Delta Air Lines, Inc. is one of the largest and most successful air carriers in the United States. Originally founded as a crop dusting service in 1924, Delta was led for 40 years by an agricultural scientist and pilot named Collet Everman Woolman. Until his death in 1966 Woolman dominated the operations of Delta. In this sense he was similar to his three major competitors, Eddie Rickenbacker at Eastern, Juan Trippe at Pan Am, and Howard Hughes at TWA. Expansion through acquisition characterized the era that followed. Then, in the 1990s Delta adopted an aggressive business strategy in order to retain market share in an increasingly competitive airline industry. The new strategy was an enormous success, and in 2000 Delta enjoyed a net income of more than $1 billion and carried a record 117 million passengers. Entering the new century the airline had extended its route network to serve 221 cities in 48 states, and an additional 118 cities in 47 foreign countries. After the September 11 attacks, which led to the decline of the airline industry in the US, many of the major carriers in the industry went bankrupt. Delta was one of the few major carriers that managed to stay afloat. However, in mid 2004, the airline announced that it might have to file for bankruptcy protection if it failed to obtain pay cuts of $1 billion from its pilots, who were the only unionized employees at the airline. The case discusses the problems at Delta and their role in the financial decline of the airline. Issues like the pilot union impasse, increasing operational expenses and legacy costs, falling yields and severe competition from low cost airlines are discussed in detail. The case also outlines the restructuring plan of Delta, and the future of Song, the airline's low cost subsidiary.
Delta Air Lines Slogan: "Delta Air Lines. We love to fly. And it shows."
Delta Air Lines Mission Statement:
"We—Delta's employees, customers, and community partners together form a force for positive local and global change, dedicated to bettering standards of living and the environment where we and our customers live and work."
Principal Subsidiaries: ASA Holdings, Inc.; Atlantic Southeast Airlines; Delta Technology, Inc.; Comair Holdings, Inc.; WORLDSPAN, L.P. (40%)
Principal Competitors: AMR Corporation; Southwest Airlines Co.; UAL Corporation, JetBlue Airlines, AirTran Airways.
1924: Huff Daland Dusters, a crop dusting operation, is founded. 1929: Delta inaugurates passenger flights between Dallas and Jackson, Mississippi. 1953: Delta merges with Chicago and Southern Airlines.
1967: Delta merges with Delaware Airlines, becomes Delta Air Lines. 1972: Delta acquires Northeast Airlines.
1986: Delta acquires Western Air Lines.
1994: Delta's Leadership 7.5 program is launched, seeking to dramatically restructure and streamline operations. 2000: Total number of passengers carried during the year reaches an all-time high of 120 million.
We have found two major problems in Delta Airlines. They are: 01. First one is the increasing operational expenses and legacy cost. As per Exhibit 5, ratio says that Delta Airlines has a highest percentage of labor cost (43.4%). Then, in 2002 per barrel was $26, then in 2003 it was in $ 31 and in 2004 $47. It increases the operating expense 10 – 20 percent. In Delta Airlines, pension formed the biggest portion of legacy cost. Delta’s pensions were more than $5.7 billion in mid 2004. 02. Second problem is falling yields and serve competitors from low cost airlines. External Environmental Scanning:
Political & legal:
First of all, to get access into the capital market on acceptable terms Delta Airlines need to seek restructure their costs under Chapter 11 of the U.S. Bankruptcy Code. After the September 11 attacks, which led to the decline of the airline industry in the US, many of the major carriers in the industry went bankrupt. Delta was...
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