CASE STUDY

'MANAGING AT QANTAS IN TURBULENT TIMES: COVID 19 IMPACT'

Prior to Covid-19 pandemic Qantas was well positioned having ordered new aircraft in anticipation of continued new passengers and flight expansion. Share prices had increased to A$6.67 following a February 2020 press release, indicating Qantas had future-looking plans to deal with the Covid-19 threat. But by March 2020 revenue had drastically dropped, and it was estimated that this pandemic was costing Qantas up to A$40 million a week. Corona virus share prices had declined to A$2.14, as Qantas was forced to rapidly change plans and engage in a massive and fast brutal restructuring. Strategies Qantas decided to implement to reduce Covid-19 impact on business included reducing the fleet of aircraft, sacking or temporarily laying off workers, and curtailing its extensive network of operation. Qantas did not delay in making these decisions but acted fast and drastically in response to this pandemic. This crisis for the global aviation industry had occurred almost overnight, with an estimated longer- term impact that the International Air Transport Association predicted could take as long as three years to recover from.

Since Covid-19 first became a global threat Qantas has had to make many decisions across all areas of operation and staffing. There has been massive demand from customers with queries relating to flights, extent of services still to be provided, and refund requests, resulting in increased call waiting times, dealing with frustrated and often angry customer requests for flight credits and refunds. Extensive pressure has been placed on existing call centre staff, flight programmers, and all human resource managers involved with staffing across all levels of staff from ground crew, to pilots, cabin crew and administration staff.

Initial decisions have needed to be determined by Qantas CEO Alan Joyce, in consultation with key managers, regarding the need to cut a minimum of 6,000 jobs throughout all areas of Qantas business operations. As part of the longer-term strategy to survive through the pandemic, the finish time for Covid-19 as an active business threat is estimated at around July 2021. There is no guaranteed assurance that this will be the actual ending date for business to recommence as usual. Qantas is planning to stand down a further 15,000 workers while international travel bans continue to be in place, with hope these workers may be reinstated when the pandemic is over. Qantas aircraft have also been a Covid-19 casualty, with 100 aircraft grounded for a possible 12 months or more, and of these six 747 aircraft have been removed six months ahead of when initially planned. Planned delivery dates of a previously ordered new airbus A321neo and another Boeing 787-9 plane have been deferred as they are currently not needed. The greatly anticipated 'Project Sunrise' non-stop New York to London flight has also been put on hold due to the massive reductions in international travel. A flow- on impact from less international travel has also resulted in Qantas deciding to urgently cancel 12 Airbus A350s, as this ambitious project is now on hold.

A major area of concern for Qantas and passengers has been that Qantas staff, both international and domestic, had been unknowingly flying while Qantas staff were infected by Covid-19. Airline crew had previously been exempt from 14-day self -isolation rule, and Qantas were now dealing with notices served on them by the Transport Workers Union, alleging breaches of workplace safety, as baggage handlers and flight crew were diagnosed with the virus. This new challenge has required the need to make decisions about safety measure for staff, new self- isolation rules for Qantas staff, and other management plans to minimise infection risk.

Finding funding during this challenging time has required new financial strategies for Qantas, one of which is to raise $1.9 billion from investors through a share sale.Alan Joyce released a statement stating that Jetstar (budget arm of Qantas) could cut airfares from Sydney to Melbourne to $19 to encourage passenger demand after Covid-19 restrictions reduce. A statement has been released to shareholders from Alan Joyce indicating that the Covid-19 pandemic will continue to impact on airline operation for many years, but there is no clarity for exactly how long or to what extent. Currently Qantas has only 5 percent domestic travel compared with pre-pandemic figures. Qantas has estimated domestic demand for flights should be around 70 per cent of pre-pandemic levels by 2020-2021, with the possibility (not guaranteed) that flights might return to 100 per cent in 2021-22. At this stage it is difficult for Qantas to predict intra Australian flight demands and opportunities due to different border restrictions between Australian States. The same situation presents for Qantas international flight planning, as there is no definite time as to when and where all previous flight destinations will be reinstated. Qantas had released a statement in May 2020 that 25,000 of its 30,000 staff would remain stood-down at least until the end of June, which proved to be inaccurate as restrictions and the pandemic continue.

Decisions to recommence flights depend on governments, not just extent of customer demand. These factors impact on future planning Qantas for numbers of flights, destinations, customer numbers and income. The most recent financial statement has reported that in August 2020Qantas had recorded a net loss of A$1.964 billionfor the year ended June 30, one of its largest ever.

Questions:

1.Define and discuss how the five forces in the general external environment have impacted on Qantas due to Covid-19. Which two of these general external forces have had the most impact, citing specific examples from the case to support your selection?

2.With reference to the case study and the types of decisions made and that might be made in the future at Qantas to deal with Covid-19 threat, which decisions can be explained as rational, and which are informed by bounded rationality. Cite examples from the case study and justify reasons for your answers.

3.If you were Alan Joyce(CEO), how would you apply the six step strategic management process to plan a way for Qantas to survive in both domestic and international markets during time of Covid-19 restrictions, and for one year after Covid-19 travel restrictions lift?