With the rapid
technological advancements being introduced to us today, it seems as though the
word is getting smaller by the minute.
In the earlier age of time, distance was a huge barrier when it came to
many things. With the times we live in
now, distance is literally but a number.
When friends or family are in need, we can simply talk to them
instantly, and or, be to their location in an exceptional amount of time. Along with many technological advances, the
efficiency and means of transportation have rapidly changed for the
better. The SS United States, which was
in service from 1952 to 1969, to this day, holds the record for the fastest
ocean liner ever built. She crossed the
Atlantic in 3 days and 12 hours, sailing at a speed of more than 54 km/h. Now, Delta has flights daily going from New
York City, New York, to London, United Kingdom in 6 hours and 55 minutes. This is how impactful the advances in
transportation have come.
Delta Airlines comes into the conversation once one mentions
the word aviation. One could argue that
the majority of individuals in the United States have heard of Delta Airlines
and most can tell which airline it is just by one glance at their iconic logo.
Delta Airlines is the biggest Airlines in the terms of passengers it ferries
across to several destinations all over the entire world every single
year. It is the second highest revenue
grossing airline in the world. Also, it
has the largest fleet size in the world ranging from Airbus A319-100s, to
Boeing 777-200ER and LR variations, to Bombardier CS100, to the McDonnell
Douglas MD-88s. As of January 17, 2018,
the Delta Airlines mainline fleet consisted of 849 aircraft in service. It is also known as one of the oldest fleets
of any American airline, with an average fleet age of 17 years. This is something Delta is known for and they
make it work to their advantage. They
buy older generation or used aircraft and they also continue to fly aircraft
for 20-30 years, which is much longer than most other major airlines (M, 2016).
Enough with the statistics of Delta Airlines, let’s get into
what made those statistics possible and what makes them one of, if not the most
iconic airline in the country. One item
that can either make or break a business is expansion. In Delta’s case, this absolutely helped make
their corporation into the quintessential airline it is today. Expansion is simply where Delta Airlines has
left everyone else behind. Once
established in the 1920s as an aerial crop dusting business, Delta has gone on
to become one of the biggest airlines around the world. This is partly due to its aggressive
expansion policies which involved mergers with other airlines and to several
parts of the world. They have been so
successful with the expansions, that Delta actually serves passengers in all
continents of the world, except Antarctica (M, 2016).
Another way of expanding other than in geographic terms
would be in passenger terms. Once Delta
took over Northwest Airlines in 2008, their customer base grew even larger,
even while Delta already had a huge loyal customer base. Delta’s business model also focused on
delivering high customer service in order to appeal to their core demographic,
business travelers. Delta also invested
in a multi-billion dollar enhanced training program for their customer service
agents, which were designed to improve their customer service. Delta also led the race to become the first
airline to develop the first mobile bag tracking feature app on smartphones.
Deltas network has become so voluminous that a passenger can simply log on just
one time with Delta, and they can travel to every continent of the world, again
of course, except Antarctica. A way that
Delta maintains their large base of loyal and new customers is because they
give their customers first priority every time one chooses to take the skies
with them. This is proven to be true due
to the fact that Delta is the founding member of Sky Team Alliance and offers
Sky Miles, which is a special loyalty program.
Delta shows that just by simply taking care of and satisfying your
customers, one can go a long way in the market for success (M, 2016).
Delta’s business model is supported by its operating model
which is through four key activities: Industry-leading customer service,
purchasing used aircraft, low-unionization, and vertical integration. Many airlines opt to purchase expensive new
aircraft that come with low maintenance costs but, of course, with extensive
acquisition costs. This, in turn, leads
to those airlines typically having high fixed costs. However, Delta goes with the strategy of
purchasing used aircraft, because this offers cheaper acquisition costs but
higher maintenance costs. This operation
model leaves Delta with lower fixed costs with higher variable maintenance
costs, therefore, allowing them to quickly scale down or up in order to meet
demand, while not having to worry about the burden of the same level of fixed
costs of the other airlines. Thus,
creating a continued competitive advantage over the competition reducing the
operational risk should there ever be a rapid increase or decrease in volume
Another item within Delta’s operating strategy is that they
own their own fuel refinery. For most
airlines, the standard strategy is either fuel hedging or futures trading. However, Delta has taken this a whole step
further by actually owning a source of low-cost fuel, thus protecting them from
cost spikes (C, 2015).
The operating strategy for Delta is also directly injected
into its workforce. While most airlines are known for their high unionization
rates, with approximately 50% of the airline employees unionized, Deltas
unionization rate is actually closer to 18%.
This allows them to keep base wages lower. Although this might not sound positive at
first, one must also know that instead of offering high fixed wages, Delta offers
industry-leading profit sharing plans.
This then allows Delta to shift a portion of their labor costs from
fixed to variable. Thus allowing Delta
to remain competitive even during the market downs, and also reduces the risk
of an employee strike (C, 2015).
One major and impressive thing about Delta’s development
over the past 10 years is that Delta gets a revenue premium of 107%. What this means is that in the first quarter
Delta’s revenue per available seat mile was a total of seven points higher than
the average of the rest of the airlines due to the simple fact that people
choose to fly Delta. Prior to 2005, when
Delta sought bankruptcy protection, they had revenue per available seat mile
that was 86% of the industry average.
Impressively, just two short years later during the first quarter of
2007, the executives of Delta gladly announced that revenue per available seat
mile was an extraordinary 96% of the industry average. They were then able to surface from
bankruptcy protection on April 30, 2007, just approximately two years since
they had entered the protection (Reed, 2014).
Even though all of the major airline bankruptcies in the
first 10 and a half years of the 21st century have gone on to be
successful, thus allowing carriers to profitably restructure, Delta’s was
arguably the most diversely successful.
Due to the many bankruptcies, this led to the need to initiate some
major cost-cutting, primarily labor cost cutting which would then facilitate
the concluding stages of post-deregulation to work itself out. Also during this time, lofty oil prices
forced the industry to reduce capacity.
This led to United deciding that in 2008, they would begin to charge $25
for a second bag check, thus leading the charge for other airlines to begin to
pursue subsidiary revenues (Reed, 2014).
Among the several airlines that filed for bankruptcy were
both American and US Airways. Their
bankruptcies led them to merge allowing a takeover by the ambitious management
team from America West Airlines. United airlines
would sit in bankruptcy for three years waiting for the opportunity of a merger
which would finally come in 2010 after enticing Continental. Delta; however, was able to use bankruptcy as
a way to step back and evaluate the direction in which they would like to push
forward in the future. Prior to the
bankruptcy, Delta had a gold mine under their nose the entire time which would
turn out to be one of the U.S. airline industry’s best assets: the Atlanta hub,
which is now the biggest single airline hub in the globe. The Atlanta hub was easily overlooked during
this time due to the fact that it was dissipated, used mainly as a way to
connect passengers between Florida and the Northeast. Basically meaning that it was a leisure
market with minimal potential for the greatest revenue premiums. However, that would all change, Atlanta now
has 970 daily departures to 210 destinations that include 62 international
destinations. In total, Delta Airlines
serves over 59 countries across the globe (Reed, 2014).
This is how impactful the advances in transportation have
come. It is easy, with the above-given
information, for one to look at Delta Airlines and truly understand the
impressive stature of their corporation and the amazing expansion that has
taken place throughout their years of existence. Delta is a solid example of a
company that learned from its previous mistakes. Just as other Airlines faced
hardships, Delta was able to use the 2005 bankruptcy as a wakeup call in order
for the company to better align its core business and operating models. The new improvements in alignment and
strategy that was derived from this situation have led to gaining competitive
advantages with respect to fuel prices, customer service, labor, and greater
operating cost flexibility. This success
is what brings the iconic name of Delta into most conversations when one talks
of aviation and the different airlines both in the United States and across the