BACKGROUND Delta Airlines is an innovative, creative company and a well-established and respected airline.

It is also the oldest and largest air passenger carrier in the world as at September 2009, after acquiring NorthWest Airlines. Since its inception in 1928 Delta has built a reputation of offering consistent superior customer service to its passengers. For four decades, Delta held the reputation of being the most consistently profitable airline, however with the US Federal Airline Deregulation Act of 1978, coupled with the recession of early 1980s saw the Airline suffering its first financial loss in the early 1980s. The company however managed to turn the defeat around and was again profitable well into the 1990s. Delta constantly faced challenges - economic downturns, competition from low cost carriers (domestic) and other international airlines competing for US international travellers. By the time Delta entered the 21st century it was faced with new challenges; such as the crippling of the airline industry in 2001 - a direct result of the terrorist attacks of September 11th, the constantly rising fuel prices, and the economic downturn in 2009. Delta eventually filed for bankruptcy in 2005, when it was no longer able to meet its financial obligations. Industry analysts typify the airline industry as unattractive, unstable and cyclical in nature. Delta operates in an intensely competitive environment, which is still struggling to recover from the most recent recession. Efforts to compete with low cost carriers have not met with expectations. A pioneer of the hub and spoke model which it uses to map its destinations, Delta’s competitive edge is being the airline of choice for international travel. Through strategic alliances with other international and domestic airlines, Delta offers more options to travellers in choosing airlines to take them to their destinations. Currently Delta airline flies to over 60 countries and is the only airline to fly to all six [fully populated] continents. The challenges facing Delta have significantly impacted the organization’s financial stability. Despite the many financial obstacles, Delta’s cash flow has remained positive. While it is on the road to recovery, the company must find creative ways to stimulate growth in a struggling airline industry [and by extension the economy] if it is to maintain strong financial health, and remain viable.
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HISTORY In 1928 C. E. Woolman and a group of investors from Monroe, Louisiana developed a passion for passenger air travel. Formerly Huff Deland Dusters an aerial Crop Dusting Company, Woolman purchased the Crop Dusting Company and renamed it Delta Air Services. In 1934 the company was awarded a mail contract from the US Post Office, and Delta flew its first passengers on August 5, 1934 from Atlanta to Dallas. The company ‘took off’ and in 1941 relocated its head office from Louisiana to Atlanta in order to access the facilities of the city and the Atlanta Airport as well as to tap into the growing market of business travellers. The company began expanding, overtime acquiring struggling Airlines like Chicago and Southern Airways in 1953 and Northeastern Airlines 1972, thus adding more routes. Delta’s growth continued well into the late 1970s; by 1978 the company ranked 5th in the industry transporting some 3.3 million passengers, earning revenues of approximately US$2 billion dollars. However the Federal Airlines Deregulations Act of 1978 had a game changing impact on the Airlines industry, especially legacy carriers like Delta. This era saw the emergence of new Low Cost Carriers (LCC), resulting in a more competitive environment. The company continued on its growth path and in 1990 Delta held the no. 3 position, moving 67.2 million passengers with total revenue earnings of US$8.5 billion. When Pan Am folded in 1991, Delta assumed ownership of the once iconic air line acquiring routes in the Central America and the Caribbean regions. Delta was now transformed from a regional carrier to a competitive Global carrier. The results were also evident in its profit margins, which ultimately earned the company a reputation as the most consistently profitable one in the industry. Delta also earned the reputation of the best paying airline in the industry. Delta’s employee rewards system resulted in a motivated and dedicated workforce and a high staff retention rate. Notwithstanding, Delta Airlines had its share of challenges over the years. The problems of the late 1980s and early 1990s – the recession, rising fuel prices and the war in the Middle East severely affected the airline industry. Although the airline industry at that time was described as unstable and unpredictable, the early 1990s saw the emergence of smaller low cost airlines, expanding the airline industry, and resulting in an intensely competitive environment. In 1996, Delta Express was launched to compete against these airlines. A financial failure, Delta Express
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the Middle East. Areomexico. as all the major airlines suffered huge financial losses. Its purchase of Northwest Airlines in 2008 has resulted in a more favourable financial position. telephone interview October 25. All agreements have since been rescinded. as the Airline recuperates from its financial demise. the Caribbean and Australia. 1997 Delta and Air Jamaica signed a letter of intent to pursue cooperation in marketing and other services. promoted through the ranks. Five persons are stationed at the Montego Bay Sangster’s International Airport– three in the areas of passenger service. and two in marketing. To date SkyTeam is the second largest air alliance in the world and have 13 members and growing. Africa. Asia. 3 . in markets in North America. Delta’s strong employee relations. Richard Anderson. are the pillars on which Delta Air Lines Incorporated grew and developed. Europe. The terrorist attacks of September 2001 affected the already struggling US Airline industry. focusing on its core business (air-transportation). and Korean Air. which has also been divested. the current CEO was however recruited from United Health Group having had previous experience with Continental Airlines and Northwest Airlines. South America. Currently Delta Airlines operates an extensive domestic and international air carrier serving over 160 million persons each year. including a codesharing agreement (Air Jamaica. Delta in Jamaica Delta directly employs six persons in Jamaica. Harold. 1997). it returned to having a positive cash flow.operated until 2003 when it was divested and replaced by Song. its commitment to providing superior service and employing prudent financial strategies. Additional staff is provided on a needs basis by AJAS. Over the years Delta’s CEOs have been ‘home grown’. Delta formed a global airline alliance called SkyTeam with Air France. a unique low-cost subsidiary airline. 2010). Delta operates up to 10 flights daily from the Sangster’s International airport. In 2001. Delta operated under bankruptcy provisions for two years (2005 – 2007). During this period. and one from Norman Manley International Airport (D. On June 30. One individual in the area of passenger service is stationed at the Norman Manley International Airport (Kingston).

SkyTeam. U. The Atlanta company has had few labor problems compared with most major airlines — the last strike was a mechanic's walkout in 1947. Entrepreurial Orientation: Joining with other major airlines in the industry to form a global alliance called. a study was conducted by Harris Interactive of airline reputations. the world’s second largest airline alliance that provides flights and easy connections for their customers. the Airline Reputation Quotient (RQ) study rated domestic and foreign airlines on issues ranging from safety and trust to customer service and food.3% from a year earlier. Within this decade. airlines reduced overall workforce 2. Department of Transportation. Delta was graded with an RQ of 70. or systems. the world's largest Airline and Airport review site ranks Delta a 3 star airline. The award recognizes government and airline industry employees who work together to advance the inspection and testing of aircraft structure. They are a founding member of Skyteam. The 3 Star ranking signifies a "satisfactory" standard of core product across most travel categories.S.S. Delta was the recipient of the "Better Way" award offered by the Air Transport Association (ATA) in association with the Federal Aviation Administration (FAA). according to the U.000 consumers. bettered only by one airline in the United States and nine airlines worldwide (Hucko 2000). Geographical Coverage: Delta is the only US airline that flies to all continents.COMPETITIVE ANALYSIS SWOT ANALYSIS OF DELTA Strengths Reputation: SkyTrax. components. By measuring the attitudes of over 20. In July 2010. The SkyTeam alliance results in cost savings by sharing cargo and 4 . Workforce: In September 2009. Delta was the only airline of seven network carriers to increase its staff complement (4). excluding Antartica.

5 . but still have a significant debt to contend with.D. slipping from third. (Threat) • Passenger laws: Proposed laws to penalize airlines who bump passengers. smartphones and PDAs. This will change the way Delta relates to its staff. one of only a few. p. Weakness Customer Satisfaction: Delta has been consistently slipping in customer satisfaction ratings. Innovation effectiveness: Delta contionuously incorporates and upgrades technology to enhance customer experience. For the past 2 years. Opportunities & Threats Political and Legal environment: • Airline union rules: Unions can now be certified if they win a majority of votes cast. Gogo. They have some of the highest fares in the US airline industry. Delta is currently a nonunionized airline. integrating frequent-flyer programs. The recent merger with NorthWest airlines has not helped. For example. as NorthWest had significantly low customer service ratings (Yamanouchi 2010). JetBlue and Spirit Airlines. Pricing: Delta’s pricing structure has struggled against low cost carriers such as SouthWest. to allow passengers to cancel or change reservations within 24 hours without a charge. combining information technologies. 2003. in 2008 Delta installed the Aircell mobile broadband network.passenger terminal facilities. to access the Internet. having $20. of up to $8. In the J. This enabled their customers traveling with Wi-Fi enabled devices. such as laptops. Power and Associates 2010 North America Airline Satisfaction Study. they could only be certified if they won the votes of the majority of workers.9 billion. Before.5 billion in debt. Also. consolidating sales. and engaging in joint procurement where feasible (Corridore. Delta was ranked 4th of 7 traditional airlines. Financial Stability: Delta filed for bankruptcy protection in 2005. 7). maintenance and administrative operation. Delta has been operating at a loss. They have since exited bankruptcy.

This allowed Delta to be the first U. (Opportunity) 6 . with a premium on safety. Also allows them to offer flat seat bed and on demand digital experience (Delta 2010). Their economies and demographic developments are realized by air travel. prices are expected to rise slowly in 2011 as global economic growth leads to higher global oil demand. • Customer Awareness: Public has increased the use of the internet to shop around. airline to provide onboard Wi-Fi for domestic mainline fleet. India & China). anticipation a profit of $8. (Opportunity) • Recovery from the recession: The International Air Transport Association (IATA) has tripled its projections for 2010. mainly BRIC nations (Brazil. (Threat) Fuel Pricing: The Obama administration is proposing laws to develop a consistent fuel pricing mechanism (Hunt 2010). low cost airlines have gained in popularity. (Opportunity) Economic environment: • Emerging Markets: Markets in emerging economies. (Opportunity) • Oil Price Volatility: While oil prices over the past two years have not reached the dizzying $147 per gallon heights of 2007.Airlines would have to refund baggage fees if the passenger arrived without luggage. (Threat) • • Deregulation: Allows easy entry of competitors into the airline industry.5 billion (ZIR 2010).S. (Threat) Social and Cultural environment: • Public acceptance of low fare concept: With a reduction in disposable income worldwide. (Threat). (Opportunity) Technological environment: • Emerging technologies.9 billion up from $2. are expected to sustain growth over the next 20 years. Russia.

headed by American Airlines. Boeing and Airbus. (Threat) • Other Legacy Carriers: Traditional airlines constantly seek to improve. buses and railroads. LCCs offers stripped down. is an increasingly popular travel option. (Opportunity) Competitive: • Short haul travel: On short routes (less than 600 miles). are developing 787 and A380 airplanes that run on fuel from algae and other bio fuel sources (Hamilton 2007). with the 1978 deregulation of the industry and access to bank loans allowing for easy entry. This. it has remained very ‘hot’ with numerous startup airlines emerging worldwide. Spirit among others. in recent years. in an already competitive field. Delta competes not only with other airlines. but automobiles. Porters Five Forces New entrants in the industry: This is a strong possibility in the industry. the interest being to get the traveller from point A to point B. Even with the current weak state of the airline industry. merge or join airline alliances. (Opportunity) Natural environment: • Alternative energy sources: Airlines are castigated for their contribution to global warming. no frills travel. (Threat) • Low Cost Carriers (LCC): LCCs enjoyed huge cost advantages over legacy carriers like Delta. This is the model used by SouthWest.• Unducted Fan driven aircraft: Aircraft technology being touted to result in planes vastly improved in fuel effieciency. Deltas main fleet suppliers. 7 . despite data suggesting they contribute just 2%-3% of Carbon Dioxide emission worldwide. Chief amongst these are the One World alliance airlines. Jet Blue. Nevertheless. Reduction in disposable income made more persons opt for longer but cheaper travel.

In 1996. allows for staffing flexibility. Its employee model. and replaced by Delta Song. Delta has continued to be innovative in its efforts to halt the slide in its customer satisfaction ratings. Delta had been innovative in its approach. Competitive Rivaly: This is very strong amongst airlines. Bargaining power of suppliers: Only two companies. Options to purchase tickets on the airlines website or in advance can result in lower prices. and markets everywhere. supply aircrafts to Delta and most of the other airlines. Delta introduced Delta Express on the low cost model. There is hardly any segmentation in the airline industry. Bargaining power of customers: This is surprisingly weak. Boeing and Airbus. There are no real substitutes for planes in international travel. Only airlines that can adapt and change will survive in the airline industry. private motor vehicles and trains offer a low cost alternative to flying. which helps to keep staff motivated.Threat of Substitutes: Only a threat on the domestic front. Buses. While Delta has been making a loss. With the power of the prospects. a direct competitor to JetBlue and SouthWest. Delta over the years has attempted to meet the advent of the LCC head on. Delta is known to be one of the highest paying airlines. Most airlines use the same model planes. This has resulted in airlines cutting fares to remain competitive. This offshoot was abandoned in 2003. wherein their reviews have a wide reach. whereby only its pilots are unionized. but there is no sign of collusion between the actors. This suggests that the company is on its way to profitability. The industry is marked by intense competition. The flat seat bed and the development of the world's most sophisticated single-aisle in-flight entertainment system. The tradeoff is the time to travel. The high costs of switching from one airline to another makes this not a popular option. It is virtually unmatched in the number of gates it flies to worldwide. represents efforts to put smiles on their customers faces. Delta’s cash flow has been positive for the past two years. Song folded after three 8 . The low cost carriers go after everyone. the loss is attributable to debt repayment. This is an oligopoly. Delta is achieving a competitive advantage in terms of its reach.

Delta is turning those threats into opportunities. 9 . The LCCs are Deltas biggest threat and highlights a major weakness. None of the attempts at a low fare subsidiary was financially successful.years. rather than contribute to Delta’s success and reputation. it served to detract from. Delta continues to spend time and money in researching the low cost market to find the right fit for the company. By including features that an LCC cannot match on their flights and continuing to find ways in successfully re-enter that industry space. Indeed.

they asserted that the new company would take on the Delta name. We intend to be an even greater company and will focus our time. and hospitality from the heart. a superior return for investors and challenging and rewarding work for Delta people in an environment that respects and values their contributions.CORPORATE LEVEL STRATEGY – The Marketing Plan The Delta Mission Statement: Since the founding of Delta Air Lines. One reason is the strength of the Delta brand that sets it apart in the industry. Delta has persevered. When United and US Airway attempted aggressive takeovers. Delta employs a four pronged corporate strategy: 1. Delta has the widest gate span of any airline. We are a leader in a business we know best-airline transportation. Through acquisitions and mergers. which served to water down the Delta name. starting in the 1950s. We will provide value and distinctive products to our customers. Delta branded its low cost carrier Song in order to protect the equity of its brand (Kotler. 257). It was also one of the conditionalites of the NorthWest merger. Additionally. have seen Delta’s fleet capacity superior to all. Western Airlines in 1987 and in 2008 with NorthWest. Customer Satisfaction and Rewards 3. Marketing and Promotion Differentiation: Despite the negative publicity generated by falling into bankruptcy. and investment on building that leadership. our company has stood for safe and reliable air transportation. attention. We are dedicated to being the best airline in the eyes of our customers. Employee Retention and Rewards 4. p. and Keller. This is primarily built on its extensive flight service. as it did not want to associate the name Delta with the entity in the event that it failed. Maintaining the integrity of the Delta brand was a part of the reason for divesting the Delta Express and Song brands. distinctive customer service. Differentiation 2. Our vision is for Delta to build on its traditions and always to meet our customers' expectations while taking service to even higher levels of excellence.2009. Merging with Chicago Airlines and Southern Air Lines in 1953. 10 .

NorthWest Airlines was consistently low in customer satisfaction.Delta’s purchase of virtually all of Pan Am transatlantic flight in 1991 ensured that for over twenty years.000 members of staff. Pilots are the only unionized group. Delta’s staff is among the most loyal anywhere. baggage handling and cancelled flights as part of its turnaround plan. and mounted a ‘Save our Delta’ campaign. They represent 17% of Deltas more than 75. Delta was again recognized in three categories: Best Frequent Flyer Program. Employee Retention and Rewards: The airline industry is highly labor-intensive. 11 . As a result. Delta has a very strong claim to being the world’s foremost global airline. During the period of bankruptcy. The airline is looking to become one of the top three ranked airlines for customer service. The company strives towards providing job security and a “promote from within” policy. and this affected Delta ratings immediately after the 2008 merger. on-time performance. A part of Deltas strategy has always been to offer fantastic benefits. voted to reject overtures from the Association of Flight Attendants (AFA). Best Airport Lounges and Best Airline Web Site. they presented the company a brand new Boeing 767. including health benefits. In 1982. Indeed. and it is vital for Delta to keep its workforce motivated and satisfied. Delta has since been able to get back to ratings it enjoyed prior to the merger. named ‘The Spirit of Delta’. This prompted the AFA to unsuccessfully charge Delta with ‘harassment and intimidation’. Compensation and benefits to all categories of workers have always been top of the industry. The foundation of Delta's differentiation is its customer service throughout the travel experience. Its reward programs are amongst the best in the industry. 401(k) plans and free travel. In the "Best of Business Travel Awards" from Business Traveler Magazine (January 2008). premium in-flight offerings and rewards programs for frequent flyers. Delta staff in 2008. Customer Satisfaction and Rewards (The Product): Delta is committed to keeping its customers happy by finding innovative ways to enhance their flying experience. Delta team members took a voluntary pay reduction.

Again. dangerous goods and high value firearms. This segment commands higher prices. It provides specialty cargo product services . This segment produces very low yields for the industry and is very seasonal. flying cargo to 64 countries across six continents. pop-sites like YouTube and other internet medium to press home the Delta message and channel users to its Delta. The airline is aware that today’s digital travellers must be reached through different avenues than the traditional TV and billboard advertising. InsideFlyer magazine honored Delta Air for "helping to start and shape the world of loyalty programs throughout the past 25 years. 1 airline.com website. the business travelers. They have minimized the traditional marketing media. Each segment is unique in terms of its requirements. as it is very price sensitive. Through its SkyTeam association.Target markets and Pricing: Delta attempts to provide services to significant parts of the freight. Delta is currently the world’s No. Delta’s business customers has access to 15. Delta itself already flies to more gates than any other airline in the world. 12 . perishables. was recognized for excellence among frequent travel programs and received The Freddie Award. The leisure market is the weakest link in the Delta marketing chain.089 daily flights to 791 destinations worldwide in 162 countries. Delta’s pricing mechanism is even higher than most legacy airlines. For its Freight segment. Delta utilizes various social networking sites. and its growth potential is the best of all segments. Promotions: Delta has been very intuitive in how it carries out its promotions. It has re-engineered its containers to ‘envirotainers’. The business segment requires high flight frequency.live animal. high seat accessibility and a vast gate network and interconnectivity. the second largest air alliance in the world. A key part of Deltas marketing strategy is its Frequent Flyer Program." This is a big hit with Delta’s primary customer base. Their program. Delta’s pricing are at the high end of the industry. human remains. one reason why it is so susceptible to the LCCs. Delta recognizes however that this is potentially the largest segment of the total airline market. It has been recognized as one of the industry’s best. business and leisure segments. SkyMiles.Marketing and Promotion: Marketing Strategy . such as Facebook.

travel agencies and tour companies.Through their various slogans throughout the years. Harold 2010) 13 . Delta has reached out to travellers with a personal touch: • • • • • Much more space (advertising of Delta business class leg room) Delta gets you there You'll love the way we fly Delta is ready when you are Delta is my airline In Jamaica and other smaller markets. marketing takes place through collaborative marketing with hotels. (D. They seek creative ways to package room and flight deals with partners in the travel industry.

to achieve optimal financial results. In order to determine its position in relation to its objectives. 14 . This is consistent with a simple management structure. Delta Airlines employs several measures. Delta’s Board of Directors is handpicked by its shareholders. and hence results in individuals carrying out multiple functions. The end results are that organisations can quickly adapt to and respond to environmental demands. resulting in a strong management/employee relationship. Controls: The airline industry is characterised as cyclical and unstable and as such requires that airline management teams find a balance between prudent management practices to ensure that its resource employees receive fair benefits. The board is supported by four key committees. Delta has stringent financial control methods in place. Usually key decisions are made solely by the CEO. namely finance. and adequate return on investment for its shareholders. while at the same time driving cost cutting initiatives. corporate governance. and offering the highest compensation package across the board. including a representative for Delta’s only unionised workers – its pilots.STRUCTURE AND CONTROLS Structure: In order to remain viable and profitable Delta Airlines and made several transitions in its management structure. and personnel and compensation. There are no role differentiations. All categories of workers are represented on the Board of Directors. and includes leaders of other reputable companies. This requires the involvement and full participation of the company’s legal and finance teams in management decision making policies. Delta reputedly has the best and most committed workforce. In order to ensure that it attains its planned objectives. where elaborate administrative and formal reporting structures are noticeably absent. The core functions are usually carried out by individuals who are interchangeable. where work processes is standardized and streamlined. auditing. (Organisation configuration of Mintzberg). In its formative years the structure at Delta Airlines was described by the management team and industry analysts as conservative. Currently Delta Airlines employs the machine bureaucracy structure.

Strategic Control: In order to determine if the company has maximised on the available growth opportunities in terms of markets and products. Delta uses several financial ratios. Some of the ratios reviewed are: Quick Ratios Currant Ratios Net Sales/Total Assets Current Debt/Equity Long Term Debt/Equity Total Assets/Equity Net Income/Net Sales In addition sales and market share analysis are also compared by Delta for strategic business decision making. Profitability is reviewed by looking at each expense as a percentage of revenue. 15 . The financial statements also presents a financial picture of these activities in terms of revenue earned versus revenue spent for any undertaking. balance sheet as well as information provided by industry analysts to determine whether or not planned objectives are met. in terms of Passenger/Cargo and further by region. Profitability Control is another financial control measure used by Delta Airlines. Passenger satisfaction is measured by reviewing customer surveys conducted by industry analysts. Expenses are reviewed in the same format as revenues. to ensure that organisations are able to keep steady pace with the environment in which it operates. the company consistently examines the airline environment by conducting primary and secondary market audits.Financial Control: 1. Controls exist to determine whether or not the planned objectives are being met and taking corrective measures where necessary. 2. In addition the company reviews the revenue environment.

the financial controls are a crucial analytical tool as it guides the company to effective and efficient decision making. Specifically. The company promotes from within.2009 posits that a company’s strategic fit will erode because the market environment changes faster than the company’s seven Ss – (strategy. the leisure market is the weakest segment that Delta operates in. allowing them to have a broad view of the business. The structure that exists at Delta facilitates the flow of information from front line staff to managers which aids in the decision making process. it would be prudent if Delta does its own marketing research to access first hand information on the needs and demands of the market. The control measures employed by Delta are mostly financial.com website. expanded gate information and virtual check-in on its Delta. Notwithstanding.Kotler and Keller . which could be due to ineffective control measure (the lack of marketing research information). 2009 p. It has already been established that Delta Airlines has the staff and skills to deliver the corporate strategies. hence employees are motivated to develop themselves for future job promotions. structure and system which make up the hardware of the business. However. and style. four major hubs and one secondary hub. Examples are the internet check-in. That is. Currently Delta operates five hubs. Delta Airlines competes on a technological advantage in that it consistently upgrades its technology in order to match the needs of its customers. Evidently Delta Airlines management and employees also have shared values based on the structure and the coherent relationship that exists. Control methods present an opportunity for managers to identify changes within the market it operates in 16 .) (Kotler &Keller. Employees are also encouraged to participate in cross functional jobs. Delta employees are hired at entry level positions and move through the ranks to become managers. in that regard. skills. Delta has had two failed attempts at competing in this market. and helps to determine corrective actions. 56) Systems – Delta has strong airline routes through its pioneering of the hub and spoke model. financial control measures serves its purpose. employees are encouraged at Delta Airlines to contribute to the decision making process. staff and shared values are the software. In an industry that is characterised as financially unstable.

Delta has had it fair share of challenges over the years. its ability to adapt to such a dynamic and constantly changing industry speaks volumes. In addition. 17 .and to make the adaptation as quickly as possible in order to survive. Despite the negative publicity received with regards to its falling customer service and having to file for bankruptcy in 2005. as it has always managed to rebound in the end. Delta seems to have the right controls in place.

These figures will give a clear analysis of Delta’s performance for the three years. The emphasis is placed on the net income.FINANCIAL ANALYSIS We examined Delta’s balance sheet. 2) for Delta was positive which indicates that Delta had a good return of their assets and is indicative of the company making money.314) (8. return on asset ratio and debt to equity ratio.154 1. Based on the data presented in fig 1.612 614 2008 22. Data was pulled from the financial documents for three years (2007-2009). (Millions USD) Total Revenue Operating Income Net Income Cash Flow 2007 19.607 2009 28.922) 1. Delta experienced a $1. During 2007 the ROA (fig. cash flow and income statement in order to arrive at financial performance of the company. even though they did much better than year 2008. 18 .237) 352 Fig.063 (324) (1. This is as a result of a significant weakness in the airline environment due to the global recession. Although Delta experienced a loss in 2009 this was a significant improvement compared to the loss in 2008. 1 Return on Assets (ROA): This measures the overall effectiveness of management in generating returns to common stockholders with its available assets. Net Income: This is the profits or losses reflected in a company’s balance sheet at the end of the year. but was not enough to have taken them out of the negative.2 million net loss in 2009.096 1. Delta managed to grow some return in 2009. The years 2008 and 2009 were not very good for Delta as they experienced a significant loss on returns in 2008. It measures the company’s financial performance within a given year.697 (8. This put Delta in the top position in 2007. when compared to competitors.

76 -0. as reflected in the chart above and have managed to maintain the number 1 position from 2008-2009. The purchase of Northwest Airlines could have contributed to this significant loss.64 0.21 -7.Ratios Return on Assets Quick Ratio Current Ratio Net Sales/Total Assets Total Liabilities/Total Sales Total Debt/Equity Total Assets/Equity Net Income/Net Sales 2007 0.76 0.59 0.68 0.05 0.64 0.71 -0. A high ratio indicates that the company is able to finance its growth with debt. Notwithstanding.03 0. Delta managed to maintain a positive cash flow for the period. it showed that the company experienced a significant loss in Net Income for 2008.5 0. 19 .88 3.90 0.96 2009 -0.76 0.99 70. While Delta has managed to maintain a steady growth in revenue for the 3 years (2007-2009).78 2008 -0.14 Fig. Delta has shown a steady increase in its debt to equity from 2007-2009. which still have them maintaining their grounds in the industry.98 20.73 0.9 -0.79 0. 2 Debt to Equity: This is used to measure financial leverage of a company.67 0.2 0. This has benefited their shareholders greatly as well as to increase their earnings.

PROJECTIONS FOR THE AIRLINE INDUSTY (2010-2029) Commercial aviation has weathered many downturns in the past. GDP growth rate: Global gross domestic product (GDP). Airlines are working relentlessly to reduce costs by replacing older. the key indicator of worldwide economic activity. air cargo traffic is recovering.5% GDP 4.3% per year until 2029. is the greatest driver for growth in air travel.2% 3.9% 4. Passenger Traffic: Encouraging near-term indicators as the global economy recovers. Global passenger traffic is forecasted to grow 6% in 2010 and an average 5. Asia-Pacific airlines are expected to lead the world in profits. fuelhungry airplanes and finding more efficient ways to operate.6% 1. Yet recovery has always followed quickly as the industry reliably returned to its long-term growth rate of approximately 5 percent per year.3% 4. and is expected to return its 2007 peak. Air cargo traffic growth turned positive in November 2009 after 18 straight months of decline. This is expected to grow an average of 3.9% over the next 20 years.1% 6. followed by North American airlines.4% 2.8% Domestic 4. This is set to grow at 5.8% 5. following a $10 billion net loss in 2009. Regional Projections Region Asia Pacific Europe North America Middle East Latin America Commonwealth of Independent States (CIS) Africa Air Traffic Growth 6.2% per year for the next 20 years. Air Cargo: After two years of decline.9% International 7. Profits: Global airline financial performance is expected to improve to the breakeven point this year.7% 4% 4% 3.4% 20 .8% 4.

With new fuel efficient technology being developed and customer-centric features becoming more commonplace. the international market. considering the growth of that region and its emergence as the world’s number two economy. Meantime. Delta would be prudent in acquiring or leasing new airplanes. It is however air marked for rapid growth. Fleet Change: Delta’s fleet is on average 14 years old. will determine if this ratio should be further reduced. There are. Delta is the airline best positioned to take advantage of the projected growth in world airline travel. We recommend that this is altered to 60/40 within the next three years. As part of the capacity reallocation. starting with its Cincinnati hub which is central to its New York. Atlanta. the actual growth compared to the projections. the growth rate in that market in expected to be the second lowest in the world over the next twenty years. Appendix C shows that the LCC model has not taken off in Asia. We recommend Delta close at least one of its hubs. with a view to cutting all underperforming ones. Marketing efforts need to concentrate on the Asia/Pacific. Paul and Michigan hubs. Latin America and Middle East regions. how Delta has twice challenged unsuccessfully. with less than 8% market share. however. based on its extensive fleet and worldwide coverage. Minneapolis/St. They should look at the feasibility of establishing at least one hub in China. Certainly the MD-88. It also has a significant presence in those regions poised for the largest growth. Delta’s current domestic/international capacity mix is 70/30. Capacity Reallocation: The domestic market in the United States is dominated by LCCs. Delta’s cash cow. We recommend Delta should access the individual domestic routes in the United States. As the Growth by Regional Flow table (Appendix A) shows. and Delta needs to be aware of this market if it plans to reenter the LCC market. Constant surveys of the market.RECOMMENDATIONS From our analysis. MD-9 and DC-9 models used for some domestic flights must be retired. Delta should look at the United States cities where it has its hubs. 21 . is poised for greater growth. a few changes that we recommend.

this dedication has not fully translated to customer satisfaction. They must continue to be innovative in their offering to customers. They offered made to order meals through a full service café and bar. New York-JFK. 22 .As a part of the capacity reallocation strategy recommended. This should commence with the next year. The café also offered an extensive wine and beer selection. This concept should be expanded to hubs in Cincinnati. Minneapolis-St. Delta should reduce its inventory of single aisle planes such as the A319. Paris-Charles de Gaulle. along with customer service training. Paul. Memphis. Recently. Offering the employees shares in the company. Delta must take steps to halt the sliding customer satisfaction scores. A staff relations program must be immediately designed and implemented. Amsterdam and Tokyo-Narita over the next two years. Salt Lake City. 320 and the CRJ models and increase its double aisle model used on international flights. Detroit. Delta introduced an enhanced Sky Club dining experience at their New York hub. should help. Customer Relations: While Delta’s employees are totally committed to the company.

CONCLUSION The environment in which airlines have been operating since 2001 has been tumultuous. The projections for growth make this an exciting time for airlines. Delta has always been a leader in innovative flight experiences. It pioneered kiosk check-in which is now industry standard. these factors may drive some of delta’s competitors out of business. 23 . in an era where capacity management is extremely tight and cost cutting occurs almost daily. How they position themselves will determine their chances of survival. Fuel and labour costs are causes for concern for Delta. Features aimed at making flying with Delta an experience helps to offset its relatively high prices. but these are industry wide factors and may actually benefit Delta. Delta was dragged to the pits of the crisis but has risen and recovered better than any legacy airline. One financial disaster after another has been a feature of the decade for airlines. With Delta’s capitalization. The coming years should see Delta continue to soar above the rest.

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