ACC5216 - Qantas Job Cut Decision: Accounting Theory & Analysis

This case study examines Qantas' decision to implement job cuts following financial losses in 2013. It analyzes the reasons behind the decision, including a $252 million loss, and its effects on key stakeholders such as employees, investors, and customers. The study uses stakeholder theory to understand the implications of the decision and recommends the Function Cost Analysis theory to improve cost savings. The analysis includes comparing Function Cost Analysis with Low-Cost Country Sourcing. The paper concludes that the job cuts impact stakeholders and the company's performance, with a recommendation for Function Cost Analysis to drive cost savings and maximize customer satisfaction. Desklib provides more solved assignments for students.

Running head: QANTAS - JOB CUT DECISION ANALYSIS
QANTAS - JOB CUT DECISION ANALYSIS
Name of the Student:
Name of the University:
Author Note:

1QANTAS - JOB CUT DECISION ANALYSIS
Abstract
This paper titled “QANTAS - JOB CUT DECISION ANALYSIS” performs the
analysis of the job cut decision made by the company in the February 2014. This report
highlights the facts and reasons of this decision and the effect of such decision in the
stakeholders of the company. Further, it analyse the stakeholders of the company by using the
different stakeholder analysis theories. Lastly, the paper compare the different accounting
theories to recommend the appropriate accounting theory to reduce the costs of the company.

2QANTAS - JOB CUT DECISION ANALYSIS
Introduction
This essay titled “Qantas – Job cut decision” is based on the decision taken by the
company to sacks 167 staffs in July 2014. The Qantas is the flagship airline company based
in Australia, funded in 1920. The company originally registered as Queensland and Northern
Territory Aerial Services Limited (QANTAS). The company widely regarded as world’s
leading long distance airline and one of the strongest brand of Australia (Qantas 2019). The
main business of the company is the transportation of the customers. This essay contents the
fact of the case, reasons and effects of this job cuts (Massola 2014). Along with the
comparison of the different accounting theories and determine the, which theories is most
important for the company.
Discussion
Fact of the case
The Qantas suffered the loss of $252 million in December 2013 for the last six
months. In this respect, chief executive officer said that this result is not acceptable, and the
airline will cut the 5,000 full time equivalent positions to return the profitability, in February
2014 (ABC News 2014). After five month, company sacked 167 staff in July 2014 including
the 131 engineers and 36 administration staffs. This was the first of the 5000 job cuts. The
company was planning to save $2 billion by this job cuts in financial year 2016-17.
Reasons and effects of the case
The main reason behind this job cut is that the company suffered the loss of $ 252
billion in second half of the year 2013. While, Qantas domestic earned the profit of $57
million, which is decreased by the $ 218 million and international business loss increased $
262 million from $ 91 million, in the same period in 2012. This loss suffered by the company

3QANTAS - JOB CUT DECISION ANALYSIS
became the main cause of the 5000 jobs cuts in the next year. As the chief executive offer
said that this kind of the performance is unaccepted by the management of the company.
On the other hands, as per the opinions of the various financial and management
analysts Qantas can suffer the various problems as mentioned further. The deduction in the
numbers of the maintenance engineers would create safety problem. This decision can put the
Qantas in drastically undermanned because as noted in the consultation phase, company
already do not have enough staff to perform the future works. It also cause the flight delays
because some of airplanes would not be have airworthy. As the company already do not have
the enough staffs, it also would create the scenario where the aircraft would not get
permission to fly.
Effect in the stakeholders
This job cut decision will be mainly effect the three stakeholders of the company.
Those are employees, investors and the customers. In respect of the employee, they have to
perform the copious amount of overtime in order to get their daily duties and to face the huge
workload. This decision also implement the fear among the employee regarding their job
security, which may affect the performance and dedication of the employee towards their jobs
(Oxenbridge, et al 2017). Second, one is investor, as the many financial and management
analysts predicted that this decision would affect the performance of the company, as the
company already do not have the enough staffs to perform the future tasks. This will affect
the investors of the company because they also feel the lack of surety in their investments as
per the statements made by the analyst. Lastly, the customers of the company will also
affected by this decision of the company as the analyst had said, lack of the maintenance
engineers can increase the safety problems, delay in flights and the cancel flights.

4QANTAS - JOB CUT DECISION ANALYSIS
Implication of the stakeholder theory
As per the Edward Freeman’s stakeholder theory, company has the responsibility to
all of its stakeholders, who directly or indirectly claims any stake upon the company like
employees, shareholders, customers and same like. The any decision made by the company
directly affect their stakeholders. As per the second level of the Edward freeman’s theory for
the stakeholders, at the time of the negative situation, company can enhance its efficiency in
the industry only by balancing the interest of all the stakeholders (Anderson and Brauns
2015). Qantas needs to perform the further stated functions to motivate their stakeholders.
Company need to talk with their entire stakeholder to ensure their importance in the
organisation. They need to arrange the meeting with their shareholders and investors to
explain their plans, causes and needs of the plan along with the expected outcomes of such
plan. Similarly, firm needs to make sure that their employee keeps their faith in the
organisation, help them to feel secure related to their job and arrange some motivational
sessions for the employees (Ramirez 2015). For the customer’s motivation, company need to
improve their services. By providing their best services to the customer, company can show
positive effect of their decision.
Implication of accounting theory
In this case, of Qantas, this essay consider the Relevant Cost theory of
accounting to analyse the decision made by the company to job cut. The reason behind
choosing this theory is that this theory is relevant to the case and simply give the result that
what the stakeholders should need to do in this situation. As per this theory, management
make their decision by comparing the cost of the resources and their contribution towards the

5QANTAS - JOB CUT DECISION ANALYSIS
profit making of the company (Bryce, Ali and Mather 2015). If their contribution is more in
the profit making of the company than their relevant cost, then company continues its
operation with such stakeholder otherwise not (Tantalo and Priem 2016). The outcome of this
theory for the employees that they have to perform well and more productively in order to
save their job. The shareholders or the investors of the company need to understand the
situation more deeply and have to forecast the future performance of the company in the basis
of the need and effect of this decision, before investment (Joubert, Garvie and Parle 2017).
Lastly, the customers of the company need to have faith in the company and observe the
change before making any perception about the company.
Theories of cost savings
There are many cost saving theories in the accounting like Supplier consolidation,
Function cost analysis, Component consolidations, reverse coasting, Low cost country
sourcing, cost driver analysis and it alike. Here, the comparison of Function cost analysis
theory and Low cost country sourcing theory is performed to determine the best theory for
the Qantas to cost saving (Blank 2016). The low cost country outsourcing is a strategy in
which a company purchase its resources from such countries where the cost of production
and labours is low, in order to reduce the cost of operating expenditures. The other theory is
Function cost analysis; it is an economic technic of research the systems for optimising a
proper parity between operating system or properties and expenses incurred to achieve those
properties and functions. The first theory is more related to the manufacturing companies as
this theory focuses only in production of the resources in other countries which cost of
production is low (Lockström 2017). Therefore, this essay recommend the second theory,
which is Functional cost analysis to the Qantas to reduce company’s cost.
Implementation of Function cost analysis theory

6QANTAS - JOB CUT DECISION ANALYSIS
The main objective of function cost analysis is to achieve the highest customer
satisfaction as well as reducing the all related costs of the firm to achieve the maximum
customer satisfaction. This theory will help the company to identify the high cost-consuming
units with the low productivity (Ketokivi and Mahoney 2016). This also assist the
management of the Qantas to replace these unproductive unit costs with the more productive
units with lower cost consumption. It also allow the company to focus on the more productive
units rather than the units that consume more cost with less production. This theory is best
suits Qantas to minimize its cost to provide maximum satisfaction to their customers.
Conclusion
The paper concludes that the Qantas announces the 165 job cuts due to the loss
suffered by the company in the last second half of the financial year 2013. This affect the
main three stakeholders those are employees, shareholders and the customers of the company
along with the performance of the company. The paper also analyse the stakeholder theory to
ascertain the stakeholder’s move toward this decision. This paper recommends the Function
cost analysis theory of to the company to perform the cost saving.

7QANTAS - JOB CUT DECISION ANALYSIS
References and Bibliography
ABC News. (2019). Qantas sacks 167 staff, union warns of flight delays. [online] Available
at: https://www.abc.net.au/news/2014-07-08/qantas-lays-off-167-staff-as-part-of-cost-cutting-
program/5582404 [Accessed 30 Mar. 2019].
Anderson, M. and Brauns, T., 2015. Industrial relations in Queensland under an LNP
government. QUT L. Rev., 15, p.4. https://heinonline.org/HOL/LandingPage?
handle=hein.journals/qutlj15&div=17&id=&page=
Blank, J.L., 2016, June. Frontier Estimation of a Cost Function System Model with Local
Least Squares: An Application to Dutch Secondary Education. In North American
Productivity Workshop (pp. 103-118). Springer, Cham.
https://www.researchgate.net/profile/Jos_Blank/publication/322905397_Frontier_Estimation
_of_a_Cost_Function_System_Model_with_Local_Least_Squares_An_Application_to_Dutc
h_Secondary_Education/links/5c46f7be299bf12be3da23b5/Frontier-Estimation-of-a-Cost-
Function-System-Model-with-Local-Least-Squares-An-Application-to-Dutch-Secondary-
Education.pdf
Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L., 2017. Cost-benefit
analysis: concepts and practice. Cambridge University Press.
https://www.nrc.gov/docs/ML1233/ML12338A400.pdf
Bryce, M., Ali, M.J. and Mather, P.R., 2015. Accounting quality in the pre-/post-IFRS
adoption periods and the impact on audit committee effectiveness—Evidence from
Australia. Pacific-Basin Finance Journal, 35, pp.163-181.
http://tarjomefa.com/wp-content/uploads/2017/08/7411-English-TarjomeFa.pdf
Forsyth, A. and Stewart, A., 2016. Of Kamikazes and Mad Men: The Fallout from the Qantas
Industrial Dispute. Melb. UL Rev., 36, p.785.

8QANTAS - JOB CUT DECISION ANALYSIS
Harrison, J.S., Freeman, R.E. and Abreu, M.C.S.D., 2015. Stakeholder theory as an ethical
approach to effective management: Applying the theory to multiple contexts. Revista
brasileira de gestão de negócios, 17(55), pp.858-869.
http://www.scielo.br/pdf/rbgn/v17n55/1806-4892-rbgn-17-55-00858.pdf
Joubert, M., Garvie, L. and Parle, G., 2017. Implications of the New Accounting Standard for
Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet. The
Journal of New Business Ideas & Trends, 15(2), pp.1-11.
http://www.jnbit.org/upload/JNBIT_Joubert,_Garvie_Parle_15(2)_2017.pdf
Ketokivi, M. and Mahoney, J.T., 2016. Transaction cost economics as a constructive
stakeholder theory. Academy of Management Learning & Education, 15(1), pp.123-138.
https://journals.aom.org/doi/pdf/10.5465/amle.2015.0133
Kumar, N., Andersson, D. and Rehme, J., 2015. Logistics of low cost country
sourcing. International Journal of Logistics: Research and Applications, 13(2), pp.143-1
Lockström, M., 2017. Low-cost country sourcing: Trends and implications. Springer Science
& Business Media.
Massola, M. (2019). Qantas cuts 5000 jobs, posts $252 million first half loss. [online] The
Sydney Morning Herald. Available at: https://www.smh.com.au/business/companies/qantas-
cuts-5000-jobs-posts-252-million-first-half-loss-20140226-33i4c.html [Accessed 14 Feb.
2014].
Nas, T.F., 2016. Cost-benefit analysis: Theory and application. Lexington Books.
Oxenbridge, S., Wallace, J., White, L., Tiernan, S. and Lansbury, R., 2017. A comparative
analysis of restructuring employment relationships in Qantas and Aer Lingus: different

9QANTAS - JOB CUT DECISION ANALYSIS
routes, similar destinations. The International Journal of Human Resource
Management, 21(2), pp.180-196.
Qantas (2019). Our Company | Qantas. [online] Qantas.com. Available at:
https://www.qantas.com/travel/airlines/company/global/en [Accessed 30 Mar. 2019].
Ramirez, R., 2015. Stakeholder analysis and conflict management. Cultivating peace:
conflict and collaboration in natural resource management, pp.101-126.
Tantalo, C. and Priem, R.L., 2016. Value creation through stakeholder synergy. Strategic
Management Journal, 37(2), pp.314-329.
https://www.researchgate.net/profile/Richard_Priem2/publication/265690092_Value_Creatio
n_Through_Stakeholder_Synergy/links/59d8c055aca272e60966bf7b/Value-Creation-
Through-Stakeholder-Synergy.pdf