Challenges Facing the Airline Industry in Australia and Remedies - Case Study Example

Challenges facing the airline industry in Australia and remedies Unit name Your name Date of submission Student ID number Abstract This study investigated the challenges that are present in the airline industry in Australia and possible remedies to ensure that business sustainability is achieved. In an analysis conducted in this study, it has been observed that the factors that influence business sustainability in the airline industry in Australia are both internal as well as external. Internal factors involve huge competitions with the advent of many players in the industry. Poor management decisions and bad customer service has been two major factors that affect business sustainability in this region. Political influence, climatic conditions and other environmental factors are external factors that affect sustainability of the airline industry in Australia. As a remedy, good customer service and making strategic management decisions are important factors that will ensure business sustainability and perpetuity in the region is maintained. Introduction Background to the study Airline business is a very competitive business. The clients who use airline as their mode of transport are highly volatile. The levels of loyalty to a specific airline has been on the decline in recent years owing to much competition between various players in this industry. Australian airline industry has been on the spotlight in the past due to volatility in the way this industry behaved (Hooper, Cain & White, 2000; Sullivan, 2015). The 2014-2015 period saw a lot of crash between the Australian supposedly flag carrier, Qantas and a rival airline, Virgin where the former accused the other of pilferage of clients (Nancarrow, 2011). This was one event that under marked the challenges facing this industry prompting a study to establish them and find a solution to the issue. Objectives of this study There are a number of objectives for this study namely; i. To identify the challenges facing the airline industry in Australia ii. To identify the solutions devised so far and establish whether they have worked iii. Come up with recommendations on how the challenges facing this industry in Australia could be encountered Sector analysis Sustainability challenges facing this sector The airline business in Australia is among the most important industries in the country. Australia as a nation is linked to others via its airports and hence the airlines have become an instrumental part of the country’s economic development and growth. The airline industry in Australia is divided into two segment; the domestic airline and the international airline. Each of these segment plays an important role in the development and growth of the industry as a whole. By the year 2000, there were over 206 regional destinations within Australia that were being served by the airlines operating in the country as the chart below shows. Image source: http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0203/03RP10#aair Increased competition among airlines For a long time, there has been a lot of turbulence in the Australian airline industry with the advent of new players. Qantas airlines has, for the longest time been branded as the official airline of Australia. New players have cropped up however, forcing the company to reinvent itself in a much competitive environment. Virgin Blue airlines is one of the closest rivals of Qantas airlines. Before the Virgin airlines came into the picture, Qantas airlines had a market share of over 50% of all domestic as well as international traffic flowing through major airports in Australia. This market share has reduced dramatically as each player battled for space in the lucrative Australian market. The other players operating in the nation include Pel-Air, Skytrans, JetEx among others. The increased competition has resulted in the reduction of volume of sales and hence a reduction in the amount of profit that these airlines have been receiving (James & Freestone, 2009). Customer service and customer loyalty issues Forsyth (2001) notes that for any business operating in the hospitality industry, customer service is a very important element. This is what defines how people perceive your business and what brand you have created for the business. Poor customer service results in loss of clientele. In the airline industry, the comfort of the passengers is utmost importance. Airline industries have invested a lot of resources in the training of their personnel in customer services. This has been one of the challenges facing the airline industry in Australia. There has been a lot of complaint about bad customer service and reliability issues in Jetstar, Qantas budget airline. Reliability in the airline industry is important. The clients need to know that they can rely on the airline to take them where they want to go without unnecessary delays or setbacks. The issue of reliability, or lack of it among many airlines in Australia, including Qantaslink has led to a loss of much business in this industry. Competition from other modes of transport Australia is a developed nation. Its transport network on road and rails is also very well developed. This enables people to move from one place to the other very fast and without any glitch. When traveling via air becomes too hectic and too unreliable, people go for the alternative of using rail, road or water to go to their destinations (Barney & Hesterly, 2010). This has particularly affected domestic travels. International travels remain steady because options available for travel this way are limited. More and more people are opting to travel by train if their destinations are domestic, citing unreliability, poor aircrafts and bad customer service offered by the airlines in Australia. Influences of both internal and external business environment Business perpetuity and sustainability is sometimes determined by factor beyond the control of a business (Keast, Mandell & Brown, 2006). Mixing these factors is called external factors and they may contribute a lot to how a business performs. They may affect the profitability of a business either positively or negatively. In Australia, the external business environment dictates how this industry operates and its relation to whether it would make any profit or not. Weather and environmental condition variations Weather is a very important factor in the determination of whether the airline industry remains in business or not. The presence of turbulent weather conditions along the shorelines of Australia has been a major challenge to many airlines operating in this country. When the weather is bad, the flow of traffic to and from the various airports in the nation is inhibited to a very large extent. Bad air conditions inhibit movement of aircraft. If the movement is restricted, the companies cannot do good business and eventually this reflects negatively on the overall profits made by these companies. Bad management decisions One of the internal factors that have really affected the operations of these airlines and the profits they have made is poor management decisions. The management of the airlines is responsible for the creation of sustainable goals and objectives and then implementing strategies to ensure that these goals have been reached (Baltagi, Griffin, & Rich, 1995). Qantas airlines has been on the spotlight for poor management decisions which have grossly affected the profits generated by the company. Virgin airlines have improved on customer service in the recent past, enabling themselves to garner clientele who are search of luxury and good service. Political intervention and influence is also another internal factor that affects the airline industry in this region. Political decisions can affect how these airlines interact and how they operate. If these decisions favor them, there is a chance of additional business for these airlines. The vice versa is also true. Politicians are responsible for making regulations and decisions that affect the macroeconomic setup of the country (McShan & Windle, 1989). These decisions are crucial to the perpetuity of the airlines because they determine if the airline will operate profitably or not. How focusing on sustainability has been good for the sector Sustainability is a key concept for any business. One of the goals of each business is to remain in business and make profits (Caves, Christensen, & Tretheway, 1984; Kain & Webb, 2003). If the capacity to make profits is inhibited, there is likelihood that sustainability will not be achieved. Sustainability is a product of many factors. A business that is not sustainable becomes redundant in the long run. In Australia’s airline industry, sustainability has been an important concept. There are over 90,000 passengers who pass via Sydney airport on a daily basis. This shows that the demand for the services these airlines have to offer is still high. These passengers need to be harnessed so that they can keep supplying these airlines with the much needed business. By employing sustainability measures, airlines in Australia can be able to grow and create a lasting business. To do so, a number of strategies must be developed and applied. Customer retention is a key strategy. The airline industry has invested a lot of resources in the training of their staff on how to offer quality customer services. Another strategy geared towards sustainability in this industry is purchase of quality aircrafts and equipment. By sourcing good aircrafts, these airlines are able to ensure that the safety and reliability standards are optimized. This cultivates trust among clients and hence allows for sustainability in the long run. Conclusion From the above discourse, the challenges facing the airline industry in Australia has been keenly addressed. The objective of the study was to find out what these challenges are and then figure out a way of eliminating them. One of the challenges identified here is bad management decisions resulting in development of strategies that are not good enough to offer sustainability to players in this industry. Another challenge has been observed as being poor weather an environmental conditions around the island which sometimes forces aircrafts to be grounded or incapacitated. Some internal as well as external factors challenging sustainability have also been identified. For instance, poor customer service has been noted as an internal factor that challenges sustainability in this industry. Political interference and regulations is also another factor in this case. Solutions that were suggested include an investment in good customer service so that they can lure over 90,000 daily passengers from using alternative means such as rail or road. The major limitation of this study is the inability to get detailed information on specific problems facing specific airlines thus limiting the study to a general nature. 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