Case Study Analysis Of Delta Airlines

Background

The airline industry is a capital intensive industry that is required to spread the burden of the high cost rates in the multi million dollar jets and this only be achieved by cutting the ground time in the airport gates and then maximizing the number of flights on a daily basis. In this report, the case study analysis will be made on the Delta Airlines. The detailed business environment of the Delta Airlines will be explained along with its economic characteristics, changing drivers and the competitive situations. In making some of the strategic decisions on the future dimensions some of the economic traits and competitive conditions must be adopted. The qualitative and the analytical tool like the use of the SWOT and the stakeholder theory will help to develop and understand its future trends. In this report the analysis will cover up the maximum features of the market size, the competitive rivalry, the development patterns along with the different types of the distribution channels.

The Delta Airline has its headquarters in Atlanta, Georgia, U.S and is regarded as the second largest airline in the World (Knapp, 2014). The Delta Airline is the one that operates at an international and domestic network and across all the major operations in the continent except for Antarctica. The Delta Airline is regarded as the funding partner for the Sky Team Airline Alliance. The Delta Airline began in 1924 and Huff Duster was the first one that made commercial flying company which was later recognized for its success and value and was finally renamed to Delta Air Services (Chen et al. 2013). With time the organization broadened its services and made a focused vision on its expansion to the different horizons. From 2012, it is evident that the services of Delta are of 572 destinations and in 65 countries and has operated 5766 daily flights and with almost more than 80000 people worldwide (Ritchey et al. 2013). The mission and vision of the CEO of the DELTA airlines is to build an employee driven, customer focused culture and a spirit of innovation  as its foundation towards its success.  He is committed towards putting in the shared values of integrity, honesty, perseverance and respect at the core of almost every decision.  He is more focused  into operating the Delta Airlines as the one to be the most reliable and customer centric and also trying to expand in the global footprint and lastly to become the number one choice in terms of travel for the next generations. The leadership quality of the CEO can be well estimated from his words stating that taking care of his people when asked to sum up his job in five words.

PESTLE Analysis

Political

The political forces will make a deep impact in the business of the airlines. The business span to the different country and to the political and the government environment has made them fall a direct impact on them. Major de regulations of 1978 were the hindrances that has been reduced to barriers before the industry of the airlines. Major governments has partnered themselves with the airlines (Welsh, 2014). Eventually with this help they have eased the regulatory environment that is actually in favor of the Delta

Economic

After 1930 the downturns has affected the business  airlines in a deep way that has been made evident to the business economy class travelers even in case of the slide downs (Luo, 2014). The airline company and the passengers too were forced to cut down the costs. Recessions influenced the rate of the business and their profits in the global economy. These things influenced the rate of the ability of the customers. The rising middle class is beneficial for the business of the Delta airlines and overall the changes were increased for their demands.

Social

The delta airlines almost owns 80,000 people and the generation of the airline industry is an important factor that is behind the popularity of the industry (Kalantzis, 2017). The high demand raising is primarily due to the population increase of the millennial generation. The society that includes the business and the people is benefitted by the network f the fights. Many socio cultural factors affect its industry that has been mutually beneficial between the airline industry and its society.

Technological

In the airline industry, the range of the fuel efficiency varies to its convenience and here technology plays an important part. Better and more fuel efficiency in the aircrafts are much needed at this time. These are of higher demand in the market and with the upgradation of the information technology these will highly help in its growth and prosperity. Technology has added its pace with the lives of the people in booking in checking the availability of the tickets through the use o their cell phones.

Environmental

It cannot be denied that the airline industry is solely responsible for their emissions in the global market by 2%. (Dempsey, 2014) Though the airlines have focused to reduce their emissions and specially their cut down of the CO2emission upto half from 1990. Delta takes this very seriously and has made necessary improvements on it. It has achieved the loyalty of the customers and has grown a larger customer base than its rivals.

Impact of Globalization on Stakeholders

Legislature

Inspite of the deregulation acts there re much flaws in the larger web that affects the airline industry both internationally and domestically. From laws related to the security issues will eventually affect the name of the industry. There were several legal risks to this airline industry but they to do their best in order to remain compliant. Delta signed an agreement with the OSHA in 2017 that is solely to protect the workers and operate the baggage handling vehicles.

Globalization is a blind spot on the stakeholders and this undermines the explanatory power that will be useful to the managers in the global corporations like the Delta Airlines. There is a need to create value for the corporations in the stakeholders that is more sensitive to the globalization. The two challenges that is bought in the stakeholders is the acknowledgment  to its power relations that includes the movements like the sub political, hierarchy and bureaucracy. The second one is the new dimensional responsibility that is the political one in case of the globalization. In other airlines like the Southwest, consists of  many advantages which to  some extent is lacked by the Delta Airlines in this competitive world, which really needs to be coped up fast so that its reputation can be maintained and it does not losses its customers. There are hardly any major drawbacks as the airline itself is the second largest and a brand itself. The financial success has received a free publicity that has helped in building an image that can be used as well as trusted passengers and also focuses on hig volumes from city to city. The former airline has a robust domestic network and is considered the second largest in the US market and as per the data of the CAPA is measured by the deployment of seats. Through its acquisition of AirTran  and  requirement of the slot divestitures, it has been ordered to move forward with its mergers and make the Southwest inroads in the US market of Washington.

The question of Value: Does the resources enable the Delta Airways to exploit the environmental opportunity and  to neutralize the threat to the environment?

The Question of Rarity: Is the Delta airways controlled by a small number of competing firms?

The Question of Imitability: Is the Delta  Airways being resource less will cost it to face a disadvantage in developing or obtaining it?

The Question of Organization: Is the policy and the procedure organized by the Delta Airways needs to support the exploitation that is rare, valuable and costly to be imitated? 

VRIO Analysis

The Porter’s five forces will help to analyze the state of the competition that is found in the industry in a very composite form. From this analysis the goal of the five forces model will be evaluated by putting the position in the industry in a considerable way so that they might face the future in a better way. The threats that are horizontal are a competitive threat that makes the customers switch from a substitute service or product to a new company that might be entering into the market place with share rates that are appropriate. The vertical threat is that which along the supply chain like the suppliers and the buyers can easily gain the bargaining power that can be put forward to the company as a competitive disadvantage.  The Delta Airlines is one of the oldest airline that has made their operations in the US. The sheer size of Delta along with its status as a long time leader in the airline industry has helped them to make an endurance in its continual process. The share of Delta is quite high and its earnings are growing in a substantial rate. the five forces of Porter consist of:

The rate of competition is quite high in the airline industry. Some of the big airlines can fly to places that has the same airport and is about the same prices even. The lack of the amenities and the amenities are to some extent same, no matter what airline you chose. The traditional rivals of Delta include American and United, but these organizations also face a major competition that is from the growing popularity of the value carriers and notably the Southwest but Spirit and JetBlue also prevails. This may be because the people cannot differentiate which air travel he takes and mostly those are threatened by the prospect that might lead to losing the passengers in their level of competition. in a way, the organization manages the threats in the competition that has an extensive market campaign to focus on the awareness of the brand and their long standing reputation.

The buyers are immensely powerful over the airlines not because that they require effort and costs in order to switch from one carrier to another in a minimal way. The raging and emerging popularity of the bookings of the third party, smartphones applications are the issue of the airlines. Delta is such an airline that is not contacted by the travelers when booking their flights. They can easily access it through the apps and the sites that makes them compare the rates of all the carriers that needs to be entered in their trip itineraries and can make the least expensive deal while making them accommodate in their schedules. Delta can easily respond to the forces of the market by making a market research and by offering more flights but at a cheap rate so that the customers may reach to their destination frequently on a third party platform. As a matter of fact, the company is strengthening their relationships with the companies of the credit card holders so that they can strive their best in the offerings towards the best reward programs. The customers must take an oath that will make them switch their carriers so that it may be accumulated that might be set freed in making the miles in a particular airline.

The potential new entrants that can be found in the marketplace represent a comparatively minimal threat to the Delta airlines. The barriers that mostly restrict itself in the airline industry are remarkably high. The cost of the operation is massively high and the regulations of the government will navigate the ones that is numerous and is exceedingly complex. There was none such airline that was founded in the 21^st century that has even recorded to make a market share of 2% (Milne & Kelly, 2014). The JetBlue was founded in 1998 that has made a representation in their new airline that will make a dent in their industry and has a market share that is even less than one third part of Delta.

The suppliers in the airline industry is quite high. The list of the airlines that the suppliers sell to is however very short. The asymmetrical places that has been used for the bargaining power is directly in the hands of the airlines. It cannot be denied that the bargaining power is directly on the hands of the airlines and in case of the Delta airlines it is quite strong. This can be assumed as it is the second largest airline in the global market as per the passengers. It can be stated that from January 2016, the Southwest is already high on its heels. In simple words it can be stated that the suppliers of the Delta organization have a strong incentive that will keep their relationship in good terms. It will not be difficult for the Delta Airline to find a replacement in the supplier only if the desired relationship goes bad. With the help of the contracts, the supplier is likely to find another capable buyer when replacement of the sale volume is concerned as represented by Delta (Scott & Trimarchi, 2017).

In case of the Five Forces Model, the substitute is not only a service or a product that is required to be competent enough that will make them directly with the offerings of the Company that needs to be acted as a substitute for it. Hence, the United flight from New York to Los Angeles is not only the substitute for the Delta flight that has the same starting and end points. For an example the substitutes are those that is required for making the trips either by bus or trains. Unless the trip is very short, no transport apart from the travel from the Los Angeles to Los Vegas, there will actually be no methods for the travel rates that can be worked as a viable substitute for the air travel. For example, from New York to Las Vegas the traveling time is 6.5 hours in flight. Almost the trip takes a time of about 41 hours by land transportation and the train can only get faster but not fastest. The most convenient way to travel for the long distances is the air transportation and Delta face a little threat from their substitutes.

Factor endowments: In the airline industry, the human resources, air space resources, capital, equipment and facilities falls under the endowment factors. There is always a need for support for large finances, as it costs millions. There is also a need for the professionals like the human resources and other technical staffs and hence recruitment is necessary.

Demand conditions: The delta airways has a large number of buyers, amongst which we can find the individual customers who purchase flights directly from the airlines even though there are business to business sales to charter companies.  

Related supporting Industries: The absence or the presence of the supplier industry and other related industries like the airports, navigation information, airports and maintainance of related industries are some of the important works.

Firm Strategy, structure and rivalry: Local conditions affects the strategy of the Delta airlines. These structure and strategy helps to determine the different industries that will make their firm excel. The Delta airlines is based on the hierarchical society. Rivalry can be considered with the Southwest airway that is a major airline and is preferred next to the delta airways.

Government: This can be considered as the important variable that affects the competitiveness of the airline industry. Earlier was not that much owned by the Government and the airlines had the control over the policy and the agreements, but now this has changed. The deregulation act has opened for more entrants into the market and that will make the level of competition more high.

Chance: The demand for the air travel in the Delta airways is slowly rising which has increased the activity level economically within the country. There are chances for the Delta airways to capitulate the market in US.

The SWOT analysis of the Delta Airlines will be explained below:

Strengths

The breakeven point of the airline was achieved. The airline is regarded as the most profitable one that has its history in 2013 and can be used for good momentum. Even in the financial year of 2016, the total revenue that is earned is that of $1.56 billion from the $926 million in 2015 (Mahmud et al. 2017).

Maintaining a good labor relation and loyalty that has contributed to make an increased investor interest and success in the operations. Delta has made around 12000 mainline pilots that has been represented by the association of the pilot, internationally and through the largest pilot group of the Union.

Extra benefits for customers is one of the long term advantage and offering in the Delta Airline. The offerings also include the Wi-Fi services to the on-board and the in-flight passengers along with that the demand in the digital entertainment system that can provide satellite TV, games, songs and movies. The passengers of the first class are made more privileged than the economy class with an addition of the pillows, blankets and free cocktails (Lim & Hong, 2014).

Delta airline is a members of the SKY team that has more privileged customers like the check in counters, extra baggage allowance and the preferred seating are some more that may be added. The expense of the company on the different services has to have a considerable reduction that may be shared by the cargo (Lück, 2017).

The methodology of the Stars is followed that is also operating under the BCG Matrix that includes for example worldwide route systems, their fares and is over a fleet of 800. This also has a partial ownership that is the Orbitz and has made a worldwide span in the websites in purchasing the tickets online and providing offers like a discount of 3-5% and 2% for the check ins through the self service kiosks.

Weakness

The cost of the labor is high and though the Delta airlines is one of cheapest and the easiest services to all the customers, the cost  of the employees is pretty high. Hence this could be the reason why the Delta airlines took so long to become the profitable. The total cost of the employees has incurred almost 36-40% of its experience (Guzman-Bouilloud et al. 2017).

The status of the Delta airline is slowly falling amongst its infrequent travelers. The frequent fliers are those who spends much time on the tickets and Delta has its revenue requirements and also the altered mileage system and finally ended up in hope of getting the airline status. In 2014, the Delta Airline has decided to base the miles of the airlines that will not only be earned by the distance but by the cost of the tickets instead. The requirements were made keeping the customers in mind sot hat they may love to travel in luxury.

The subsidies that are unsuccessful has been made to complete with the Southwest and JetBlue, eventually Delta has tried to get some of the low cost fare schemes. The Delta express was started specially for this and because of its unsuccessful way it was shut down in 2003. It has launched SONG airline that lasted for almost 3 years not only because of its low fare and high cost structure but that which lead to the increase in its debts. Thus its attempt to focus on the core business perished while trying to enter the low fare markets.

Opportunity

The strategic partnership needs an establishment with the airlines like the China Eastern and the Gol Linhas Aereas Inteligentes that is the key to broaden their global network in the Latin America and Asia (Kim,  Liu & Yun, 2016).

The low price of the tickets as per the survey has been conducted by the CNN that will make sure of an 50% increase in the air traffics in the coming years (Boness, Younggren & Frumkin, 2017). Hence, it is a great opportunity for the Delta Airline to increase its revenue, customer base and its market share to low price and competition.

Threats

The fluctuations in the fuel price has been set to remain as the biggest expense in the airline industry which in short term, might expose Delta to the other external fluctuations in the price of the fuels.

The appreciation of the US dollar has made an impact unlike the fliers of the other  countries. It is evident that a strong US dollar might impact the travel from the international destinations that is still suffering from the weakness in the economy. This might effect the people living in US but those living in the Asian and the European countries when flying to USA will be the victim to this dollar appreciation. This can be considered that the rate of impact is high when keeping the good number of the international flights.

The security of the company was affected severely especially from the incidents of the 9/11 that is due to the expenses that is to  maintain their security rise inspite of all the measures and equipment for enhancing their security (Hunter, Batchelor & Dey, 2014).

Global  growth has enabled the airline business with all sizes that needs to be expanded with their operations in the international market (Hunter, Dey & Batchelor, 2016).  It is upto the Delta Company to decide if the  suppliers can offer better value propositions than the competitiveness in the international market. The most striking change in the globalization is its outsource of the labor to the countries like Asia. The rate of the ability to hire those chines workers at the fraction of the cost in the US based workers were allowed to reduce those manufacturing costs greatly. This has made the US based companies like the Delta in investing the resources that is required in the technological department other than the goods that are manufactured. The global finance market has made a capital that allows them easily in the emerging markets. The investors were easily abled to move the capitals into the markets that are slightly unabled like the India (Morrison & de Wit, 2016).

Conclusion

From the above report on the Delta Airlines it can be concluded that the airline is the most renowned one in the global market. The VRIO framework has been analyzed along with the micro and the macro environmental analysis  that will help in better understanding of the Delta airlines. It can be concluded that the Delta airline has become the second largest because of its customer loyalty and its great services. Hence, the various opportunity of this airline is highlighted that will help to overcome the weaknesses, all this by keeping the possible threats in mind.

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