Delta Airlines

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EXECUTIVE SUMMARY

This report provides an examinaion of the current structure, performance, stragergy and management of Delta Airlines, along with an industry analysis of the airline industry. The report uses current and past financial and statistical data for the company along with other up to date material to determine Delta's current market position and future potential.

The report finds that Delta Airlines has successfully emerged from its bankruptcy in 2005 to report successful returns in both 2007 and 2008. With its 2008 acquisition of Northwest Airlines Delta became the world's largest airline, further improving its position in the airline industry. Despite this current positive position report also finds potential adversities faced by Delta in the future due to falling profit margins. This has been mainly attributed to through increasing overheads in particular huge increases in fuel prices and cost associated with the accusation of Northwest Airlines.

The report concludes that Delta Airlines should hold its current market position into the future, and produce profitable margins. It does however acknowledge the potential threat from new entrants to the market, current cut price competitors and increasing overheads as problems that must be overcome in order to achieve this profitability.

INTRODUCTION

Delta Airlines is a United States based airline carrier that has grown to become the world's largest commercial airline. The airline that was established in 1928 has overcome many adversities to establish itself in the airline industry. 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. Despite filing for bankruptcy in 2005 Delta has managed to return to a profitable position and establish itself in a position to continue to be a major player in the commercial airline industry well into the future.

COMPANY STRUCTURE, CONDUCT & PERFORMANCE

Background

The airline industry in the United States has experienced significant changes in the spatial configuration of networks since the Airline Deregulation Act of 1978 (Lee, Chen and Shaw, 1995). Attempts have been made to study the structure of the market forces of the hub and spoke network in the airline industry.

Due to competition from low-cost airlines, the negative effects of 9/11 on travel and skyrocketing fuel prices, the company held over $20 billion in debt as of September 2005 and declared bankruptcy. Delta was able to emerge from bankruptcy in 2007, achieving a profit in the same year. In April 2008, Delta announced its intention to purchase Northwest Airlines; the two companies combined would create the world's largest airline (Gayle, 2008).

Market Structure

Delta competes in the increasingly unattractive airline industry. While there are many variables in the airline industry, it is also a business where the end product is essentially the same regardless of which airline provides the services. It does not matter whether you fly on a Delta or United jet. This fact makes it imperative that each airline attempts to find those traits on which the other airlines may need improvements in and then trying to take advantage of the situation by setting itself apart from its competitors.

The market structure for airlines is an oligopoly. This means that there are only a handful of companies that compete in this industry. Oligopolies are more competitive than monopolies, industries for which there is only one seller of the product, but are less competitive than industries that experience near perfect competition. Oligopolies are industries where set-up costs are extremely high, so people can't just enter the market even if there's money to be made in the industry. Attempting to commence a new airline in competition with United or American would be extremely...
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