Delta

Airlines
VIRENDER SINGH US Carrier
PGDM 1st(2010-12)
DOON BUSINESS SCHOOL
Background Information
 Founded – May 30, 1924
 Headquarters: Atlanta, Georgia
 CEO: Bill Ayer
 Employees: 75,000+
 Daily Flights + Partners: 6,795
 Destinations: 461cities in 96 countries
 First passenger flight in 1929 Dallas, Texas to
Jackson, Mississippi
SWOT Analysis
Strengths:
1. 3rd Largest Mega Carrier
2. 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
Competitors Alliances
 American Airlines  Atlantic Southeast
 United Airlines Airlines
 International Airline  Comair, Inc.

companies (min.)  Other Delta

connection carriers
 Skyteam Alliances
 Codeshare partners
Stock Continues To Decline
 

- Lost $446 Million in 2003

FINANCIAL DATA OF DELTA
AIRLINES
YEAR END REVENUE COST (TC) INCOME YIELD
DECEMBER (TR) 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
 Resultingfrom 9/11, war in Iraq, and SARS
 Low-cost carriers stealing market share

 Customer Service
 Poor Morale
Porter’s Buyer’s Bargaining
Current Competitors
Five Power
Ability to secure discount American, United,

Forces fares by advance

purchases and deeply
Northwest, Continental,
Southwest, USAir,
discounted fares America West, Alaska,
available through the ATA, JetBlue, AirTran,
Supplier’s
internet Spirit, Frontier, Others
Bargaining
Power
Labor Union
negotiating power, Delta Airlines
fuel contracts,
travel agent Potential Entrants
commission rate
structure, meal TED, Pinnacle Airlines
Substitute Products
service
Automobiles, railroads,
and buses
Delta’s High Labor Cost
Airline Pilot Wage Comparison

$300
$250
$200
Hourly Wage

$150 Series1
$100
$50
$0
Delta Southwest AirTran JetBlue
Airline
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 Program

Rising 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 Integration
Orbitz & 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
Bonusesbased solely on
performance
Labor Concessions
Proposal:
 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
Technologically Innovative
In-flight Entertainment:
- Seat-back video in all classes
- Pay-per-view movies (AVOD)
- Interactive video games
- Live TV

Telecommunications:
Song employee Stacy Geagan tests a - Server technology; MP3’s
seat-back touch screen.
The airline plans to have live TV, video
- High Speed via satellite
games and music - Wireless Access for laptops
available on all its 36 planes by early
spring.
- In-seat power outlets
 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
 Deltalaunched ‘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 !