Delta Air Lines Inc example essay topic

While sitting in Atlanta's Hartsfield International Airport, one cannot help but to notice and feel an overwhelming dominant presence of one particular airline. Delta as we know it today, traces its roots way back to 1924. Huff Dal and Dusters was founded as the world's first aerial crop dusting organization. In 1928 the company became Delta Air Service, and the following year Delta carried its first passengers over a route stretching from Dallas, Texas to Jackson, Mississippi with stops in Shreveport and Monroe, Louisiana. In 1941, the company moved its headquarters from Monroe to Atlanta, Georgia.

Although headquartered in Atlanta, Delta is a Delaware corporation (Delaware is the most "pro-business" state in the US). Delta Air Lines Inc. provides air transportation for passengers and freight throughout the United States and around the world. As of February 1, 2001, Delta (including its wholly owned subsidiaries, Atlantic Southeast Airlines, Inc. and Comair, Inc.) served 201 domestic cities in 45 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands, as well as 50 cities in 32 countries. With its domestic and international code share partners, Delta's route network covers 218 domestic cities in 48 states, and 131 cities in 58 countries. When analyzing Delta, you do not have to search very far before quite possibly one its strongest attribute rears its head. Based on calendar 2000 data, Delta is the largest U.S. airline in terms of aircraft departures and passengers enplaned, and third largest as measured by operating revenues and revenue passenger miles flown.

Delta is the leading U.S. airline in the transatlantic, offering the most daily flight departures, serving the largest number of nonstop markets and carrying more passengers than any other U.S. airline. Delta Air Lines transports more passengers worldwide than any other airline. Through a vast worldwide route system Delta has flown over 117 million passengers, more than any other airline in the world. Delta mainline, domestic and international service, Delta Express, Delta Shuttle, Delta Connection (R), Delta Sky Team and Worldwide Partners operate 6,400 flights each day to over 450 cities in 98 countries.

Not only is Delta a beast in the market it wields its power quite intelligently. Along with this momentous market share, Delta has enormous control over some of the nations key gateways. Delta controls 72 percent of the air traffic at Salt Lake Utah. This mid west city is a gateway to most of the key major cities on the pacific coast as well as mid west.

With the upcoming winter games in Salt Lake, Delta should profit handsomely. In Cincinnati, where Delta is 77.5 percent of the market, the situation is much like that in Salt Lake City. Cincinnati is used as a link between most central states. Delta really flexes its muscle in the south however. By controlling an unbelievable 80% of the air in Atlanta (the nations second busiest airport) Delta has an unbelievable and almost unshakable grip on most southeastern cities, especially cities in Georgia, South Carolina and dominance in Florida. With this dominance Delta can afford to charge almost 15% more for business travelers than other airlines in these areas.

Like all excellent organizations, leadership must start at the top and Delta is not any different. Delta's motto may be 'We love to fly and it shows' but judging from the airline's performance in the early 1990's, you couldn't tell. In 1993, the company employed 73,500 people worldwide. By 1995 that number was down to 59,700. Some of the cutbacks were achieved through early retirement, but most of it came from heavy layoffs. This drastic reduction cost the airline heavily, both in public image and employee morale.

At the same time, Delta's on-time performance record, once at the top of the industry, also took a serious fall. Three years and a new CEO later Leo Mullin, Delta is once again ruling the skies. In 1998, Delta posted a record $1 billion company profit. Revenue increased by 4% to $14.13 billion. Delta's stock for fiscal 1997 rose from $82 a share to $129-1/4. The airline came in fourth in on-time performance for the first eight months of 1998.

Success runs downhill. While the promotion process is based on 'seniority,' entry-level employees say that the 'rapid' growth of the company is creating 'frequent opportunities for career development. ' Also, reports one insider, 'the best thing about Delta is that after 6 months you may bid for another job anywhere in the company. The main thing is to get your foot in the door.

' 'Most promotions are from within,' says another. 'Once you are hired there are a lot of place to go within the company. ' Although one employee reports that Delta hires its new hires primarily as part-time workers, another, who started part-time and quickly became full-time, says, 'the culture is one of rapid advancement. ' Although Delta's pay scales are described as 'not impressive,' the travel benefits definitely are. Not only do Delta employees receive free air travel for their families, but they also receive certificates that they can use as gifts. They are allowed 12 domestic flights per year and one international, first class of course.

In the past two years, all employees were given stock options,' reports one employee. 'The benefits are wonderful. I pay nothing as a full-time employee for my medical coverage, which is very good,' says another. According to one employee, Delta also hands out 5 percent bonuses during healthy financial years. Behind Continental, Delta has the highest employee satisfaction in the industry; it's easy to see why!! In the communities that Delta has a strong hold on, Delta gives back generous to the community.

They are a sponsor for the up coming winter games for example. Delta vision statement states that Delta is. ".. Delta is preparing youth from many backgrounds and cultures to lead and enjoy the unprecedented opportunities of the 21st century". Delta supports programs that promote youth in three key areas: Wellness, Leadership Development and Cultural Advocacy. To accomplish that mission, Delta commits over $16 million annually to four Signature Partners and other worthy organizations.

Also, Delta supports and promotes employee volunteer efforts through our Community Partners program. Another strength that Delta posses are its safety record. The last aerial mishap for this airline giant was in 1997 Delta does not have any real current weaknesses per say. In April of this year, Delta subsidiary, Com Air had a pilot strike. Delta might want to take precautions to ensure that that event does not occur again. All levels and departments appear to be working quite efficiently as of yesterday.

Delta's main worries are mainly threats to the organization, which I will address at a later point. Given this however, Delta has unbelievable opportunity for growth. While New York's baseball devotees were drooling over the Mets-Yankees subway series, Delta Air Lines was hitting a Mark McGwire-size expansion home run at John F. Kennedy International Airport (JFK). The Atlanta-based carrier has just announced a US$1.6 billion expansion and overhaul of its JFK terminals that will create 6,000 new jobs.

The projects are part of the airline's aggressive strategy in the U.S. Northeast's hotly contested 'Wing Wars. ' 'JFK is the one airport that has physical growth opportunities in New York, the world's largest aviation market, and it's up for grabs,' said Delta CEO Leo Mullin. If the expansion proceeds as planned, Delta will add 188 daily departures from JFK by 2005 and another 165 by 2014. Delta currently offers 57 daily JFK departures. Delta also plans to increase international daily departures from the current 21 to 82 in 2014. That would make JFK Delta's No. 1 international airport, passing Atlanta's Hartsfield International.

The JFK expansion is part of an ongoing escalation in the East Coast Wing Wars. Last year, Delta announced a $385 million upgrade of its operations at Boston's Logan Airport. Now, United Airlines is moving to acquire U.S. Airways, which has sizable operations in Boston, New York and Washington DC. Despite all of the corporate strengths, relatively non existent weaknesses, and opportunity to grow even further, Delta would be remise and be a fool not to realize that they are facing some serious threats in their near future. On September 11, 2001, the Federal Aviation Administration (FAA) suspended all commercial airline flight operations as a result of the terrorist attacks. Delta resumed partial service on September 13, 2001 and is currently operating at approximately 80 percent of its pre-September 11, 2001 schedule.

Due to the sharp decline in demand for air travel, Delta announced it would reduce its capacity by 15 percent from its pre-September 11, 2001 schedule. This capacity reduction will be implemented on November 1, 2001 and will be in effect indefinitely due to the uncertainty of future demand for air travel. Delta Air Lines reported traffic results for the month of September 2001. System traffic decreased 32.4 percent on a capacity decrease of 17.6 percent from September 2000.

The decrease in system traffic and capacity was largely attributed to the September 11, 2001 terrorist attacks on the United States. Delta's system load factor was 56.2 percent, a decrease of 12.3 points from the same period last year. If Delta had operated at pre-September 11 capacities for the entire month, Delta estimates that system load factor would have been 46.4 percent. Domestic traffic in September decreased 33.4 percent on a capacity decrease of 17.4 percent. International traffic decreased 29.7 percent on an 18.1 percent decrease in capacity. Delta Air Lines Inc. posted a $259 million loss in the third quarter, reflecting the impact of the Sept.

11 terrorist attacks on the airline. Delta had reported a profit of $273 million in the same quarter last year. Its share loss totaled $2.43, compared with share earnings last year of $2.08. Delta's loss would have been worse without its share of the $5 billion in cash assistance from the government's bailout of the airline industry. Delta's share of the package in the third quarter totaled $171 million before taxes. It expects to get $690 million overall.

Excluding the cash assistance and several other one-time adjustments, the Atlanta-based airline said it would have lost $295 million in the quarter. The airline estimated the three-day shutdown of the country's air system following the terrorist attacks, and the subsequent drop in passenger traffic, caused about $400 million in lost revenue in the quarter. Delta's total operating revenue for the quarter totaled $3.4 billion, down 22 percent from $4.3 billion reported in last year's third quarter. The company already was expecting a drop in revenue from the weak U.S. economy and lasting effects from the 89-day strike at its Comair subsidiary earlier this year. Delta said it has begun to see a slight improvement in demand, with load capacity increasing to 61 percent in October from a low of 49 percent in late September. The biggest threat Delta is facing is possible merging threat of other major airlines.

Delta has themselves been proposed to as well have done some proposing with other airlines. Delta is facing the prospect having to do battle with American and British Airways for supremacy of international destinations. Delta however is countering by joining forces with Air France to gain more a world market share. It is too early to tell the exact impact of the events of 11 September on the antitrust process, although the Department of Transport (DOT) has extended the application period for American Airlines and British Airways. The extension has less to do with the terrorist crisis and more to do with other US carriers wanting more time to respond to the filing the DOT is adamant that there will be no further extensions. From a passenger's point of view, there's one good thing about airline consolidation: There would be fewer carriers to complain about -- in an industry everyone loves to hate.

Still, that's small consolation for the turmoil that customers, politicians, and even airline executives fear could be unleashed on a relatively healthy business. Ready or not, consolidation is in the air On May 24, United Airlines announced an $11.6 billion deal to buy US Airways Group Inc. Since then, AMR, parent of American Airlines Inc, the nation's second-largest carrier, has approached Northwest Airlines Inc. and No. 3 Delta Air Lines Inc. about a marriage. Delta has voiced interest in Northwest. So the Big Six in the U.S. could be on the brink of becoming the Big Three, with 85% of the domestic market.

But how likely are all these merger scenarios -- considering the formidable labor and regulatory obstacles -- and what kind of industry might be left in their wake? The risks are huge: They include exploding airline debt loads, years of labor unrest, higher fares (which we as consumers would love to see) Moreover, the benefits may prove illusory. A carrier that gains market share, particularly among lucrative business travelers, could find its advantage quickly matched by a rival's merger. And the theory that having fewer players means higher profits remains just that, a theory. No wonder skeptical investors are trading US Airways's tock at about $40 a share, well below United's bid of $60. Still, once United got the ball rolling, no other airline could afford not to consider its own deal.

If encountered, a United-US Airways merger could cost American and Delta each $250 million to $400 million a year -- as United's stronger network drains traffic from its rivals, figures airline analyst Samuel C. But trick of Paine Webber Inc. And American risks being crippled at its Chicago hub, where greater East Coast feed for United could leave American well behind. As for the Delta's customers, the last thing we need is less competition among the big airlines. Kevin P. Mitchell, chairman of the Business Travel Coalition, figures business travelers in particular will face higher fares and fewer flights from secondary markets. The big question is whether the Justice Dept. will approve any airline mergers, especially at a time when Congress is planning hearings on consolidation and may consider legislation to block such deals. The initial signs aren't encouraging for the potential merger partners.

Justice sued Northwest and Continental in 1998 after Northwest took a controlling stake in the Houston-based carrier. Combined, the two are about the size of United and have less overlap than United and US Airways. Given that, 'it's hard to see how [Justice] would not challenge US Airways / United,' 's ays Daniel M. Kasper, an airline expert at economics consultancy LEG Inc. Justice is also investigating alleged predatory practices by other carriers at their hubs and is looking for antitrust violations in a new online reservations system jointly owned by some of the biggest airlines. Global airline consolidation might also factor into Justice's thinking, with British Air poised to swallow KLM and with other European deals sure to follow. 'Do U.S. airlines get left behind?' ' wonders a former government official.

Also, low-fare king Southwest Airlines Co. (LUV) is thriving, while startups like Air Tran and Frontier are healthier than they " ve been in years. Against that backdrop, Justice might be more inclined to approve mergers. But the fact remains that there's no pressing need right now for airline consolidation. Even US Airways isn't in imminent danger of failing. 'I don't think it's imperative we consolidate at all,' ' admits one airline executive.

Still, if consolidation stalls now, you can bet the idea will be back the next time the industry hits a major downdraft. 'It's a matter of when, not if,' 's ays one big player. So keep those seatbelt's fastened. As you can see Delta has some major potential worries ahead of them as an organization.

Will they weather the storm and remain a monster in the airline industry or will they fold and get swallowed by bigger fish in the sea. Something tells me Delta will remain on top of the world however. Only time will tell.