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Delta AirlinesUS CarrierVIRENDER SINGH
PGDM 1st(2010-12)
DOON BUSINESS SCHOOL
Background InformationFounded – May 30, 1924Headquarters: Atlanta, GeorgiaCEO: Bill AyerEmployees: 75,000+Daily Flights + Partners: 6,795Destinations: 461cities in 96
countriesFirst passenger flight in 1929
Dallas, Texas to Jackson, Mississippi
SWOT Analysis
Strengths:1. 3rd Largest Mega
Carrier2. Innovative Strategic
Business Moves• Song• Sky Team Alliance• Comair and
Atlantic Southeast Airlines
3. Industry-leading airport model (lobby re-design, self-service kiosks)
SWOT Cont’d
Weaknesses:1. Labor expense (highest in industry, approx. 40% of operating expense)2. Market share, yields, & load factor (all decreased significantly since Sept. 11th)3. Stock price (down 66% since Sept. 2001)
Competitors / Alliances
CompetitorsAmerican
AirlinesUnited AirlinesInternational
Airline companies (min.)
AlliancesAtlantic
Southeast Airlines
Comair, Inc.Other Delta
connection carriers
Skyteam Alliances
Codeshare partners
Stock Continues To Decline
- Lost $446 Million in 2003
FINANCIAL DATA OF DELTA AIRLINES
YEAR END DECEMBER
REVENUE (TR)
COST (TC) INCOME YIELD BEFORE TAX
2001 13879 15743 -1864
2002 13035 15307 -2002
2003 13303 14492 -1189
Main Issues and Problems
Rising Operational Costs Labor Cost Taxes and security fees Rising prices of fuel Labor management mistrust Large Executive Perks
Declining Profits and Market Share Resulting from 9/11, war in Iraq, and SARS Low-cost carriers stealing market share
Customer Service Poor Morale
Porter’s Five Forces
Delta Airlines
Current Competitors
American, United, Northwest, Continental,
Southwest, USAir, America West, Alaska, ATA, JetBlue, AirTran, Spirit, Frontier, Others
Potential Entrants
TED, Pinnacle Airlines
Buyer’s Bargaining Power
Ability to secure discount fares by advance
purchases and deeply discounted fares
available through the internet
Substitute Products
Automobiles, railroads, and buses
Supplier’s Bargaining
Power
Labor Union negotiating power,
fuel contracts, travel agent
commission rate structure, meal
service
Delta’s High Labor Cost
Airline Pilot Wage Comparison
$0
$50
$100
$150
$200
$250
$300
Delta Southwest AirTran JetBlue
Airline
Hou
rly
Wag
e
Series1
Delta solution by Virender Singh Cost Saving Strategy Forward Integration Labor-Management Relations Labor Concessions Increase Customer Loyalty Employee Ownership Culture Technologically Innovative Customer-Centric Some Other Suggestions
Cost Saving Strategy
Fuel Hedging ProgramRising fuel costs, deferred fleet
additions, older less fuel efficient fleet
Operational Improvements Effective flight scheduling,
maximizing crew resources, improving maintenance processes, and reducing aircraft turn-around times.
Forward IntegrationOrbitz & Worldspan (on-line reservations) Delta has partial ownership in both
Discounts: 3-5% discount for purchasing via
internet (e-ticketing) 2% discount for check-in using self
service kiosks Double Sky Miles promotion (6-12
months)Delta saves $25 per e-ticket issued vs. paper
Labor-Management Relations
Investment in employees Training seminars (semi-annually) Specialized job training (40
hours/year)
Executive compromises Cap on executive compensation &
pensions
Bonuses based solely on performance
Labor ConcessionsProposal:
20% wage cut for all pilots No wage increases next 5 years
Incentives: 3% increase above industry (2008-
2013) 3% increase in Profit-sharing
package Signing bonus of 100 shares of
company stock $1,000 Delayed Retirement bonus Two seats on BOD for pilot’s union
(10 currently)
Increase Customer Loyalty:
Delta Needs to Set itself apart…
V.I.P. seating in every row Sensitive to Special
Needs Special seats for obese
travelers Free chocolates & cocktails
Increase Customer Loyalty:
A La Carte Food Service Order from a menu when
booking flights online Collaboration with theme-
restaurant giants such as Hard Rock
Reduce fees & penalties• $100 to change a ticket • $25-80 for overweight bag• $80 for oversized bag• $40 for extra bag
Employee Ownership Culture
Re-institute Profit sharing program 2% of the company's profits
Stock option plan 10% OTC discount for all employees
People take better care of things they own Special care ultimately passed on to the
customer
Song employee Stacy Geagan tests a seat-back touch screen.
The airline plans to have live TV, video games and music
available on all its 36 planes by early spring.
In-flight Entertainment:- Seat-back video in all classes- Pay-per-view movies (AVOD) - Interactive video games - Live TV
Telecommunications:- Server technology; MP3’s- High Speed via satellite- Wireless Access for laptops- In-seat power outlets
Technologically Innovative
Customer-Centric“ZONE" System
Speeds up the boarding process; rather than boarding back rows first, passengers sitting in window seats
board first, followed by the middle seats, then aisle
seats.
Better Gate Displays Convenient kiosk check-in Expanded Concourses
Customer-Centric
More Kid-Friendly: Free headphones, Children’s movies Children’s music station, Free playing
cards Coloring game booklet with crayons
Bring front line employees out more to assist, allowing flyers to get through the lines quicker
Some Other suggestions
Elimination of some use less jobs Elimination of unnecessary costs Adding more flights Work culture be more flexible Need some strong relations with
partners
Delta - Song
Delta launched ‘song’- a new low cost subsidiary as budget – airline. It can be work for delta airlines because they can approach and target the customer those prefer low cost airlines.
THANK YOU !