Critical Review of Newspaper Article on Qantas Airlines' Oligopoly Market in Australia

This critical review analyzes a selected article on Qantas Airlines' oligopoly market in Australia, showcasing the airline's use of economic principles to enhance profit and sustain business operations. The article highlights the airline's competition with over 14 large international airline brands, which has restricted its market share to only 28%. The review interprets the article through the lens of oligopoly theory, showcasing how Qantas focuses on capacity management and disciplined cost control to match demand and deter market competition. The review concludes by highlighting the real-life scenario of oligopoly and how Qantas has effectively utilized economic principles to enhance its profit during 2016.

Running head: ECONOMICS ASSIGNMENT
Critical review of newspaper article exercise
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Author note:

1ECONOMICS ASSIGNMENT
Introduction:
21st century market economy is highly driven by the various economic principles which
are being utilized by the managers in order to enhance the profit of the business operation
(Kokovin 2017). This essay is aimed to critically analyze a selected article, which is published in
the Sydney Morning Herald on 2016 with the headline “Qantas keeps focus on costs as
competition sparks fall in international fares”. Through this critical analysis, this essay will try to
showcase the oligopoly market of Australia airline utilizing the various economic principles. In
addition to this, it will showcase the personal understanding from the critical analysis of the
selected article regarding the economic principle and to conclude it will provide summarized
overview regarding its findings.
Brief summary of the article:
Economic principles are utilized to enhance the growth rate and provide sustainability to
the business irrespective of the market structure. In addition to this, when it comes to the
economic theories of oligopoly, then it states market power, market penetrating policies and the
deterrent policies in order to describe the market phenomenon. Analyzing the selected article it
can be seen that the Qantas competes with more than 14 large international airline brands that
has restricted its market share only to 28% (anna.aero, 2018). Owing to subsequently large
number of airline service providers in the economy, the brand has faced reduced growth during
2015. However, various growth policies taken by the brand stakeholder, it has faced 4.7%
growth in its profit during 2016 (Sullivan, 2018). According to the chief executive of Qantas,
there is considerable amount of volatility in the global aviation marker due to economic
transition. In addition to this it is also true that Australian border geopolitical issues has affected
the air service of the nation too. To conclude the chief executive according to the new paper

2ECONOMICS ASSIGNMENT
report highlights that the strategy has showed positive outcome during 2016 through rise in
revenue by 84% as compared to the previous year.
Economic interpretation of the article:
Thus during last two years there has been subsequent fall in the demand of the air service that
has caused fall in the revenue for the brand. In addition to this new entrants in the market as well
as growing competition due to the present market players, the Qantas has faced reduced air fare
that has affected the brand negatively. According to the theory of oligopoly, due to small number
of players in the market who sales close substitute, they act as a unit who does not takes price
rather sets it (Johnston and Marshall 2016). It enhances the revenue mutually and benefit all the
firm to enjoy considerable amount of profit. However, contrary to this, being the large firm,
airline industry does not go according to the theory of oligopoly. Each player in the market sets
different strategies to win over the other and enjoys better profit through higher market share. It
has enhanced the inter competition among the airline brands in Australia that has effectively
reduced the fare of the airline as compared to the last year fares. Thus, brand like Qantas focus
on the capacity management technique to match it with the demand while staying disciplined on
costs (Sullivan, 2018).
Macroeconomic learning from the article:
The selected article highlights the real life scenario of oligopoly, where large number of
buyers and small number of sellers are available. Considering the selected article it has been
learned that aligning the brand with the demand is one of the best strategy to deter the market
competition under oligopoly (Ciliberto, Murry and Tamer 2016). In addition to this, as the sellers
sells close substitute, promotion of the product can act as one of the best policy to enjoy better

3ECONOMICS ASSIGNMENT
market share. Qantas is doing the same, thus it has become potential to enhance its profit during
2016.
Conclusion:
Selected article was about the airline market of the Australia, which is a pure oligopoly
industry. From the above analysis of the article it has been found that the market has failed to act
as a whole and influence the market through united pricing strategy. Thus, the selected report has
effectively described the oligopoly market and it has showcased how it deterrent policies work
under competition of the market.

4ECONOMICS ASSIGNMENT
Reference:
anna.aero. (2018). Qantas is averaging 30% passenger share in its top international markets.
[online] Available at: http://www.anna.aero/2016/10/20/qantas-is-averaging-30-percent-
passenger-share-in-its-top-international-markets/ [Accessed 10 Apr. 2018].
Ciliberto, F., Murry, C. and Tamer, E.T., 2016. Market structure and competition in airline
markets.
Johnston, M.W. and Marshall, G.W., 2016. Sales force management: Leadership, innovation,
technology. Routledge.
Kokovin, S., Parenti, M., Thisse, J.F. and Ushchev, P., 2017. DP12367 On the Dilution of
Market Power.
Lin, H., 2015. Quality choice and market structure: A dynamic analysis of nursing home
oligopolies. International Economic Review, 56(4), pp.1261-1290.
Sullivan, M. (2018). Qantas keeps focus on costs as competition sparks fall in international fares.
[online] The Sydney Morning Herald. Available at:
https://www.smh.com.au/business/companies/qantas-keeps-focus-on-costs-as-competition-
sparks-fall-in-international-fares-20161021-gs7dyy.html [Accessed 10 Apr. 2018].