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This report explores possible strategic option for Qantas to respond to its strategic challenge to initially sustain Jetstar as the third airline in the domestic airlines industry as well as to respond to its private label threat. This report starts with a brief description of Jetstar. The next section explores the industry environment. Section after discusses the strategic challenges faced by Qantas/Jetstar. Finally strategic recommendation are presented to overcome the challenges faced by Qantas and Jetstar .
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JETSTAR .
Jetstar Airlines is borne by Qantas's initiative to compete in the lucrative low cost domestic travel segment currently dominated by Virgin Blue. This airline will be launched on the 25th of May 2004 (Jetstar [1] 2004). Much hype surrounds the commencement of its services as they plan to position themselves as the cheapest domestic airlines in Australia. Jetstar is currently using the defunct company Impulse, previously acquired by Qantas in 2001 as its operating entity, but is uses 14 units of the recently retired Boeing 717-200 aircrafts from the Qantas fleet as its carriers (Jetstar,[2] 2004). However, plans are underway to purchase 23 Airbus A320-200 carriers with a flight capacity of 177 by 2006. (Creedy, 2004). At full operation capacity, Jetstar offers 116 flights a day that connects 14 destinations within Australia. See Appendix-A.
The business model and operating features that give Jetstar a cost advantage can be summarized as follows. Jetstar choice of Boeing 717-200 aircrafts is to have large crew flexibility, higher pilot to aircraft ratio, fewer stand by crews, lower training and maintenance cost (Cranfield University report 2000). Moreover Jetstar avoids free food and drinks on board, thereby reducing the operating cost. Jetstar does not provide passengers with seat numbers to induce them to reach the departure lounge well in advance to find more comfortable seats on board (Greenblat 2004).
