SISP behind the Qantas Operation - Case Study Example

SISP behind the Qantas operation Author Name Grade course Institution Tutor Date Executive Summary The restructuring of the technological operations at the Qantas airline came against a backdrop of technological operations which affect operation undertaken by the airline. Technology is required in sorting out freight and looking into the issue of passengers who fly quite a lot with the carrier. The restructuring enabled change for the better to be implemented faster as the company was able to note the weak areas relating to outsourcing. The restructuring enabled the specialists in I.T to be taken to the department where their services were required the most. The restructuring was partly informed by the complexity of the old system. The company realized that it received data from different sources which meant that a lot of time would be spent reconciling the disjointed data. This resulted in a lot of inconsistency as far as reporting on the business was concerned. The airline initially installed an application for project management with the aim of enabling the company to determine which projects ranked higher than others. Having one source of all the relevant information enabled the company to have a clear view of all the operations. Having the information centralized meant that it was possible to determine what information would be relevant to projects which were vital for either the domestic market or the international market. With the current arrangement, Qantas realized that it has been able to have its I.T related expenses being more meaningful to the business goals. Every information on any project by the company is stored in a central place and it is easier to track the level at which any project is. Introduction Qantas Airways Limited is an Australian national airline. Qantas is based in the state of New South Wales specifically in the city of Sydney (Ward & Peppard 2002 p. 203) . It happens to be the largest airline in Australia and is in the record as being among the airlines that have been operated continuously for the longest period of time in the world. In the month of July, 2012, Qantas made a decision to divide it international and domestic operations. It is a decision which surprised many people at the airline. The following report discusses issues with respect to Qantas' technology operations. The report uses theories and concepts of strategic information systems planning (SISP) and business process transformation. The report therefore aims to look at factors that ought to have been put into consideration when the company was undertaking the major plans in its information systems. The report also seeks to elicit the changes that would enable the airline to gain a competitive edge over its business rivals. Discussion Qantas airline made a key decision to split its business. The decision to split was partly informed by the need to separate the domestic market from the international market. The international business, unlike the domestic one had been making losses. The move was meant to form part of the plan the company has for the coming five years. The two companies would be managed differently and also have different chief executives. The overall group was to retain one chief executive who would be in charge of the whole group. Before announcing the decision to split the business operations, the company had declared five hundred engineers redundant (Shamra 2012, p.1). The decision by the company to split might not have a big impact on the aviation industry. The management that oversaw the routes in the domestic market differed from the people who looked at the international market. The major change could be viewed as the company stopped reporting the finances jointly (Hazledine 2010, p.151). The decision by Qantas could be informed by a previous decision by Virgin group which was having its international arm of the business to be managed by a company which is not listed. A break up would not be very likely. The domestic business for Qantas cannot successfully operate without collaboration with the international market. This is especially regarding the programs that cater for those passengers who frequently fly on the airline. The frequent flyer program adds a lot of business to Qantas and it would not be desirable to split the two completely. By having the two companies being under one group, this would be more advantageous to the company rather than having two separate entities. Qantas would also have to take into consideration the Qantas Sale Act. This is a piece of legislation which regulated the operation of Qantas as the national carrier of Australia. Getting rid of the Act would enable the company to bring in more shareholders. Bringing in additional shareholders would mean more capital which would be to the advantage of the business (Hazledine 2010, p.152). The split of Qantas into two could viewed more as having a lot to do with accounting. This is because international business' performance was very poor when compared with the domestic market. Therefore, by splitting the businesses, the company would be aiming at ensuring that its shareholders that there is a difference in the performance of the two parts of the group. The split of Qantas raised very many questions as to what the future of Qantas would be bearing in mind that it is the international carrier in Australia and hence the Australian flag carrier. The fact has been that many Australians fly Qantas on routes within the country but the story changes when it comes to the international air routes. For international flights, many Australians prefer Qantas' competitors and their decisions with respect to this could to some extent be informed by the fact that Qantas does not have much to offer when compared to airline such as Singapore Airlines and Emirates. By splitting into two, Qantas was in essence moving back to the days when Qantas was wholly owned by the Australian government. In these days gone by, the domestic market was catered for by the Australian Airlines. Such a split can be interpreted as acting as a protective mechanism so that the company is not exposed to the uncertain international routes. The company made some decisions which might not be very sound reducing the number of flights it operated to London. The company also delayed acquisition of modern Airbus A380s. Another wrong decision was having a refurbishment of Boeing 747-400s which use old technology and are less fuel efficient and their cost of maintenance is higher than the planes which the competitors operate. Such competitors have managed to run their airline businesses more successfully. Part of the sweeping changes might have been informed by some decisions which have been made by the airline's management but which have not gone down well with its international business (Gwo-Guang & Rong-Ji, 2003 p. 36). The company had tried to invest in shorter distance flight which would be based in Malaysia or Singapore but this did not kick off. The issue of the top management have played a key role in defining the direction that the business takes. By stopping further plans to expand the long haul partly due to the failure on the planned expansion to the Asian market and also removing people who would have been expected to be contenders for the top position at he company paints a bleak picture for the company (Ajith & Srikanth 2010 p. 1022). Without proper leadership at the carrier, then things would naturally be expected to get worse for the company. Before the split, the profits posted by the company had declined by almost 83% when compared to the preceding period in the previous year. Such low profits would not make it possible for the company to pay dividends to its shareholders and thus resulting in a situation where the shareholders had not received dividends for quiet some time. Qantas group ignored to what extent the international brand contributed to the groups loyalty program known as frequent flyer. This program makes the money the highest amount of money. This money comes from reward point issued by the company to third parties who purchase them at prices set by Qantas. It is important to establish the extent to which the international market is to the domestic market which turns out profits. The official losses reported on the international division may come out funds being diverted to the domestic section. There are factors worth considering when it comes to accounting for assets that cannot be classified purely as domestic or international. There is a question as to whether stopping the previously planned expansion to Asian countries would present an opportunity to Qantas to deal with this issue of expansion of travellers in the Asian region. The evidence of the growing Asian market is shown by statistics from other players in the Airline industry which point to the fact that it is the route with the highest potential for growth. The future for Qantas cannot be clearly stated noting that it has stopped further growth even to its franchise, Jetstar. It becomes difficult to determine how Qantas is able to gain by deciding to freeze further expansion while their competitors post very good figures (Shamra 2012, p.2). Advances in technology have ensured the modern airliners are able to use much less fuel and thus saving on the cost of fuel. It is evident that Qantas has not been quick to purchase the latest technology and thus has to play catch up to its competitors who are way ahead in terms of adopting planes which are cheaper to maintain and have efficient fuel consumption. Qantas has often cited the high costs of fuel as the reason it is posting dismal financial results. The Chief Executive Group does not appear very optimistic about the future prospects of the international division of Qantas. There are many possibilities that may befall this division including going bankrupt or even being sold off. Another alternative would be to have the international market which is greatly diminishing being run under agreements in the domestic division which are much cheaper. The other and perhaps more attractive alternative would be to have the airline supplied with a modern fleet of planes. A number of obstacles do exist such as the ones anticipated in the Qantas sale Act. The Act of Parliament does not appear to have been well thought out. The reason whey the legislation is perceived as having many flaws is due to the fact that when it was being drafted the draftsmen were not alive to the existence of business models dependent on serving clients who have little money (de Man, Roijakkers & Graauw 2010, p.172). The Act fails to address how making subsidiary investments could be used against the low cost model of doing business. The piece of legislation fails to appreciate the fact that the company could find itself faced by hard choices if the parents is faced by hard financial times and hence sought to sell it business. There is a precedent to this fact given that the company faced difficult times in the year 2006. The company turned to private equity so as to remain afloat. Therefore, the management would be hell bent on going round the restrictions which are placed upon it by the Qantas Sale Act if the situation allows. The management would go also go around the restriction of the piece of legislation by using offshore entities that the legislation does not explicitly prohibit. Solutions to Qantas Woes By splitting into two, Qantas sought to stop the perennial losses from the international arm which has struggled to keep afloat in the turbulent waters of air transport business. The company aimed to come up with a management team charged with the sole responsibility of ensuring that costs go down and that the airline finds partners. As part of the reorganisation, Qantas, appointed Simon Hicky to run the international arm. This followed Mr. Hickey's successful stint at the helm of Frequent Flyer Programme. The new head of the international arm bears the unenviable responsibility of looking for partners who would inject fresh ideas and give the business a new lease of life. The new head would have to explore other way of stemming the rising costs and the ever present threat of competitors and result to growth for the struggling giant (Ajith & Srikanth, 2010 p.1025). Split the business into two leaves the international arm as an independent arm with a manager who is dedicated to its performance. The international arm would have to focus on entering into productive alliances and ensuring that its capital is not depleted. The domestic market which has been profitable for a long time is supposed to concentrate on wading off competition from airlines such as the Virgin Group. The future of Qantas depends to a great extent to partnerships that it forges. Such partnerships ensure that Qantas is able to ply more routes and have the reach of its network expand without the unwarranted expense of purchasing a new fleet of plane. The airline has had a failure with respect to forging a partnership. A deal that was expected between Qantas and Malaysia Airlines fellow through in March following what was described to be failure to come to an agreement on the commercial terms. The Group Chief Executive has pointed out that separating the airline into two entities would result in operational decisions being made in more efficient manner. The new head of the international division has had a history of forging partnerships which have resulted in mutual benefits. One of the potential partners with the international arm of Qantas is Emirates. As the President of the giant, Emirates Airlines, pointed out, cooperation with Qantas would result in code share and this would be of benefit to both airlines. Being able to turn around the fortunes of the ailing arm of Qantas would prove much about the new head's leadership qualities (King 2009 p. 221). Experts have pointed out that the structure whereby the operations of the airline have been split result in the management becoming easier. In this new arrangement, dealing with opposition from the government and trade union should be easier. Questions do arise as to the relevance of Qantas Sale Act, 1992. Jetstar, a franchise of the Qantas airline has advanced the argument that having foreigners as flight attendant in some of the domestic flights would play a crucial role in ensuring that the airline survives. At the passing of the Qantas Sale Act, the rise of cheap travel by air was not thought would be a reality. The draftsmen did not also imagine of a situation whereby a low cost franchise would be introduced. The crating of the Qantas Sale Act was as a result of instructions from Paul Keating was the Prime Minister. Part of the reasons informing the drawing up of the Act was to facilitative British Airways to purchase a 25% stake in the Qantas airline owned by the Australian government. The Act was aimed at ensuring that the decision was important before the company was opened up to private investors (Galliers & Leidner, 2004 p. 309). Before British Airlines purchased a stake in Qantas airlines, the latter made an important acquisition being Australian Airlines. Australian Airline was the fully owned carrier that operated in the domestic market. This resulted in tow entities owned by the state into a single carrier. The Qantas Sale Act set a limit to foreign ownership in the airline. Thus shareholders who were domiciled outside Australia would not legally purchase more than 49% of the total shares of the carrier. This was in conformity with the test which is applicable in determining whether a carrier should be considered as owned by a given state and hence the flag carrier of the given state which engages in negotiation about treaties dealing with air traffic. Thus Qantas Sale Act was an assurance that Qantas forever carried a political significance. The Act also ensured that Qantas as a brand could never be sold abroad. Therefore, Qantas would forever remain an airline and the control had to be dominated by nationals from Australia and the headquarters of the entity also had to be in Australia (Simon & Christine 1994 p.17). The limitations that have been set out in the Qantas Sale Act are haunting the airline about twenty years after the passing of the Act. There are other examples of mergers by two national brands and the result was one company. KLM and Air France Merger had the outcome of a company which publicly listed but the two merging carriers retained their separate identities, their headquarters and the people working for them. Conclusion Qantas airline realized that only an overhaul of its operation would ensure its survival in the face of growing competition in the competitive area of airline business. The Australian flag carrier decided to split its operations into an international arm and a domestic arm. However, despite the restructuring that has been carried out, there is still some element of pessimism about the survival of the airline. There are investors who have the feeling that reducing restrictions regarding the level of ownership by foreigners in Qantas might not necessarily result in improved performance. Qantas has sought to have the Qantas Sale Act removed citing the fact that Virgin Australia might be acquired by Etihad. Such an acquisition would, according to the contention of Qantas, ensure that Virgin attain an unfair advantages over its arch rival. Financial experts concede that legislative restrictions affect the running of the national carrier. However, the financial experts point out to the fact that the airline ought to lower its coss. The national carrier also been advised on the need to make improvements on the operations at its international arm which has resulted in losses. Even if legal restrictions are eased, Qantas cannot escape from the requirement to ensure that the provisions of the Air Navigation Act are followed to the letter. This is what would guarantee Qantas to the international traffic rights which assure the Australian government of international routes. The problems facing Qantas are not about to end. However, the measures taken could result in marked improvement at the operations of the airline. It is important to point out that it is not all doom and gloom for the national carrier since the errors it is making are evident. The carriers therefore require to follow the right prescription and in no time the airline could return to profitability. Proactive measures should be put in place to ensure that in future such problems are predicted and avoided. References Ajith , M & Srikanth B, 2010,’Interoperability and Open Travel Alliance standards: strategic perspectives’, International Journal of Contemporary Hospitality Management, Vol. 22, no.7, pp. 1010 – 1032. Cassidy, A, 1998, ‘A practical guide to information systems strategic planning’, Boca Raton, Fla, St. Lucie Press. de Man, A, Roijakkers, N & Graauw H, 2010, ‘Managing dynamics through robust alliance governance structures: The case of KLM and Northwest Airlines’, European Management Journal, vol.28, no.3, pp 171-181. 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