Executive Summary
Qantas is Australian largest domestic and International airline. It provides regional, local and long-distance airline travel services. Apart from that is also operates businesses in specialist markets such as Q-catering, and it also operates other subsidiary airlines such as Jetstar. Qantas experienced a statutory loss of $2,843m at the end of the 2014 financial year. The research paper describes and explains the strategies put in place by Qantas to recover from debt, sustain future profitability and to increase stakeholder’s benefits (Abbott & Cohen, 2014).
At the end of the financial year of 30th June 2014, Qantas experienced financial losses which resulted in a statutory loss of $2,843m. The loss was due to the drop in revenue and increase in expenditure in the previous year. The decrease in income was linked to the decline in passenger revenue and increase in the freight net revenue from $935m to $955m with the comparison of the previous financial year. The increase in expenditure was due to the global fuel prices which shifted from $4,145m in 2013 to $4,461m in 2014. It caused the operation costs of the aircrafts to rise from $3,061m to $3,142m at the end of the 2014 financial year. The factors caused elevation of consumer revenue which led to the decline in passenger yields. The decrease in passenger revenue attributed to the competitive advantage of Qantas competitors.
Qantas Transformation Program was set up to respond to these factors. QTP is a long-term business strategy. The QTP will address sustainable growth with a focus on the cost minimization and debt reduction. The program aims to identify $2b in cost reduction which is to be successful over the next three years. The act will bring sustainable profitability thus delivering quality services and shareholder value. Other strategies put in place increase in capacities. International Airlines continue to attract Australian market. It has lead to the growth in consumer demand, which will increase the profitability for the financial period. Increased capacity puts Qantas in a favorable position for market growth.
When the economy was facing greater financial expenses, plenty of businesses ended up completing their payment of unsecured debts. Qantas was among them. The result puts Qantas in a stable financial position and will not need refinancing until 2016. Other consideration put into secure financial stability are minimizing capital investment to ensure the presence of cash flow for debt reduction. The reduction of Net finance costs up to $204m at the end of the financial year. Qantas has overall liquidity of $3.6B. These will enable easy access to cash flows that will ensure future ability to meet debt requirements for the next financial year (Abbott & Cohen, 2014).
Qantas has consumer loyalty resulting in 65% of the domestic market share. It continues to have favorable consumer reception, which reflects the increase of Qantas Consumer Loyalty Members. The end of the 2014 financial year Qantas membership reached 10m.Although the losses may be damaging the improvement strategies put in place will ensure stakeholder receive the deserved benefits. The strategies information proves that there is hope for Qantas, and if the plans are followed up, there will be enormous profits for both the company and the stakeholders. The strategies have proved to work since Qantas was voted the Australian’s favorite domestic and international airline at the end of 2015.
Reference
Abbott, M., & Cohen, B. (December 01, 2014). A Survey of the Privatization of Government-Owned Enterprises in Australia since the 1980s. Australian Economic Review, 47, 4, 432-454.
