Research Paper on Threats faced by Qantas Airways
The higher level of competition presented by Virgin Airlines in the Australian local market is one of the biggest threats to Qantas Airways. Along with this, the higher competition level is also faced by Qantas within the global markets. High regulation within the airline industry is present. Due to the dominance of government-supported and state-owned airline organizations, the regulatory landscape in Asia for airline companies is quite complex. Significant costs are incurred as the airline organizations are subjected to extensive requirements with regards to legal and regulatory compliance. Within many regions of the world, operations have been maintained by Qantas and these operations are carried out within a highly regulated atmosphere.
The operations of the organization are subjected to various international and domestic restrictions, regulations and laws. The organization may expose to debarment, suspension, penalties or fines if these restrictions, regulations, and laws are non-complied. This can leave a material adverse impact on the organization. Expenses are continued to incur to the organization in connection with compliance to regulations of the government. The demand for air travel can be reduced or the cost of airline operations can be increased significantly as the additional charges and rates of airport, taxes, regulations, and laws have been changed with the passage of time. Costs can be increased, revenue can be reduced and the prices of the ticket can be raised if these measures are adopted. This in return will also enhance the obligations on the organization and can influence its margins adversely.
The key raw material used in the airline industry is formed by jet fuel. To the prices and availability of related feedstock and oil, the demand for petrol and its other related products has been sensitive and cyclical historically. Due to various factors that are beyond the control of organizations such as Qantas, the global prices of refined products and crude oil have widely fluctuated historically. For Qantas, one of the major parts of the total expenses is formed by the cost of jet fuel. In comparison to FY2011, the jet fuel expense of Qantas increased to 4,468.8 million dollars in FY2012. In comparison to FY2011, the fuel expense was eighteen percent higher in FY2012. Therefore, the operations of the company can have a negative influence due to any increase in fuel expense of aircraft and this in return will affect the profitability and margins of the company.
With the emergence of low-cost airlines particularly in the East Asian region, intensified competition has rise within the airline industry. The airline operation of Qantas has become less competitive due to the low fare imposed by these budget airlines. In various geographical parts of the world, involving India, China and the Middle East, sever competition is being faced by Qantas from local operators in the long-haul market. Growth has continued to be made and strong market positions have been formed by low-cost airlines in the medium-haul market.