University Name: Qantas Performance Analysis Report - EFB203

This report provides a comprehensive analysis of Qantas, the Australian airline, examining its performance within the context of economic principles. The analysis covers various aspects including airline background, supply and demand dynamics, elasticity, cost structures, production, market structure, and behavior. It further investigates the impacts of international economics, trade, exchange rates, macroeconomic policies, GDP, and overall growth on Qantas's operations. The report explores how factors such as consumer sentiment, fuel prices, and competition influence the airline's profitability and market position. Additionally, it assesses the effects of government policies, interest rates, and technological advancements on the airline's performance and the broader aviation industry in Australia. The report highlights the challenges and opportunities Qantas faces in a competitive global market.

Running head: PERFORMANCE ANALYSIS OF QANTAS
Performance Analysis of Qantas
Name of the Student
Name of the University
Author note

1PERFORMANCE ANALYSIS OF QANTAS
EXECUTIVE SUMMARY
This paper analyses the overall performance of the Australian airline Qantas. The performance,
background and context of the Qantas is discussed here. To get the overview of the airline
organization the below analysis will be helpful. This paper examines the demand, supply and
elasticity of the airline industry as well as Qantas. How the market structure, behaviour, cost and
production affected the airline is also discussed. The paper discusses about the growth, GDP and
macroeconomic factors which affects the performance of the company. The macroeconomic
policies that impacted the growth of the organization is examined here. There are other factors of
economics which influences the Australian airline industry and Qantas is analysed in the paper.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Airline background, context and performance............................................................................3
Impact of supply, demand and elasticity.....................................................................................4
Impact of costs, production, market structure and behavior........................................................4
Impact of international economics, trade and exchange rates.....................................................4
Impact of macroeconomic policy, GDP and growth...................................................................4
Impact of other factors.................................................................................................................4
Conclusion.......................................................................................................................................4
Reference List..................................................................................................................................5

3PERFORMANCE ANALYSIS OF QANTAS
Introduction
In order to provide transportation to both freight and passengers the Australian domestic
airline industry operates aircrafts within Australia on scheduled routes. The key economic factors
which affects the airline industry are increase or decrease in demand and supply of air travel,
consumer sentiment about the service and the change in crude oil price. Qantas is the major
player in the Australian market as it provide low cost airline for domestic and international
flights. The subsidiary of Qantas Jetstar also offer low cost flights (Homsombat, Lei and Fu
2014). There are many economic drivers which affects the performance of the flag carrier of
Australia Qantas. To assess the performance and position of Qantas in the industry drivers such
as demand, supply, cost, production, market structure, trade, exchange rates, growth, GDP and
macroeconomic policies are discussed. The carrier of Australia focuses on the use of advance
technology and quality of service to attract more customers (Sarina and Wright 2015). The
growth of the industry helped the Australian airline to earn more profits. Existing competitors in
the market influence the growth of the industry as well as the Qantas. The intense price
competition between Virgin and Qantas airlines lower the profit level comparatively. There is
barriers to entry in the industry due to high competition.
Discussion
Airline background, context and performance
The largest airline of Australia by international flights, fleet size and international
destination is Qantas Airways Limited. The flag carrier of Australia, Qantas founded in
November, 1920. The third largest airline of the world founded after KLM and Avianca
(Mohammadian et al. 2019). The headquarters of Qantas are situated at Mascot, Sydney, and

4PERFORMANCE ANALYSIS OF QANTAS
New South Wales. It started operation in May, 1935. The main hub of the airline is at Sydney
Airport. In March 2014, the share of Qantas in domestic market of Australia is 65% and the
percentage of Australian passengers travelling in and out of the country by Qantas is 14.9%. A
low cost airline named Jetstar Airways is owned by Qantas which operates both domestic
services within New Zealand and Australia and international services from Australia. It also has
some other Jetstar branded airline. The founding member of an airline alliance named Oneworld
is Qantas. In 2014, the airline reported A$2.84 billion loss whereas it returned to profit in August
2015, declaring A$557 million of profit (Lee and Worthington 2014). The number of aircraft
operated by Qantas and its subsidiaries is 297 in November, 2018, of which, the number of
aircraft by Jetstar Airways, QantasLink branded airlines and Express Freighters Australia are 71,
89 and 6 respectively.
Impact of supply, demand and elasticity
The price elasticity of demand states change in quantity demanded with respect to the
change in price. Demand in airline industry is constantly changing with respect to the market
conditions (Borenstein and Rose 2014). There is a significant demand response with respect to
change in air fares. As the air fare increases the demand for air traffic goes down. Any change in
policy such as increased landing fees and taxes will lead to decline in demand. Qantas witnessed
significant loss in the year of 2014 due change in demand and supply.
Though, the business travelers are less elastic than leisure travelers in response to change
in fare. As the customers have substitutes, the fare elasticity in case of short-haul is greater than
the long-haul. Thus the performance of Qantas in long-haul is better than the short-haul. These
factors affects the airline industry in general (Douglas and Tan 2017). However, the demand
elasticity of individual air carrier is higher than the demand elasticity of the whole market. The

5PERFORMANCE ANALYSIS OF QANTAS
income of the individual also influence the demand of air traffic. The rate of increase in air travel
is higher than the rate of increase in income. Therefore, the rich population of Australia is
helping to hike the demand for the Qantas airlines. The patchy demand for carrier and higher fuel
cost hit the profit margin of the airline. As the fuel price increased by $614 million, the fall in
profit of Qantas Airways is at $1.3 billion before tax. To cope up with the competition the carrier
launched frequent flyer program. After domestic business airline group’s second most profitable
unit is Qantas Loyalty, contributing $374 million profit (Morrell 2018). The mixed demand of
the aircraft specially the price sensitive flights of Jetstar routes affected the business of the
carrier and the industry.
Impact of costs, production, market structure and behavior
The revenue of the industry is estimated to increase over the next five years from 2021-
2022 at an annualized 1.4%. More than 800,000 Australian job is supported by the aviation
industry. However, increased passenger movement charge of 17% by the government of
Australia in 2012 hurt the economy and the business of Australian airlines (Pearce 2015). A flat
fee for all departing international air travelers is charged, of around $58. The growth of
Australian tourist trade hampered. The main problem is with wage structure of Australia and
high cost base. The huge competition in the market make it impossible for the government to
reduce wages and cost burden of the existing companies. The lower cost attract more carriers
from outside and grab the market share of the Australian carriers.
The control of price, capacity and frequency on many routes are much less and many new
international carrier have emerged due to liberalization. The failing unit costs, growth of the
discount airlines and lower fares declined the real value of airlines. The regulatory constraint of
the industry such as bilateral air service agreement including open skies agreement increased the

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level of competition (Zhang 2015). The factors affecting the behavior of the airline industry are
rising competition and price, decline in number of customers and international tourism. The
entrance of the new players and collapse of some existing players create unstable growth in the
airline industry. Entry cost of new airline is higher due to capital cost. This resulted in increase in
market power of the incumbent airlines. Many initiatives like mergers and acquisition have been
taken to avoid high competition of the aviation industry. Several airlines collapsed due to price
war among big players of the industry. In order to sustain, many carriers are forced to provide
discounted price for airline tickets.
Impact of international economics, trade and exchange rates
The operating environment of Australia is better than any other country which
provides an opportunity to grow the business. Therefore, Qantas get a perfect environment to
grow and develop its business. Hub airport infrastructure induced the growth of transport and as
a result competition become fierce in the Australian airline industry (Vasigh, Fleming and
Humphreys 2014). Meanwhile, the Chinese and middle eastern carriers posed a threat for Qantas.
The capitalization of the respective carriers intensified competition in international routes. The
contribution of aviation industry in Australian domestic economy is $79.8 billion or 6.1% of
GDP. The strong Australian dollar make it easier for the people of the country to take more
overseas trips. As the foreign exchange hit by $154 million, the profit of Qantas Airways fall to
17% and the profit stand at $1.3 billion before tax. The percentage of Australian population
travelling every year abroad increased from 30% to 50% in 2017.
Australia is an attractive business hub for these new carriers. The market share of these
airlines increased as they tapped the domestic and international market. In contrast, the more
open access facilitated existing carriers like Qantas and Virgin of Australia (Forsyth 2016). The

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airline which is now challenging Qantas domestically and internationally is Virgin. The main
competitor of Qantas which defunct long before is Ansett. It also promoted the international
operation of Jetstar. Qantas being the main carrier of Australia for long time. The depreciation of
Australian dollar and fuel surcharges increase the prices of both international and domestic
airline tickets of Qantas (Markham et al. 2018). Increased terrorist activities throughout the
world raise the safety concern of the air travelers. It affected national and international tourism of
terror stricken countries as well as the world as a whole. In 2013, terrorist activities like plane
hijacking, murders, injuries and kidnapping and terrorist attacks have increased by 43%.

8PERFORMANCE ANALYSIS OF QANTAS
Impact of macroeconomic policy, GDP and growth
Impact of Australian economy on Qantas is significant. The Qantas Group contributed
0.7% in the gross domestic product of Australia. The contribution of only Qantas is 0.4% of
GDP of Australia. The estimated total GDP of Australia was at $1.313 trillion in 2018. The
estimated nominal GDP of Australia was at $52,191 in 2018 (Duval 2016). For over 15 years,
Australia has grown at an average annual rate of 3.6%. The strong economic performance and
macroeconomic policies by the Australian government influences the growth of Qantas airline
(Alexander and Merkert 2017). The macroeconomic factors influencing airline industry of
Australia are exports, imports, trade agreements, input prices, consumer price index, government
spending and inflation rates. Australian government took stance policy to maintain the real GDP
growth and positive economic outlook of the country. The biggest airline of Australia facilitated
by the positive GDP growth as aggregate demand increased due to it. The low unemployment
rate of Australia create an opportunity for the airline to get labor at a competitive rates. The
inflation rate of Australia is maintained low which effected the cost structure of the Qantas. To
influence the supply of money and credit within the economy Reserve Bank of Australia (RBA)
set monetary policy in order to stabilize the financial system and stimulate growth. The interest
rate of the country impacted because of monetary policy through selling and purchasing of
government bonds. The positive growth helped Qantas to sustain in highly competitive market.
The profitability of the organization influenced by the macroeconomic policy including
monetary and fiscal policy of the government of Australia.
Impact of other factors
There are many additional factors which are also important for the airline industry to
grow. One of the other factor affecting economy and airline industry is interest rate. The interest

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rate influence the present and future price of goods and services which will impact the demand of
the airline industry. Higher interest rate affect aviation industry with high leverage and expected
cost of the industry. Aviation industry required continuous research and innovation.
Technological advancement is very important for the growth of aviation industry (Zhang, Wang
and Fu 2017). The continuous research and innovation need a huge investment and Qantas need
to bear the total cost of using technology. These factors impacted the revenue generation of the
company and some part of it will impact the price of the air tickets. The company need to
comply with environmental regulations of Australian airlines industry (Kristjanpoller and
Concha 2016). The government planned to reduce carbon emissions by 2020 and Qantas took
part in carbon emission scheme to maintain global carbon emissions trading scheme. The strong
gold and currency reserve of Australia will help the airline industry to strengthen business and
attract more customers. The currency reserve help to check the vitality of the market and ensure
smooth business of Qantas airline.
Conclusion
The brand reputation of Qantas is very strong in full service and premium airline with a
subsidiary Jetstar, both offering low cost airline. It is a globally reputed brand for its great
services and products for passengers across the world. The company focuses more on passenger
satisfaction, safety issues, human resource, environment friendly service and advanced
technology. The micro and macro analysis of Qantas through cost, production, revenue,
international trade, demand, supply, macroeconomic policies, GDP and growth help to
understand the market position of the organization. The overall operation of Qantas is assessed
and it is clear that the organization is performing well despite domestic as well as international
competition. Qantas need to continue with innovation and research to serve it customer in a

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better way to beat the competition. The biggest potential rival of Qantas from Australia is Virgin.
The plausible business strategies of Qantas supported the business to run successfully even with
potential competitors.

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Reference List
Alexander, D.W. and Merkert, R., 2017. Challenges to domestic air freight in Australia:
Evaluating air traffic markets with gravity modelling. Journal of Air Transport Management, 61,
pp.41-52.
Borenstein, S. and Rose, N.L., 2014. How airline markets work… or do they? Regulatory reform
in the airline industry. In Economic Regulation and Its Reform: What Have We Learned? (pp.
63-135). University of Chicago Press.
Douglas, I. and Tan, D., 2017. Global airline alliances and profitability: A difference-in-
difference analysis. Transportation Research Part A: Policy and Practice, 103, pp.432-443.
Duval, D.T., 2016. The Future of Australian International Aviation: Liberalisation, Competition,
and the Dutch Disease. In Air Transport in the Asia Pacific (pp. 163-176). Routledge.
Forsyth, P., 2016. Tourism and aviation policy: exploring the links. In Aviation and Tourism (pp.
103-112). Routledge.
Homsombat, W., Lei, Z. and Fu, X., 2014. Competitive effects of the airlines-within-airlines
strategy–Pricing and route entry patterns. Transportation Research Part E: Logistics and
Transportation Review, 63, pp.1-16.
Kristjanpoller, W.D. and Concha, D., 2016. Impact of fuel price fluctuations on airline stock
returns. Applied energy, 178, pp.496-504.
Lee, B.L. and Worthington, A.C., 2014. Technical efficiency of mainstream airlines and low-cost
carriers: New evidence using bootstrap data envelopment analysis truncated regression. Journal
of Air Transport Management, 38, pp.15-20.