Delta Airline Case

Delta Airlines in a major American airline company headquartered in Atlanta, Georgia, United States. The company was founded on May 30, 1924. They operate as an extensive domestic and international network. Delta currently operates a fleet of more than 700 aircraft and they employ approximately 80,000 people. In 2011 they were the world’s largest airline in terms of fleet size. Delta Airlines is a very successful company. Part of what makes them so successful is expansion, making good decisions in route selection and hubs location, being service oriented, having a strong operation management, being reactive in terms of prices, and offering low fares.

Before the Deregulation Act of 1978, the airline industry was federally regulated in regards to

Delta airline uses merger so as to be able to expend its business. In 2008 the company merged with Northwest airlines. It operates in Europe, North America and Asia/Pacific regions. Once the merger was complete, Northwest Airlines and all its constituents become wholly-owned by Delta Airlines. The merger saw to it that Delta Airlines started operating in the Northwest for FY 2008. In the period of two month that is from October of 2008 the time the merger was completed to December of 2008, the company had increased it revenues to $2 billion. Having a flexible nature, allows Delta to improve customer services, and in the long run be able to achieve its strategic objectives.

The United States Airline Deregulation Act of 1978 was a dramatic turning point in America. It was the first systematic dismantling of a comprehensive system of government control since the Supreme Court declared the National Recovery Act unconstitutional in 1935. It was also part of a broader movement that, with varying degrees of thoroughness, transformed such industries as trucking, railroads, buses, cable television, stock exchange brokerage, oil and gas, telecommunications, financial markets, and even local electric and gas utilities. Since the Airline Deregulation Act of 1978, the airline industry has experienced significant growth,

Delta Airlines is the largest airline carrier on the Atlantic Coast. In terms of scheduled passengers carried they were world’s largest airline with 277.6 billion in 2013. Also the second largest

The Risk of Entry by Potential Competitors – Since the deregulation of the airline industry in 1978 over 1,300 new airlines have opened for business. However, most now are bankrupt or merged with the other carriers to stay workable. The established giants were Delta (merged with Northwest), American Airlines (merged with U.S. Airways), United Airlines (merged with Continental), and now Alaska Airlines (merged with Virgin America). Now the Low-Cost Carriers (LCCs) are posing a massive threat which includes Southwest Airlines (merged with Air Tran), and JetBlue.

Technological advancements, mergers and acquisitions, volatility in crude oil prices, currency depreciation, ground staff management and baggage handling are the major external factors for Delta Air Lines. The Monroe oil refinery purchased by Delta Air Lines provides an opportunity for the company to deal with the volatility in crude oil prices. Presently Delta Airline is over dependent on the North American markets, which had experienced a major hit during the recession in 2008.

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

The report finds that Delta Airlines has successfully emerged from its bankruptcy in 2005 to report successful returns in both 2007 and 2008. With its 2008 acquisition of Northwest Airlines Delta became the world's largest airline, further improving its position in the airline industry. Despite this current positive position report also finds potential adversities

The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being

Delta’s stock is greater than the S&P 500 index. It has been increasing from 2011 to 2015 closets to 4.60. Comparing with the competitors, the companies keep increasing their stock prices which indicates a steady source of income for investors. Delta comes second after American because American has been increasing their stock prices.

As the new century unfolded, Delta Air Lines continued exponential growth becoming one of the largest airlines in the country. A merger with Western Airlines in 1987, the acquisition of Pan Am’s transatlantic routes in 1991, and a final merger with Northwest Airlines in 2008 meant Delta now had routes all over the world. Delta like many other airlines faced very difficult times post 9/11 and during the recession. The airline made significant cost improvements across its operation and the merger with Northwest Airlines ended up pushing the airline back into profitable business.

On October 24, 1978, President Carter signed into law the Airline Deregulation Act. The purpose of the law was to effectively get the federal government out of the airline business. By allowing the airlines to compete for their customers' travel dollars, was the thinking, that fares would drop and an increased number of routes would spring up.

3,4- The Airline industry and the market The airline industry is large, specially in the United States, mainly due to the “ Deregulation” of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air transportation industry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was found inefficient and in 1978 deregulation took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many new companies emerged and regional airlines saw deregulation as an opportunity to expand. Due to the rise in competition, by 1986 mergers started to take place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is determined mainly by price, studies revealed that half of the leisure travellers and on quarter of business travellers did not have a preference for a particular airline, which means that prices determined the

The years since regulation have been rocky for the airline industry. Airline after airline has declared bankruptcy and either ceased existence or emerged as a weaker airline. The surviving airlines have done so by merging and protecting their territory with tactics not even dreamed of in most industries. Robert Crandall said it best when he noted, "This is a nasty, rotten business (Petzinger,1995)." You would think that with the competition allowed by deregulation that a large number of new names would exist, but that does not seem to be the case. Most Americans still travel on American, Delta, United, US Airways, or Continental (Kane, 2003). The only true champion of deregulation is Southwest Airlines, whose success is paving the way for others such as JetBlue, but the obstacles are enormous. Initially, the airlines went after each other by slashing fares and driving competitors out of business. The industry quickly learned that although this tactic was effective, it was not profitable, and it was more economical to focus on controlling the air out of a few cities (hubs) than to attempt to directly compete in every single market. Since most of the major airlines already had key cities in which they controlled most of the takeoff and landing slots, airlines could charge higher fares and take in greater profits without any real head to head