Delta Airlines

Srividya Krishna Prasad

Design Strategy

IndexOverview➔ About Delta➔ Client’s Need➔ Initiative for COVID ➔ Analysis from Framework

- 4P- SWOT- Business Model Canvas

Research & Analysis➔ Competitive Matrix➔ PESTLE➔ Predispositions➔ Secondary Research➔ Insights

Design➔ Preliminary design concept➔ Ideal design➔ Triple bottom line➔ Strategic design➔ Strategic Balancing

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Overview1

➔ About Delta➔ Client’s Say➔ Summary of what I know➔ Analysis from Framework

- 4P- SWOT- Business Model Canvas

About Delta➔ Delta Air Lines operates 878 commercial aircraft, making it the second

largest airline fleet in the world.

➔ In the past, Delta purchased or leased older generation aircraft and it flies aircraft for 20–30 years, much longer than most other major airlines.

➔ This makes Delta's one of the oldest fleets of any United States airline, with an average fleet age of 14.9 years.

“We should be prepared for a choppy, sluggish recovery even after the virus is contained, I estimate the recovery

period could take two to three years.”“Ed Bastian, CEO, Delta Airlines

Delta’s Initiatives for COVID➔ To align capacity with expected demand, Delta is reducing system capacity by

15 points versus its plan, with international capacity reduced by 20-25 percent, and domestic capacity reduced by 10-15 percent.

➔ Parking aircraft, and evaluating early retirements of older aircraft

➔ Delta also made cash flow decisions by deferring their capital expenditure, voluntary pension funding and share repurchases.

➔ In addition, the recent fuel price decline provides approximately $2 billion of full-year expense benefit.

Analysis Framework - 4PProduct.Delta Air Lines provides scheduled air transportation and cargo services for general passengers, professionals and commercial customers.

Price.The airline, known for customer care and luxury, has maintained its upper middle class and business travel customer base. While many airlines continue to cut costs to compete with emerging low-cost airlines, Delta is continuing the serve the upper-class market where it thrives.

Place.The company is headquartered and has its largest hub at Hartsfield-Jackson Atlanta International Airport in Atlanta, Georgia. Delta offers more than 13,000 daily flights, with 326 destinations in 59 countries.

Promotion.Operates a website at www.delta.com, which provides information on the Company’s services, schedule, destinations and regulations. The company also operates a direct sales team, which can arrange bookings over the phone.

Operates its own kiosks across numerous airports worldwide, through which customers are able to access assistance.

Analysis Framework - SWOT

➔ Strategic merger of Northwest Airlines➔ Strong Brand Equity and brand presence➔ Strong hub in Atlanta➔ It has near about 5000 flights every day➔ Has a strong employee force of over 75,000 people

A fleet size of over 700 caters to 250+ destinations

Strength

➔ Buy more aircrafts under the current market➔ Leverage on SkyMiles, Delta is the only airlines to

have no expiration date of the extra miles offered➔ Capitalize on growing market for aircraft

maintenance, repair, and overhaul (MRO)➔ Delta is well positioned to capitalize on growing US

regional airline industry

Opportunity

➔ Overdependence on the North American market➔ High debt obligations causing financial issues

Weakness

➔ Intense Competition➔ Reputation damage as Delta was rated worst airline

by USNews.com➔ Raise in fuel prices

Threats

Key partner Key activities

Key Resources

Value proposition Customer relationship

Channels

Customer segments

Cost structure Revenue Streams

.

- Fleet of aircraft, - Ground facilities, - Oil refinery assets- Sales channels

. - Passengers- Cargo- Other - aircraft maintenance, staffing etc.,

- Operates a website- Operates a direct sales team - operates its own kiosks

. While many airlines continue to cut costs to compete with emerging low-cost airlines, Delta is continuing the serve the upper-class market where it thrives.

Being one of the 3 major US carriers, Delta's diverse fleet combined with their extensive reach in the domestic and international markets provide customers with premium end to end connectivity between major business hubs and tier two cities alike.

.

Code sharing partners, Company is able to extend its own services, selling connecting flights for airlines such as Alaska Airlines and WestJet through its own sales channels

Joint Venture Partners, with which the Company provides joint services, such as its deals with Air France - KLM - Alitalia, and Virgin Atlantic;

Dedicated Assistance

Incurs costs in relation to the acquisition and maintenance of its aircraft, the purchase and supply of consumables – in particular jet fuel, the operation and maintenance of its oil refining assets, its implementation of sales and marketing programs, the maintenance of its physical infrastructure and ground support facilities.

- Air transportation- Cargo services- Refinery : Production of jet fuel, gasoline and diesel.

Research2

➔ Competitive Matrix➔ Secondary Research➔ Insights

Southwest Airlines American Airlines United Airlines Delta

Segment Customers preferring comfort/punctuality

Customers preferring comfort/punctuality

Business / Leisure travelers / Luxury seekers

Passengers preferring reliability, safety and comfort

Target Group Price sensitive customer Middle class/Upper middle class

Upper middle class / HNIs Frequent Business travelers, Middle class/Upper middle class

Positioning Low cost American airline Premium American Airlines

Premium airline with high quality of service

Passenger Airline

USP Largest low cost carrier in United States

Excellent quality of onboard entertainment

Largest airline holding company in the world

World's Largest and America's oldest operating Airline

Routes Domestic only and International is limited to north american continent

Domestic and International

Domestic and International (only europe)

Domestic only and International is limited to north american continent and Europe

Competitive Matrix

PESTLE

➔ The company operates under the laws of the United States of America.

➔ Since Delta Air Lines is operating in hundreds of countries, they also have to adhere to all the laws and policies of those countries.

➔ Tax regulations and laws concerning business, operating conditions and pollution change all the time.

➔ Not all governments run the same as the United States and many have different sets of laws and taxes that businesses from around the world have to respect.

➔ By being aware of these international laws and tax regulations the company will be able avoid potential lawsuits and disputes run operations smoothly.

Political.

PESTLE

➔ Economic conditions will determine how much consumers are willing to spend depending on the current situations that are happening in the various regions.

➔ Association survey found 40% of recent travelers anticipated waiting at least six months after the virus is contained before flying again.

➔ This decreases the demand for air travel and consumers will try to use their own means of transport.

➔ The fuel price have drastically reduced giving Delta an advantage. ➔ As the economy slowly improves, consumers will have more money to spend

on vacations and leisure travel. ➔ Other economic factors that Delta Air Lines needs to be on top of include the

interest rates, exchange rates and expected inflation that the company will face operating in different regions around the world.

Economic.

PESTLE

➔ The entire society including businesses and people are benefited by the wide network of flights globally.

➔ Airliners face threats from wars, political instability and social unrest.

➔ Due to COVID 19, there is a social unrest all over the world. This led many consumers to cancel and develop a fear of traveling on planes.

➔ The consumer’s paranoia led to decreased revenue across the board for Delta airlines

Social.

PESTLE

➔ Delta Airlines has a well documented history of utilizing technology from the use of mainframe computers, early adoption of jet aircraft, and integrating Northwest’s and Delta’s online websites and booking system.

➔ Moreover, the use of mobile devices has grown across the world. Delta has always been steps ahead with using technology to accommodate the consumer experience when flying with their company.

➔ Passengers were able to use the Internet to book, change, cancel their flights with the click of a button

➔ Technology has added pace to people’s lives who can check and book tickets using their cell-phones.

Technological.

PESTLE

➔ The airlines industry is responsible for around 2% of the entire emissions globally.

➔ Sustainability is an important concern for the airlines companies just like the other businesses across the world.

➔ Delta also takes its environmental responsibility seriously and has made improvements across its operations both on the ground and in the air.

➔ Delta has started several initiatives across its operations to cut down on its CO2 emissions.

➔ Delta has managed their environmental impact better by achieving higher customer loyalty and also grown a larger customer base compared to competitors

➔ Delta has invested in environmental initiatives.

Environmental.

PESTLE

➔ There are several legal risks and the airlines have to do their best to remain compliant. In 2017, Delta signed a settlement agreement to protect workers that operate baggage handling vehicles.

➔ These settlement agreements are highly effective tools used to ensure that the Delta is addressing the hazards that could kill the workers.

Legal.

Predisposition➔ The coronavirus pandemic is ushering in a new era of air travel : Higher fares,

fewer routes, preflight health checks and less free food.➔ Since air travel is going to have higher fares, people will start looking for lower

cost transportation services. ➔ Delta Air Lines wants to reach and cater to consumers that were in the business

class passenger segment. ➔ By only aiming marketing at business class passengers, Delta had the

opportunity to cater leisure passengers➔ Delta has oldest fleets of any United States airline, with an average fleet age of

14.9 years, this means that they do not replace the aircraft very often.➔ Since the aircraft is not replaced on a regular basis, Delta spends more towards

fuel compared to other operators.➔ Cheap flights can be found for now as airlines compete for a handful of

passengers

Secondary Research➔ Airlines have been slashing seat capacity by more than 70% since January,

according to analytics firm Cirium.

➔ There’s no knowing when people will be willing to pack into enclosed cabin spaces again, though an International Air Transport. Association survey found 40% of recent travelers anticipated waiting at least six months after the virus is contained before flying again.

➔ Configurations are likely to change as carriers try to squeeze more money from customers. Some will upgrade premium cabins while their fleets are grounded, resulting in an even starker difference between higher-class sections and ever more spartan economy seating.

➔ The virus has led to a ballooning of remote video-conferencing, which could prompt a reassessment of the need to fly at all, according to UBS Group AG.

InsightsA seismic shift is underway.

People are anticipating to wait for at least six months after the virus is contained before flying again.

Cabins Post-Fever

Configurations are likely to change : Airlines will upgrade premium cabins while their fleets are grounded.

Most operators plans to retire aircraft.

Delta Air Lines management thinks the carrier has more aircraft than it needs for the recovery from the novel coronavirus pandemic

Time consuming health check-ups

Travelers are going to be subject to tests like temperature checks, or they may even need health certificates to fly.

Ballooning of remote video-conferencing

The virus has led to prompt of re-assessing the need of flying at the first place.

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Delta Air Lines generates their main source of revenue through scheduled air transportation and cargo services for general passengers, professionals and commercial customers.

4Main source of revenue

Design3

➔ Preliminary design concept➔ Ideal design➔ Strategic considerations➔ Strategic design➔ Triple bottom line

Preliminary Concepts

Purchase more aircrafts

Since Delta's one of the oldest fleets of any United States airline, it is the right time time to buy more aircraft as there are available at lower rates.

Provide more cargo services

Since passenger demand is going to take time to pick up, Delta could consider converting the flights into cargo planes with long range capacity ( which can target Asia) under current circumstance.

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Converting to Economic Configuration

Convert the existing transatlantic routes to all economy configuration and fill in the low cost void that was created by the Norwegian air going under

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Ideal Design

To overcome seismic shift

Since people are anticipating to wait for at least six months after the virus is contained it would be good to plan towards keeping the middle seats empty, at least initially, to reassure customers about personal spacing. The cabin crew can have goggles, masks, gloves and protective gowns.

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Purchase more aircrafts

Since Delta's one of the oldest fleets of any United States airline, it is the right time time to buy more aircraft as there are available at lower rates.

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Triple Bottom Line

People Profit Planet

By providing personal space to passengers and preventive measures for the employees would build a positive emotion for people with respect to air travel. This enables people to feel safer until the paranoia fades away. Further purchasing more aircrafts would lead to increase in jobs which would be a great addition to the current situation.

By buying new aircrafts, Delta will be able to build a fleet that are 25% more sustainable than the existing fleet by using state-of-the-art A220

Cutting down the air fares to expand the customer segment will provide an additional source of revenue and Delta will be able to compete with budget friendly airlines and would have competitive advantage over the existing competitors.

Strategic Design GoalExpanding the Cargo ServicesSince passenger demand is going to take time to pick up, Delta could convert the flights into cargo planes with long range capacity (which can target Asia) under current circumstance.

How will this work?

Retaining older aircrafts

The purpose of buying newer aircrafts is to save fuel consumption. Since the fuel prices are already low, Delta airlines can retain the existing aircrafts.

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Converting passenger aircrafts to Cargo Carriers

The purpose of buying newer aircrafts is to save fuel consumption. Since the fuel prices are already low, Delta airlines can retain the existing aircrafts.

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Provide cargo services domestically and internationally

This would serve as a source of revenue until general passengers start their leisure travels.

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So, how does it help?

➔ It creates a source of revenue for Delta to survive until general passengers are back to leisure/business air travel.

➔ Retaining older aircrafts saves money for Delta Airlines as they do not have to invest in huge amount to purchase newer aircraft.

➔ Since the fuel price is low and that is the most expensive resource when it comes to aircraft’s expenditure, Delta will be able to save some money.

Strategic Design GoalEconomic ConfigurationSince Delta Airlines has already grounded more than 25% of their aircrafts that belong to international routes, they can convert the existing transatlantic routes to economic configuration.

How will this work?

Business Class

The current transatlantic routes are mostly configured for upper middle class or business class passengers.

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Economic Class

The transatlantic could be converted into Economic configurations

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Inclusive of widespread customersegment

Being inclusive generates more passengers for Delta Airlines.

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So, how does it help?

➔ Since Delta’s customer segments are business and upper middle class travelers, having an economic configuration would generate more revenue by increasing the passengers.

➔ Norwegian air is one of the economic carrier and under the current situation Delta will have a competitive advantage.

Strategic Balancing➔ Even though it is a great time for Delta to upgrade or purchase new aircraft due to the recent

price drop, it is essential to consider the situation for next few months ( about 6 months). People are paranoid to travel for at least about 6 months after the virus is contained.

➔ Considering passenger’s paranoia, even though Delta purchases new fleet, it will be unable to generate revenue through passengers.

➔ Hence, a more strategic way would be to take advantage of the price drop in jet fuel. As jet fuel is the most expensive resource for an aircraft, it would be better to run the existing aircrafts and save money spent on fuel.

➔ Adding to passengers paranoia, a more strategic way to continue the revenue flow would be through running cargo services. As it is hard to predict the outcome while the crisis is unfolding, running the cargo services would be a safe bet to generate revenue.

➔ Since Delta has already grounded their planes, it is the best time to convert them into economic configuration and strategically take advantage of the transatlantic route.

Thank You!

Srividya Krishna Prasad

I loved designing the strategy!