SWOT Analysis of Delta Airlines

Having been founded on May 30th 1924 Delta airlines is one of the only 4 legacy carriers still left in the aviation industry since the 1978 airline deregulation act. It is a major United States airline and its headquarters are in Atlanta, Georgia. Delta airlines operates 5,000 flights every day of which are both domestic and international. Delta airlines hub is located at Hartsfield-Jackson Atlanta international airport which is considered the worlds busiest airport in accordance with passenger traffic which accumulates to over 91 million passengers per year. Its fleet consists of 722 airplanes and its company slogan is “Keep Climbing”

Strengths

When it comes to any company brand name speaks, whether it be a weak or strong. Delta exceeds in this due to it having a strong brand name. It is worldwide recognized due to it being in existence for over 80 years and the awards that it has one on an international level. Its name can be seen any ware including it having created the sky lifts used in New York cities Bronx zoo. Due to its easy recognizable name it has stood the test of time in the ever vastly changing aviation industry.

Another strength that Delta airlines has is its cost advantage of fleet ownership. Unlike many other airlines Delta owns almost 75 percent of its fleet which is roughly 580 aircraft and they save money because of that. Since they own 75 percent of there fleet that means that they receive tax breaks and no payments must be made with that 75 percent of the fleet because it is owned. In the airline industry alliances and agreements must be made amongst airlines in order for them to have greater chance of survival and Delta has taken advantage of that.

Delta has and continues to build international alliances with other airlines to gain any type of advantage that it can. Delta is part of the Sky team alliance and has code share agreements with 14 other members in the alliance. Code share agreements are beneficial and almost all airlines are willing to form them whenever they can. Code shares allow two or more airlines to occupy the same flight. This can make the airline look bigger because it is flying the same route more frequently which makes the airline look good. It can also attract more attention to the airline because it could serve markets that it normally does not by the second airline which is good for public exposure.

Deltas strength is also that is innovative. Due to high negative customer satisfaction delta began improving its customer service drastically with new training programs and use of innovative technologies. Its airport experience is very good due to its roll out of charging stations at its terminals which lets customers charge any electronics they have due to increased popular demand. A major strength that Delta has is its recent investment in a jet fuel refinery near Philadelphia. Since jet fuel accounts for up 40 percent of Deltas cost, this investment could reduce this cost drastically if all goes according to plan.

Delta has embarked on a journey to dramatically improve its onboard experience with the introduction of fuel lie-flat beds on its international long flight business class. It plans to complete this by the summer of 2014 on all of its internal long flight business classes. Delta still continues to upgrade its flight and it plans to purchase over 100 Boeing 737-900 ER aircraft in the years of 2013 to 2018 to replace its older fleet. These new aircraft will have larger overhead bins and a much bigger cabin for the passengers and as well as improved ambient lighting.

Weaknesses

In September 2005 Delta filed for chapter 11 bankruptcy which allowed it to still function but will start to perform corporate restructuring. At that time delta was about 20 billion dollars in debt and its future was fuzzy and many questioned whether it could still survive. In 2009 the company has emerged from bankruptcy but it has left many to question how the company is run and as a result many potential investors have been lost.

Poor management and rocketing fuel prices was a result in its filing for bankruptcy but appropriate measures were not taken at the time and could have altogether prevented its filing for bankruptcy. Another weakness that Delta airlines experiences are it’s over dependence on the North American market for revenue. Deltas domestic routes accounts for up to 80 percent of its total amount of routes served which means the North American market will affect the company greatly if any type of economical shift was to happen.

If Delta offered more international destinations then the 2005 filing for chapter 11 bankruptcy could have been avoided. Deltas poor management team is targeted for most of the company’s low performance due to inadequate steps taken to prevent the company’s downfall. Delta did make a comeback in 2009 when it emerged from bankruptcy but 4 years in bankruptcy has left a toll on the company and its future is uncertain.

Opportunities

Delta is still nevertheless moving on forward and the merger of northwest airlines and delta airlines is an example of that. In 2008 the merger was approved by the department of justice and the merger was considered not a threat to the industry. This merger is very beneficial for both airlines because this decreased some competition for the airline and some operating costs were reduced because of this. Now that the merger was completed the airline has an enterprise value of over 17.7 billion dollars which is still pretty good even in though the economy is still struggling to get back to its feet.

With the merger everything has to be rebranded now since the two companies have merged together. Delta reports that not all northwest airplanes will be painted but the majority will be and this also includes other northwest equipment such as beverage and food carts. There are still some problems with the new merger such as unionized northwest flight attendances cannot work with non-unionized delta flight attendants on the same flight. This issue comes from union rules which prohibit non-unionized and unionized workers from working together. In the following months when a new contract is proposed this issue will most likely be resolved. Delta is also planning on expanding by purchasing AMR which is the parent company that owns American airlines.

It is unclear yet if the buy will go through but Delta is considering on bidding but so is US airways and TPG capital so it is still unknown who will buy it. With new emerging markets abroad, Delta is planning on having more flights to the Asia market. New nonstop flights from Seattle, Washington to Tokyo, Japan are being proposed with new Boeing 747-400’s with a fully upgraded interior that will include full lie down beds, in flight entertainment to every seat and other services are being talked about to be rolled out. Delta is not only expanding its in-flight services but also services on this ground like its terminal number 4 at JFK international airport in New York city.

At the end of the 2011 year delta enhanced its terminal number 4 at JFK at a whopping cost of 1.2 billion dollars. Important have been made that will speed up customer check in time and also give the terminal a new modern design that’s versatile. Delta not only upgraded its JFK terminal but also its domestic hub at LaGuardia airport located on the tip of queens. Delta has added over 100 new daily flights from LaGuardia airport to 30 new cities across the United States. This is very good news for Delta because they are attracting a larger number of people due to the more destinations that it offers. New services are also being rolled out in business market cities like Miami, Cleveland and Dallas to name a few.

This is an important and strategic decision that Delta has made and now has access to a important market due to the high potential of bringing in a lot of money. Services are also being added to smaller and mid sized cities like Buffalo, Rochester and Greensboro to name a few, so it’s not only business markets being affected. Delta is not only upgrading on the ground but also in the air such as the reduction of its turboprop fleet and replacing it with its jet fleet which is more reliable and fuel efficient in any way you look at it.

Due to recent technological advancements Delta will be adding four million new seats every single year at its LaGuardia hub by using larger planes that were previously not available. This will bring more service to people without increasing airspace congestion which is a win-win situation for both sides. Delta now operates its newly terminal C at LaGuardia airport which will handle all these new flights that will be coming in. This means Delta has doubled its operating capacity in just one year and now operates 35 gates at LaGuardia with a new Delta sky club in terminal C.

The department of transportation has commented and said there will be an increase in competition now due to more destinations being offered and low fare tickets. Delta also maintains a strong marketing strategy by supporting major league teams like the Mets and also its ads that can be seen all of New York’s subway.

Threats

One of the major threats that Delta has and all airlines is oil prices. With the natural resources being depleted faster than ever, jet fuel prices have skyrocketed in recent years and have forced a handful of airlines into bankruptcy. Fuel costs can account up to 40 percent of an airlines total operating cost and leaves very little margin for other costs. External factors can also jeopardize Deltas future such as the economic slowdown that the country is still in today. With an economic slowdown this means fewer tickets are sold because less people are flying due to not having enough money. Since 2008 the United States economy is still recovering and in that 4 year time frame many business have gone bankrupt due to the fact no one is buying their products or services. Other threats Delta faces is terrorism and hijackings just like all airlines.

Delta has had over a dozen of hijackings and surprisingly none have resulted in any injuries which are remarkable. If a hijacking were to happen today to Delta it would probably be very bad for the company and its image because the media would probably over speculate it. A big problem that Delta airlines faces is increased competition due to other airlines offering much lower airfare such as Southwest airlines. Southwest airlines is currently the largest low cost airline and competes with Delta airlines. Depletion of natural resources is still an ongoing threat to Delta airlines.

With aluminum prices raising it is costing aircraft manufactures like Boeing and Airbus to charge higher prices for aircraft which could take a tow on Deltas financial future. New aircraft that are made require to use aluminum that was not recycled so there is a real chance that this will cause aircraft prices to go up in the next 5-10 years. A dieses outbreak is also a threat to Delta and other airlines because it can cause certain markets to be inaccessible and cause a decrease in cash flow to the company which can hurt it substantially. This was the case in 2010 with the swine flu outbreak which cause some airlines to temporally stop service to some Asian markets due to high risk factor of spreading the dieses.