Qantas Airline: Market Analysis And Accounting Policy Choices

Analysis of Qantas Performance and Market Position

Qantas is one of the largest international airline service provide that operates mainly in Australia, New Zealand and other oceanic regions. The organisation is the flag carrier of Australian airline and according to the fleet size and operational date, it is the third largest airline in the world (Shaffner et al. 2017). In the Australian market it is accounted for 68% of market share that makes it the market leader and when it comes to the international passengers, then Qantas is accounted for the 28% passenger share (Dobni et al. 2016). In order to understand the organisational performance of the firm it is necessary to analyse the Qantas with the tool like Porter’s Five Force model. It will provide detailed insight of the market for the Qantas and enable to understand where it excels and where does not. Porter five force analysis of the Qantas is as follows:

Threat from new entrant: Moderate

There is always threat from the new entrant in any industry. Australian airline being duopoly in nature will become fragile if any new entrant enter the market. Market share for Qantas will eventually fall and it may so happen that the firm can lose its superiority (Ellis 2016). Thus, threat from new entrant is moderate for the Qantas.

Bargaining power of the buyer: Moderate

Buyers in the Australia has moderate amount of bargaining power. Apart from Qantas there is Virgin Australia and other regional players to whom it is possible to shift in case of higher price. In this scenario, buyer possess moderate amount of purchasing power.

Bargaining power of seller: Medium

Qantas is the largest operational airline service provider in Australia, thus it ought to have higher amount of bargaining power. However, in order to provide affordable service and hold the market, it sets the price low.

Threat from substitute: Low

Qantas is accounted for superior service at affordable price that makes it one of the most preferred airline brand in Australia (Lucarelli 2014). On the other hand, other existing market players are mere negligible in front of the Qantas that makes the scope of substitution low.

Rivalry among the market players: Medium

Australian airline industry is duopoly in nature, where only Virgin Australia is present other than Qantas. The market share of the Virgin Australia is only 32% that makes it primitive in front of the Qantas which enjoys almost 68% of the market share (Lohman and Spasojevic 2018). However, presently Virgin has been gaining momentum in its performance through the foreign investment that makes the threat quotient moderate for the Qantas.

Two Accounting Policy Choices for Auditors and Analysts

In order to understand the place where Qantas excel and where it has lags that can be proved to be harmful for the business is certainly need to be analysed. Thus, it become essential to utilise tools like SWOT and analyse the firm in order to provide it better scope for survivability and generate more amount of revenue. SWOT analysis of the Qantas is as follows:

Strength	Weakness
· Major strength of Qantas within its operation. It has one of the largest fleet in the world that makes it stand out of the crowd. · Qantas is acknowledged as flag carrier of Australia that provides it much amount of popularity. · Large amount of market share is one of the positive side of the brand. · Affordable pricing has made the brand popular since decades.	· In spite of being the market leader there has been fall in the market performance by the Qantas that has reduced the profit of the firm (Hardt 2014). It is one of the main weakness of the firm. · There has been managerial gap that has made the Qantas to lose some of its market share to the regional players. · Lack of foreign investment is one of the major weakness for the firm.
· Opportunity	· Threat
· Qantas lacks in the case of the international airline service. Thus it need to introduce more international flights in order to gain exposure. · Though it has large fleet, however, they are aging fast. Thus it need to introduce new jets so as to align itself with the market demand.	· Threat is looming on the Qantas because there is rise in operation of Virgin Australia, which can be proved to be harmful for the Qantas. · Rise of regional players is another shocker for the Qantas. With rise in the regional players Qantas will face lower domestic demand of their service, which can reduce the profit of the firm (Merkert and Alexander 2018). · Rise in the investment in the Virgin Australia from foreign investors is another major issue in front of Qantas.

Qantas is one of the largest airline service provider around the world and analysing the organisation it can be seen that it has differentiated market strategy for the domestic environment and for the foreign environment. As per the findings from analysing the Qantas business operation it can be seen that competitive environment and industry are the two major factors that define the strategy for the firm both in the domestic and international market. The price strategy of the firm in the foreign market is based on the low cost discount airline that makes it affordable to the foreign passengers and on the other hand through ensuring high barrier in the domestic market it enjoys large amount of market share, which aid it to gain much amount of profit (Bereznoi 2015). Qantas in the domestic market mainly target the up market passengers, whereas keeps the regional services unnoticed. It has aid the firm to gain more profit with lower amount of sell (Halpern 2018). Trunk roads are being served by the Qantas however, it is reluctant in the domestic market to take this into account.

The two accounting policy choices has been started with a cross-sectional accounting study focused on “voluntary environmental and social accounting disclosures”. Under this guideline is has been seen that “AASB 119 Employee Benefits (2011) (AASB 119)” is an important accounting policy which needs to be disclosed by airline companies. The various additions under this policy has been seen with the use of corridor approach instead of suggesting mandates about recognition of free measurements of a particular liability or asset. The corridor approach policy for accounting will ensure the appropriate accounting approach for actuarial gain and losses defined with the various benefits associated to superannuation plans. The adoption of this standard by any airline company will result in restating the comprehensive income for a particular financial year (Warren and Jones 2018).

As a significant policy should be stating about the underlying EBITDAR along with the statutory results. On following these accounting policy, the investors will be able to know about the various types of expenses which are related to staff, manpower and various types of expenditures such as consumption for operations and segmental variable costs. This policy will be conducive in addressing the operating segments which is directly attributable for the domestic flights and allocation methodology would be applicable for reporting the international operations of an airliner (Zabarankin Pavlikov and Uryasev 2014).

Financial Ratios of Qantas in 2013

Based on the financial performance review it is identified that the profit of Qantas Airlines in 2013 was $6 million. Some of the other information have showed that the net profit margin was merely 0.04%. In addition to this return on equity for the company was 10% and return on asset was calculated as 0.03%. The operating expenses for the company excluding fuel was evaluated as $ 1367 million in 2013 (Sakao and Lindahl 2015).

Table 1: Profitability Ratios of Qantas in 2013