With the rapid technological advancements being introduced to us today, it seems as though the word is getting smaller by the minute. In the earlier age of time, distance was a huge barrier when it came to many things. With the times we live in now, distance is literally but a number. When friends or family are in need, we can simply talk to them instantly, and or, be to their location in an exceptional amount of time. Along with many technological advances, the efficiency and means of transportation have rapidly changed for the better. The SS United States, which was in service from 1952 to 1969, to this day, holds the record for the fastest ocean liner ever built. She crossed the Atlantic in 3 days and 12 hours, sailing at a speed of more than 54 km/h. Now, Delta has flights daily going from New York City, New York, to London, United Kingdom in 6 hours and 55 minutes. This is how impactful the advances in transportation have come.
Delta Airlines comes into the conversation once one mentions the word aviation. One could argue that the majority of individuals in the United States have heard of Delta Airlines and most can tell which airline it is just by one glance at their iconic logo. Delta Airlines is the biggest Airlines in the terms of passengers it ferries across to several destinations all over the entire world every single year. It is the second highest revenue grossing airline in the world. Also, it has the largest fleet size in the world ranging from Airbus A319-100s, to Boeing 777-200ER and LR variations, to Bombardier CS100, to the McDonnell Douglas MD-88s. As of January 17, 2018, the Delta Airlines mainline fleet consisted of 849 aircraft in service. It is also known as one of the oldest fleets of any American airline, with an average fleet age of 17 years. This is something Delta is known for and they make it work to their advantage. They buy older generation or used aircraft and they also continue to fly aircraft for 20-30 years, which is much longer than most other major airlines (M, 2016).
Enough with the statistics of Delta Airlines, let’s get into what made those statistics possible and what makes them one of, if not the most iconic airline in the country. One item that can either make or break a business is expansion. In Delta’s case, this absolutely helped make their corporation into the quintessential airline it is today. Expansion is simply where Delta Airlines has left everyone else behind. Once established in the 1920s as an aerial crop dusting business, Delta has gone on to become one of the biggest airlines around the world. This is partly due to its aggressive expansion policies which involved mergers with other airlines and to several parts of the world. They have been so successful with the expansions, that Delta actually serves passengers in all continents of the world, except Antarctica (M, 2016).
Another way of expanding other than in geographic terms would be in passenger terms. Once Delta took over Northwest Airlines in 2008, their customer base grew even larger, even while Delta already had a huge loyal customer base. Delta’s business model also focused on delivering high customer service in order to appeal to their core demographic, business travelers. Delta also invested in a multi-billion dollar enhanced training program for their customer service agents, which were designed to improve their customer service. Delta also led the race to become the first airline to develop the first mobile bag tracking feature app on smartphones. Deltas network has become so voluminous that a passenger can simply log on just one time with Delta, and they can travel to every continent of the world, again of course, except Antarctica. A way that Delta maintains their large base of loyal and new customers is because they give their customers first priority every time one chooses to take the skies with them. This is proven to be true due to the fact that Delta is the founding member of Sky Team Alliance and offers Sky Miles, which is a special loyalty program. Delta shows that just by simply taking care of and satisfying your customers, one can go a long way in the market for success (M, 2016).
Delta’s business model is supported by its operating model which is through four key activities: Industry-leading customer service, purchasing used aircraft, low-unionization, and vertical integration. Many airlines opt to purchase expensive new aircraft that come with low maintenance costs but, of course, with extensive acquisition costs. This, in turn, leads to those airlines typically having high fixed costs. However, Delta goes with the strategy of purchasing used aircraft, because this offers cheaper acquisition costs but higher maintenance costs. This operation model leaves Delta with lower fixed costs with higher variable maintenance costs, therefore, allowing them to quickly scale down or up in order to meet demand, while not having to worry about the burden of the same level of fixed costs of the other airlines. Thus, creating a continued competitive advantage over the competition reducing the operational risk should there ever be a rapid increase or decrease in volume (C, 2015).
Another item within Delta’s operating strategy is that they own their own fuel refinery. For most airlines, the standard strategy is either fuel hedging or futures trading. However, Delta has taken this a whole step further by actually owning a source of low-cost fuel, thus protecting them from cost spikes (C, 2015).
The operating strategy for Delta is also directly injected into its workforce. While most airlines are known for their high unionization rates, with approximately 50% of the airline employees unionized, Deltas unionization rate is actually closer to 18%. This allows them to keep base wages lower. Although this might not sound positive at first, one must also know that instead of offering high fixed wages, Delta offers industry-leading profit sharing plans. This then allows Delta to shift a portion of their labor costs from fixed to variable. Thus allowing Delta to remain competitive even during the market downs, and also reduces the risk of an employee strike (C, 2015).
One major and impressive thing about Delta’s development over the past 10 years is that Delta gets a revenue premium of 107%. What this means is that in the first quarter Delta’s revenue per available seat mile was a total of seven points higher than the average of the rest of the airlines due to the simple fact that people choose to fly Delta. Prior to 2005, when Delta sought bankruptcy protection, they had revenue per available seat mile that was 86% of the industry average. Impressively, just two short years later during the first quarter of 2007, the executives of Delta gladly announced that revenue per available seat mile was an extraordinary 96% of the industry average. They were then able to surface from bankruptcy protection on April 30, 2007, just approximately two years since they had entered the protection (Reed, 2014).
Even though all of the major airline bankruptcies in the first 10 and a half years of the 21st century have gone on to be successful, thus allowing carriers to profitably restructure, Delta’s was arguably the most diversely successful. Due to the many bankruptcies, this led to the need to initiate some major cost-cutting, primarily labor cost cutting which would then facilitate the concluding stages of post-deregulation to work itself out. Also during this time, lofty oil prices forced the industry to reduce capacity. This led to United deciding that in 2008, they would begin to charge $25 for a second bag check, thus leading the charge for other airlines to begin to pursue subsidiary revenues (Reed, 2014).
Among the several airlines that filed for bankruptcy were both American and US Airways. Their bankruptcies led them to merge allowing a takeover by the ambitious management team from America West Airlines. United airlines would sit in bankruptcy for three years waiting for the opportunity of a merger which would finally come in 2010 after enticing Continental. Delta; however, was able to use bankruptcy as a way to step back and evaluate the direction in which they would like to push forward in the future. Prior to the bankruptcy, Delta had a gold mine under their nose the entire time which would turn out to be one of the U.S. airline industry’s best assets: the Atlanta hub, which is now the biggest single airline hub in the globe. The Atlanta hub was easily overlooked during this time due to the fact that it was dissipated, used mainly as a way to connect passengers between Florida and the Northeast. Basically meaning that it was a leisure market with minimal potential for the greatest revenue premiums. However, that would all change, Atlanta now has 970 daily departures to 210 destinations that include 62 international destinations. In total, Delta Airlines serves over 59 countries across the globe (Reed, 2014).
This is how impactful the advances in transportation have come. It is easy, with the above-given information, for one to look at Delta Airlines and truly understand the impressive stature of their corporation and the amazing expansion that has taken place throughout their years of existence. Delta is a solid example of a company that learned from its previous mistakes. Just as other Airlines faced hardships, Delta was able to use the 2005 bankruptcy as a wakeup call in order for the company to better align its core business and operating models. The new improvements in alignment and strategy that was derived from this situation have led to gaining competitive advantages with respect to fuel prices, customer service, labor, and greater operating cost flexibility. This success is what brings the iconic name of Delta into most conversations when one talks of aviation and the different airlines both in the United States and across the globe.