Case Study Report: Airlines
This paper provides a comparative study of the goals, management style, and labor relations policies of three Australian airlines: Qantas, Virgin Blue, and Air Australia Airways. It examines the recent history of these major airlines, with a specific focus on the labor relations difficulties of Qantas, Virgin Blue’s attempt to create a more innovative model of customer service as a budget airline, and Air Australia Airway’s challenge to Qantas’ dominance. It suggests that ultimately Virgin Blue offers the best prospects for investment, given its track record, size, and strong human resource policies.
Conclusion and summary
The airline industry has been one of the most severely-affected industries by the recent global recession. Although Australia was mercifully not impacted as much as some other nations by the recent credit crisis, because airlines have a global focus as organizations, all of the major airlines that fly through Australia were shaken to some degree because of their international exposure to risk. The instability of the global economic environment is one reason that airlines are often considered bad investments. However, it is important to evaluate each airline on an individual basis before making such an assessment.
Qantas Airline is the major carrier within Australia at this time. It embraces both a ‘budget’ and a ‘premium’ strategy through its marketing of its main brand Qantas and lower-cost Jetstar. “Qantas was named “Airline of the Year” (2003) by Aviation Transport World magazine. Qantas’ achievements in employee safety, and its subsequent cost and efficiency savings, were recognised as a key influence in winning this prestigious award,” not simply the airlines’ ability to solicit customers (Changing the culture of an Australia icon, 2004, Qantas.). Qantas often labels itself as ‘the’ Australian airline, given its size and venerability as an institution.
Qantas’s dual-tiered budget-premium strategy can be contrasted with Virgin Blue Holdings Limited, which primarily deploys a budget-focused strategy. In contrast to Qantas’ more traditional managerial approach, Virgin is noted for its freewheeling, fun attitude, similar to that of the Southwest and Jet Blue business models in the United States. According to charismatic and iconoclastic CEO Richard Branson: “[He] once said that Virgin Blue was more Virgin than Virgin. In my opinion, I think the culture here surpasses those of the other Virgin airlines. That’s not to put them down, but the culture here works brilliantly for the local environment” (Breaking into a new culture: The Virgin Blue story, 2003, HR Magazine.). Virgin’s fun marketing campaign caused its Q-rating to soar even before its planes took off in Australia. It is a budget airline where everyone is meant to feel at home because of the relaxed atmosphere communicated by its crew.
Air Australia Airways similarly offers low-cost travel to passengers, much like Jet Blue. However, it also stresses the charter services and unique routes it is able to offer to customers, as a way of ‘branding’ itself. In fact, its CEO said “the airline would not be competing directly with Qantas or Jetstar and would focus on under-serviced routes, particularly direct international flights from Brisbane and Melbourne. ‘We’re on a bit of a different model…We’re trying to offer them a different service to fly directly out of these airports,’” [he said]…”No other airline was flying to Honolulu from Brisbane or Melbourne” (New budget Air Australia ‘a warning to Qantas,’ 2011, News.com. au). Its organizational culture is iconoclastic, given this ‘out of the box’ business model that focuses on creating an airline that offers unique services for Australians, by Australians, in contrast to the internationally-focused cultures of Qantas and even Virgin.
Qantas Airline has heavily publicized the recent changes in the regulations it put into place to better protect employee’s safety and security in the air, in its promotional literature. When safety procedures were found to be inadequate, based upon unsatisfactory workplace safety audit results by government agencies, Qantas engaged in an organization-wide effort to mitigate these problems and created an initiative known as “People Safe, driving the safety cultural reform process” (Changing the culture of an Australia icon, 2004,Qantas.). However, this also underlines the fact that for many years, Qantas employees were at risk. This behavior indicates that Qantas tends to attend to a problem only when it becomes a legal or publicity problem. When Qantas wishes to motivate employees, it uses top-down, organization-wide initiatives. Managers set specific benchmarks for managers and employees to achieve, rather than engage in participatory dialogue.
The union representing Qantas employee paints a picture of an uncaring employer in its ongoing labor disputes with the company. To cut costs, Qantas recently ‘shed’ “about 1,000 jobs, dropping some international routes and launching new operations in Asia, where costs are lower, including a budget airline in Japan” (Ground fighting, 2011, The Economist).). Although “Qantas announced an underlying profit before tax of A$552m for the 2010-11 financial year,” the “airline’s international arm reported a loss of more than A$200m… [still] the unions have called for wage rises, guarantees on workforce numbers and for Qantas to keep the maintenance headquarters for its growing fleet of A380 Airbus planes in Australia” (Ground fighting, 2011, The Economist).
Virgin deploys a famously rigorous approach to find the “optimistic, enthusiastic and humble” people it is searching for, to staff its airlines (Breaking into a new culture: The Virgin Blue story, 2003, HR Magazine.). “Even cabin attendants go through a (Breaking into a new culture: The Virgin Blue story, 2003, HR Magazine.). Virgin states that it strives to put people first, and to satisfy customers it must create a staff that conveys its message effectively. Air Australia Airways does not have an established HR ‘attitude’ thus far, although the company does stress its 100% Australian ownership and commitment to serve the nation with a unique Australian attitude.
Qantas has garnered a great deal of negative publicity because of its stymied labor negotiations with its employees, who have been protesting the by the airline. This suggests difficulty at the company in fostering healthy relationships. Australian Prime Minister Gilliard was called in to help settle the dispute because of the potential it held to do great damage to the Australian economy. During the dispute, Qantas CEO Alan Joyce grounded all flights. “The decision of Joyce drew numerous criticisms from the public since it stranded thousands of passengers and reportedly embarrassed the government as it hosted leaders from the 54-nation Commonwealth bloc in a summit in Perth” (Alan 2011). However, Joyce defended his action: stating that the unresponsive union, representing international pilots, engineers and ground staff, had already “disrupted schedules and caused flights to be cancelled. Qantas says the industrial disputes have cost the company A$68m ($71m)” (Ground fighting, 2011, The Economist).
Although Virgin is a customer-service focused company, it shows great respect for its carefully-selected and chosen employees and has not suffered the same labor-related angst as its rival. According to Virgin HR: “We back our people even when there may be complaints or concerns. We give them the benefit of the doubt at the least, because we spend such an effort recruiting them so we feel we know them pretty well…if you can get a group of people who are committed, respectful of one another and who are motivated to see others develop and do well, you avoid the politics of those sorts of destructive behaviours” (Breaking into a new culture: The Virgin Blue story, 2003, HR Magazine.).
Air Australia is so new, its managerial attitude towards workers is still evolving, although it deploys a similarly youth-oriented ‘fun’ strategy as Virgin Blue. It stresses its united, ‘Australian’ attitude in its current promotional literature: “this airline is 100 per cent Australian owned, is hungry … And it is out there wanting to grow its market share” (New budget Air Australia ‘a warning to Qantas,’ 2011, News.com. au).
Conclusion and summary
Qantas still possesses considerable size as an organization, and is an Australian icon. The disruption its labor dispute caused is testimony to the essential role it plays in the Australian economy. “Australia’s great land mass and the distances between its main cities make it depend on air transport more than most comparable countries. Qantas has cornered about two-thirds of Australia’s domestic market” (Ground fighting, 2011, The Economist). However, “its high operating costs, and growing competition from airlines based in Asia and the Middle East, have cut its share of international traffic out of Australia from about one-third 15 years ago to one-fifth” (Ground fighting, 2011, The Economist). Combined with its current labour turmoil, investing in Qantas seems questionable. The war of words has been bitter between managers and employees, which is not a prepossessing harbinger of a good future. The CEO accused the unions of “trashing our strategy and our brand” (Ground fighting, 2011, The Economist). This stand-off is troubling in what is, after all, a service-based industry.
Air Australia Airways remains a relatively small, untested and boutique airline. The company is beginning an entirely new operation in the midst of a shaky global economy. In contrast, Virgin Blue possesses a tested, existing international infrastructure, a CEO and name with global recognition, has a clear organizational philosophy and culture. It also has strong, positive reviews based upon customer feedback. It is clearly the best choice of all the major possible investment opportunities.
Air Australia Airways. 2011. Official website. Available at:
http://www.airaustralia.com/en/About/Our%20Business.aspx [Accessed: 9 Jan 2011]
Alan, Joseph. (2011). PM Gillard’s Mediation contributed to early settlement in Qantas row.
International Business Times. Available at: http://au.ibtimes..htm [Accessed: 9 Jan 2011]
Breaking into a new culture: The Virgin Blue story .2003. HR Magazine. Available at:
[Accessed: 9 Jan 2011]
Changing the culture of an Australia icon. 2004. Qantas. Available at:
NZ/Qantas%20Safety%20Success%20Story.pdf [Accessed: 9 Jan 2011]
Ground fighting. 2011. The Economist. Available at:
[Accessed: 9 Jan 2011]
New budget Air Australia ‘a warning to Qantas.’ 2011. News.com. au. Available at:
http://www.news.com.au/travel/news/new-budget-airline-air-australia-a-warning-to-qantas/story-e6frfq80-1226185329702 [Accessed: 9 Jan 2011]
Qantas. 2011. Official website. Available at: http://www.qantas.com [Accessed: 9 Jan 2011]
Virgin Blue. 2011. Official website. Available at: http://www.virginblue.com.au [Accessed: 9 Jan 2011]