1 Executive Summary
Virgin Australia is an airline company established in November 1999.Before it was named as “Virgin Blue”,and its central office was in Brisbane.It was renamed as “Virgin Australia”,in 2011.It is the second largest airline company after Qantas having around 10,000 staffs.The total revenue of the company in 2017 was around A$5 billion,by purchasing around 100 aeroplanes and carried over 23 million passengers around the world(virgin.com,2017).Virgin Australia achieved a profit before tax in 2015 was A$41 million and A$90.1 in year 2016 which is A$49.5 million more than the fiscal year 2015,indicates that Virgin Australia is in its growing trend financially,and also achieved more market share by acquiring Tiger Air Australia in the domestic sector airlines business(virgin australia.com,2016).
Firstly,the company analysis includes PESTEL analysis,company competitors and SWOT analysis.The PESTEL analysis explains about the macro0-environment of Australia.The political analysis explains about how Virgin Australia business is affected by the government policies for its growth and competition to sustain itself in the market,growing willings towards the recognition of the company,and some legal issues.The company analysis demonstrate the outlook of Virgin Australia financial growth market by comparing annual profit datas of financial year 2015 and 2016.
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The SWOT anlysis gives Virgins strengths of strategies and brand recognition,weaknesses of cost saving measures and services provided by the company.The opportunities are the growth of expansion of the market of the company however threats are the vast competition.
Secondly,the business report shows the reasons and outcomes of two business issues First is the change in business strategy from low cost carriers(LCCs) to full service network provider(FSNP).,Virgin Australia able to compete with its main competitors Qantas and Jet Airways in Australia
The second issue is that Virgin Australia stepped into Acquasition process with Tiger Airways in domestic market and with HNA group in international market to increase its market coverage and helpful to compete with its competitors.
Lastly,some suggestions are provided for both business issues.
In conclusion,Virgin Australia are focusing on to provide better customer services and trying to give benifit to its shareholders in every aspect.
2 Introduction
Virgin Australia is an reputated and second largest Airlines company in Australia.It is one of the biggest company by fleet size.It started its services on 31 August 2000 as Virgin Blue,with only two aeroplanes in one track.it was able to keep itself as a main airline company in Australia domestic market after the collapsed of Ansett Australia in september 2001.The Airline was able to expand its services in 33 different cities in Australia.The total debt of the company was A$5.4 billion,operating benifit was A$109.6 million,the total assets was A$ 6.2 billion with total profit of A$1.1 billion in 2018(virginaustralia.com,2018).
3. Company Analysis
3.1 External Analysis
Strategy management is an important criteria of managing modern businesses which includes goals and instituting programs that complete these goals.Various factors have affect on the organisation,which should be find out and analyzed for achieving maximum results.PESTEL and SWOT analysis is used in this case report analysis.
3.2 PESTEL Analysis
The PESTEL analysis tool is used to analyze the key factors of change in a business environment. It is a tool to find out the possible effects from political,economic,social,technological,environmental and legal environments that effects business’s success(Johnson, Whittington, Angwin, Regner, & Scholes, 2014).
Political Australia’s government implied the deregulation of the country’s domestic airlines market process,permitting private competition ,and privatising its interests in existing airlines(Nolan 1996).After that time a numbers of Airlines companies entered into the Australian market and Virgin was the one with positive affect in it.
A governmental support through policies such as “Open skies” enabled and helped the company to sustain in a competitive environment (virginaustralia.com, 2009). Through the policy, Virgin Australia has achieved attained strategic relations with the HNS group. The example shows the potential positive impact of political decisions.
Virgin Australia stopped its all flight services because of the COVID-19,pandemic and moved on debt of A$6.84 billion to pay to 10,000 creditors. It gave a proposal to the government for loan of amount A$1.4 billion but the government rejected it, so due to larg impact on its revenue went on one of the biggest bets in the industry buyed by Bain a singapore business investor but still there is an issue between shareholders, employers, and owners for the settlement of their credit amounts, salaries, and job @2020 Bloomberg L.P), has a negative effect.
Economic Australia is forecasted to slow growth on GDP, with an average of 2.3% annually in the next five years(trading Economics 2019).
The world GDP growth slows down 2.1% to 3.3%(International Money Fund 2019).
It is recorded that a 99% reduction in overseas arrivals to Australia compared to 2019 hurts the airline industry(Overseas travel statistics provisional publication,2020).
Social With a strong and style brand image, Virgin Australia have showcased its presence in different social media channels. They even conduct numerous events and programs. Through their sponsorship in AFL or the Sports car championship they have tried to nurture Australian talent and culture through promoting their values and financial support (virginaustralia.com, 2016).
Technological Virgin airAirliness kept itself in a good position by putting latest technological developments such as installation of inflight wi-fi service and the setting up of self-check ins which is convinient and time-saving (virgin Australia. com,2017).
Environmental To reduce carbon emissions, Virgin Australia started using bio-fuel,which is a good indication of sustainability(virgin Australia. com,2017).
Legal For every airline including Virgin Australia should follow the legal rules.Competitive regulations to be a single operator on a regional airways can be changed to two major airlines,by giving travelers more choices and allowing international airlines to carry domestic passengers,the level of competition and service will be enhanced(competition policy review.gov.au,2015)
3.3 SWOT Analysis
SWOT is used to show the internal and external factors to give an overall analysis for business(johnson,scholes, and Whittington,2009).
- Strenths
- Very good performance in domestic airlines business.
- Brand recognition globally.
- Strong partnership and networking in airlines business.
- Developed Advanced technology usage.
- One of the only airlines with an Investment Grade Credit Rating(IGCR).
- Highest number of fleet size.
- Weaknesses
- Based on Skytrax reviews,Qantas has a higher rating 7/10 while virgin Australia has 6/10.
- Unable to invest purchase fuel in a bulk amount results in difficulties in competing with main competitors Qantas and Jet airways.
- Virgin Australia provides in-flight entertainment app to use own devices.
- Cost savings measures were taken and facilities were cut which may result to loose customers.
- Opportunities
- Strong Australian Dollar value leading to more revenue in the form of more ticket sales.
- Good geographical positioning in the Asia-Pacific reason for market expansion.
- Increase in operations in domestic market as well as in international markets.
- Good online promotions and loyality bonuses for customers to increase travel. THREATS
- Competition based on pricing would lead to reduction in the opertional costs.
- Change in Government policies to protect new entrants.
- Increase oil and fuel prices.
- Prediction in Global economic crisis leading to a weak AUD.
3.4 Competitor analysis
Qantas is the main competitor of Virgin Australia.In this report sustainable growth rate of Qantas and Virgin are compared and is found that the sustainable growth rate of Virgin in year 2013 has a negative SGR and Qantas has a positive SGR. This clearly shows that Virgin airlines has no growth in that year.In the year 2015-16, Qantas has very high SGR of 27.28 and 32.21.It is find that over the years there has been a decrease in SGR of Virgin than that of Qantas and this scenario shows that Qantas is growing faster when compared with Virgin Airlines.
4 Business issues
The change in business strategy from low cost carriers(LCCs) to full-service network provider(FSNP).,Virgin Australia able to compete with its main competitors Qantas and Jet Airways in Australia butVirgin Australia has been badly hit by grabbing international fuel costs,especially since Qantas has grabbed better(bulk amountt fuel in advance at cheaper prices) and has deeper opportunities to compete in the market.In response Virgin Australia made cost-saving measures and reduced capacity.Larger cuts and cost-savings measures are taken on july 18,which included baggage fees and more fleet costs.
The second issue is that Virgin Australia stepped into the acquisition process with Tiger Airways in domestic market and with HNA group in international market to increase its market coverage and help to compete with its competitors.
5 Outcomes
Although change in business strategy from low cost carrier (LCC) to full-service carrier provider(FSCP) may be helpful to compete with its main competitors Qantas and JetAirways it may lose its large numbers of older customers which like and rely on its services as low-cost carrier provider.
Acqusition process with Tiger Airways in the domestic market and with HNA group in the international market has positive outcomes to its market coverage in the internal and external business market.
6 Recommendation
There are a few recommendations for Virgin Australia to help improve its operations to attain sustainable growth in the airlines business market.
For the first business issue, proper use of the power of customers to purchase fuel in bulk amounts will be helpful ma the cost savings and customer service issues . Improvement in technology and entertainment facilities so that it will be able to attract more customers and also helpful to compete with its competitors Qantas and Jet Airways which are providing better services and facilities in a chepaer price than Virgin Airlines.
The second issue is to focus on its own company expansion and increase revenue from its own stakeholders rather than acquisition with Tiger Airways to prevent its brand recoginition.
It is suggested that Virgin Australia should continue its differentiation strategy to sustain unique in a highly competitive market to maintain their competitive advantages.
7 Conclusion
This report analyzes the performance of Virgin Australia and the findings are advantageous as well as important for the organization. It has been find out that Virgin Australia willing to provide the best customer service and please its shareholders in every aspect of business. This analysis is undertaken by applying some concepts and tools of business strategy to conditions of the business. The analysis of the macro-environmental condition (PESTEL) find out that economic and technological factors play a significant role in the growth of the business. Virgin Australia has been badly hit by twisting international fuel costs, especially since Qantas has enclosed better(bulk bought fuel in advance at lesser prices) and has heavy purse to compete in the market. In response Virgin Australia made cost saving measures and reduced capacity. Larger cuts and more cost-savings were announced on July 18, which included baggage fees and more fleet costs.
VirginAirliness has kept itself onward by using recent technological advancements. One of the recent examples is the installation of an inflight Wi-Fi Service and also setting up of self-check-ins which is convenient and also time-saving (virginaustralia.com, 2017).
Its commitment to maintaining its value is shown in its constant improvisation of airline services. Though the airline has with number of achievements for its service, there are also a few important factors that led to the downfall of the organization – a twist in the price of fuel and unsecured loans from major shareholders. Despite all the disadvantages, Virgin always follows its culture and its relationship with the staff, being self-controlled. Overall, the performance of Virgin Australia can be rated as good but still requires a few improvements to sustain in the aviation industry.
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