...Delta Airlines Cynthia Howard-Morgan BUS499 Professor Anderson July 29, 2012 Introduction The longest-running airline carrier, Delta Airlines began in 1924 as a crop-dusting company called Huff Deland Dusters. Delta has since become a world leader in providing efficient, on-time travel, since 1941, the company has been based in Atlanta, where Hartsfield-Jackson International Airport serves as its largest domestic hub and primary base for flights to over 57 countries. The airline also operates four other hubs in major U.S. notably Los Angeles which it has recently reestablished (Delta, 2011). Due to competition from lost-cost airlines, the negative effects of 911 on travel and skyrocketing fuel prices, the company held over $20 billion in debt as of September 2005 Delta declared bankruptcy. Delta was able to emerge from bankruptcy in 2007, achieving profitability that same year. In April, 2008, Delta announced its intention to purchase Northwest Airlines. The two companies combined created the world’s largest airline. Currently it is the only airline to service all six permanently inhabited continents in the world. The company's structure and management approach have constantly evolved in order to maintain competitive in the cutthroat airline industry (Delta, 2011). Delta vision will able them continue to be the world’s largest and the world’s greatest airline. Segments of General Environment Segments that rank the highest would be suppliers and work...
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...A03-04-0011 Delta Air Lines: The Latin America Contact Center Decision PY In early September 2000, Mary Smith, Delta Air Lines’ Regional Director of Reservations for Latin America and the Caribbean, glanced over her notes one more time. Delta had decided to consolidate all of its reservations offices in Latin America into a single Latin America Contact Center. Now it was up to her to recommend a country location for this $3–4 million investment. Gail Childs, her immediate supervisor and General Manager for International Reservations, would want her report soon in order to get the final go-ahead from Delta’s CEO. Although a number of countries were possible options, Mary reviewed again the pros and cons for Mexico, Chile, and Argentina. CO The Internationalization of Customer Service NO T By 2000, telephone customer service was growing rapidly throughout the world. Many companies chose to outsource their telephone customer service operations to outside call centers; others kept such operations in-house. Other than locating call centers, also known as contact centers, within a region to be closer to customers, the principal reason for U.S. companies to move telephone customer service outside of the United States was to reduce costs. Because labor costs constituted between 60–80% of a call center’s operating expenses,1 airlines, computer firms, credit card companies, and others that used telephone customer service extensively were moving these...
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...Delta Air Lines INC is a major United States airline that services both domestic and international travel. Delta is part of the “big four” legacy airline carriers, contributing to approximately 15.1% of the US domestic airline market share. Delta and its subsidiaries offer flights to 341 destinations with over 13,000 flights daily. Established in 1924, agricultural scientist Collet Woolman founded Delta as a crop dusting service. A few years later, the crop dusting service broke away and formed Delta Air Service. As time passed, Delta successfully expanded through technological innovations, research and development, and acquisitions with alliances. Product quality, consumer relations, and product safety are all key components to a successful airline carrier. In the past, Delta has demonstrated strong customer safety initiatives, thus contributing to their success. In contrary, Delta has been faced complainants from customers related to lost luggage, poor performance, and poor operations. Merging airlines is often complex can sometimes backfire. Much of Deltas growth in the last 10 years is attributed to the Northwest Airlines acquisition in 2008. When the two airlines merged, revenue increased and net income grew substantially, despite other costly economic factors. In order to successfully execute this merge, the management executives at Delta carefully planned the various stages of this risky move. Before merging, Delta faced issues with customer service, labor...
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...OVERVIEW OF THE CASE In 2002 Delta airlines faced the unfortunate realization that the competition from low cost carriers like Southwest and JetBlue was becoming a serious problem. Even though Delta had been looking at this problem for a long period of time, the business model of Delta Airlines was organized by function and their solutions generally focused on individual aspects of the firm. For example, the marketing department provided marketing ideas, the customer service department offered customer related solutions etc. Delta realized that they did not have a comprehensive solution to dealing with the low cost carriers in the market. One of the simplest solutions proposed by Delta management was the idea that Delta could launch its own low cost subsidiary, however, looking at the rest of the airline industry, low cost subsidiaries seemed to be ideas that were either immediate failures or unsustainable over time. According to experts, they had “never seen a high-cost carrier transform itself into a low cost carrier”. With or without this option, Delta would have to find a solution to this problem. The airline industry in the United States is immense, with more than 620 million passengers and over $81 billion in fares in 2001 alone. Unfortunately, while immense in size, in terms of profit, the airline industry continued to perform below the average for other industries. Many investments made by the larger carriers were not profitable and the tragedy of 9/11 put more pressure...
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...Delta Airlines and the Trainer Refinery American Public University Strategic Management 05 July 2015 By Jon Kaercher Abstract The airline industry is a highly competitive service industry that operates on thin profit margins the airlines have to be flexible and adjust quickly to changes in customer’s preferences, increased fuel costs, and changes in the economy that can have a direct impact on profitability. The airlines look for solutions such as adding services, offering discounted ticket pricing and receiving subsides from the government to ensure they remain solvent This requires each airline constantly monitor its business strategy to ensure that it exploits every opportunity to provide their customers with the best possible flying experience. 1) What drive the basic economies of the airline industry? The refining industry. The airline industry operates as a service industry in which it provides the transportation of its customers and their personal belonging from one destination to another for a fee. To provide this service the airlines require a large amount of capital to purchase and maintain expensive equipment and facilities. Their cash flow is generated from profits and the depreciation of their airplanes, this cash flow is used to repay debts and buy new aircraft. The airline industry is very labor intensive because it’s in the service industry and its customers require personal attention, this can be very expensive for the airline. Over one...
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...Ratio(for 2000-2004) -3.84 -0.57 -2.01 -2.74 4.81 B. Altman's Z-Score: 2004 2003 2002 2001 2000 T1 (Net Working Capital/Total Assets) -0.107 -0.062 -0.103 -0.120 -0.093 T2 (Retained Earnings/Total Assets) -0.201 0.033 0.066 0.124 0.190 T3 (EBIT/Total Assets) -0.145 -0.017 -0.054 -0.058 0.083 T4 (Market Value of Equity/Book Value of Total Liabilities) 0.038 0.055 0.063 0.184 0.377 T5 (Sales/Total Assets) 0.688 0.543 0.561 0.588 0.714 Z=1.2*T1+1.4*T2+3.3*T3+0.6*T4+1.0*T5 -0.18 0.49 0.39 0.54 1.37 C. In consideration to part a: (1) Current ratio. The current ratio of Delta Airlines in the past 5 years is averagely around 0.6, which implies the company's inability to pay its short-term liabilities because the current levels of cash and near-cash assets are not sufficient enough to pay for them. (2) & (5) Operating cash flow to current liabilities and total liabilities ratio. Delta Airlines’ operating cash flow covers only a negligible percentage of its current or total liabilities, if not negative. This would further imply that the company is having a problem of paying its liabilities, both short-term and long-term as they do not have the ability to generate cash. (3) Liabilities to Assets Ratio. This ratio shows that a high percentage of the company’s assets are provided by debt, which also means that the firm has a high operating risk. In...
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...SECOND SEMESTER FEBRUARY 2015/2016 (A152) GROUP: B (5) WRITTEN REPORT CASE ANALYSIS CASE : Depreciation at Delta Air Lines: The “Fresh Start” PREPARED FOR: PROF. DR. MOHAMAD ALI B ABDUL HAMID PREPARED BY: NAME | MATRIC NO | AHMAD SHABIRIN BIN BAHRIN | 221521 | YELMI MARIANI BINTI ZULKIFLI | 221792 | LEONG SIAO ZHUEN | 230190 | NIWASHINI A/P SUBRAMANIAM | 230293 | ANG HUI QIN | 230294 | EXECUTIVE SUMMARY Delta Airline began 2008 with more worldwide destination of 321 destinations in 58 countries. In 2008 merged with Northwest Airlines, become the largest airline in the world. In May 1st 2007, Delta adopted policies regarding estimated lives & residual values for aircraft, but its was far from the 1st time it had changed its estimates. PPE (flight, ground property) are often more than half of the total asset. Depreciation of those asset is a major operating expenses and is not an attempt to measure the current value of assets. The amount of depreciation estimated by an airline company for each operating period is based in the cost of asset, estimates of asset lives, and assumptions about residual values at the end of the asset lives. These estimates & assumptions have changed through the years for almost all airlines. Depreciation practices had been change several time. CAUSE AND STATEMTN OF PROBLEM Delta, has changed assumptions of economic life of aircraft 4 times since 1986, each time extending the expected life by 5 years...
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...Delta Airlines Board of Directors Presentation October 18, 2013 Consultants: General Overview of Delta Airlines Strategy COMPANY’S SANDBOX High rivalry makes industry unattractive Profitability increasing, but still below cost of capital Consolidation trend has reduced rivals helping profits DELTA’S CURRENT STRATEGY Trainer refinery acquisition: using vertical integration to address Delta’s largest expense Metrics of improving flight completions, on-time arrival rate and decreasing mishandled bag to address customer satisfaction RECOMMENDATIONS • Trainer refinery: mitigate risks for success. • Customer satisfaction: domestic differentiation strategy and international best in class strategy Overview Industry Company Strategy Conclusions Review 2 The Airline Industry: At a Glance Across the Industry • Slow, but positive, global GDP growth • More financially-stable U.S. airline industry as merger integrations mature and restructured carriers emerge • U.S. carriers maintain capacity restraint with growth less than GDP • Inflationary pressures across all categories, with industry capacity discipline allowing for recovery of higher cost inputs • Corporate travel demand remains solid with corporate travel spend to increase 5% for 2014 Overview Industry Company Strategy Conclusions Review 3 Industry profitability improving, but returns still below WACC Profits have been improving in the past three years… …but...
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...Title of essay: Exploring Marketing with Delta Airlines as a Case Study Tedlow, Richard S. believes that the history of consumer product marketing in the United States can be divided into three phrases.1 The history of marketing will aid us in understanding the business world today and is thus useful in this essay to explore this in brief before embarking on studying Delta Airlines as a case study to approach the topic of marketing, in the context of the U.S Airline Industry. Phrase 1 is that of fragmentation and this is purely due to logistics reasons, rather than the result of any marketing strategy. This results in transportation of bulky goods from one region to another being relatively expensive and for a consumer product to achieve national distribution, a favorable ratio of weight and bulk to value is required. This phrase happened before the 1880s and the market size is restricted due to a lack of information, and it is characterized by a high margin and low volume. The second phrase of unification is the rise of mass marketing, with high volume and a low margin, which is the direct opposite of the first phrase of fragmentation. The development of this phrase is possible due to firstly, the development of the railroad and the telegraph and secondly, innovations in manufacturing technology. All the above innovations led to a more effective transportation and communication network that lowered the cost of mass marketing products by significant percentages. There is a rise...
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...Depreciation at Delta and Singapore Airlines Case (Introduction) A question is asked, “What makes a business successful?” While this question can have many answers, the financial standing among of the businesses in comparison can make a strong argument. One way to tell how financially fit said business by looking at the net earnings Airline companies consider Property, Plant, and Equipment (PP&E) as a significant portion under the asset category on the balance sheet. 1. Calculate the annual depreciation expense that Delta and Singapore would record for each $100 gross value of aircraft. (a) For Delta, what was its annual depreciation expense (per $100 of gross aircraft value) prior to July 1, 1986; from July 1, 1986 through March 31, 1993; and from April 1, 1993 on? 1a. Pre- 1986: (100-10)/10 = 9 annual depreciation 1986-1993: (100-10)/15 = 6 annual depreciation 1993-beyond: (100-5)/20 = 4.75 annual depreciation (b) For Singapore, what was its annual depreciation expense (per $100 of gross aircraft value) prior to April 1, 1989; and from April 1, 1989 on? 1b. Pre-1989: (100-10)/8 = 11.25 annual depreciation 1989-on: (100-20)/10 = 8 annual depreciation 2. Are the differences in the ways that the two airlines account for depreciation expense significant? Why would companies depreciate aircraft using different depreciable lives and salvage values? What reasons could be given to support these differences? Is...
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...Strategic Plan of Delta Airlines Abstract Delta Air Lines, Inc. (Delta) is an air carrier based in Atlanta, Georgia that provides scheduled air transportation for passengers and cargo throughout the United States and around the world. The Company offered customers service to destinations with Delta and Delta Connection carrier service to 321 destinations in 58 countries in January 2008. To Latin America and the Caribbean, Delta offered more than 500 weekly flights to 63 destinations in January 2008. It is a founding member of SkyTeam, a global airline alliance that provides customers with worldwide destinations, flights and services. Through the late 1970’s and 1980’s, Delta Air Lines worked to establish its name as the premier U.S. airline for customer service. The foundation of Delta’s customer service was based on a company with a culture of “southern hospitality” and employees who went above and beyond the call of duty. The company’s human resource strategy helped build the skills, motivation and opportunities for employees to deliver great customer service, and that allowed Delta to attract business travelers who paid premium prices for travel (Wright, 2008). Delta’s success shows just how important HR strategy can be, especially in its impact on company performance (Wright, 2008). The information published on Delta’s offers a great deal of information about the company, culture, and the benefits to jobseekers. Furthermore, the website provides an abundance...
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...Describe the Following for this Case Study- 1. Industry & Market: Delta is in the airline industry. It is a major economic force, both in terms of its own operations and its impacts on related industries such as aircraft manufacturing and tourism. There are few industries that create the amount and intensity of attention that airlines receive. Delta is the world’s largest airline in terms of both fleet size and scheduled passenger traffic. Delta’s major competitors are Southwest Airlines and United Airlines. 2. External Environment: (Factors beyond the control of the firm that influence its choice of direction and action, organizational structure, and internal processes) STEP Analysis: Social- Social factors and travel practices of individuals have extensive effects on the airline industry. There are individuals from a number of income classes and the airlines have to classify these people and ought to give them what they need. Technological- as clients’ wants develop in the future and there are more technological expectations the airline industry will have to be ready to meet their clients’ wants. Delta must keep up with competition and their technological advances such as online ticketing, booking, updating flight information, baggage check-in and handling of customer complaints all on the internet. Economical- Consumers tend to reduce travel if personal economic conditions are suboptimal, forcing airlines to cut capacity and production. Indicators such as unemployment indices...
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...Overview of Airline Industry Depreciation Policies, 12/22/99 CFRA believes that certain airline companies have recently obtained an earnings boost by extending the depreciable lives and increasing the residual values relating to operating aircraft. In addition, some airlines have recently recorded one-time write-downs and losses on the sale of aircraft, leading to questions about the proper depreciable life of aircraft. Typically, an airline’s aircraft depreciation expense is derived by initially estimating both the useful life and the residual value -- or the perceived fair market value of the aircraft at the end of its estimated useful life. To determine the periodic depreciation expense -- which reduces the value of the aircraft on the company’s balance sheet while increasing operating expenses -- the total cost of the aircraft is reduced by the estimated residual value and that sum is divided by the estimated useful life. By increasing the estimated residual value and extending the estimated useful life of its aircraft, an airline company would prospectively record a lower depreciation expense on its income statement and a higher value for each aircraft on its balance sheet. Consequently, the airline would receive a boost to earnings in all future periods and a boost to earnings growth during the four quarters following the change, as prior financial statements are not restated. While near term earnings would be boosted by the reduced depreciation expense, future earnings...
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...Delta 1. (a) Fuel cost drives the airline industry. Fuel cost average anywhere from 30% to 50% of total operating costs in the airline industry and crude oil and jet fuel costs had been on the rise. (b) The refining industry in the US is defined regionally by petroleum administration for Defense Districts (PADD), a system put in place during the Second World War. 2. Rising fuel cost is truly a problem for Delta. In 2011 Delta was hit hard by rising fuel cost. Deltas total fuel cost had risen by nearly $3 billion in 2011. Delta was already a company on the rebound. It closed in 2011 with $35 billion in revenue, up 10 percent from 2010, with profits up 40% to $854 million. Delta was driving profitability by flying fewer planes fewer miles with fuller seats. It had 80,000 employees worldwide and $3.6 billion in cash. Delta was the world’s largest airline in terms of both fleet size and scheduled passenger traffic and jet fuel costs were killing it. 3. Rising fuel costs were the result of growing supplies of domestic oil in the US and its inability to gain access to major refining centers like the US, East Coast and Gulf Coast districts. The rapid development and production of shale oil from domestic sources was landlocked. Pipelines were at capacity and oil was stockpiling. Transportation alternatives like railroads were costly 4. Refineries on the East coast were closing because they were suffering the highest crude acquisition cost. Although East Coast refineries...
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...Political-Legal Environment: Delta Airlines Delta Air lines is not immune to the political and legal structures that exist both domestically and globally. There are many factors that affect the political and legal structures for Delta in their domestic environment of the United States and also in the global environment of Europe. Teresa Cederholm in her article on MarketRealist.com states “The airline industry is widely impacted by regulations and restrictions related to international trade, tax policy, and competition” (2014) She goes on to elaborate further on issues that impact the airline industry such as “war, terrorism, and the outbreak of diseases” (2014). All of these issues require the government to set in and set different rules for airlines on how they operate both at home and abroad. There have been many factors that have recently affected the political and legal environment for Delta Airlines. One of the biggest events of our generation that affected the airline industry was the terrorist attacks of September 11th. After September 11th, the United States government many security regulations in place to make air travel safer for both the passengers and the crew of the air plane. With many of the restrictions in place, Delta Air Lines faced many problems financially. According to Cederholm, the revenue for all the United States airlines dropped to $107.1 billion in 2002 from the $130.2 billion in 2000 (2014). Cederholm goes on to state that “the global airline industry recorded...
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