...Human Resource Management Delta Case Study: Improving Delta’s Profit Margin Written by Filiz McNamara, Ogochukwu Udekwe and Vicki Troftgruben February 21, 2011 Table of Contents Page Introduction 3 External Environment 3 Internal Environment 18 Systems and Stakeholder Analysis 32 Conclusion 34 Problem Identification 36 Generation and Evaluation of Alternatives 37 Recommendation 38 Decision Implementation 39 References 40 Introduction Delta Airlines was founded by C.E. Woolman, an agriculture extension agent (Anthony, Kacmar, & Perrewe, 2010). C.E Woolman was not a banker, venture capitalist or war pilot, as many of the competing airlines were. He didn’t have the aggressive military style that many of the other airline founders had. What C.E. Woolman instilled within the employees at all levels of the organization is that people matter and should be treated fairly and equitably. This philosophy led Delta Airlines to be the leader in customer service from the company’s inception through the many mergers over the years. Through the difficult financial times when other airlines were laying off employees and filing for bankruptcy, Delta continued to pay their people well and keep them employed. There was an exception during the Ronald Allen CEO era of 1987 thru 1997. Human relations took a significant down turn during his tenure as CEO, especially during 1993 and 1994, but Delta decided to part ways with Allen and began repairing...
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...Global Competitive Strategy Executive Brief: Delta Airlines Executive Summary: After years of instability, decreasing profit margins, and volatile costs, the airline industry is experiencing stabilization and profitability. Though low-cost carriers, such as Southwest and Jetblue, were able to succeed during rough economic times, Delta should not launch a new stand-alone discount airline to directly compete within this market. As shown in Exhibit 1, despite recent changes in the industry - including consolidation, bankruptcy filings, and a forecasted positive economic outlook - intense competition and supplier power remain extremely high for the industry. Based on the following analysis, Delta is in direct competition with other legacy airlines such as United/Continental and American Airlines for the higher end market juxtaposed to its less direct competition with low-cost carriers, e.g. Southwest, which fall into a separate strategic group targeting a different market and consumer. As a result of Delta’s entrenched strategy of providing many routes and amenities for higher ticket prices, the company’s core competencies, resources, and activities do not align with the discount airline market and, therefore, the company should not launch a new low-cost carrier airline. Company and Competitor Analysis: Delta’s core competencies are to provide multiple domestic and international routes to travelers, customer service and luxury, technological innovation, and access...
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...MBA 610 Case Study: Southwest Airlines Corporation 1. Southwest Airlines Corporation is an extremely popular and profitable company due to their strategy of being the nations’ low-fare, high customer satisfaction airline. Southwest is able to offer the nation’s lowest fares due in part to their low operating-cost structure, the lowest in the domestic airline industry. This low operating-cost structure (refer to Exhibit 1 for 5 year financial highlights and 2004 data) is the basis on which Southwest builds its competitive advantage, as it allows Southwest to sell low fare tickets while still enjoying a gross margin percentage of sales (29.2% of sales in 2004) much higher than United Airlines (22.7% of sales), American Airlines (1.9% of sales), and Delta Airlines (18.9% of sales). Southwest achieved this low cost operating structure through eschewing the traditional “hub-and-spoke” approach used by their competitors, and instead flying short haul, medium haul, and point-to-point flights, allowing for more frequent flights. As a result, about 80% of Southwest’s passengers fly non-stop and the overall passenger length is approximately 758 miles. Additionally, Southwest consistently seeks out ways to improve its efficiencies and low cost structure. For an example, at Southwest, turnaround time (from the time a plane lands until it is ready for takeoff) takes approximately 20-25 minutes and requires a ground crew of four plus two people at the gate. By comparison, turnaround times at...
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...Dhian Ayu Paramita Management Control System Assignment 12/335910/EK/19096 Discussion Questions -- Case 3.1 Southwest Airlines Corporation Question 1 : What is Southwest’s strategy? What is the basis on which Southwest builds its competitive advantage? One of the goals of the company is to achieve its goals which can be seen through the Vision. Southwest’s Vision “ To become the World’s Most Loved, Most Flown, and Most Profitable Airline” can be achieved by planning good strategy. Strategy is also needed in order to achieve Southwest’s goals and purpose, which is “To connect People to what’s important in their lives through friendly, reliable, and low-cost air travel”. The main strategy of Southwest is the capability of the company to manage and take advantage of its competitive advantage. Major competitive advantage of Southwest Corporation is its people, just like current CEO Gary Kelly said on company’s official website : “Our people are our single greatest strength and most enduring long-term competitive advantage”. Additionally, Southwestt keep developing its sustainable competitive advantage by using Generic Competitive Advantage. It was the advanced of Michael Porter’s Five Force Analysis Model consist of Low Cost or Differentiation. a) The Low Cost Strategy or Cost Leadership Southwest used tight cost control and cost minimization by keeping their cost of goods sold low but not as an exchange of satisfaction of the customer...
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...Jacob Dreizin Rudiger Hesse Robert Martinez Lee Vu Hoang Nhat Victor Ka Sing Tsui Executive Summary On September 27th, 2010, Southwest Airlines announced its intention to buy AirTran Airways for $1.4 billion, with the merger being effected within two years. Although by number of planes, AirTran is just slightly more than one-quarter the size of Southwest, the number of routes that each airline presently flies is the same. We anticipate that the intended merger will thus affect the latter far more than might be suggested by the fleet size indicator. Indeed, if the U.S. Government approves the merger, Southwest would become a different entity. It would transform from a primarily regional airline into a national one, becoming America’s third-largest carrier by number of passengers flown. Its fleet would increase by over 25 percent, and it would fly two airplane types—the Boeing 717 and 737—rather than just one. Moreover, having acquired AirTran’s hub operations in Atlanta, currently the world’s busiest airport, Southwest would, for the first time, come into direct competition with Delta, the number two U.S. airline by number of passengers flown, which also claims Atlanta as its main hub. It would also take over AirTran’s Caribbean routes, thus gaining its first international operations. Our analysis will first provide a background of the U.S. airline industry, so as to illustrate the setting for this acquisition.We will then review the sources of both Southwest’s and AirTran’s present...
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...no. 2-0012 Southwest Airlines Corporation In 2001, Southwest Airlines Corporation’s (Southwest) year-end results marked 29 consecutive years of profitability. Southwest, which was incorporated in Texas, commenced customer service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston, and San Antonio. The company grew to become the fourth largest U.S. airline (in terms of domestic customers carried). In 2002, it boasted a fleet of 366 Boeing 737 jets. Southwest was the United States’ only major short-haul, low-fare, high-frequency, point-to-point carrier. (Refer to Exhibit 1 for five-year financial highlights.) Southwest had the lowest operating-cost structure in the domestic airline industry and consistently offered the lowest and simplest fares. Southwest also had one of the best overall customer service records. In 2001, the airline had 35,000 employees and generated total operating revenues of $5.6 billion from a passenger load factor of 68.1 percent. Its stock exchange symbol was LUV, representing Southwest’s home at Dallas Love Field, as well as the theme of its employee and customer relationships. Fortune magazine consistently recognized Southwest as one of the top 10 businesses to work for in the U.S. and one of the most admired companies in the world. Among airlines, Southwest ranked on top as the most admired airline worldwide from 1997 through 2001. In 2002, The Wall Street Journal reported Southwest Airlines ranked first among...
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...STUDY: Delta Airlines Inc. by Benjamin Godman Delta Air Lines is a major American airline and one of the world’s largest air carriers by traffic serving over 330 destinations in over 60 countries on six continents. Originally starting out operating crop dusters and delivery mail in Louisiana, Delta now utilizes over 700 aircraft and subsequent support activities like maintenance and operations. Delta airlines services over 165 million customers worldwide every year by averaging over 5000 flights daily. Delta Air Lines is now the oldest airline operating in the United States and is the result of multitude of airline mergers over the past 80 years that included Pan American World Airways and Western Airlines just to name a few. Its most recent merger with Northwest Airlines in 2010 was its largest in its history and in 2013 finished with $5.7 billion in unrestricted liquidity, generated $4.5 billion in cash from operating activities, reduced debt by $1.4 billion and funded capital expenditures of $2.6 billion and returned $350 million to shareholders. Delta’s 2013 pre-tax profits were up 147% in comparison with 2012. In recent years, Delta was a founding member of the Sky Team Alliance, created Delta One which is an Elite business cabin, introduced flatbed seats for international travel, Delta Comfort+ for increased comfort in the main cabin seating and other amenities to ensure its competitiveness with other airlines such as American Airlines Group Inc., Southwest Airlines...
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...key reasons why Southwest Airlines has such high customer satisfaction ratings in comparison with other airlines. Provide two (2) examples that illustrate instances of customer satisfaction to support your position. It isn’t often that the words ‘exceptional customer service’ and ‘airline’ are in the same sentence. Tricky rules regarding flight-schedule changes, high fees and sometimes-rude employees have given the airline industry a bad rap. It is this reputation that Herb Kelleher went up against when he founded Southwest Airlines in 1971. “Herb’s vision was that we were going to provide excellent customer service in an industry not known for treating customers well,” says Teresa Laraba, senior vice president customers for Southwest. They’ve succeeded. Now, 41 years later, the airline is known for exemplary service—corporate employees even send personal letters of thanks or apology for flight delays and other inconveniences to customers. The result of this effort is a high degree customer loyalty. The proof is exhibited through social media. At press time, southwest had more than 3.1 million ‘likes’ on its Facebook page, compared with 363,000 for United Airlines and 355,000 for Delta. Provide two (2) examples that illustrate instances of customer satisfaction to support your position. Focus on your hiring process: Southwest looks to hire people with engaging personalities and who are excited to work with the public. They do hire former airline industry employees, but only...
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...Group and Southwest Airlines Co. | | 2/11/2012 | Introduction For the purpose of this paper, Alaska Air Group (ALK) is the subject of the primary financial analysis with the majority of comparisons made against Southwest Airlines Co (LUV). For financial purposes, the airline industry falls under the transportation sector, consisting of airlines, railroad, and trucking and characterized by the movement of people and products. For the purpose of this analysis, comparable airline carrier ratios are used. An enhanced look into the specifics of Alaska and Southwest’s financial statements and accounting methods explain their positioning in the airline industry and reflect their performance in recent years. Activities Alaska Airlines reported record earnings for the year 2010, with a $203 million improvement from 2009. A 9.8% increase in passenger traffic over the previous year drove the revenue increase (Alaska Air Group, Inc., 2011). Alaska also led the ten largest carriers in on-time performance for the year. For the third year in a row, it ranked highest in customer satisfaction among traditional network carriers, as listed by J.D. Power and Associates (Alaska Air Group, Inc., 2011). Challenges * The safety and financial results could be harmed in the event of an accident or incident * Changes in government regulations or restrictions could drive operating costs up * Security concerns related to the airline industry as a whole * Labor...
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...Case analysis Texas Air, Inc. I. Main Problem * Pricing Strategy Sub problem: * Late departures * Poor service and safety II. Objectives * To defend its price leadership over its competitors in the airline industry. * To amend its pricing strategy to avoid massive losses. * To shun being the lowest rank out of fourteen major airline in its evaluation on time arrival. * To improve service and safety of the Texas Air Inc. III. SWOT analysis Strengths * Price leadership * Largest airline system * High number of established, high frequency discount rates Weaknesses * Poor service and safety * Ultra low-fares Opportunities * Growth and expansion * partnership Threats * Competition * Passengers complaints IV. Alternative Course s of Actions (ACAs) ACA1. Texas Air Inc. will now be increasing its price by 30%. Expect high quality service would be given to its consumers. ACA2. Set aside pricing philosophy Peanut and MaxSaver fares. V. Recommendation We decided to adapt ACA1 because this can be better strategic move for the Texas Air Inc. In this strategy, they can avoid passenger’s complaints such as late departures, canceled flights and dirty planes. We believe that they can give their passengers a high quality services. VI. Marketing Strategy Executive Summary: Early in 1987, Texas Air bought Eastern Airlines and the financially troubled People Express. Texas merged Continental, New York...
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...of Barron’s, a tag line in the “Marketweek” column reads, “Airlines and other money-losing companies.” 1 This tag line reflects the intense rivalry and the massive financial losses undergone in the airline industry in the past few months due to the economic recession and the 9/11 terrorists attacks. Amidst this airline industry malaise, however, JetBlue Airlines (”JetBlue”) launched service in February 2000 and generated over $41 million in profits in 2001.2 In this report, we explore the question, “Is JetBlue’s strategy conducive to sustaining profitability?” The answer is a resounding “Yes”. At the one thousand foot level, we believe that even in the unattractive airline industry in which companies try to differentiate on qualities other than price -- but in the end often compete on price -- JetBlue has a unique formula for success. It competes head-to-head with the majors, particularly Southwest Airlines (“Southwest”), on price, cost structure, features, and customer satisfaction. However, the company has carved a niche in which a “live and let live” strategy should prevail. Indeed, a rival attempting to bankrupt JetBlue may well cause more harm to itself than to its target. Airline Industry Overview Background At one time the airline industry resembled the utility industry to the extent that regulators determined what firms could and could not do. In the 1970s, a time of runaway inflation, and rising unemployment, many agreed that something had to change. In 1978 Congress passed...
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...The domestic airline industry is a difficult industry to compete and operate in; it is characterized by high capital requirements, high barriers to entry, low or no growth, rising costs, high competition, and strict government regulation. In addition to rising fuel costs, which happens to be a major issue, events such as the economic recession, swine flu outbreak, and 9/11 attacks have negatively effected or still continue to negatively effect domestic airline travel. To survive and reduce losses within the industry, some airlines still in business are merging to cut costs and adding baggage fees. However, low-cost carriers such as JetBlue and Southwest have emerged as winners and continue to achieve profits in a troubled industry. JetBlue has managed to stay competitive by offering points of differentiation in its service and aligning its low-cost strategy with its operations. JetBlue offers pre-assigned leather seats, free entertainment options such DIRECTV and SiriusXM radio, low fares, a better loyalty program, single class service, more nonstop flights, and a consumer friendly website. It maintains lower costs by operating two models of aircraft, employing non-unionized employees, and serving under-served markets. With its points of difference and ability to deliver high customer satisfaction, JetBlue has been able to differentiate itself from the competition. The airline is able to provide low fares and high quality service while also offering additional options at no...
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...Accounting 2557/2617 1 EXECUTIVE SUMMARY In the world today, oil is being used as the main source of energy for a lot of core industries. Due to its non-renewable characteristics and the global rising demand, oil has increased in its value, which results in many oil price crises recently. For all those industries using large amount of oil in operation, the risk of rising oil price is an extensive problem. The most efficient method to hedge against this risk is by using oil futures contracts. Because of its effectiveness, oil futures contracts are playing a key role in risk management for a number of industries including transportation and manufacturing. This report provides principal knowledge about oil futures and its role in hedging the risk of oil price volatility. A case study of US airline industry with most updated data obtained from Bloomberg system is also discussed, which suggests the effectiveness of oil futures in risk management for most airlines companies. However, in some case, the inflexible use of oil futures may create a burden in financial costs while not producing effectiveness in risk hedging. 2 TABLE OF CONTENTS LIST OF FIGURES 3 I. INTRODUCTION In the world of industrialisation, the role of oil is becoming more and more crucial especially for transportation and manufacturing industries. Those industries consume a large amount of oil, which constitutes the major part of their operational costs. However, having gone through the three oil...
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...JetBlue Airlines JetBlue was founded in 1998 by David Needleman and many of the first executives, including Needleman were former Southwest Airlines employees. First flight was from Buffalo, NY to Fort Lauderdale, FL in February 2000. One operating base: JFK International Airport Five focus cities: Orlando International, Luis Muñoz Marín International Airport (San Juan) International, Logan International (Boston), Long Beach and Fort Lauderdale – Hollywood International Airports. 84 destinations, 198 aircraft Company slogan: You Above All 15,000+ employees JetBlue’s Nasdaq price from 2002 to present (JBLU) Brief History of the Domestic and Global Airline Industry The two of the oldest airlines in the world which are still operating are Qantas (Queensland And Northern Territory Aerial Services) in Australia and KLM (Koninklijke Luchtvaart Maatschappij) Airlines, in the Netherlands, both of which started flying in 1920. Following World War I and many trained veteran pilots, with airmail service offered by the United States Postal Service through contract air carriers some of which evolved into PanAm, TransWorld, American, and Delta Airlines. Following World War II, the commercial airline industry continued to expand under government regulation. Until congress deregulated the airline industry in the United States in 1978 and airlines were able to set the prices for their own fares and choose their own destinations. ...
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...Southwest Airlines MGMT 420 Abstract Since the early 1980’s the number of passengers travelling via airlines has increased drastically. The airlines all went through a troubling time when the Deregulation Act of 1978 came into effect. It opened doors for more competitive airlines to be built and created a competitive environment for the airlines. Southwest Airlines since it was developed has had numerous challenges to overcome and to operate. Since those challenges have depleted it has risen to be one of the top airlines that offer the lowest air fares for its customers. They also offer their employees the best work atmosphere and culture. Their mission statement is directed to both employees and customers. They have placed multiple strategic plans that has made them successful especially after the effects of 9/11 on the economy and trust of the consumer. Though the employees of the airlines are mostly Union workers, Southwest Airline has only had one strike from their employees during their time of operation. Southwest Airlines utilized promotional tactics such as offering safe, reliable, low cost flights with exceptional service. The company wanted to ensure that it was meeting the needs of both leisure travelers that did not have the funds to pay for expensive flights and for the travelers that were on time restraints and had to get to their location on time. Southwest has successfully done better than its competitors when it comes to cost and respect. Their frequent...
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