The Australian Domestic airline industry is dominated by two major companies, Qantas Airways Ltd. and Ansett Holdings Ltd. Qantas currently holds a 46. 0% share of the market, and Ansett Holdings 41. 4%. Hence the market is essentially operating as a duopoly. There are also two independent airlines operating in the industry, Flight West airlines Pty. Ltd. and Hazelton airlines Ltd (IBIS industry report 2000). However, due to the small size of these competitors ( 1. 6%), only Qantas’ main competitor Ansett, is analysed below.
Ansett Holdings is an Australian company that has significant operations in the Australian domestic airline market. According to the IBIS Report “Ansett has experienced a good year”. In 1997-98 the company’s total revenue increased to $3. 5 billion and has been climbing ever since. The company’s performance was partly due to a one-off asset sale, which boosted sales by $52 billion. In turn, the extra revenue brought on by this sale assisted in reducing the company’s international losses to less than $10 million.
In recent times, Ansett’s profit figures have generally increased, with the company’s profit soaring from just $51. 6 million in 1994-95 to $156 million in the ’99 financial year. This represents an increase of
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It is much more cost effective to use a smaller vehicle;Links to a national or international central reservation system for the ease in ticketing. A central reservation system can reduce mistakes made, and is widely accessible all over the world, ensuring ease for the customer and the staff; Good relations with travel agents, as these are the face of customer relations. Travel agents are one of the most important links with the customer as essentially they are the suppliers. The company needs to ensure that their name is recommended every time;Flexible scheduling system to meet fluctuating peaks and troughs in demand.
Ability to expand and curtail operations rapidly in line with market demand. Need to examine holiday seasons, ski seasons etc. in different parts of the world and be able to provide for the extra demand. Good ground support systems for total customer service. Look into a ‘one stop shop’ to complete the passenger’s travel experience (IBIS report 2000). Securing a terminal space at the airports. These terminals, especially those in Sydney and Melbourne, have been leased out to Qantas and Ansett by the owners on very long term leases.
In addition the land adjacent to the terminals has also been leased out the same airlines;Although the fact that existing firms have achieved significant economies of scale remains, Deregulation of the domestic airline market in 1990 removed constraints on the new domestic entrants, the setting of airfares and the levels of capacity. Companies such as Virgin and Impulse who pride themselves on being ‘cheap and mean’ by reducing overheads such as charging for food and beverages can now look at entering the market (IBIS Report, 2000).
The majority of sales of domestic airline tickets are to domestic tourists, the business sector and inbound tourists (IBIS Report, 2000). Whilst two years ago buyers could only choose between Qantas and Ansett, who produced identical prices and services, it appears that very shortly customers will be able to choose between services and prices with the introduction of Impulse and Virgin Airlines, who provide cheaper alternatives. Both Qantas and Ansett have reacted to this change by lowering prices, but they may look to lose a percentage of their market share.