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

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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 !