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Honors Senior Capstone Projects Honors Program
Spring 2018
Delta Airlines: A Strategic Analysis Delta Airlines: A Strategic Analysis
Erin McKenna
Merrimack College
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McKenna, Erin, "Delta Airlines: A Strategic Analysis" (2018).
Honors Senior Capstone Projects
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BUS 4402W
STRATEGIC ANALYSIS AND DECISION MAKING
SECTION E
Honors Capstone Part 1
Erin McKenna
I,Erin McKenna, acknowledge that I have adhered to the Academic Integrity Policy described in
the Merrimack College student handbook.
October 3rd 2017
1. Introduction
This report will look at the Fortune 500 company Delta Air Lines. This report will look
Delta Air Lines’ strategy as well as an external analysis of the different factors in the industry.
Although Delta Airlines is in two different industries, airline and refinery, this report will focus
specifically on their position in the airline industry.The purpose of this report is to see where
Delta Airlines stands in the Airline Industry and whether or not their strategy is effective. I will
be using many different sources in this report with the majority of the information coming from
Bloomberg and Delta’s company website. This report will use a variety of different models,
graphs, and other analytical tools in order to examine the industry.
2. The Company
Although Delta Air Lines began as a small crop dusting company it as grown into one of
the world’s largest airlines. Regionally, Delta serves about 320 destinations in around 60
countries and operates a mainline fleet of more than 800 aircrafts. Today, Delta serves nearly
180 million customers each year and offers more than 15,000 flights daily (Bloomberg,
2017).Delta competes in two industries, airline and refinery. The refinery segment focuses on
providing jet fuel to the airline segment. This report will focus on the airline segment, which
provides air transportation for people and cargo both in the U.S. and internationally with 70 % of
the net sales coming from the U.S market . The airline segment also provides other airline
services such as maintenance and repair services for third parties (Bloomberg, 2017). The graph
below shows that Delta has focused most of its strategy on domestic flights which have brought
in the most revenue for the company.
Figure 1- Revenue
Source: Bloomberg
Delta’s strategy is based on alliances. These alliances allow individual carriers to extend
their service without flying into new territory. Delta’s alliance with SkyTeam had allowed them
to reach more than 900 destinations in more than 170 countries around the globe. This alliance
allowed Delta to acquire more global coverage. Delta also made similar alliances with companies
such as China Eastern Virgin Atlantic, and Korean Air to help increase Delta’s presence in Asia
and Europe (Bloomberg, 2017). This alliance also help to eliminate competition in the industry.
Delta also faces much competition from other large airlines such as American Airlines, JetBlue,
and United Airlines and Southwest (Bloomberg, 2017).
Another key part of Delta’s strategy is customer satisfaction. Delta has made significant
investments to improve its operational performance which consistently ranks first among the
major U.S. carriers. In 2016, Dela operated 241 days with zero mainline canceled flights which
was almost a 50% improvement over their performance last year (Bloomberg, 2017). By making
sure their customers are satisfied Delta hopes that they will attract more repeat customers.
2.1. Assessment of the Current Strategy of the Firm for the Selected Industry
The Airline industry is notorious for its difficulty to make a profit and 2017 hasn’t been
very different. In August the five biggest airlines’ S&P index fell about 7.5% losing about $10
billion in market value. Delta, along with two other carriers, cut third-quarter guidance for
revenue from each seat flown a mile and UBS Group AG predicts that soon others will be forced
to do the same.This is worrying due to the fact that the airline industry have been claiming that
industry consolidation would lead to steadier profits and smoother shareholder returns, not more
fare battles with low-cost rivals. This is particularly worrying for Delta because a large part of
their strategy is based on consolidation. Delta’s unit revue this quarter rose 2% to 3%, instead of
the 2.5% to 4.5% rise that occurred last quarter. Operating margin is expected to be around
16.5% to 17.5% instead of the 20% seen earlier. Delta has “blamed this fall on “a slow recovery
in domestic” ticket prices purchased close to travel and higher fuel costs linked to the hurricane a
year earlier” (Schlangenstein, Sasso, 2017).
Figure 2 - Equity
Source: Bloomberg
The graph above displays Delta Air Lines equity since 2007 and predicts the values until
2019 (blue line = earnings per share) (orange line = revenue). Clearly Delta’s equity fluctuates
quite a bit. This fluctuation is probably due to the unpredictable nature of the industry. Delta has
clearly improved since 2008 when the recession hit. Clearly travel would be the first thing that
many people would give up when a recession hit.
Delta is also in a great position to fly with an older fleet which means they can wait until
airplanes are cheaper. This also means lower ownership costs that outweigh the rise in fuel
prices. This purchase strategy has really helped to improve profits for Delta. Delta has also been
very smart and has sold spare parts from their old aircrafts which have been a great source of
additional revenue (Bloomberg, 2017).
Personally I believe that Delta’s strategy is as good as it can be for any airline company.
While the strategy of consolidation is not producing the perfect results Delta’s revenue and
operating margin are both rising even if it's not as much as it has in previous years. Delta’s
customer service is also helping Delta to stay at the top of industry and the company has done a
great job of avoiding major scandals and bad press. However, Delta does face competition from
American Airlines, Southwest and other airlines and this is a price-driven industry that allows
other companies that offer lower prices to take some of Delta’s market share. All in all Delta’s
strategy has done a great job of keeping the company at the top of an industry that is extremely
difficult to compete in.
3. External Analysis
3.1 The General Environment
When analyzing the current state of the airline industry it is important to look at many
different factors. Over the next two to five years there will be many external factors that Delta
will need to take into consideration. When looking at political and legal factors facing the
industry one of the biggest current problems is travel bans. President Trump has imposed several
travel bans that have prevent travel from many different countries and has caused many problems
and loss of revenue for airline companies. Along with that sanctions and regulations imposed can
also cut off potential revenue. Also, living in a post 9/11 world many people are still fearful for
their safety on flights and prefer to travel through other means which means more revenue loss
for the industry.
Along with the political and legal factors there are also many economic factors that affect
the industry. Fuel prices have always been a concern for the industry but with the recent
hurricanes and earthquakes that have rocked Texas, Florida, Mexico, and many Caribbean
Islands fuel prices will definitely even more of a concern for airline companies. Along with the
fuel prices, recessions are always a worry for the industry. Traveling is a luxury and when
recessions and depressions hit the airline companies are the first to feel the blow as shown in
Figure 1, Delta's revenue took a big hit during the 2008 recession. The spread of diseases such as
Ebola can also halt air travel (Cederholm, 2014).
The recent natural disasters are not only an economic problem but they are also an
environmental problem all of the locations hit by disasters were popular vacation definitions. It
will be years before these places are completely rebuilt and it will cost the airline industry
millions in revenue. Natural disaters is the wrong areas can lead to huge losses for airlines. Due
to high fuel prices, airlines should also be looking at cheaper more environmentally friendly
alternatives (Cederholm, 2014). Becoming more green is also a concern for many flyers which
means that airlines have had to find more environmentally conscious ways of conducting
business.
A major social problem in the industry is the recent bad press the airline industry has
received. With the advent of smartphones people have the ability to record everything and many
airlines, especially United Airlines, have received very bad press and it has cost them a lot in
potential revenue. Delta has tried to find a solution for both of these problems by promoting
Delta in a positive light by sending aid to those in Puerto Rico (Morrow, 2017). On the plus side,
studies predict that millienal travel will increase by 50% by 2020 (Cederholm, 2014). This means
that airlines should pay special attention to millienals and their prefrences in order to gain their
business.
Finally, technology is a huge factor in the airline industry. New innovations are being
invented everyday and it is important for the airline company to keep up with advancements. In-
flight entertainment and free wifi are now considered an essential need by most flyers and it is
important that airlines provide these accommodations and anticipate new technology that may
soon emerge. These technological changes also give Delta a chance to differentiate themselves
from their competitors. On October 1st, Delta will become the first U.S global carrier to offer
free in-flight mobile messaging. Along with that Delta is also adding more wi-fi and more
seatback entertainment (Serna, 2017). Airlines should also be using technology to their
advantage and looking for ways to cut costs with more efficent ways of running their
machinery(Cederholm, 2014).
3.2 Industry Analysis
Exhibit 1: Porter’s Five Forces Model
Force
Weak
Medium
Strong
Likely Change
Threat from existing
competition
X
Increase
Threat from buyers
X
Increase
Threat from suppliers
X
No change
Threat from new entrants
X
No change
Threat from substitute
products
X
No change
Threat from existing competition:
The threat from existing competition is fairly high in the airline industry and that is
dangerous. There are a large amount of firms in the industry all of which are roughly the same
size. There is also a lack of product differentiation with most airlines flying to the same
destinations and offering similar flying experiences. Since experiences are so similar, if one of
Delta’s competitors offers a better price the customer is more likely to choose them. Certain
airlines have been able to create “hub-and-spoke” systems that have allowed them to become the
dominant carrier in a certain region (Barney & Hesterly, 2015), however for the most part
airlines are the same. With the ease of looking up cheap flights on the internet it is likely that the
threat of existing competitors will increase in the coming years with other airlines offering lower
prices.
Threat from buyers:
The threat from buyers is also fairly high in this industry. As stated before, the product
differentiation is low which means that the buyer’s decision is made mostly on the basis of price.
The rise of third-party sites that allows buyers to easily compare prices has greatly risen the
threat of buyers. Travelling is a huge expense and buyers aren’t interested in being loyal to one
airline they are interested in finding the cheapest flight. This puts a lot of power in the buyer’s
hands and the power is likely to increase within the next few years.
Threat from suppliers:
The threat from suppliers in the airline industry is low. There is a large number of firms
and the suppliers all supply similar products. Just as there is not much product differentiation in
the industry, there is also not much product differentiation among the suppliers. This low product
differentiation puts more power in the buyers hands and lets them have more choice when it
comes to suppliers. There are also a large number of suppliers in the industry so the airlines have
a lot of choices when it comes to purchasing supplies. This threat is likely to stay relatively low
for the foreseeable future.
Threat from new entrants:
The threat from new entrants in the airline industry is really low in airline industry. The
industry is really hard to break into and it costs an extraordinary amount of money. The entry
costs are high, the operating costs are high and the competition is high. It is even harder for a
new airline to get a piece of the market share, airlines that have been around for years still have
difficulty gaining market share. Customers also value name recognition in this industry so an
unknown name is unlikely to attract new customers. All in all the threat of new entrants is low
and it is unlikely to change anytime soon.
Threat of substitutes:
The threat of substitutes is medium in this industry. Since the flying is the only way to
travel to certain destinations there is no real substitute for airlines. The only substitutes that exist
are other modes of transportations such as trains and cars. Unless a new form of travel is
invented this threat will continue to remain the same.
4. Conclusion of the First Report
Clearly, the airline industry is a difficult industry for any company but Delta has
managed to remain at the top of the industry for many years. They have managed to come up
with a strategy that is not perfect but does allow them to hold a large chuck of the industry's
market share. While Delta is at the top right now this industry is fickle and they must be aware of
political, economic and technological threats. They must also be aware of the threats for existing
competition and the threats of buyers. The next report will look at Delta Air Line’s positioning,
it’s main resources and capabilities as well as an internal analysis of the country.
References:
Barney, J. B., & Hesterly, W. S. (2015). Strategic Management and Competitive Advantage (5th
ed.). Hoboken, NJ: Pearson.
Bloomberg. (2017) Bloomberg Professional. [Online]. Available at: Subscription Service
(Accessed:27 September 2017)
Cederholm | Sep 3, 2014 2:55 pm EDT, T. (2014, September 3). Must-know: External factors
that influence the airline industry. Retrieved October 01, 2017, from
http://marketrealist.com/2014/09/must-know-external-factors-influencing-airline-industry/
Morrow, A. (2017, September 30). Third Delta humanitarian flight carries first responders,
supplies to support Puerto Rico. Retrieved October 01, 2017, from http://news.delta.com/third-
delta-humanitarian-flight-carries-first-responders-supplies-support-puerto-rico
Schlangenstein, M., & Sasso, M. (2017, September 05). The Five Biggest Airlines Plunged
7.5% in August, Wiping Out $10 Billion in Market Value. Retrieved October 01, 2017, from
https://www.bloomberg.com/news/articles/2017-09-05/airlines-10-billion-monthly-swoon-keeps-
wall-street-on-edge
Sirna, C. (2017, September 26). Delta to offer free mobile messaging in flight. Retrieved October
01, 2017, from http://news.delta.com/delta-offer-free-mobile-messaging-flight
BUS 4402W
STRATEGIC ANALYSIS AND DECISION MAKING
SECTION E
Honors Capstone: Part 2
Erin McKenna
I, Erin McKenna, acknowledge that I have adhered to the Academic Integrity Policy described in
the Merrimack College student handbook.
November 14, 2017
1. Introduction
In my first report I looked at the airline industry and the factors that are affecting it. In this report
I will be looking further into Delta Airlines and their individual performance in the airline
industry. This paper will focus primarily on what kind of positioning strategy Delta has chosen to
use in order to compete and gain market share in this industry. I will also be looking at Delta’s
business model and the resources and capabilities. I will conclude this report be conducting an
internal analysis using the VRIO model. In order to conduct this analysis I will be collecting
information from a variety of different sources and using different models in order to display my
findings.
2. Strategic Positioning
As I displayed in my first report the airline industry is an extremely difficult industry
both enter and compete in. It is because of the challenges airlines face in this industry that
coming up with a positioning strategy is also a challenge for many airlines. Some of Delta’s
competitors such as Southwest have chosen a cost-leadership strategy, where they offer the
lowest ticket prices to customers with a lack of customer service. Baumwoll, Howland, Kruse,
Lamb, Shepard, 2008). Delta, on the other hand, has chosen a product differentiation strategy.
Delta’s ticket prices do fall on the higher end of the industry average but they provide service
and accommodations that increase consumers’ willingness to pay.
In order to keep their ticket prices high Delta has spent years trying to increase the flying
experience. Delta has added better food, craft beer, and more on flight movies. Along with those
improvements, Delta had begun including free in-flight meals in 10 domestic markets. Delta is
constantly trying to improve the customer experience and it does this through conducting its own
research. Delta has used heart rate monitors to track customers’ heartbeats at 11 stress moments
during the travel experience. These moments included looking for parking at the airport, going
through security, and boarding the plane. By doing this Delta looks for ways to improve the
travel experience at every moment. Some of these improvements include upgrading airports and
Wi-Fi along with studying and implementing line management tactics used by companies like
Disney. (Birkner, 2017).
Delta’s svp and CMO Tim Mapes says, “The challenge is to make every customer feel
like one in 180 million versus one of 180 million—how do we personalize and customize, and
humanize, everyone’s particular experience? We respond in ways we think can make things
better, and then listen again, to see if we can refine things.” (Birkner, 2017).
As I talked about in my first report the airline industry is a price-based industry, where
most customers make their choice based on which company is offering the lowest price. This is
why it is interesting that Delta has taken a different approach. Delta’s positioning strategy is
based around the idea that customers will be willing to pay a little more for a ticket if their
overall travel experience is more enjoyable. Even though this is a price-based industry this is also
an industry that is extremely low in customer satisfaction so it is possible that many customers
would be willing to pay more for less frustration.
3. The Business Model and Firm Resources and Capabilities
Similar to most companies, Delta Airlines has had to change their business model a few
times in order to keep up with the changes in an industry. In 2005, Delta declared bankruptcy
and since then it has had to change its business model in order to adapt to the ever-changing
industry. Today Delta’s business model focuses on attracting corporate travelers. This can be in
their recent marketing campaign “4 a.m.” which salutes all the travelers that wake up early in
order to catch their flights. Delta’s business model also focuses on shifting their cost structure
from fixed costs to variable costs as much as possible. This business model is supported by
Delta’s operating strategy, which focuses on four key activities: “purchasing used aircraft,
vertical integration, low-unionization of labor, and industry-leading customer service” (Sam C,
2015). Delta Airlines was also a pioneer of the hub and spoke system (Delta Flight Museum,
2017). This system involves a hub, which is a central airport and the spokes which are the routes
out of that central airport. Hubs allow airlines to offer more flights for passengers (Bonsor,
2017).
Delta’s business model is also highly focused on delivering high customer service. Their
commitment to customer service can be seen through the billions that the company has invested
in enhanced training programs for customer service agents, designed to try and improve the
customer experience (Sam C, 2015). A large part of Delta’s customer service deals with great
employees. Below I have listed the resources and capabilities that Delta has in order to
effectively execute their strategy.
Exhibit 1: List of resources and capabilities for the company
Resource/Capability
Description
Customer Service
Delta has focused lots of attention on
making sure they provide their customers
with the best service possible. Constantly
improving the travel experience is the
cornerstone of Delta’s business model.
Marketing Campaign
Delta’s marketing is what keeps Delta in
the consumers mind when they are looking
for a flight. Delta is one of the oldest
airlines in the U.S. and its name
recognition has allowed it to keep a great
reputation in the eyes of consumers.
“Hub and Spoke” model
This model allows Delta to increase the
amount of flights it can offer its
passengers, which increases revenue for
Delta.
Purchasing old aircrafts
This strategy leaves Delta with lower fixed
costs but higher maintenance costs,
allowing them to quickly scale up or down
to meet demand, while not being burdened
by the same level of fixed costs of other
airlines.
Vertical Integration
By purchasing their own oil refinery Delta
Airlines is able to save millions that can be
used to fund other endeavors.
Culture
88% of employees think that the company
is a great place to work (Delta.com). Delta
puts so much focus on making sure their
employees are happy so that they provide
the best service possible. This culture is a
large part of Delta’s success.
4. Internal Analysis
While there are many resources and capabilities that Delta uses in order to execute their strategy
some internal analysis is necessary in order to see if these resources will allow Delta to have a
sustained competitive advantage.
Exhibit 2: Internal Analysis
Resource/Capability
(V)aluable
(R)are
Difficulty to be
(I)mitated
Customer Service
Y
Y
N
Marketing Campaign
Y
N
N
Hub and Spoke
Model
Y
N
N
Purchasing old
aircrafts and Vertical
Integration
Y
Y
N
Culture
Y
Y
Y
Customer Service:
As I mentioned previously in this report, exceptional customer service is the cornerstone
of Delta’s business model and is at the center of their positioning strategy. Delta is constantly
talking with their customers and researching new ways to make the travel experience better.
Delta has added more beer options, free in-flight Wi-Fi, nicer lounges and they have all been in
an effort to make each customer feel special (Birkner, 2017). This resource is extremely valuable
to the company because without it they could not conduct their strategy. This resource is also
rare, as many other aircrafts such as Southwest and other budget airlines don’t focus on
providing the same level of service. This resource is not difficult to imitate because other airlines
could offer the same customer service if they conducted similar research or adopted the same
positioning strategy as Delta.
Marketing Campaign:
Delta’s marketing campaign is valuable as it conveys their strategy in multiple ways
because it displays both the customer service that makes buyers willing to pay more and it shows
that they are targeting those business travelers. Campaigns such as their “4 A.M” campaign
portray Delta has a company who will treat those early morning travelers the way they deserve to
be treated (Birkner, 2017). It is Delta’s marketing campaign that shows potential consumers what
they get when they choose to fly Delta. Without their marketing, consumers would not be aware
of the special amenities that a flyer gets when they choose Delta. This resource is not rare of
difficult to imitate because many other airlines could choose to do similar marketing campaigns
that portray similar messages.
Hub and Spoke Model:
Delta’s hub and spoke system is valuable because it saves Delta a large amount of money
that they can put back into creating a travel experience that customers are more willing to pay
money for. Since airplanes are an airlines most valuable commodity and every flight has a set
cost the more seats that an airline is able to fill the closer it gets to showing a profit (Bonsor,
2017). This hub and spoke system was at one point rare but over the years several other airlines
have adopted a similar system making the system also very easy to imitate.
Purchasing Old Aircrafts and Vertical Integration:
Both of these aspects of Delta’s operating strategy help to save Delta money in
innovative ways. Through this system Delta has been able to vastly reduce its fuel prices and this
has allowed save funds (Sam C, 2015). While this operating system provides great value to the
company it is not very rare and is easy to imitate. Other companies could easily implement a
similar operating system and some other airlines have already implement similar strategies.
Culture:
The culture of Delta is one of the company’s most valuable resources. 88% of employees
think that Delta is great place to work and that is all due to the culture. Delta’s strategy rests in
the belief that if the company treats the employees well the employees will treat the customers
will (Banstetter, 2015). This culture is one that is unique to Delta making it both rare and
difficult to imitate making it one of the few resources and capabilities that can help Delta
maintain a sustained competitive advantage.
4. Conclusion of the Second Report
In this report I have looked a Delta’s product differentiation strategy and describe Delta’s
business model. I have also done an internal analysis on the company and looked at the different
resources and the capabilities that contribute to Delta being able to execute its strategy. In the
next report I will be conducting a SWOT analysis and will be offering some solutions to Delta’s
strategic problems.
References
Banstetter, T. (2015, December 17). Investor Day: Delta lays out strategy for sustained success.
Retrieved November 13, 2017, from http://news.delta.com/investor-day-delta-lays-out-strategy-
sustained-success
Baumwoll, J., Howland, B., Kruse, J., Lamb, S., & Shepard, J. M. (2008, June). Delta Airlines:
An Analytical View. Retrieved November 8, 2017, from
https://www.academicmind.com/unpublishedpapers/business/management/2008-06-000aao-
delta-an-anyalytical-view.html
Birkner, C. (2017, April 09). How Delta’s Focus on Customer Experience Turned a Bankrupt
Airline Into a Powerhouse Brand. Retrieved November 8, 2017, from
http://www.adweek.com/brand-marketing/how-deltas-focus-on-customer-experience-created-a-
powerhouse-brand/
Bonsor, K. (2001, June 14). How Airlines Work. Retrieved November 7, 2017, from
https://science.howstuffworks.com/transport/flight/modern/airline3.htm
C, S. (2015, December 8). Delta Airlines: Flying High in a Competitive Industry . Retrieved
November 7 , 2017, from https://rctom.hbs.org/submission/delta-airlines-flying-high-in-a-
competitive-industry/
History. (n.d.). Retrieved November 8, 2017, from http://www.deltamuseum.org/exhibits/delta-
history/first-in-the-air
BUS 4402W
STRATEGIC ANALYSIS AND DECISION MAKING
SECTION E
Honors Capstone: Part 3
Erin McKenna
I, Erin McKenna, acknowledge that I have adhered to the Academic Integrity Policy described in
the Merrimack College student handbook.
December 7, 2017
1. Introduction
In the first two reports I provided you with an overview of Delta Airlines, their current
strategy, their resources and capabilities, and the overall environment of the industry. In this final
report I will be conducting a full SWOT analysis on Delta Airlines and look at their internal
strengths and weaknesses as well as their external opportunities. After conducting this analysis I
will be drafting some strategic questions that I feel Delta is facing as well as provide my
recommendations to solve each question. The main sources that I will be drawing from are from
my last two reports which consisted of Bloomberg, Delta’s website, and others.
2. SWOT Analysis
As I explained in my first report Delta Airlines has a lot of external factors that have the
potential to affect the company both positive and negative. One opportunity that Delta has is the
potential to capitalize on new technology. New passengers are constantly looking for new
features that make each airline different. As the world becomes more and more technological so
does each industry and Delta now has the opportunity to use this to their advantage. In the future
as technology become a greater part of our lives Delta has the chance the make their in-flight
experience more technology oriented offering new feature to entice flyers. Delta has already
begun to do this by adding in-flight Wi-Fi and more in-flight entertainment (Serna, 2017). While
these features are great technology is only going to get more and more advance and in the future
the use of technology could provide Delta with a competitive advantage.
Another opportunity that Delta has the potential to become greener. As the condition of
the environment become a bigger and bigger concern many consumers are trying to make their
own lives greener and a large part of this buying products from companies that are concerned
with their environmental footprint. Choosing new more environmentally friendly alternatives is
an opportunity for Delta to gain a great positive image and draw a wide customer base.
Another opportunity that Delta has is to use the increased use of social media to their
advantage. Nowadays people have the ability to share any moment they want with the world and
this can be both a positive thing and a negative thing for companies. Many airlines have been
affected negatively by social media and have lost out on business due to the bad press. With the
social media presence growing Delta has the opportunity to promote themselves in a positive
light. They can use their own platforms to talk about all the great charity work they do and they
can encourage their passengers to share their flight experience on social media.
Along with opportunities there are also many threats that Delta faces. The first threat is
the threat of travel bans. In this current administration several travel bans have already been
imposed and the future of travel is very uncertain. It is very likely that in the future there will be
new travel bans and sanctions that will be imposed and these could negatively affect Delta
Airlines and the airline industry as a whole.
Another threat that Delta faces are depressions and recessions. Depressions and
recessions are a potential threat for almost every industry but particularly for airlines. Travel is a
major luxury and when a recession hits the airline industry one of the first industries affected.
Delta has already been affected in the past by recessions the most recent being in 2008. Another
recession is inevitable so it is a constant threat for Delta.
Another threat that Delta faces is the potential for international disasters. Disasters can
include natural disasters as well as political violence and disease breakouts. When disasters strike
in popular destinations it cuts back on people traveling and negatively impacts airlines. Recent
disasters such as the hurricane hitting Puerto Rico as well as outbreak of Ebola have already had
a negative impact on airlines (Cederholm, 2014. It is inevitable that another disaster will hit and
it will hurt Delta Airlines.
Exhibit 1: List of Opportunities and Threats for Delta Airlines
A
long
with
the
external opportunities and threats that Delta faces they also have many internal strengths and
weakness that they need to take into consideration. The first strength that Delta has is customer
service. Delta takes very good care of their employees and spends a lot of time and
moneymaking Delta a great place to work. By doing this they make sure that their employees
provide superior service to their customers. This great customer service is rare in the airline
industry and it brings a tremendous amount of value to the company.
Another strength that Delta has is their culture. Deltas culture that stresses great
employees and great service. While this culture brings value to the company it isn’t that rare due
to the fact that other airlines have a similar culture. So while this is a strength for Delta it is not a
super strength. Delta will need to add some new rare aspects to their culture in order for their
culture to provide them with a sustained competitive advantage.
Another strength that Delta has is their strategy choice of purchasing old aircrafts. This
strategy is one that isn’t used by many other airlines, which makes it rare, and it provides a lot of
value to Delta. It helps lower their fixed costs but higher maintenance costs which allows them to
quickly scale up or down to meet demand, wile not being burdened by the same level of fixed
Opportunities
• Capitalize on New Technology
• Become Greener
• Circulate Good Press
Threats
• Potential Travel Bans
• Depressions and Recessions
• International Disasters
costs as other airlines. This is a strength that really benefits Delta particularly when it comes to
saving money, which is vital in this industry due to the fact that it is extremely difficult to draw a
profit.
Of course every company has their weaknesses as well as their strengths and Delta is no
exception. Delta’s first weakness is their reliance on the North American market. This is not
necessarily a bad place to focus on seeing as there is great profitability among North American
Airlines. However, as I displayed in my first report Delta draws almost all of their profit from
domestic flights (Bloomberg, 2017). Their reliance on the North American market cuts them off
from a large international market and it makes it risky focusing on one market.
Another weakness that Delta has is their hub and spoke system. While the system does
provide some value for the company it also hinders the company. The system increases the
amount of flights that Delta is able to offer but it also makes them more vulnerable. If there is
something wrong with one of the hubs, such as bad weather, it forces Delta to cancel many,
many flights (Light, 2017). This hub and spoke system makes it possible to offer a lot of flights
but it also forces them to cancel a lot of flights.
Another weaknesses that Delta has is their past debt. Just like many airlines Delta has
found themselves in some financial problems and it has been a weakness in the past for Delta.
Now they have been able to get themselves out of the hole but it is still a weakness for Delta
because it forces them to design their strategy in a certain way. Delta isn’t able to make risks or
change their strategy because they don’t have any parachute to fall back on.
Exhibit 2: List of Strengths and Weaknesses for Delta Airlines
Strengths
Weaknesses
• Customer Service
• Culture
• Purchasing Old Aircrafts
Strategy
• Reliance on North American
market
• Hub and Spoke System
• Past Financial Issues
Strategic Questions:
1. How can Delta portray themselves in a positive light on social media given that they have
great customer service but also have had past financial issues?
a. This is an important question for several reasons. Gaining a positive brand image
on social media is a huge opportunity for Delta. However, social media is a
double-edge sword. Since one od Delta’s strengths is their strong customer
service, advertising that would be really great for the company. Since Delta has
had some past financial issue they could gain bad press from the rise of social
media.
2. Should Delta focus more on expanding into the international market, given the threat of
international disasters?
a. This question is important because Delta’s reliance on the North American market
is a big weakness for Delta. Expanding into the international market could be a
really great opportunity for Delta; however, the international market also poses a
threat. Delta needs to decide if the benefits outweigh the risks.
3. Will Delta becoming more focused on technology hurt their customer service given the
fact that it a large part of their culture?
a. This question is important is because becoming more technologically innovative
is a huge opportunity for Delta to draw in consumers. However, they run the risk
of becoming too technology oriented and they will lose the personal touch that
makes customer service such a strength for the company.
Strategic Recommendations
1. My recommendation is the Delta should to control social media as much as they can and
capitalize on their positive press. On their own social media Delta is able to control what
is released so they can promote the best aspects of the company and they can promote
how they have turned around their financial status. They can also encourage passengers
to talk about their great flying experiences on Delta. By generating more positive press
they are able to outweigh and negative press that may come up from the use of social
media.
2. My recommendation is that Delta should reposition themselves and enter the
international market. Even though Delta has positioned themselves as a North American
airline and I think they are missing out on a large profit that could be gained if they
entered the international markets. Even though potential international disasters are a
threat for Delta I still think that the loss that a disaster could bring is nothing compared to
the gains that could come from entering this new market.
3. My recommendation is that Delta combines the benefits of technology while still having
a personal touch. I think that Delta should be as innovative as possible before replacing
people. By adding new technology while still having the human touch Delta Airlines will
be providing the best of both worlds. This will allow for a unique position for Delta to be
in and I think that it will appeal to all markets, those who want innovation and those who
want great customer service.
4. Conclusion
Throughout these three reports I have looked at Delta Airlines’ performance in the
Airline Industry. Through several different types of analysis such as Porter’s Five Forces, the
PESTEL model, and the SWOT model I have conducted a full internal and external analysis of
the company and from this analysis I developed the strategic questions that I think are the most
important for Delta to focus on. I have also provided my personal recommendations for what
actions Delta should take in the future to address these questions. I hope that this report has
provided a well-rounded analysis of Delta’s past and present as well as useful recommendations
of where the company should go in the future.
References
Bloomberg. (2017) Bloomberg Professional. [Online]. Available at: Subscription Service
(Accessed:27 September 2017)
Cederholm | Sep 3, 2014 2:55 pm EDT, T. (2014, September 3). Must-know: External factors
that influence the airline industry. Retrieved October 01, 2017, from
http://marketrealist.com/2014/09/must-know-external-factors-influencing-airline-industry/
Light, L. (2017, April 10). Delta's latest mess highlights an industry weakness. Retrieved
December 01, 2017, from https://www.cbsnews.com/news/delta-flights-canceled-airline-
weakness/
US airline debt and balance sheets Part 1: American, Delta and United opt for nuanced strategies.
(2016, February 18). Retrieved November 29, 2017, from
https://centreforaviation.com/insights/analysis/us-airline-debt-and-balance-sheets-part-1-
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