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PESTLE Analysis of Qantas Airways – Impact of Covid-19
Covid-19 pandemic has affected the business of almost all the industries and companies. The general external environment has impacted Qantas due to Covid-19 in various ways.
- Political-Legal environment: Due to the Covid-19 pandemic, the Australian government has implemented travel restrictions, which harmed Qantas’ business operations. Factors like passenger safety, social distancing, and lockdown have negatively affected the company’s financial revenues, and this is expected to continue in the near future. The Australian government has banned international travels that were a major source of revenue for Qantas Airlines. Political factors banning travel in international countries have given a tremendous blow to the much anticipated “Project Sunrise” that was supposed to be a non-stop flight service from New York to London.
- Socio-Cultural Environment: The Covid-19 pandemic has led the customers to become suspicious of traveling and coming in contact with people suffering from coronavirus. The Major concern for Qantas was that both the international and domestic staff of the company were unknowingly flying while they were infected by the coronavirus (Davies, 2020). The company has been dealing with notices on them by the Transport Workers Union based on the allegation that the company breached workplace safety.
- Technological environment: Since the outbreak of Covid-19, the company has been facing massive demands and queries relating to flights, request for a refund that has resulted in an increased call waiting time for the customers. The staff faces a challenge of dealing with angry and frustrated customer requests regarding refunds and flight credits. There is extensive pressure on the company’s customer care staff, flight programmers, etc. There is no perfect technology that can respond to various customers’ requests and demands efficiently.
- Economic environment: One of the worst affected external environmental factors due to Covid-19 is the economic environment. The revenue of Qantas drastically dropped down to A$40 million per week, and the company was forced to cut down almost 6000 jobs across their business operations (Davies, 2020). The company has been planning to cut down further 15000 workers as the international travel ban is expected to continue for quite a while.
- Competitive environment: There is an expectancy of immense competition regarding the prices of fares and services after the fight operations become normal. Due to Covid-19, Qantas has been facing the pressure of government guidelines and has reduced the international passenger capacity by 90% (Davies, 2020). Since international travel restrictions are expected to continue, there will be intense competition in the domestic and Trans-Tasman flight operations. Qantas will be a major part.
The two general external forces having maximum impact on Qantas due to Covid-19 are the Political-legal environment and Economic environment. The Political-legal environment gave a major blow to several business plans of Qantas. The Government of Australia has implemented travel restrictions, and it is difficult to predict the exact longevity of the restriction. There is no definite time as to where and when will the previous flight destinations be reinstated. This is proved by a statement released by Qantas in May 2020, which stated 25000 to 30000 of their employees would remain stood-down till the end of June that proved the inaccuracy of restrictions (Qantas, 2020).
On the other hand, the economic environment has caused severe damage to the company’s financial position. During this pandemic situation, the company is struggling to find funding from investors because of the Covid-19 disease’s unpredictability. Qantas’ share prices have declined to A$2.14 because the company was forced to undergo rapid changes in their planning and implemented severe restructuring (Qantas, 2020).
Decisions Undertaken by Qantas Airways as a Fight Against Covid-19
Qantas made several major decisions that can be considered rational. Implementing strategies such as reducing aircraft fleet, sacking off workers, and curtailing the extensive operational network can be considered rational. Covid-19 pandemic has caused an overnight crisis in the aviation industry. Qantas has been badly affected due to the ban on international travel by the Australian and various other relevant governments of foreign countries. The international travel ban is expected to take three years to recover, and therefore the company had to cut down the workers and drop down its network of operation. As a part of the long-term strategy to survive, the company’s CEO, Alan Joyce, decided to cut down a minimum of 6000 jobs across Qantas’ business operations. There is no guarantee regarding the end date of the Covid-19 pandemic, and therefore the company made decisions that will be beneficial for the future.
The planned date for delivering pre-ordered airbus A321neo and Boeing 787-9 plane has been halted due to their non-requirement in the present scenario. Qantas’s decisions were spontaneous in regards to reducing their fleet of aircraft, as this would have resulted in huge losses. The company recorded a loss of approximately $2 billion, which was primarily due to the company’s decision to write down the evaluation of the assets that included the fleet of Airbus A380 aircraft. These decisions were rational because, despite all the losses suffered, the company still managed to profit from $24.7 million. Qantas airline also decided to spend $642 million on its restructuring program that included the redundancy salaries to personnel (Joubert et al., 2017).
There were several decisions taken by Qantas that were based on bounded rationality. The company decided to go for a cut in airfares from Sydney to Melbourne up to $19 to encourage the passenger demand after the reduction in Coivid-19 restrictions. The company has only 5 percent of domestic travel compared to the figures prior to the Covid-19 pandemic. This decision to cut down airfares is based on domestic flight demand estimation to increase around 70 percent after the pandemic is over (Qantas, 2020). However, in this situation, it is not possible to predict the intra-Australian demands for a flight as the border restrictions vary from state to state. The company further made a decision that around 25000 to 30000 of their employees would remain stood down till the end of June that is purely based on bounded rationality as it is impossible to predict the timeline of the Covid-19 restriction.
The company understood that the decision regarding flight recommencement depends on the government, and hence they took decisions that affected the lives of thousands of employees. The CEO of Qantas, Alan Joyce, released a statement to the stakeholders that the impact of the Covid-19 pandemic will continue for several years, and there is no clarity regarding its longevity. Therefore, Qantas decided to cut down its employees and plan for a reduction in domestic airfares. Lastly, despite knowing the government’s associated risks and norms, the company decided to fly their staff that was unknowingly infected with Covid-19. This decision is not justified, and as a result, the company is facing legal notices from the Transport Workers Union.
Strategic Management Process for Qantas Survival from Covid-19
As the CEO of Qantas, the six steps of the strategic management process needs to be efficiently planned so that Qantas can survive both the domestic and international markets during the restrictions of Covid-19 along with further one year after the relaxation of Covid-19 travel restrictions. The application of six steps strategic management process will be as follows:
- Identification of strategic position: This stage will help in preparing for the remaining strategic planning processes. It will be important to develop a clear vision for the business during restrictions and post restrictions. The short term objective will be to operate domestic travels with the best airfares that will help in sustaining the competition (Gao, 2020). To attain this short term objective, it is essential to under the strategic position of Qantas regarding the company’s financial stability and investment. After the relaxation of the restriction, the future goal will be to go for international flight operations that are more realistic, and the goal should encourage customers to choose Qantas airlines.
- Gathering information and people: After establishing the strategic position, it will be essential to bring the relevant people involved in the implementation process. This step’s crucial thing will be to gather all the relevant and up-to-date information regarding the company’s position and the pandemic. Once the people and the up-to-date information are gathered, the relevant team will examine Qantas’s external and internal issues. While examining the issues, it will be greatly beneficial to ask the people gathered for their valuable input.
- Performing a SWOT analysis: SWOT stands for strengths, weaknesses, opportunities, and threats. As the CEO of Qantas, performing a SWOT analysis will immensely help identify the company’s strengths and weaknesses under the pandemic situation and highlight the opportunities and threats for future business practices. A separate team will be formed to work cohesively to develop new goals for Qantas and help in structuring the strategies accordingly. An efficient SWOT analysis will help Qantas move in the right direction to mitigate the Covid-19 implications and ultimately help achieve the goals.
- Formulating a strategic plan: After successfully identifying the strategic position and aligning a set of goals with Qantas’ mission, the working process of the strategic plan can begin. While developing the strategic plan, the greatest initiatives that will have a major impact on Qantas need to be considered, which will tremendously improve its position. As the CEO of Qantas, the working of a strategic plan can be ensured properly by monitoring every individual’s performance and the associated obstacles. Therefore, it will be important to set measurable goals so that the improvements are visibly witnessed.
- Executing the strategic plan: After the strategic plan is set, the plan’s execution needs to be done. This step of the strategic management plan is the action phase, and it will be started by making every concerned individual associated with Qantas aware of the strategy. The different tasks will be distributed to various departments of Qantas so that the best results are obtained. In this step, it will be crucial to regularly check with the various Qantas departments so that the employees of the various departments stay on track. If the departments do not match up with the objectives, then the necessary changes will be made.
- Constant monitoring of the performance: The entire strategic management process will not be effective if everyone does not efficiently perform their work. Therefore, it will be crucial to manage and monitor the performances to lead to satisfactory results. As the CEO of Qantas, the domestic and international airfares, along with passenger service, must be monitored properly so that any negligence gets highlighted and corrective measures can be taken accordingly.
The Covid-19 pandemic has created a tough situation for Qantas, and proper implementation of sic steps strategic management can do wonders for the company.