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Delta Airlines Essay

1466 words - 6 pages

Delta Air Lines INC is a major United States airline that services both domestic and international travel. Delta is part of the “big four” legacy airline carriers, contributing to approximately 15.1% of the US domestic airline market share. Delta and its subsidiaries offer flights to 341 destinations with over 13,000 flights daily. Established in 1924, agricultural scientist Collet Woolman founded Delta as a crop dusting service. A few years later, the crop dusting service broke away and formed Delta Air Service. As time passed, Delta successfully expanded through technological innovations, research and development, and acquisitions with alliances.
Product quality, consumer relations, ...view middle of the document...

In 2001, Mullin even negotiated a deal to pay Deltas top pilots an astonishing $300,000 yearly salary, making them the highest paid pilots in the industry. This approach left the airline carrier with billions of dollars in losses, and there were periods of time where Delta was on the threshold of disappearing for good.
Nearly five years later, Delta went from being at an all time low to one of the most profitable airline carriers. On May 30, 2007, the company emerged from bankruptcy as an independent airline. Delta completely transformed their business both operationally and financially. The decision to merge with Northwest turned Delta into a powerhouse. Airline analysts declared the move as a great milestone. In the matter of 12 months, Delta rebranded 95% of its 250 airport stations both domestically and globally, and repainted Northwest’s jets with the red, white, and blue Delta signature.
After coming out of debt, Delta offered stock incentives and raises to more than 39,000 nonexecutive employees. Delta had a reconstituted its management, lowered labor costs, and expanded its international network.
One of the most difficult things for the airline industry is the unpredictable nature of many conditions. The industry often faces circumstances that are beyond their control. Things such as war, threatened danger, terrorists attacks, political instability, economic instability, government regulations, spending patterns, weather, and natural disasters are factors that affect the industry quite often.
Because an aircrafts operation depends entirely on fuel, increasing fuel prices have had an enormous impact on the business. Fuel is Delta’s largest expense, costing the company about $1 billion each quarter. From 2010 to 2011, Delta’s fuel cost per gallon increased by 31% despite airline traffic increasing 4.5% and a revenue growth of 12%. In order to offset the cost, Delta is forced to increase consumer prices along with international fuel surcharges. “Fuel is the biggest challenge facing this industry, and Delta is actively reducing capacity, implementing fare actions, hedging our fuel needs, and attacking our cost structure in order to offset fuel’s impact," said Delta’s CEO Richard Anderson.
Unexpected catastrophes often result in economic insecurity and looming concern for Delta. The fallout of the September 11th, 2001 terrorist attacks on the United States shocked the airline industry big time. After the attack, all flights were temporary banned, and when they returned people stayed away from flying as a national fear broke out. The airports increased security and inconveniences formed long lines and delays, making it a difficult time for Delta. Just one month after September 11th 2001, Delta reported a quarterly net loss of $260 million, or $2.14 a share compared to the $133 million gain, or $1.01 a share in 2000.
Over the years, the airline industry has seen a trend in M&A, which is the merging and acquiring of...

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