Please refer 'Case' study below about Qantas Airlines and respond to each of the following discussion topics.

Part 1

Task 1

a)Briefly describe what the key internal and external drivers of change were at Qantas at the time, as described in the case study material.

b)Provide a summary of Qantas's strategy and identify what are possible areas of change that were identified by Qantas.

c)Identify who the key stakeholders are e.g. employees, management, directors, government regulators etc., which will need to be consulted and with whom discussions/consultation will need to take place to prioritise change requirements. Map and briefly describe each stakeholder group according to power/influence matrix.

Part 2

Task 1

a)Describe how to a cost benefit analysis to evaluate change requirements

b)Describe how to conduct a risk analysis when evaluating change requirements

c)Describe how to determine potential barriers to change for change requirements

Task 2

a)Develop a proposed change management project plan for the changes proposed by

Qantas, using the suggested format provided or a format of your choice.

b)Taking into consideration stakeholder groups previously identified, briefly describe what approvals you will need to obtain to proceed with the proposed change management plan

Part 3

Task 1

a)Referring to the stakeholders that you've previously identified, and propose a communication plan. Your plan should include the needs to be addressed, strategies to be used, a schedule of activities to be included in the communication plan, resources required and how the impact of the communication or education plan will be measured once completed.

b)Provide at least one sample of materials that will be used in the planned communication activity e.g. email, memorandum, staff flyer, training material, instructions, procedures etc.

Task 2

Arrange one communication activity associated with the implementation of proposed changes e.g. staff meeting to communicate the change; facilitating a focus group; delivering a training session; conducting a mentoring or coaching discussion with a staff member etc.

Part 4

Task 1

a)Action the one activity associated with implementation of the change management project i.e. staff meeting to communicate the change; facilitating a focus group; delivering a training session; conducting a mentoring or coaching discussion with a staff member referred to in Part 3, Task 2 (above).

b)Provide a brief reflection about the effectiveness of your activity and briefly describe any barriers you may have observed during the process of completing the activity. Following are some questions that you can consider (please also add your own ideas): -

i)Do you think that you successfully communicated the critical facts and benefits about the proposed changes?

ii)Do you think that you have successfully addressed all stakeholder's concerns about the proposed changes?

iii)Do you think the organisation will get complete 'buy-in' to the proposed changes from all stakeholder groups? If not, what barriers to change can you identify from respective stakeholder groups?

iv)What impact do you think the proposed changes will have on morale at Qantas as a whole and within discreet stakeholder groups?

Task 2

a)Briefly describe (in theoretical terms) suitable strategies to embed change

b)Briefly describe (in theoretical terms) how you will monitor, evaluate and modify the activities and interventions you have included in your change programme.

Case Study Qantas Airlines

CHANGES IN THE AIRLINE INDUSTRY

The airline industry has gone through turbulent times since 2001. which has brought about a dramatic drop in passenger volume leading to increased competition in the Australian airline industry as airlines compete aggressively to try to attract customers to gain a small share of the pie. Although the airline industry is recovering, oil prices have surged to an all-time high, threatening the aviation sector's profitability. Like many airlines, Qantas had to respond to these market conditions by raising its fuel surcharge on both domestic and international flights, which raised concern as to what may happen to its passenger volume. Airlines are pursuing changes with an emphasis on aggressive containment of cost to sustain highly competitive fare levels.

DEVELOPMENT AND CHANGE IN QANTAS

The Australian government deregulated the domestic airline industry in 1990. The primary driving force for the deregulation initiative was to promote increased competition and pricing flexibility, aiming for greater efficiency in the industry and benefits to the customer. Since deregulation, Qantas has faced additional competition from regional carriers, especially Air New Zealand. Through the government reducing the entry barrier from a legislative point of view, it enabled smaller airline carriers to gain market share from major players like Qantas. The deregulation shifted the airline industry from guaranteeing exactly two airlines, with parallel schedules and identical planes and prices on major domestic routes, to almost complete freedom of entry to the market, subject only to safety restrictions. A major problem identified with the airline deregulation is that the structure of the industry has not been modified like the government anticipated. Under the deregulation, two airlines still serve the same domestic routes without any divergence in the pricing, market share and greater efficiency in scheduling. Compass Airlines entered the domestic market with a low-cost operating model, offering a single class of service at industry-low prices. The established airline carriers had to respond with deep price cuts and special discount offers. The new entrants were poorly capitalised and the expensive barriers to entry forged by the incumbents, such as their control of terminals, and external environmental factors resulted in Compass's demise. Other factors determined change in the airline industry:

1 Existing competitors struggle to make profits.

2 The industry is highly volatile, risky and uncertain.

3 The market is mature. 4 Buyer demand is slowing due to external factors (terrorism, war, interest rates etc.).

Another factor that helped Qantas to develop and grow was that the attempt by regional airline Impulse to enter the capital city market failed in 2000. Shortly after Impulse commenced service, a fourth player, Virgin Blue, also entered the market. Unlike previous entrants, Virgin Blue had the backing of an international carrier. Qantas's main defence mechanism to remain competitive is to continually upgrade its core competencies across the multitude of customer service platforms and to continue to pioneer innovations such as the CityFlyer services on key trunk routes. It is reportedly considering investing about $1.5 billion to expand its fleet of Boeing 737-800s to around 30 aircraft. This development strategy allows Qantas to remain competitive with Virgin Blue's all-economy configuration. Qantas's introduction of new products/service such as frequent flyer programs, club lounges, holiday packages and upgrades of IT systems were dynamic development initiatives introduced at intervals (spacing) according to a set schedule. There are some unique factors that Qantas introduced as developmental initiatives to achieve unique market attractiveness. OzJet was launched in November 2005 to target business travellers on the Sydney-Melbourne route, the third busiest in the world, with prices equivalent to Qantas economy fares. Unsurprisingly, OzJet failed to win enough of the market to affect pricing and was unable to make sustainable returns; barely three months after beginning operations, the airline was transformed into a charter fleet. Three of the four low-cost carriers failed in a year, while the one that did survive had the advantage of circumstance, the demise of Ansett and much deeper pockets. Considering the size, borders, isolation and urban dispersion, air travel is a necessity in Australia unlike any other country on earth. Therefore, the threat of substitutes in the form of other modes of transport (bus, train, boat etc.) is effectively negligent, especially with the advent of low-cost air travel. Despite a population of just 20 million people, Australia is ranked fourth in the world concerning domestic passenger-kilometres performed, which is indicative of the viability of the domestic aviation market. Qantas has the undeniable benefit of a stranglehold on the albeit small Australian market. In Australia, Qantas and Virgin Blue are the two main players. A major reason for the continual profitability of Qantas is its policy to initiate and implement changes. Qantas offers the full-service carrier and Virgin Blue offers a low-cost carrier without any major competition from any other airline carriers. Lacking capacity and operating on a very limited number of routes, Virgin Blue was unable to 'fill Ansett's shoes'. Nor was Virgin Blue willing to modify its low-cost provider model and provide an in-flight service. In the absence of competitors, Qantas restructured its management team, outsourced non-core services, implemented contract management and managed to increase its domestic market share to 70% in 2005. Responding to the ever-changing Australian airline industry, Qantas implemented developmental policies in a proactive manner. The sudden upsurges in demand required rescheduling more flights and using smaller aircraft to cater for the increased demand at lower costs. When international terrorism impacted on the global airline industry, Qantas diverted its international fleet to domestic routes to further capitalise on the domestic upsurge in demand. A key factor that further has galvanised the oligopoly in Australia is the small number of routes.

DEVELOPMENT STRATEGIES AT QANTAS

In 1999, Brett Godfrey, an Australian executive of Virgin Express, proposed to Richard Branson (Virgin guru) the establishment of a 'Virgin-branded, low-cost, low-fare carrier operating in the Australian domestic market'. This low-cost carrier was similar to Southwest Airlines (SWA), which was renowned for being a 'no-frills' airline. Godfrey said: '[T]he airlines that are clearly succeeding are those that have stuck to the consumer-friendly Southwest low-fare model'. Qantas continued to introduce changes to execute its broad differentiation strategy. This strategy was based on it 'seeking to provide products or services unique or different from those competitors in terms of dimensions widely valued by buyers'.23 The unique offerings by Qantas were different classes, frequent flyer programs, club lounges, catering services and corporate freight-carrying services, truly bracketing itself as a broad differentiation strategic organisation. Since Virgin Blue's aggressive expansion was based on lower costs, which were 30-40% lower than Qantas's, Qantas CEO, Geoff Dixon, drew a 'line in the sand' by creating Jetstar to restrict Virgin Blue and other carriers from taking more than 35% of the domestic market.25 Qantas adopted a broad differentiation strategy that included 'pincer-movement' tactics. Qantas's strategic platform had three principles:

1 establishment of a low-cost carrier, Jetstar, to compete with Virgin Blue

2 growth in the leisure markets, through expanding Qantas Travel agencies and inclusive holiday packaging with airfares

3 maintenance of its quality as a full-service carrier.

Qantas used a market segmentation strategy, adopting two brands to target different markets to bridge the gap at the low-end of the domestic market, a concept that occurred in the UK with British Airways and its low-cost carrier, GO. Qantas's broad differentiation strategy in the low-cost carrier market seemingly strengthened the competitiveness of the oligopoly market, as prices became increasingly competitive to retain and regain market share. When investigating types of competitive low-cost strategies, Virgin Blue adopted the Southwest Airlines low-cost carrier model, whereas the Qantas Jetstar model was a selection of the best features from the leading low-cost carriers around the world, tailored to meet the demand of the Australian market. Qantas aimed to adopt the efficiency (cost) of Ryanair, the branding of easyJet, the innovation of JetBlue and the customer service of Southwest Airlines.

IMPLEMENTATION OF CHANGE

The change in competitive dynamics in the post-deregulation period forced Qantas to introduce aggressive structural changes. Since deregulation, Qantas seniormanagement has transformed the organisation from a government-run reactive organisation into a high-performing strategic corporate organisation. In 1993, Qantas CEO James Strong took the challenge to build a new partnership between staff and management. The challenge was to instill a need for 'staff understanding that it is necessary to make a profit' by contributing to a profitable company. Strong immediately implemented business strategies to drive profits by reducing costs and building up a customer-service focus. Key initiatives such as an extensive training program, development of work teams, new classification structures, a share ownership scheme, changes in the management structure, 'road shows' communicating company performance, outsourcing, competitive tendering and downsizing were introduced to improve company performance. There was a strong emphasis on implementing an integrated approach by appointing various group and general managers to manage the turbulent organisational and industrial changes that Qantas had to pursue. This strategic restructuring at the top allowed Qantas to implement policies for change, downsize its labour force and reduce costs. The reduction of labour cost has been a central plank of employee management in Qantas since deregulation. Senior executives in the industry regarded reduced labour costs as one of the necessary features of survival. It is not the sole means of ensuring profitability and a competitive edge, but is part of an overall corporate strategy, and has been on the agenda in Australian airlines since the pilots' dispute of 1989-90.

Qantas has been very effective in implementing change without major disruptions in the post-deregulation period. On the international front, Qantas took some targeted measures to withstand market pressures. In 2001-02 Qantas deferred a number of infeasible Asian and trans-Tasman routes to newly established low-cost alternatives: Australian Airlines and Jetconnect. The redirection towards international low-cost carriers was further emphasised by Qantas in 2004 when it agreed to a partnership (49.9%) based in Singapore, and the launch of Jetstar International in December 2005. Qantas has built a bigger footprint with the maximum range of price options to help cope with the recent turmoil in the industry. On the domestic front, the leisure market has grown from 35% to 60%. Qantas launched the low-cost carrier, Jetstar, in May 2004 to restrict Virgin Blue's inexorable growth and to alter industry attractiveness, warding off new entrants from the domestic duopoly that delivers 57% of its earnings. Through a new reservation system that emphasised direct distribution channels, new low-cost ground handling and catering alternatives, more favourable labour agreements and higher aircraft utilisation through a production-driven schedule, Jetstar aimed to achieve the lowest cost base in the market. With the addition of Jetstar and low-cost international affiliates, Qantas exploited their competence for market reach to broaden its differentiation strategy. It now covers all aspects of the market (regional, domestic and international), offering both low-cost and premium services. Peter Gregg, the CFO of Qantas, proclaimed: 'The success of our domestic operations is due principally to our differentiated business and leisure product.' Due to its competitive position, Qantas was able to replicate Virgin Blue's low-cost leadership strategy, while maintaining an inimitable broad differentiation strategy. Thus, through aviation expansion, Qantas's uniqueness was protected and a strategic competitive advantage was achieved.

MANAGEMENT OF EMPLOYEES

Due to entrenched union positions, Qantas was operating with higher than market pay for less productive work. Consequently Dixon stressed to Qantas's 14 unions

Top of Form

That they were 'going to have to realise that some employment practices contributed to Ansett's demise'and pointed to wage reductions of 16% at Singapore Airlines since 9/11 as indicative of where the airline had to go. In order to align its labour costs more closely with those of its rivals, Qantas enforced increased redundancies, increased use of accumulated leave to reduce staffing numbers, began an expanded leave-without-pay program and increased use of part-time workers. Qantas signed agreements with unions to set up Jetstar, like Virgin Blue. The strategic implementation of Jetstar was not only a means to differentiate the brand and restrict competitors but also to influence labour reform. Qantas introduced a bold policy initiative in February 2003 to use overseas labour markets as part of its cost-cutting strategy.

MANAGEMENT OF SUSTAINABLE COST REDUCTION PROGRAMME

Following unsustainable growth in net operating expenses (from $7.8 billion in 1999 to $10.7 billion in 2002-03), there was increasing pressure to eradicate costs from the supply chain. Qantas management devised the 'Sustainable Future Program' in August 2003 to reduce operating costs by $1.5 billion through productivity initiatives and re-engineering processes. In the six months up until December 2003, alterations towards labour productivity resulted in a 13% improvement in domestic cabin crew utilisation, while net operating cost per available-seat kilometres (ASK) fell by 7.2%. By introducing new efficient aircraft, savings were made on fuel and maintenance while also improving punctuality; on-time arrivals domestically during January 2004 were 90%. Internet sales increased significantly, accounting for 30% of domestic and 9% of international sales in 2004. Technology costs were drastically reshaped under a $1.4 billion outsourcing push to IBM and Telstra, aimed at reducing computer and communications fixed costs from 70% to 30%. Commissions paid to travel agents were reduced to as little as 1% in September 2004, expected to result in cost savings of $100 million annually. Pursuing an aggressive fuel hedging program, Qantas recently boosted its fuel hedging level to 90% of its needs for 2006-07. A fleet renewal program has been instituted to provide Qantas with not only the most up-to-date and efficient service, but also an increasingly flexible fleet that allows

MANAGEMENT OF RESTRUCTURING PROGRAMME

Given a new corporate strategy, modifications to corporate structure are required. So commencing in 2003, Qantas undertook a restructuring process that involved the establishment of eight different businesses in three categories: flying businesses, flying services and associated businesses. While maintaining a corporate centre to provide information technology, human resource and financial services, all businesses were to stand alone and compete for investment. Aimed at optimising accountability, collaboration and agility, Qantas management was convinced that adapting to evolving market conditions would be difficult with a traditional organisational structure. This is a contention Dixon endorsed: 'I believe the reorganisation will better enable us to manage the constant change and drive initiatives now in place - and others that will be required - so we maintain our reputation for excellence in everything we do.'

MANAGEMENT OF PARTNERSHIPS AND ALLIANCES

The restructuring emphasis on collaboration was also reflected in Qantas and Singapore Airlines uniting to share costs on new training and maintenance facilities for the super-sized Airbus-380. It is argued that a strategic partnership is an effective way to pursue opportunities that are uneconomical to pursue alone. The alliance of Qantas and Singapore Airlines was also emblematic of the global shift from the days of national flag carriers towards consolidation. Qantas was a founder of the Oneworld alliance in 1998, which aimed to unify code-sharing so capacity utilisation and domestic hub traffic could be optimised, while realising savings in combined marketing and customer loyalty programs. The Oneworld alliance represented another means for Qantas to expand its network while reducing its costs.

LESSONS FROM THE QANTAS CHANGE MANAGEMENT STRATEGY

Qantas has restructured itself to focus on the important business priorities. The company is happy with the cost structure, and is now planning transition from cost centres to profi t centres. Adopting best practices and striving for continuous improvement, Qantas instituted a cost-cutting program and created a leaner company. Qantas has been able to restructure its business with minimal unrest. One of the reasons for this was good communication informing people at work of what was happening and why it was taking place. Waddell et al.67 rightly argue that effective communication about changes and their likely consequences can reduce speculation and unfounded fears. Leadership plays a key role in Qantas. Margaret Jackson, the Chair of the Qantas board, and Geoff Dixon, the CEO, have formed a formidable partnership. They have been able to lead the company through some diffi cult times in the market and still deliver on its strategy. The success over this period shows that the company's senior executives support their leaders and helped drive the message through to the rest of the company.