Introduction Background information During the period ranging from mid 1990s to 1999, the global aviation industry experienced a rapid growth arising from increase in demand for air travel. In addition, there was an increase in Gross Domestic Product ­ (GDP) in most countries.As a result, the industry grew with a margin of 4% to 6% annually. However, this trend was reversed at the beginning of the 21 st century as a result of changes in the international business environment. The airline industry is characterized by a high degree of volatility. As a result, changes in the international business environment have a significant effect in the operation of all firms in this industry. One of the firms that operate with in the airline industry is Qantas Airline Limited. The airline operates within the Australian airline industry. Since its establishment in 1920, the airline has managed to establish a portfolio of businesses which include Qantas Holiday, Qantas Frequent Flyer Program, Qantas Freight, Qantas Catering, Qantas, Engineering, and Qantas Defense services within the industry. The firm serves diverse customer categories that include corporate customers, the government, leisure travelers, wholesalers and travel agents. Some of the contemporary issues facing the firm relate to the recent economic downturn, increase in fuel prices and threat of terrorism. These issues have affected the performance of Qantas Airline in the Australian Stock Exchange. In an effort to understand how these issues have affected the firm, the researcher sought to conduct an in-depth analysis of the issues. Analysis of the contemporary issues Financial crisis In its operation, Qantas Airline faces numerous financial risks which have a potential of creating a problem in the firm’s future cash flows. The financial risks emanate from changes in the global economic environment. For example, the recent global economic recession that originated from failure of the US financial institution affected the operation of the firm in a number of ways. For example, there was a reduction in demand for air travel amongst customer in different categories. During this period, consumers sought alternative means of transport both in the local and international market. Considering the fact that consumers are price sensitive, one of the sectors which pose intense competition to the firm is the low cost airline. According to Gross and Schroder (2007, p.12), low cost carriers are offering less expensive mode of air travel. As a result, most consumers are considering the low cost carriers as the most cost effective mode of air travel. Low cost carriers have a higher cost advantage compared to full service carriers which averages 51% as illustrated by figure 1 in the appendix (Cento, 2009, p.21). The increased adoption of this business model within the airline industry is posing a threat in the survival of traditional airlines such as Qantas Airlines. The low cost carriers operate within the same route as Qantas thus leading into a significant reduction in the firm’s sales revenue hence its profit. During its 2009 financial year, the airline’s profit amounted to &181 million. This is a lesser amount compared to its profit during the 2008 financial year which amounted to $ 1,408 million. This in