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Eliot Martin

on 31 March 2016

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Transcript of DELTA AIRLINES

Delta Quiz
Fuel Hedging Strategy:

Innovative fuel to save fuel costs

Strategy successful for the company

1. Delta's presentation
3. 5 Forces
4. VRIO Framework
5. Core competencies and competitive advantages
6. Strategic positions
7. US domestic market vs. global market

PESTEL Analysis
Based on the 5 forces analysis, what is Delta strategic position ?

Describe Delta's strategic position in the US domestic market vs its global presence. How does Delta's domestic strategy differ from its global strategy ?
Question ?

US domestic market: 16,8% market share

Global market: Rank 2nd

SkyTeam alliance: 25% of global market share
Top Range service
Quality airport facilities

Renovated aircrafts

Extra legg room seats
Hub-and-Spoke model
Invented by Delta in 1955

Uses main airport to direct passenger

Wide variety of routes and destination
Delta History
Delta's Strategy
Customers and flight services
Unbundling of services
Extra fee for baggage services, meals, preffered seatings...
Lower, and exact price for costumers
Costs control for companies
Interactions between costumers and companies
Online booking and checking
Direct boarding from the lounge areas
Child-free zone or flying nanies
By J.D. Power & Associates
On global satisfaction in
North America
Gulf Threats
Diversification Strategy
3 companies: Emirates, Etihad Airways and Qatar Airways
Numerous assets: Location, fuel cost, government funds, tax advantages
Brand new fleet, and hypermodern airports
Growing very fast
2012 purchasing of the Trainer fuel refinery
fuel cost: 30 to 40 percent of an airline’s operating expenses
Reparation and maintenance of his fleet
Lower Delta’s reliability toward his suppliers, and control its costs.
Political and Legal factors
Airlines Deregulation Act of 1978:

High regulation of the airline industry

9/11 terrorist attack

Economic recession
Economical factors
Worldwide recession
Unpredictable fuel costs
Threat of low-cost companies
Price of flight are cheaper
Forecast growth of the airline industry
New market like Asia
The social factors
Doubt of safety after 9/11
Demand for new services
Millennium generation: more diversity and more families
problem of obesity (1/3 in the United States)
Less travel agencies

More online reservation/check-in

The use of flight comparators

New technological demand like wifi or movies during the flight

The technological factors:
Ecological factor
The ecological care of the population is growing
• Strong financial resources and capabilities

• Organizational resources with strategic alliances

• Capability of diversification

Costly to Imitate
• Management information system

• Large customers database

• Information technology capabilities

• Physical resources and airport installations

• Marketing capabilities

• Human Resources management capabilities

• Strategic fusions

Does Delta possess any
core competencies
that would enable it to achieve a (sustainable)
competitive advantage
Core competencies
Competitive advantage
How many aircraft are flying under the name of Delta Airlines ?
How many flights per day is Delta offering to his costumers (including with its partnerships) ?
15 000
How many employees are working for Delta Air Lines ?
80 000
How many destinations ?
How many costumers each year ?
180 000 000
5 Forces
Buyers bargaining power
LCCs: Customers seeking low prices (high)

LCs: Diminished buyers power in global markets (low)

Substitute products
Short distance vs. Long distance

LCCs : greater threats of substitutes (railroad, automobile and buses) (high)

LCs : No substitutes for long distance travel (just by plane) (low)

LCCs : New entrant threat (high)

LCs : Need of larger network creation (low to medium) high barrier of entry in Hub-and-spoke

Potential entrants
Rivalry among competitors
LCCs : Southwest, JetBlue, Virgin Atlantic, Alaska. Point-to-point (higher competition between them)

LCs : Delta, United, American Airlines.
Hub-and-spoke (fewer competitors : state regulation, mergers)

Suppliers bargaining power
LCCs : fewer aircraft

LCs : Various aircrafts compared to LCCs

Principe: routed through major hubs before connecting

Pro: efficient use of scarce transportation resources

Con: airport dependency, high structure costs
Principle: directly routed to their destination

Pro: reduce time travel

Cons: less destination served
Interpreting industry analysis :

High barrier to entry

Supplier have strong position

Buyers have weak position

Few threats from substitute products

Moderate rivalry among competition

DELTA: Hub-and-spoke strategy high profit potential
Attractive long distant travel industry
Relevant partnerships and alliances

Diversification of economics activities

Intensive investment on the consumers’ experience

One of the highest traffic in the world

Reduction of the threat of fuel price variability

Satisfaction and loyalty of Delta's customers
Strong brand spirit, firm history

Huge financial resources

Efficient HR management

Strategic alliances

Highest traffic in the world
Focused principally on the American market

Consumer satisfaction decreasing
Millennial generation

Technology improving the consumer experience

New emerging markets: Asia

Competition from the Persian Gulf

New entrance with LCC's and flight comparator

Variable price of fuel

Economic recession

New potential entrants in the market

Keep the oligopoly of this market

Security raised up nationally and internationally

Bankruptcy protection in the US

New planes consume less kerosene (less than the car/passenger)
Delta's strategic position
Domestic Strategy
Global Strategy
What type of strategic move is Delta’s entry into the refining business?
Many important hubs
Cover a lot of cities in the US
Merger and acquisition strategy
Control of the brand image
Few worldwide hubs
Partnerships, join ventures and alliances strategy
Cost saving strategy
Targeting customers
Higher executives
Millennial generation
Frequent travelers
Full transcript