Business Report Qantas Airways
BUSINESS REPORT ON QANTAS AIRLINES Hasblady Leon Ramirez (Sofia) Student No 31278 Class: BAE 10 16th January 2013 TABLE OF CONTENTS EXECUTIVE SUMMARY3 1. INTRODUCTION4 2. QANTAS ETHICAL EVALUATION5 2. 1. Airlines Safety as an Ethical Issue5 3. QANTAS SHARE PRICE EVALUATION6 3. 1. Share Price Definition6 3. 2. Share Price Behavior 20126 3. 3. Share Price History7 4. Recommendation8 REFERENCES9 EXECUTIVE SUMMARY The aim of this report is to evaluate whether Qantas airways is a suitable company for ethical investment.
Firstly, Qantas has currently been incurring in an ethical issue, because it has reduced in almost 50 % its staff in order to obtain better profits, however, the flight safety has been affected due to this maintenance downsizing, also Qantas share price analysis determines that although the stock had a downturn three years ago, it has begun to rise now. However, the result of this report is that, Qantas is not an appropriate company to invest now due to the low share price behavior and maintenance airplane’s issue. 1.
INTRODUCTION The purpose of this report is to evaluate whether Qantas airways is a suitable company for ethical investment. This evaluation is divided in two aspects, ethical investing and share price performance in order to make a recommendation to clients. Currently, companies have begun to make decisions on basis to moral assumptions such as, social consideration, environmental concerns and ethical reporting with the purpose of selecting ethical investment and achieving a competitive financial return (Schwartz 2003, p. 95). According to Michelson, this recent behavior is called ethical investment (Australia and United Kingdom) and socially responsible investment ( United States) and this is a main topic in the financial industry due to the gained importance during the last years (2004, p. 1). Qantas is the largest domestic and international airline that was established in Australia in 1920. Now, Qantas is a business group of customer’s transportation, which is formed by two complementary airline brands (Qantas and Jetstar).
The business group employs 35,700 people and 93% of this amount is based in Australia (Qantas 2012). This report is divided in three main points, firstly, analyzing an ethical issue about safety flight on base of airplanes maintenance. Secondly, evaluating the share price history and how the share price behavior, and finally, it give a recommendation to the shareholders in order to acknowledge the company. 2. QANTAS ETHICAL EVALUATION This report discusses the airline safety in terms of maintenance.
Currently, companies search to increase profits and reduce costs; and a common way is a downsizing in an operational process. Qantas reduce the maintenance staff to obtain a better performance and profits; however it threatens the passenger integrity due to the low performance maintenance into airplanes. 3. 1. Airlines Safety as an Ethical Issue Qantas has reduced “500 engineering jobs in Sydney and Victoria” (Herald Sun 2012, para. 1). In Sydney that happened because the airline believes that, it had an oversupply of line maintenance engineers.
Lyell Strambi, who is Chief Executive of Qantas domestic operations, said that, the cost of its heavy maintenance was more than 30% higher than others airlines, and Qantas needed to close the difference to ensure its “future viability” (Herald Sun 2012, para. 17). The Australian Licensed Aircraft Engineers Associations said that, the airplane maintenance has been affected by changes and reductions of maintenance staff without previous risk analysis (Crikey 2012, para. 2). For example, in a Qantas flight last year was found a ? fatigue crack? n a turbine on the Boeing 747-400 that led to an explosion in the aircraft motor while it was in the air, the aircraft landed safely and all passenger were safe (News. com. au, 2012, para. 2-3). The company is the company is reducing costs towards improving profits and make the company viable in the future; however the decision to reduce maintenance costs and staff have affected flights safety thereby leaving at unnecessary risk to passengers. Finally, Qantas is currently involved in significant safety problems that have directly affected the client? s decision making. 3. QANTAS SHARE PRICE EVALUATION . 2. Share Price Definition The share price and the investment are the methods connected to “neoclassical investment models”, those models study the options that the company has to improve the performance in the future (Andersen, Subbaraman 1996, p. 1). The share price model is to analyze all aspects which cluster information about the future expectations of a company (Andersen, Subbaraman 1996, p. 1). 4. 3. Share Price Behavior 2012 In terms of evaluate the Qantas share price, this report has been made on the base of price variances which are illustrated in the below chart.
It can be analyzed through to the share market behavior and the period of time. Chart No. 1 (Australian Securities exchange 2013) http://www. asx. com. au/asx/research/companyInfo. do? by=asxCode&asxCode=QAN The graph number 1 present Qantas share price behavior over the past year. On the graph, the Y axis indicates the share price in points and the Y axis represents the period of time in months. The graph shows that, since beginnings of 2012 the QAN (Qantas Airways) share price rose slightly in 1. 800 points in March, then in April and May the share price fell slowly in 1. 00 points, after in mid-June, due to the massive downsizing, the share price decreased to reach less than 1000 points, however, in the end of June the price increased rapidly in almost 1. 200. After the events in June, the share price has been slightly increasing over the six last months, and the current price is almost 1. 600 points. 4. 4. Share Price History This section of the report discusses the historical behavior of Qantas share price over the past five years. On the graph, the Y axis indicates the share price in points and the Y axis represents the period of time in years.
Chart No. 2 (Australian Securities exchange 2013) http://www. asx. com. au/asx/research/companyInfo. do? by=asxCode&asxCode=QAN The graph reports that, the top of QAN share price over the last five years was in February 2008, when the price was above 4. 500 points. Then between 2008 and beginnings 2009 the share price was decreasing slowly until 1. 500 points, due to the economic crisis world, which affected the whole world stock market, since 2009 to in late 2010 the price increased and got the maximum in 3. 000 points.
In late 2010, Qantas had its first restructuring and started having maintenance failures and safety, which caused the share price fall during the two years and it dropped by about 1. 000 points, however it is beginning to rise now. 4. Recommendation Qantas is one of the major companies in Australia, and also is an important part of the airline global industry. However, this report suggest that, it is not an appropriate time to invest in this company, because the company is going through financial problems that have generated downsizing maintenance problems incurred in the flight safety.
Shares price also has fallen due to the lack of credibility of the company by the market. Although the share price is rising slowly at the beginning of this year, the security problem continues. In addition, as suggestions, company should organize priority the airplanes maintenance process, in order to ensure aircraft operation and keep safe the people life. Finally, in relation with Qantas share price, it has been fluctuating in the periods where the company has made decisions without measuring risk, such as maintenance downsizing and outsourcing, therefore, company must take into account the future consequences of its aking decisions. REFERENCES Andersen, M, Subbaraman, R, 1996, Share prices and Investment, Economic Analysis Department, Reserve Bank of Australia, December, pp. 1-2. Crikey, 2012, Real issues behind Qantas maintenance job loss claims, [online], Available: http://blogs. crikey. com. au/planetalking/2012/11/08/real-issues-behind-qantas-maintenance-job-loss-claims/, 15 January 2013. Herald Sun, 2012, Bitter blow as Qantas cuts 500 jobs, [online], Available: http://www. heraldsun. com. au/news/victoria/bitter-blow-as-qantas-cuts-500-jobs/story-fn7x8me2-1226361597334, 21 May 2012.
Michelson, G, Wailes, N, Van Der Laan, S, Frost, G, 2004, Ethical Investment Processes And Outcomes, Journal of Business Ethics, vol. 52, no. 1, June, pp. 1-10. News. com. au, 2012, Safety investigator finds cracked blade caused Qantas emergency, [online], Available: http://www. news. com. au/travel/news/fractured-blade-to-blame-for-qantas/story-e6frfq80-1226540282165, 18 December 2012. Qantas Airways, 2012, Our Company, [online], Available: http://www. qantas. com. au/travel/airlines/company/global/en Schwartz, M, 2003, The Ethics of Ethical Investing, Journal of Business Ethics, vol. 43, No. 3, March, pp. 195-213.