
company's future profitability (Marmol, 2015). The performances of PESTLE as an analysis tool
are as follows;
Political
The political factors influencing the company are the government influence that affects the
company's performance. Qantas is faced with actions of various governments where it operates.
For example, the political instability in the Middle East has changed the operations of two
airlines; thus generating insufficient revenue.
Economic
The economic factors also have some influence on the performance of the two airlines. For
instance, the Australian economy is faced with the threat of recession, and this may significantly
reduce the per capita income of people, thus leading to low demand for the airline services.
Social
The social trends prevalent in the aviation industry have influenced the performance of both
Qantas and Emirates airlines by a more significant margin. In particular, an analysis indicates
customers accept low-cost travelling services. The two airlines offer premium-travelling services
(Freed, 2014).
Technological
The technological aspect of the airline industry involves booking of airline tickets through online
reservation systems.

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Legal
The legal factors affecting the airline industry in Australia include the carbon tax law which
requires the airlines to fulfil the legal formalities necessary to perform their operations
successfully.
Environmental
The airline regulatory board and authority that impose regulations to ensure there is
environmental effectiveness regulate the airline industry in Australia.
Microeconomic analysis
Qantas’ SWOT analysis is crucial in identifying the internal and external factors affecting the
airline.
Strengths
a. Customer Loyalty
Qantas has attained customer loyalty from its superior services and uniqueness of their products.
These unique products include meal customization, flight entertainment; improve airport lounge
ambience and food and beverages revitalization options for the economy class.
b. Large market dominance
Qantas has dominated the Australian market and improved the company’s presence in
international markets.
c. Efficiency in reducing operation cost
Qantas has been able to reduce its operating cost by reducing 2 billion from its annual operating
cost for the last three years.

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Weaknesses
a. Reduced profits in international flights
The company faces increased running cost in global markets, which reduces the profits of
international flights.
b. Unionization problems
The company is not able to effectively negotiate with unions, which affects the effective running
of the business.
Opportunities
a. More markets to conduct business
Qantas has the chance to venture in other international demands that it has not yet ventured in for
instance Asia.
Threats
a. Competition
Qantas faced stiff competition from other airline industries, for instance, British Airways and
American Airlines among others.
b. The increased cost of management
Given the fluctuating fuel costs and costs incurred in fleet maintenance and upkeep, the company
faces the increased cost of management.

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Conclusion
The critical analysis of Australia’s strategic alliance in the airline industry has looked into
both the external and internal environment. From the review, it is clear that the operational
activities including the strategic alliance of the airline with Emirates airline would significantly
affect its operating environment. The PESTLE analysis reveals the key external factors affecting
the airline operations while the internal analysis reveals the internal factors affecting the airline
References
Lin, B., 2013. The effects of joining a strategic alliance group on airline efficiency, productivity
and profitability: a thesis presented in partial fulfilment of the requirements for the degree of
Doctorate of Philosophy in Aviation at Massey University, Palmerston North, New Zealand
(Doctoral dissertation, Massey University).
Qantas Airways is associated with the other brands such as Jetstar Asia, QantasLink and Jetstar
Pacific (Passport, 2013).
Qantas Annual Report 2016. (n.d.). Retrieved from
https://www.qantas.com.au/infodetail/about/corporateGovernance/2016AnnualReport.pdf
QANTAS Airways Limited 2011 Strategy Day Presentation, 12 December 2011,
www.qantas.com.au
Flynn, David, ‘London via anywhere: the changing shape of the Kangaroo Route’, Australian
Business Traveller, accessed 24/9/2018, www.austbt.com.au

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MARMOL, T. D., FEYS, B., & PROBERT, C. (2015). PESTLE analysis. [Place of publication
not identified], 50Minutes. http://public.eblib.com/choice/publicfullrecord.aspx?p=4005664.
Freed, J. (2014, September 24). Virgin, Qantas step up the battle for business travellers.
Retrieved from https://www.smh.com.au/business/companies/virgin-qantas-step-up-battle-for-
business-travellers-20140924-10lesy.html