AF201
MANAGERIAL ACCOUNTING
SEMESTER 2, 2021
GROUP ASSIGNMENT
COMPANY: QANTAS AIRWAYS LIMITED
House: Greyjoy Group: 45
Student Name: (House: Greyjoy) Student ID:
Shivnil Achari (uploaded on moodle) S11183282
Sheenal Chand S11186230
Natasha Narayan S11184642
Anisha Naidu S11184633
Ashleen Chand S11184616
Mohammed Jamil S11184622
Vineel Kumar S11184952
Ashna Devi S11184805
Table of Contents
Executive Summary...................................................................................................................1
Vision and Mission Statement, Objective and Nature of Business Operations.........................2
Impact of COVID-19 on the Company......................................................................................3
Figure: 1.0...................................................................................................................3
Figure: 2.0...................................................................................................................3
Organizational and Management Accounting Responses..........................................................5
Effectiveness of Responses and Recommendation....................................................................7
Conclusion..................................................................................................................................9
Bibliography.............................................................................................................................10
Executive Summary
The economy has been impacted greatly due to the global pandemic of COVID-19 where the
virus has become a threat to the health of humans. In addition, COVID-19 was declared as a
deadly pandemic by the World Health Organisation (WHO) on 11 th March, 2020 (Sohrabi,
2020). Therefore, the concerns have moved from the supply-side manufacturing issues to the
reduced businesses within the services sector. The International Monetary Fund (IMF) has
estimated that the global economy shrunk by 4.4% in the year 2020 (Jackson, 2021). This
virus has severely affected financial markets and the global economy since there has been a
significant rise in unemployment which leads to reductions in income earned by workers and
disruptions in the services as well as transportation within and out of a country are among the
consequences of the measures of disease mitigation that are already implemented in most
countries. Businesses are coping with these effects by moving their services online and letting
their employees work from home in order to still keep their jobs. However, many companies
have temporary laid off half of their employees, reduced the salary of the owner and
employees by decreasing the hours worked in order to decrease expenses. The businesses are
implementing all COVID-19 safety protocols into their normal business procedures where the
customers are required to be fully vaccinated in order to be served. Effective vaccines like
Pfizer, Moderna, Johnson & Johnson and Astra Zeneca are quite critical to ending the
COVID-19 pandemic, hence it is greatly encouraging to witness so many vaccines proving
their purpose of development. These vaccines are a game-changing tool, however, continuing
to wear masks, physical distancing, cleaning our hands and avoiding crowds is still important
in order to stay safe.
In addition, this report is based on Qantas Airways Limited, which is one of the leading
airline company in Australia and in the world as well. Qantas Airways Limited was founded
by Hudson Fysh, Paul McGinness and Fergus McMaster in 1920 and it commenced its
operation from 1921. Moreover, in November 1920, Qantas Airways limited was listed as a
public company in the Australian Stock Exchange (ASX) market n currently has a market
capital of $10.52 billion. Also the company has a total of 203,171 shareholders with
1,886,044,698 shared issued (Limited Q. A., 2021).
Therefore, this research report is based on Qantas Airline Company which is a publicly listed
company of Australian Stock Exchange (ASX) that has been affected by the COVID-19
pandemic. Firstly, it will outline and summarize the company’s vision, mission statement,
objectives and nature of business operation. Secondly, it will discuss how the company has
been affected by the COVID-19 pandemic. The effects of the pandemic on the company will
be linked to the achievement of its vision, mission, objectives and in terms of business
operation. Thirdly, some of the organizational strategies will be discussed such as
organizational responses and management accounting responses that the organization has
implemented to address the issue identified. Lastly, it will evaluate the effectiveness of the
organization’s responses and the recommendations for business operation during the
pandemic and post pandemic.
1
Vision and Mission Statement, Objective and Nature of Business Operations:
Qantas (Queensland and Northern Territory Aerial Services) Airways Limited is Australia's
largest airline service provider and the second oldest in the world, currently has 22,000
employees due to the COVID 19 pandemic. It was founded in November 16, 1920 by Hudson
Fysh, Fergus McMaster and Paul Mc Ginness and began its international passenger flight in
May 1935. This Australian public company is a multinational corporation which is involved
within the Australian Stock Exchange (ASX) where Qantas currently holds 70% of the
Australian domestic market. The Qantas Group's business sector focuses on aviation where
the core business is the transportation of customers with the two complementary airlines
Qantas and Jetstar. Its airline brands offer regional, national, and international freight
services, air transportation services and loyalty programs. The group's broad portfolio of
subsidiaries ranges from Qantas Freight Enterprises to Qantas Frequent Flyer together with
Qantas Group businesses namely, JETS Transport Express, QantasLink, Qantas Freight,
Jetconnect and more.
Moreover, the vision of the Qantas Group is to function as the world’s premium and best
airline together with exploiting its potential, expanding its competitive advantages and lay the
foundation for sustainable growth in the future. In doing so, the group is jointly committed to
maintaining the highest ethical standards, complying with all relevant laws and regulations,
and reflecting Qantas beliefs in everything they do.
Qantas mission statement depicts that they are the leading premium airline of Australia and
are dedicated to being the best. They aim to meet every customer’s expectations every time
hence the reason Qantas continues to invest in their business in order to provide their
customers with an exceptional level of service in order to be a great airline that champion’s
the Spirit of Australia by being genuine, optimistic, together, experienced and incentive.
Furthermore, the main objective of the Qantas Group is to provide safe and reliable basic
services. These services range from the transfer of national and international cargo to the
repatriation of thousands of Australians home on special repatriation flights and the
connection of regional cities. The Qantas Group aims to have a positive impact on the wider
community, minimize its impact on the environment, and achieve the highest standards of
safety and integrity. Additionally, Qantas Group also aims to achieve an overall return for
shareholders in the top quartile compared to the ASX 100 and global competing airlines.
2
Impact of COVID-19 on the Company
The COVID-19 pandemic has badly affected Qantas Airways Limited in its business
operations. Due to the COVID-19 restrictions such as border closures and travel restriction
Qantas Airways Limited has been affected severely since they mainly focused on service
through passenger travels and freight. This has affected the company’s revenue. According to
the financial performance of Qantas airline, in the year 2019 the revenue was $17,966
million, in the year 2020 $14,257 million, and in the year 2021 it was $5,934 million.
Figure: 1.0
Revenue for Qantas Airlines
17,128 17,966
16,057
14,257
million ($)
5,934
2017 2018 2019 2020 2021
years
Prior to the COVID-19 pandemic, the company’s revenue from the year 2017 to 2019 was
increasing. However, in the early 2020 the COVID-19 pandemic struck the globe through the
wide spread of COVID-19 cases thus also affecting Qantas airlines revenue from the year
2020 to 2021 as shown in figure 1.0
The major component that decreased the Qantas airlines revenue was the passengers travels.
This is mainly because the COVID-19 cases were being spread effectively through
international travels, the airlines around globe had to restrict flights to help in containing the
COVID-19 cases. The passenger’s revenue for the year 2019 was $15,696 million, $12,183
million in the year 2020 and $3,766 million in the year 2021.
Figure: 2.0
Passenger Revenue Qantas Airline
20,000
15,000
Million($)
10,000
5,000
0
2019 2020 2021
Years
passenger revenue Exponential (passenger revenue )
As shown in the figure 2.0 the passenger revenue decline from year 2019 to 2021. From the
year 2019 to 2020 a total of $3,513 million was decreased whereas from the year 2020 to
3
2021 the passenger revenue of Qantas airline decreased by $8,417 million. This is because of
the second wave of COVID-19 cases struck the country named the delta variant therefore,
there was a massive decline in the passenger revenue from 2020 to 2021.
Furthermore, COVID-19 has caused financial and operational challenges to the Qantas
Airline Group. The impact of this pandemic on the company could also affect customer
satisfaction and loyalty as they are a large degree of an ongoing success of the Qantas Group,
especially considering the huge contest for travellers that describes the avionics business.
Due to the implementation of opening and closing of domestic and international borders and
restrictions on the travel industry to prevent health risks, the company lost its customers due
to the cancellation of travels and refunding policies. The company also incurred higher cost
due to airlines/ fleet being in storage.
In addition, Qantas Airways operated in a highly regulated employment market and the
employees represented by unions and are partly to collective bargaining dispute between the
Qantas Groups and its employees, including in relation to the recovery plan, could lead
employees to take industrial action, including work stoppages. This, could disrupt the Qantas
Groups day to day operations and adversely affect business performance, potentially leading
to reputational damage.
Moreover, Qantas Airline has been facing multiple challenges in meeting their mission,
vision and objectives due to the global pandemic of COVID-19 since most countries had
closed their international boarders in order to stop the risk as well as contain this virus hence,
this makes it difficult for the company to continue its normal operations and carry out
international flights or transportation. Since the international boarders are opening back up,
the company has to now provide its exceptional level of service together with following all
COVID safety protocols.
The Qantas Airlines vision was to expand and exploit its potential to achieve advantages and
lay the foundation for sustainable growth in the future hence this was not entirely possible as
the revenue continuously declined from 2019 till 2021 as this was due to the impact of the
COVID-19 pandemic on the Qantas Airline Group. Their mission was to be the best airline of
Australia by meeting every customer’s expectation and provide exceptional level of service to
be a great airline. However, the Qantas airline failed to comply with its mission due to the
restriction in place for the travel industry. A certain percentage of its objective was
accomplished by the quarantine measures put in place for the safety of its passengers.
4
Organizational and Management Accounting Responses
Qantas Airways has been vastly impacted by COVID-19 in 2020 and 2021 as these effects
are evident in their annual reports. The company was badly affected by the pandemic in terms
of lower revenues, higher costs and loss of customers as discussed previously in the report.
To address the issues identified above, Qantas Airways has implemented a three-year
recovery plan as part of their management accounting response. The recovery plan started
from the 2020/21 financial year and will end in the 2022/23 financial year. In addition,
through the recovery plan, a total of $1 billion is targeted to be saved by the company over a
3-year period. This recovery plan consists of significant activity based saving as part of the
modern approach of management accounting response, that will focus on firstly, rightsizing
the Group’s workforce, fleet and other costs according to demand projections, with the ability
to scale up as flying returns. Secondly, restructuring to deliver ongoing cost savings and
efficiencies across the Group’s operations in a changing market. Finally, recapitalize through
the equity raising to strengthen the Group’s financial resilience to recovery and the
opportunities it presents.
In addition, as part of the cost management system, the company’s management accounting
responses are; the determination of the optimal fleet age that balances a number of factors
and varies by fleet type. This also includes; availability of new technology, the level of
capacity growth required in the market and competitive landscape. Thus, to retain flexibility
and respond to market conditions caused by COVID-19, the company has deployed various
strategies that includes; fleet redeployment, refurbishment, renewal and retirement.
Therefore, according to the 2020 and the 2021 financial report, in 2020 Qantas Airways
purchased three 787-9 aircraft and disposed one. While in 2021 the company disposed four
747-400ERs fleet and they also purchased two fleet which will be utilized for freight and
network aviation.
Planning and controlling system are a vital element of management accounting. As part of
strategy implementation, organizations need to put in place plans to set the directions of the
organization and control systems to ensure that operations are proceedings according to plan.
Planning and controlling system provide the frame work for effective resource management
to generate customer and shareholder value. Therefore, management accounting response to
resource management, to reduce costs and increase revenues during COVID-19 pandemic,
the company disposed 747-400ERs, while it made Jetstar Aircraft operate as Qantas freight.
“To further ensure operational readiness, grounded passenger A330-300s airbuses were
deployed as freighters to support International Freight Assistance Mechanism (IFAM)”
(Qantas, 2021).
Furthermore, as part of organizational strategies and responses, the company is trying to
generate customer value by extending the ‘fly flexible’ program, giving customer confidence
to book and fly by providing more flexible booking terms and conditions. Also it has
maintained high levels of customer Net Promoter Scores (Qantas, 2021).
Also, to bring back its customers in 2021/22 and recovery of domestic travel the following
were the organizational and management accounting responses:
Introduction of health and safety program for customers
5
Introduction of new routes and lounges which also includes addition of capacity
Deployment of A302s into Western Australia to meet strong market demand
Also, as part of the strategy/response, the company is trying to generate customer value by
extending the ‘fly flexible’ program, giving customer confidence to book and fly by
providing more flexible booking terms and conditions. Also it has maintained high levels of
customer Net Promoter Scores.
In addition, Qantas Airways took strategies as part of organizational responses to empower its
employees by the following policies and plans;
The Job Keeper Payment
International Aviation Support Package
Australian Airline Financial Relief Package
6
Effectiveness of Responses and Recommendation
The COVID-19 pandemic is one of the ongoing challenge as it has impacted the Qantas
Group in many ways and as a result, to overcome these worst trading conditions, there were
quick and early responses and strategies designed in the crisis by the group which was very
effective as a three-year recovery plan was set in place. This plan included a lot of hard
decisions and work which would make sure that the company would firstly endure, then
recover and repair quickly as well as retain flexibility. The plan is aiming to improve the
efficiency, progress in its operations and provide positive cash flow in the last half of the
financial year 2021 and onwards as this will give Qantas group confidence to perform
strongly to the changes in market condition. Therefore, the 2021 financial report of the
company showed the effectiveness of the three-year recovery plan as the company was able
to save a total of $650 million within a financial year. Moreover, the plan of fleet
management was completed in December 2020 and other plans such as, customer and brand,
employee engagement and Qantas loyalty is expected to be completed by 2022/23 financial
year.
Moreover, the coronavirus outbreak has impacted various companies, including Qantas. The
virus, which has resulted in global travel restrictions, has caused a catastrophic drop in travel
demand and activity, plunging global aviation into chaos. Qantas should focus on
strengthening its ties with state-owned carriers like Qatar Airways and Emirates, as they are
able to fly routes that a publicly traded company might not be able to. In April, Qatar
Airways, for example, flew around 45 percent of the traffic into and out of Australia, with
less than half of the seats filled. Finding finance at this difficult period has necessitated new
financial tactics for Qantas, one of which is a $1.9 billion share sale to investors. The
scenario is the same for Qantas' international flight planning, since there is no set date for
when and where all past flight routes will be resumed. In May 2020, Qantas announced that
25,000 of its 30,000 employees would be on standby at least until the end of June, however
this turned out to be wrong as limitations and the epidemic continued.
Furthermore, the following can be recommended to Qantas Airways in combatting the effects
of COVID-19. Firstly, restructuring of group’s business operations in delivering ongoing cost
saving in fuel consumption and efficiencies in a changed market which will provide new
opportunities to increase ramp up of flying as this will provide a stronger platform for future
profitability. Secondly, the success of the hub-and-spoke concept, which has contributed to
the rise of mega hubs, is largely responsible for the increased market share of connecting
flights on intercontinental routes. Network privilege, an airline’s ability to provide a unique
service to its passengers, is a key source of airline value creation which provides the greatest
number of connections with the fewest number of flights. Thirdly, right-size the company’s
pre-crisis labour force (reducing and retiring workers) and fleet across all parts of the
business together with having the expenses adjusted according to the demand projections
which will scale up flying. In addition, advanced analytics can help customers have a better
experience. Airlines can improve their customers’ experiences by making better use of
existing data for instance, operations control centres might dynamically change cruise speed,
7
distribute gates to reduce the distance passengers must walk between flights, and expedite
passengers with difficult connections through security to reduce stress during tight
connection times. Moreover, strengthening the company’s financial resilience by
recapitalizing through an equity raising for recovery for the opportunities it presents as this
will accelerate its recovery from COVID-19 pandemic. Finally, investors to be strongly
cautioned in making decisions and not to place investments due to uncertainty, unknown risk,
significant volatility and disruptions caused by coronavirus crisis.
8
Conclusion
The COVID-19 has immensely affected every industry around the globe. With various forms
of COVID-19 vaccines rolling out the economy of each country is expected to return back to
some form of normalcy. Thus, Qantas Airways Limited, a renowned brand and company in
the aviation industry has a vision of functioning as the world’s premium and best airline
together with exploiting its potential, expanding its competitive advantages and lay the
foundation for sustainable growth in the future. The mission of the company is, meeting
every customer’s expectations and being the leading airline of Australia.
Moreover, due to COVID-19 the company was badly affected, making it impossible for
international flights due to boarder closures and lockdowns. Hence, the company’s revenues
in 2020 and 2021 was vastly impacted as it recorded $14,257 of revenues in 2020 and $5,934
in 2021. Also COVID-19 impacted customer satisfaction and loyalty, as implementation of
travel restrictions made company cancel all its international and domestic flights, as a result it
lost its customers.
In addition, to address the impacts of COVID-19, the company implemented both
organizational and management accounting responses. Qantas Airways Limited has designed
and implemented a three-year recovery plan as part of company’s management accounting
responses, that is expected to save the company a total of $1 billion. The recovery plan
included responses towards cost management, fleet management, customer and brand, Qantas
loyalty and employee empowerment. Also, as part of resources management the company
disposed few fleet to reduce its cost and deployed few fleets to operate as freight services and
for government. Furthermore, as part of organizational strategies, the company is trying to
generate customer value by implementing policies such as “fly flexible”. Also, the company
is empowering its employees by providing them with various relief packages.
The implementation of various organizational and management accounting responses has
shown effectiveness as this was evident in the 2021 annual report. With the implementation
of the three-year recovery plan, the company was able to save $650 million by the end of
2021 financial year whereas, other plans and strategies is expected to be by the end of the
2022/23 financial year. Also it can be recommended to the company, to restructure its
business operations, resizing the company’s labor force and fleet to reduce cost during and
post such crisis and strengthening the company’s financial resilience by recapitalizing
through equity.
9
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