Low Flying Kangaroo

Parliament house flag post

Low Flying Kangaroo

Posted 1/11/2011 by Vivien Banks

The dispute between Qantas and unions can be seen in the context of Qantas’ attempts to remain viable in a highly competitive domestic and international aviation environment. This article examines some of the sources of these competitive pressures and the strategies that Qantas has adopted, or proposes to adopt, in responding to this environment. It finds that these strategies are broadly akin to those that Australian companies in other sectors have adopted when faced with similar circumstances.

The aviation industry—domestic and international—has changed markedly in recent years. One such change has been the emergence of low-cost carriers—such as Ryanair—that have made inroads into markets previously dominated by so-called ‘heritage’ (often state-owned airlines) such as Alitalia and Swissair. In the Australian context, Qantas established Jetstar as a low-cost airline to compete against Virgin Blue (now Virgin Australia) when the latter was established as a no-frills airline. This strategy has contributed to Qantas and Jetstar combined having a two-thirds share of the domestic market.

Qantas’ position on the international market is more precarious than the domestic market, with Qantas losing market share and incurring losses on its international operations. According to data published by the Bureau of Infrastructure, Transport and Regional Economics, Qantas’ share of the international market (as measured by the number of international passengers) fell by almost 15 percentage points from 34 per cent in 2000 to 19 per cent in 2010. Qantas says that its international operations are unprofitable. Several factors have contributed to this situation.

One is the Australian Government’s policy of liberalisation of the international aviation market which aims to benefit consumers by keeping fares down and providing greater choice. One consequence of the system of bilateral air services agreements that govern international aviation has been to provide a degree of protection for Qantas. The winding back of this protection has led one commentator to state that “The Qantas dispute with its unions is, to a large extent, about unwinding excessive operating costs that have been built up behind that protection”.

On 16 August 2011, Qantas announced its new international strategy. This has multiple strands. One is to gain entry into fast-growing markets. With the Australian domestic market small and growing relatively slowly, and with competition increasing on Australia’s international markets, Qantas is seeking to tap into fast-growing Asian markets by offering both low-cost flights and a full service airline. Qantas entered the Asian low-cost market in 2004 when Jetstar Asia Airways—in which Qantas held a 49 per cent stake—began flights. Qantas also proposes to invest in a full-service Asian-based airline.

A second strand is cost-cutting. According to Qantas, its international cost base is around 20 per cent higher than that of its key competitors. To reduce costs, Qantas proposes to reduce staff numbers in its international operations by around 1000 and shift activities offshore. Qantas also proposes to reduce capital investment by $US2.3 billion in its international division. These are additional to the steps Qantas has already taken such as using labour hire firms.

Qantas’ responses to its fading international prospects as protection is wound back and as it faces cost pressures are similar to what many other Australian companies in other sectors have done in the past. Australian companies such as Pacific Brands have been investing overseas for decades. Qantas’ situation and responses are thus not unprecedented.

Authored by Richard Webb; Posted by Vivien Banks

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




refugees asylum immigration Parliament elections Australian foreign policy climate change social security women welfare reform Indigenous Australians Australian Defence Force welfare policy school education higher education private health insurance Taxation health financing emissions trading Senate Australian Bureau of Statistics employment people trafficking statistics Middle East illicit drugs gambling health reform federal election 2010 income management Medicare disability Sport United Nations Asia constitution transport Australian Public Service politics criminal law Afghanistan health forced labour aid Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget Industrial Relations Carbon Pricing Mechanism dental health voting law enforcement electoral reform public service reform OECD Australian Electoral Commission WADA child protection environment poker machines Australia in the Asian Century steroids National Disability Insurance Scheme detention aged care 43rd Parliament slavery health system domestic violence parliamentary procedure International Women's Day accountability defence capability multiculturalism ASADA Australian Federal Police Fair Work Act governance labour force people smuggling debt international relations New Zealand food Australian Crime Commission pharmaceutical benefits scheme crime China regulation leadership Census election results UK Parliament Papua New Guinea banking corruption pensions children's health Aviation federal election 2013 foreign debt gross debt net debt Senators and Members ALP Newstart Parenting Payment Youth Allowance sea farers human rights violence against women vocational education and training military history by-election political parties High Court skilled migration mental health Federal Court terrorist groups science social media Higher Education Loan Program HECS federal state relations youth paid parental leave same sex relationships coal seam gas customs planning doping health risks Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy election timetable Indigenous royal commission Productivity United Kingdom firearms public policy Population ADRV terrorism transparency research and development welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining employer employee renewable energy regional unemployment fishing European Union family assistance United Nations Security Council Australian economy forestry food labelling Drugs welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy social inclusion paternalism sitting days electoral divisions Foreign affairs Southeast Asia administrative law universities TAFE Ireland citizenship asylum seekers early childhood education Canada Financial sector national security fuel disability employment Tasmania integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health housing affordability bulk billing water health policy Governor-General US economy trade unions export liquefied natural gas foreign bribery question time speaker superannuation public housing expertise climate Intergovernmental Panel on Climate Change Department of Agriculture Fisheries and Forestry Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare constitutional recognition of local government referendum consumer laws PISA competition policy US politics language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage rural and regional alcohol entitlements ministries Hung Parliament social citizenship maritime Iran ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution prisons police deaths in custody electoral margins electoral pendulum electoral redistribution redistribution NSW redistribution WA redistribution ACT electoral boundaries ASEAN Sustainable Development Goals Double dissolution Senators safety vehicles ODA MYEFO Pathology tertiary education Taiwan Xi Ma meeting family violence government financial advisers financial planners Financial System Inquiry Murray Inquiry China; Economic policy; Southeast Asia; Africa housing Speaker; House of Representatives; Parliament Defence High Court; Indigenous; Indigenous Australians; Native Title ACT Indigenous education Norfolk Island External Territories emissions reduction fund; climate change child care funding refugees immigration asylum procurement Indigenous health e-voting internet voting nsw state elections 44th Parliament 2015 ABS Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Israel Palestine asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers First speech defence budget submarines workers Somalia GDP world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing Victoria astronomy resources sector YMCA youth parliament Korea rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top