Scope for competitive advantage within Australian airline industry can be broadly classified as follows.
Service: Apart from fulfilling the basic task of transporting people and their luggage between two or more points, the airline must decide which additional services create value for the customer and add to their bottom line. This is one of the most important factors that create scope for competitive advantage. An airline basically can make use of three business models 1) offering premium service at a full fare, 2) full service at average fares, or 3) low fares with no frills. The service could be varied by its on-board service, baggage handling, ticket and gate operations.
Price policy: The low fare strategy pioneered by Southwest Airlines becomes a generic strategy within airline industry. Deregulation in most major international markets has led to harsh market share driven competition between lost cost entrants and established couriers. This scope is stress after Virgin blue entered the Australian market, Qantas promptly responded by lowering their own fares and thereafter the launching the JetStar.
Cost of Airline Operation: The company can seeks the low-cost position within industry especially for discount airline. By offering fares that are 50-75% below the normal scheduled fares, in order for low-cost carriers to survive, they must maintain a sustainable cost advantage.
This scope is considered a big threat to competitors. However, full-service carriers can also gain an advantage by minimizing costs. Normally, airlines can reduce costs through three channels.
1) lower input costs : By using single aircraft policy to reduce maintaining cost, or using lease aircraft.
2) cheaper product design: Operating single class flight, no on-board service such as free meal or minimum baggage allowance, high density seat, spartan terminal etc.
3) cheaper process design: outsourcing to minimize cost, faster turn around of aircraft.