NTRODUCTION

Australia is known as the largest country by area in Oceania and the sixth- largest country in

the world. Because Australia is an island, the importance of airlines has grown very rapidly to

match the demands of travelers and visitors. In fact, according to (Australia Net, 2007), over

90% of the visitors entering the country travel by air and a total number of international

airlines, that carry cargo and passengers to and from various parts of the world is 49.

Australia is heavily reliant on the air transport business since cities are separated by large

distances (Nolan1996). Air travel in Australia commenced around the 1920s when Qantas,

the flag airline of Australia was formed. From the 1930s to the early 1950s, the primary

domestic airline was the Australian National Airways (ANA). Qantas was then nationalized

after World War II, and its domestic operations transferred to Trans Australia Airlines

(TAA). This led to the establishment of the “Two Airlines Policy”in about 1952 to ensure the

simultaneous operation of both airlines. With TAA government owned and TNA privately

owned, the Two Airlines Policy only allowed the two airlines to operate flights between state

capital cities & major regional city airports. This in fact became a legal barrier to new

entrants to the Australian aviation market. (Wikipedia, n.d.) It was until the 1990’s that the

Australian government repealed the "Two Airline Policy" and accepted new carriers to

operate in the airlines industry together with the existing companies (Forsyth2003). This

deregulation birthed several Low-Cost Carriers (LCCs) that entered the Australian domestic

aviation industry. LCCs are now widely recognized as among the best business strategies in

current travel history and control about 25% of the worldwide market, which is expanding

widely in emerging markets, as reported in the International Air Transport Association

(IATA).

Air Australasia is a company looking to establish a low-cost airline to serve the Australasian

industry but is keen to have a feasibility study done to examine the viability of establishing a
supply chain to enhance the business venture. This study looks to compile a feasibility report,

critically analyzing how they would address the critical areas in the establishment of a low-

cost airline. We will conduct the study using Benchmarking, the Balanced Scorecard, the

BCG Matrix and PEST analysis for Air Australasia.

ROBLEM IDENTIFICATION

It has been established in the case study, that the global airline industry continues to grow

rapidly. However consistent and robust profitability is difficult to achieve. According to the

IATA, the growth measured by revenue has doubled over the past decade, form US$369

billion in 2004 to a projected $746 billion in 2014. However much most of this growth has

been driven by the Low-Cost Carriers, the overall profit margins are less than 3%. This

means sustaining such a business venture in a fast-growing industry will require innovation

and strategic approach to stay competitive. It has also been noted that almost every player in

the aircraft value chain such as airports, travel agents, airplane producers, service firms, and

engine producers—makes a decent profit. One of the great ironies in the industry is that the

most crucial link in the chain, the companies that actively move people from place to place,

fail to break even. The airlines therefore need to make large improvements so as to operate

more efficiently. The Aviation industry in Australia is heavily competitive, with a long

history and several airlines operating not just within the country but also all over the world.

International airlines, local and regional airlines and broader airline business & its security

are the main air travel segments in the industry. They also have some small segments like

gliding, hand gliding, and ultra-light aircraft. The LCCs also called no-frills, or discount

carrier are airlines that is operated with an emphasis on minimizing operating costs. They

sacrifice certain traditional airline luxuries such as Wifi, catering, assigned seating, premium

cabins among others, for cheaper fares. To make up for revenue lost in decreased ticket
prices, the airline may charge extra fees such as for carry-on baggage. They have reduced

overall fares as compared to legacy carriers. (Wikipedia, 2024)

According to Price Waterhouse Coopers, 2015, the most successful airlines, with a few

exceptions, are those with the strictest cost controls. The biggest lever to reduce costs lies

with fuel efficiency, since fuel accounts to approximately 40-55% of total operating

expenses. Legacy airlines often have decade-long, complex processes that cost far more than

the simplifies processes of the LCCs. The prospective expansion of China’s business and

commercial markets suggest an increased demand for air travel around the region (Zhang and

Graham, 2020). A number of topics must therefore be considered as part of any business

development in order to establish the business case for the enterprise. The logistics and

supply chain are necessary to ensure business continuity are an important aspect to be

assessed. Given the Air Australasian’s low-cost approach, this will inevitably put greater

pressure on the margins that the organization is willing to pay for goods and services. The

company has several supply chain issues to be addressed, but below are the main aspects that

emerged from the initial research:

➢Current local supply chain to support the business and its capacity

➢Current logistics infrastructure to support the airline’s expansion in the competitive market

➢Environmental analysis to support CSR initiatives and

➢Problem solving and the use of business tools

With about sixteen million travelers arriving in Australia annually, from across the world, Air

Australasia acknoledges the highly competitive nature of the modern aircraft industry and is

looking to conduct a detailed assessment of the challenges that will inform the supply

chainrequirements to operate the business. The benefits of effective supply chain

management range from quality control, better collaboration with suppliers, market sales and

share, higher efficiency rates, shipping optimization, reduced overhead costs, improved risk

mitigation and improved cash flow(Express, 2022). Effective supply chains are important for

companies functioning in a worldwide complex contexts and businesses looking to attain

efficiency and customer fullfillment (Lambert,2008). This study with utilize the

Benchmarking, the Balanced Scorecard, the BCG Matrix and PEST analysis techniques to

analyze the problems provided in the Air Australasia case study.

CRITICAL DISCUSSION

The theories mentioned below will be used to analyze the Air Australasia case study.

BenchmarkingBenchmarking is a model that involves comparing the business performance

with that of peers and competitors. As per Monteiro & Ribeiro (2017), benchmarking is the

competitive edge that allows organizations to adapt, grow and thrive through change. It

measures key business metrics and practices and compares them -within business areas or

against a competitor, industry peers or other companies around the world-to understand how

and where it needs to change, so as to improve performance. Benchmarking aids in the

identification of best practices in the relevant industry. It is highly suggested at the beginning

stage of a business, like Air Australasian, to evaluate performance focused on metrics in

question. The success of start-up’s is gauged with other firms in the industry, necessitating a

thorough understanding of the rival’s performances from credible sources. In airlines,

benchmarking is frequently used mostly for commercial evaluations and the records can be

obtained from several credible publications like International Civil Aviation Organization

(ICAO), International Air Transport Association (IATA) and many more. IATA for example

collects some feedback from customers on airport service delivery, assisting airports in

measuring performance statistics across about 50 airports globally (Tyler, 2000). With the

Benchmarking model, one can predict capacity planning, demand behavior, customer
requirements and articulation any obstacles like logistics, head count, maintenance repairs

etc.

The Balanced Scorecard A balanced scorecard is a strategic management tool for tracking a

thorough set of business objectives that can be measured over time. According to Terziev and

Stoyanov (2017), once the scorecard is developed, it helps align the business to a shared

vision of success, and gets everyone working on the right things and focusing on results. It

helps the company monitor and improve its performance across perspectives of customer,

internal, learning and growth, which data is used to inform decision making at all levels in the

organization. It is a combination of performance evaluation criteria that include current, past

and future performance indicators. For Air Australasian that is looking to introduce a Low-

Cost Carrier in a competitive market, it is very important to have all its initiatives, targets and

performance measures all aligned to the mission of excellent service delivery and lowest

costs possible. PEST Analysis The feasibility analysis of the airline’ssupply chain will need

to include a detailed look at the internal and external environment of the business. Factors in

the organization’senvironment that influence how the business operations run and engage

with the entire logistics and supply chain Players. The environmental audit/ PEST analysis

was developed as a procedure to identify all internal & external factors that may influence the

business performance. According to Ho (2014), PEST analysis evaluated at four categories of

external environmental factors: Political, Economic, Social & Technological. The concepts

can be categorized into three: (a) related to its nature, (b) related to its contribution to other

planning activities, or (c) related to its practice (Ho, 2014).

I.Political factors This focuses on the political stability of the government in which the

company operates. It covers all forms of government interventions, and political lobbying

initiatives, tax policies, agreements, regulations etc II.Economic factors These are the

macroeconomic conditions present in the environment in which the company operates. It

includes currency fluctuations, regional differences etc III.Social Factors These cover any

demographic, cultural and social factors in the environment that may influence short- and

long-term performance of the business. IV.Technological Factors Technology continues to

evolve, this component therefore focuses on technology related activities, incentives,

infrastructures, , and technological changes that impact the external environment (Ho, 2014).

A PEST study helps businesses to proactively respond to market trends. Instead of

responding to market factors, a PEST analysis equips the business with the tools it needs to

plan for potential hazards (Robert Chapman, 2011). To ensure the supply chain operates

efficiently, environmental evaluation to support CSR initiatives must be done and managerial

and problem-solving skills employed.

APPLICATION OF THEORY

Using the benchmarking, Balanced Scorecard and PEST analysis techniques, I will attempt to

demonstrate the practical applications of the theoretical concepts to the case study of Air

Australasian. The feasibility study will present some suggestions and recommendations,

based to aid the decision-makers in determining the most feasible implementation plan and

performance measures. Low-Cost Carrier BenchmarkingAccording to Price Waterhouse

Coopers, 2015, the most successful airlines, with a few exceptions, are those with the strictest

cost controls. This is why there is a growing demand for the Low-Cost Carriers not just in

Australia but across the world. Because Australia is an island, the importance of airlines also

continues to grow very rapidly to match the demands of travelers and visitors. With Air

Australasian looking to introduce a low-cost airline to meet this growing demand, it needs to

benchmark with not just other LCCs with in Australia, and also across other markets.

According to Kua & Baum (2004), LCCs are one of the most successful contemporary travel

business concepts. They however, require reliable and accurate passenger demand estimates

as part of their fleet, network, and commercial planning, product definition, and for scaling
investments in fleet and their associated infrastructure. According to the Airline competition

in Australia report, compiled by Australian Competition & Consumer Commission (ACCC),

Bonza launched an independent LCC in January 2023 with a network of 27 routes connecting

regional hubs to holiday destinations. It provided low-cost domestic flights, provided

travelers with more route choices and is predominantly flew routes that were previously

underserved. This is how it differentiated itself from the other airlines. Bonza’s cheapest

available fares range from $49-89 per person, but consumers are encouraged to pay extra for

services like baggage checking, seat selection and food & drink. It offers a ‘no-frills’ fare-

type. Bonza currently offers about 2-5 flights per week on each route, allowing them to

service its 27 routes with only 4-5 aircrafts. This however opens opportunity for another

airline, like Air Australasian to enter the market and offer more frequent services so as to

attract passengers, especially business travelers. that prioritize flexibility and convenience.

Bonza has primarily targeted price-sensitive leisure passengers that are flexible with the time

of day or week they travel. They are looking to maintain low prices for consumers with a

low-cost model. With brand new aircrafts, they incur minimal maintenance costs and are 14-

20% more fuel-efficient than other models on the market. According to the same report,

Bonza sold over 10,000 tickets within a few days of launching and is expected to become

profitable in the second year.It is with this benchmark that I highly recommend Air

Australasian to proceed with setting up the LCC in the Australian travel market, with a clear

low-cost operating model, distinct travel routes and offers and innovative ideas to attract new

clientele.

Balanced Scorecard

The Balanced Scorecard’s view point to economics focuses on the company’s financial

performance, increase in sales, and control of expenses. The low carrier strategy aims at

lowing expenses while improving earnings for the company. A detailed assessment of
economic viability will start with identifying factors that affect costs, like staffing, fuel,

machinery, and putting measures to cut expenses, like fuel-saving airline, simplified

procedures, route optimization, and many more. Air Australasia must determine its target

customer base demographics’ demands and interests to build its solutions. That entails

creating an intuitive webpage, delivering attractive prices, and supplying top-notch service. A

solid supply network needs to be established to sustain the operational and economical

strategy. That includes locating the regional supplier network , distribution network, and

possible vendors. Under education and development, the focus is to acquire knowledge,

develop new ideas, and foster advancement and creativity. The company should develop a

culture of learning that includes committing money for training & staff development ,

implementing novel innovations, and gauging with current standards in the sector. Air traffic

forecasts are one of the key inputs into an airline’s fleet planning, route network

development, and are also used in the preparation of the airline’s annual operating plan With

these initiatives in place, the balanced scorecard can support in linking them to the overall

business mission and objects and provide clear metrics for monitoring and evaluating

performance.

PEST Analysis This technique enables us to identify any of the environmental factors that

may hinder the success of the Low-Cost Carriers to be introduced by Air Australasian.

a)Political Factors Historically, the Australian government has the “Two Airlines Policy”that

only allowed two airlines to operate flights, posing a serious barrier to the rest of the airlines.

Ever since sector's deregulation in the 1990’s, several low-cost carriers (LCCs) have

managed to enter the ustralian domestic air transport industry now almost dominant the

sector. At the moment therefore, no political or regulatory requirements pose a risk to their

existence. b)Economic factors Rapid global changing fuel pieces, currency rates, rivalry from

competing airlines, labor costs and fluctuating operational and maintenance costs may all
influence the sector and the revenues. Projections indicate that the profitability of these

airlines is less than 3%, the company should devise means of changing the trajectory through

innovations and distinct strategies. c)Social factors Customer’sattitude and sensitivity to

pricing needs to be taken into serious consideration here. This will affect the demanding

power of the airline in comparison with legacy airlines. To build its products and services

appropriately, the business must comprehend the social makeup of the intended customer

base, which may include factors like age, and financial status. Consumer choices and societal

expectations also affect the desire for flights, such as whether people choose complete versus

legacy airlines. d)Technological factors As Technology evolves, so should the airline. It can

possibly be cheaper to for example develop a phone app for Air Australasia, to manage

customer disputes instead of having a call center. Customers can also use the same app for

purchasing tickets, food & drinks and so much more. Novel innovations, like online

reservation systems and environmentally friendly aircraft are some interesting ventures to

consider.

CONCLUSION & RECOMMENDATIONS

It is crucial to have a detailed understanding of the supply chain management methods that

promote the performance of big global companies, logistics, collaboration and partnerships.

Just like other businesses, the aviation sector requires a vast supply chain to operate

efficiently. This study aimed at compiling a feasibility study for Air Australasia by critically

analyzing how they would navigate the establishment of a low cost airline within the

Australian market while satisfying its defined objectives and targets. The study utilized

Benchmarking, the Balanced Scorecard and PEST Analysis techniques. Utilizing such

resources allowed for an in-depth understanding of factors that needed scrutiny so as to

develop the economic rationale for the endeavor, including ways to solve problems and the
regional supply network, logistical facilities, and environmental evaluation.

RECCOMENDATIONS

For Air Australasia to successfully establish and sustain the low-cost airline in the fiercely

competitive aviation market, I recommend the following: Formulate distinct travel routes and

clearly define the targeted customer base Develop a low-cost model that will sustain the low

fares without negatively impacting profitability Create a solid supply network management

system, aiding business activities while minimizing expenses. Purchase fuel-effective aircraft

to cut back on operating expenses, just as the benchmark from Bonza. Utilize innovation to

simplify business operations, enhance client retention, and lower expenses.Do frequent

environmental assessments to verify that CSR activities are being carried out.Maintain an

edge over others by regularly benchmarking with champions in the sector and identifying

efficient ways to boost efficiency in operations.To track success across business objectives

and goals, adopt an integrated balanced scorecard.

REFERENCES

Chapman, R. J. (2011). Simple tools and techniques for enterprise risk management. John

Wiley & Sons

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supply-chain-management/ [Accessed 23 March 2024].

Ho, J. K. K. (2014). Formulation of a systemic PEST analysis for strategic analysis. European

academic research, 2(5), pp. 6478-6492

Monteiro, S., & Ribeiro, V. (2017). The balanced scorecard as a tool for environmental

management: Approaching the business context to the public sector. Management of

Environmental Quality, 28(3), pp. 332-349.

Terziev, V., & Stoyanov, E. (2017). A general principle of the development process of

balanced scorecards as an instrument of control. International E-Journal of Advances in

Social Sciences, 3(8), 563-567.

Tyler, C. (2000). Pleasing the passenger. Airport World, 5(3), 19-22

Wikipedia, 2024. Wikipedia. [Online] Available at: https://en.wikipedia.org/wiki/Low-

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