To ensure the benefit of everyone concerned in an organisation, corporate governance must be enforced. Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated and controlled (Search Financial Security, 2008). It involves internal factors defined by the officers, stockholders or constitution of a corporation, but also involves external factors such as consumer groups, clients and government regulations. When an organisation has a well-defined and enforced corporate governance, it makes sure the organisation adheres to accepted ethical standards as well as to formal laws. The board of directors at Qantas are responsible for ensuring that Qantas has an appropriate corporate governance structure to ensure the ‘creation, protection and enhancement of shareholder value.’ (QANTAS – Corporate Governance Statement. 2011)
* How has Qantas responded to the carbon footprint?
The newly imposed carbon tax provides a larger incentive for the Qantas Company to reduce their emissions over the long term. In response to their contribution to the carbon footprint, Qantas has implemented a few measures in order to cut back on their carbon emissions. These measures include investing in ‘new technology, phasing out older, less efficient aircraft, reshaping [their] flying network, downsizing [their] growth plans and reducing [their] workforce.’ (Developing a More Sustaining Australian Aviation Industry, 2008). As fuel accounts for ninety-five per-cent of Qantas’ climate change impact, fuel efficiency is also one of the company’s best opportunities to minimise their footprint. One of the most effective ways of improving fuel efficiency is to invest in aircrafts that are proven to be fuel efficient.
The fuel efficiency and lower emissions technology of the new aircrafts will prove to highly contribute to the savings required in order for Qantas to ensure long term sustainability. Other measures have been taken in order to improve fuel efficiency such as reducing aircraft weight, improving flight plans, improving aerodynamic performance and improving schedules. In order to further reduce carbon emissions, Qantas is trying to form a partnership with renewable energy companies in order to invest in Sustainable Aviation Fuel (SAF). SAF is the name given to advanced jet turbine biofuel made from next generation biomass sources including sources such as algae. (Sustainable Aviation Fuel, n.d). Qantas has also implemented a carbon tax surcharge per passenger per flight in order to fund the federal government’s carbon pricing scheme.
* Qantas Airlines vs. Virgin Airlines
In response to the carbon tax both companies have introduced a carbon tax surcharge. Virgin Australia will raise fares by between $1.50 and $6 in response to the carbon tax, a slightly lower surcharge than the one earlier announced by Qantas. (Australian Aviation, 2012). Qantas announced that they will implement a carbon tax surcharge of up to $6.86. As both companies are trying to reduce their carbon emissions, Virgin Airlines, like Qantas have recently introduced more efficient flight planning and aircraft weight reduction.
* Problems associated with the Response
The Qantas group may find themselves facing several problems in the long run when it comes to the newly imposed carbon tax. These problems may include losing customers due to the increase of price per flight for customers, how Qantas will fund the new technology needed to improve fuel efficiency and whether or not the partnership with renewable energy companies will be approved. As the company’s corporate governance is responsible for regulating these problems, Qantas must ensure that their board of directors are well informed of the imposed risks and potential problems.
* Recommendation for Major Problem
In order to fund/manage the newly imposed carbon legislation, Qantas will have to raise the price of their ticket. One of the major problems associated with this is that Qantas risks losing customers over the increase of price. Corporate governance must ensure that the consumer groups travelling with Qantas are still given the opportunity to travel with Qantas. In order to benefit the company and ensure that they still have an increased market share, Qantas should ensure that they often provide ‘specials’ in order to target the budget customers who are travelling. Measures can also be taken to provide consumers with a ‘make Qantas greener’ option, such as allowing them to choose to donate a few extra dollars when they buy their ticket in order to fund the carbon tax. By doing this, Qantas may be able to lower the surcharge they have added to the ticket in order to compete with Virgin, as the extra optional donation from consumers will benefit Qantas. If ticket prices are lower than Virgin, this provides Qantas with a competitive advantage and will allow them to retain a popular market share.
Search Financial Security. (2008). Corporate Governance. Margaret Rouse. Accessed 18th May 2012. http://searchfinancialsecurity.techtarget.com/definition/corporate-governance Qantas – Corporate Governance Statement. (2011). Corporate Governance. Accessed 18th May 2012. http://www.qantas.com.au/travel/airlines/governance-structure/global/en QANTAS. (2008) Developing a More Sustaining Australian Aviation Industry. Accessed 19th May 2012. http://climatechange.gov.au/en/government/submissions/cprs-green-paper/~/media/submissions/greenpaper/0671-qantas-airways.ashx Qantas. (N.D). Sustainable Aviation Fuel. Accessed 19th May 2012. http://www.qantas.com.au/travel/airlines/sustainable-aviation-fuel/global/en Australian Aviation. (2012). Virgin Passes Along Carbon Price. Accessed 20th May 2012. http://australianaviation.com.au/2012/02/virgin-passes-along-carbon-price/