Applying Economic Principles: A Case Study of Qantas Airline

This report analyzes Qantas, Australia's flag carrier, using key economic principles to understand its market position and business strategies. It examines the number of buyers and sellers, the types of services offered, and the conditions for market entry and exit, noting the significant market share held by Qantas and Virgin Blue. The report discusses short-run and long-run profitability, highlighting Qantas's recent financial performance and future investment prospects. It also explores price determination and non-price competition strategies employed by Qantas, such as marketing policies and service enhancements. The analysis concludes that Qantas has strong growth prospects due to its market share and recent organizational restructuring.

Running head: PRINCIPLES OF ECONOMICS
Principles of economics
Name of the student:
Name of the University:
Author note

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Table of Contents
Introduction:..................................................................................................................................2
Number of sellers and buyers in the market:..............................................................................2
Type of service from the chosen organization:...........................................................................2
Entry and exit condition from the market:.................................................................................3
Short run and long run profits:....................................................................................................3
Price determination in the market:..............................................................................................4
Non price competition in the market:..........................................................................................4
Conclusion:.....................................................................................................................................4
Reference:.......................................................................................................................................6

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Introduction:
This report is aimed to analyse the important economic principles and apply the same in
case of solving the business problems for a chosen organisation. It is expected to develop the
problem solving skills for the entrepreneur and it will guide to describe the future prospect of the
chosen organisation. For the assignment, Qantas will be chosen which is the flag carrier of the
Australian airline. Being the largest firm in the Australian economy that provide airline service,
Qantas has largest fleet and it has 62% of the market share. In this report, the researcher will
highlight the market situation for the selected firm and depict the entry and exit condition from
the market for the same (Cu et al., 2016). Moreover, price determination and non-price
competition in the market will be elaborated through the essential economic principles.
Number of sellers and buyers in the market:
Qantas is one of the largest airline service provider in the Australian air market that has
62% of market share and it has largest fleet of airlines making it the best growing airline in the
domestic economy. If the international service of the Qantas is considered, then it can be seen
that the it enjoys more than 28% of the market share making it another growing airline service
provider (Seufert et al., 2017). Qantas has both the international and domestic service, however,
it has reducing domestic market due to the fall in the number of customers for the small airline
service providers who have enhancing market share in the trunk airline sector.
Type of service from the chosen organization:
Qantas is considered as the largest service provider of Australia that has enabled it to
enhance its business over the years. Though the market of the firm during the present date is
falling due to the fall in the number of buyers in the domestic economy, however, international
services form the firm makes the firm to face good amount of growth in recent date (Yu et al.,

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2017). Qantas has been enhancing its international services in different markets due to their
process of internationalisation of the same. In the US and in the European market, it is
performing extensively allowing it to grow in the recent years.
Entry and exit condition from the market:
As per the Qantas airline, it can be seen that the entry and exit in the market is highly
restricted. Market has two large competitors who are Qantas itself and the Virgin Blue who share
62% and 32% respectively showcasing higher market occupied by both the firm. It showcases
that under in any scenario, if one new entrant want to enter the market, then it will present
market players will showcase good amount of entry barrier (Teker et al., 2016). With the price
determination and the price control, it can be seen that market is highly competitive. As per the
entry barrier is concerned, cost advantage of the Qantas can provide good amount of economic
barrier in front of the new entrant and as far as the Virgin Blue is concerned, then there is also
large amount of barrier because of cost advantage and large amount of competitiveness from the
firm. When it comes to the exit barriers, it can be seen that firm provides good amount of barrier
through the rise in merger and acquisition (Jiang & Zhang, 2018).
Short run and long run profits:
Short and long run profit of the firm is high during the recent years as the firm has gone
through the restructuring of the firm. Under the enhanced performance of the firm, Qantas has
ability to face large amount of growth in the present date. As per the latest financial report, it has
profit before tax of 1,401 USD and the return on invested capital is 20.1% depicting good
amount of profit for the firm (Qantasnewsroom.com.au, 2018). Considering the cash flow of the
firm, it can be seen that it has good amount of investment both from the domestic and the
international investors that allows it to have good amount of growth in the coming years. As it

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can be seen that Melbourne Domestic lounge has been announced it has enhanced the future
investment possibilities allowing the firm to have prospect of higher income during the future
time.
Price determination in the market:
Qantas has high amount of market control within both the domestic as well as
international market that has enabled it to stay where it is now. Through large amount of
operation and availability of economies of scale, it can be seen that Qantas enjoys moderate
amount of price advantage in the market (Forsyth, 2018). This enhance the scope of the firm to
have good amount of price advantage and go through the price advantage.
Non price competition in the market:
There is certain amount of non-price competition that may arise through the rise in the
marketing policies. In addition to this, Qantas and the Virgin Blue often utilise the print and
electronic media publication as the medium of non-price competition. Moreover, it can also be
seen that there is superior service and added benefit from the selected organisation that provide
the firm competitive advantage and non-price competition in the market (Homsombat et al.,
2014). In addition to this, it can also be seen that firms like Qantas utilise the certain amount of
discount and offering to the buyers as the non-price competition.
Conclusion:
From the above analysis, it can be seen that the Qantas airline has wide scope to enhance
its business in the coming years and as per the present market scenario with the largest market
share, Qantas has good growth prospect. Under price determination in the market, it enjoys
moderate amount of control over the market and considering the short and long run profits, the

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firm has been facing good amount of growth during the present date due to the recent
organisational restructuring.

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