Strategic Management Report on Delta Airlines

Student Name: Sheila Hodge

Student ID: 21557050
Course Name: Strategic Management for the Tourism & Aviation Industry
Course Code: TH70052E
Lecturer: Keiron Coogan
Date: 23rd April 2023
Executive Summary
This report will examine the corporate strategies employed by Delta Airlines. Delta Airlines

compete in a vigorous and highly competitive environment. Furthermore, Delta is impacted

by external factors such as fuel costs, economic conditions, and alterations in regulations.

Nevertheless, it possesses a solid internal brand image, a devoted consumer base, a loyal and

diverse work environment, and a well-established supply chain network. A further in-depth

analysis of the internal and external factors of the company will be conducted. The objective

of the report is to assess Delta Airlines' position in the airline industry and the effectiveness

of its strategy. An evaluation of the company through the utilisation of strategic models in the

form of Porter’s 5 Forces, Mckinsey 7’S, PESTLE analysis, graphs, and other pictorial

illustrations.

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Table of Contents

Introduction.......................................................................................................................4

Delta Current Performance......................................................................................................4

Internal and External Environments.................................................................................7

Internal Environment of Delta..................................................................................................7

Delta Mission...............................................................................................................................................7

Delta Corporate Culture...............................................................................................................................7

Delta Business Strategy...............................................................................................................................8

External Environment of Delta...............................................................................................11

Microenvironment Factors.........................................................................................................................11

Macro Environment Factors.......................................................................................................................13

Delta Business Strategies.................................................................................................14

Differentiation and Focus........................................................................................................14

Competencies and Competitive Advantage.............................................................................15

Value Added and Supply Chain..............................................................................................16

Strategic Recommendation..............................................................................................18

Conclusion......................................................................................................................19

References.......................................................................................................................20

APPENDIX.....................................................................................................................22

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Introduction

Delta Air Lines originated as a modest crop-dusting business and grew into one of the world's

largest carriers delivering scheduled commercial and cargo air transportation. Delta has

become one of the United States' leading airlines and a legacy carrier. The corporation was

established on March 2, 1925, and its headquarters is in Atlanta, Georgia. In the late 1970s

and 1980s, Delta Airlines laboured to solidify itself as the leading U.S. airline regarding

customer care (Delta, 2023). Delta's customer service was founded on a "Southern

hospitality" culture and staff members that went the extra mile. Delta Airlines captured

premium-paying business travellers due to the organisation's human resource strategy, which

facilitated the development of employees' abilities, motivation, and opportunities to provide

outstanding customer service. Their accomplishment demonstrates the significance of human

resources strategy, particularly its influence on business success.

Delta Current Performance

According to Delta's annual report, as of December 2020, the company had 1,100 aircraft

manufactured by Airbus and Boeing. Delta maintains the most significant inventories of

Boeing 717, Boeing 757, and Boeing 767 in the world and the most extensive fleet of Airbus

A330 in the United States. Delta's fleet solely comprised Boeing and McDonnell Douglas

planes before its 2008 merger with Northwest Airlines.

Delta is committed to serving up to 200 million consumers annually with industry-leading

customer service, security, innovation, and dependability – as the most punctual airline in

North America—their commitment to ensuring that future travel is connected, individualised,

and enjoyable. Connecting people and places, Delta's 90,000 employees provide a world-

class consumer experience on more than 4,000 daily flights to more than 275 destinations on

six continents. Delta offers customers more options and competition through innovative and

strategic alliances with Aeromexico, Air France-KLM, China Eastern, Korean Air, LATAM,

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Virgin Atlantic, and WestJet. Delta's bilateral and multilateral marketing alliances with

international airlines and service agreements with several domestic and regional airlines serve

passengers in small and medium-sized cities, generating 70% of its net revenues from the

U.S. market (Bloomberg, 2017). Its strategy of Delta relies on the partnerships gained. These

partnerships enable individual airlines to expand their service without flying to new

territories. The alliance between Delta and SkyTeam enabled the airline to reach over 900

destinations in over 170 countries. This alliance enabled Delta to expand its global reach.

Delta also partnered closely with China Eastern, Virgin Atlantic, and Korean Air to expand

its presence in Asia and Europe (Bloomberg, 2017). This alliance also helps to eradicate

industry competition. It was a founding member of the Star Alliance, comprising 26 member

airlines offering connections to 1,300 destinations in 195 countries and more than 19,000

daily departures. The airline segment also offers third-party maintenance and repair services

(Bloomberg, 2017). However, Delta Airlines faces numerous threats, including increased

regulations, fierce rivalry, the global epidemic, risks related to geopolitical instability, higher

fuel costs, the war between Russia and Ukraine and the energy crisis. These hazards can

result in higher operating expenses and the potential for the company to fail. In addition,

Delta must exceed its average marketing expenditure to compete with rivals, and the

pandemic has caused a 64% decline in revenue.

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FIG 1.1 – Illustrates Delta Load Factor 2008 – 2021

FIG 1.2 – Illustrates Delta growth 2009-2022

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Internal and External Environments

Internal Environment of Delta

Delta Mission

Delta Airlines' mission is to "Connect the World, Reflect the World, Respect the World"

(Delta, 2023). They employ purposeful use of the challenges presently impacting the aviation

sector and the world by branding their connectivity with various people and their intention to

respect passengers. Additionally, they believe they provide more than a simple service and

offer significantly more. Delta's awareness of the increasing pollution indicator in the

universe and the impossibility of discontinuing flight services for an airline company has led

them to invest in and implement programmes that emphasise education and sustainable

objectives. Additionally, they are respectful of all parties and lack any form of bias.

Furthermore, they strive to provide a work environment that promotes diversity and equality

among their staff.

Delta Corporate Culture

Delta Airlines' corporate culture is shaped by its desire to support its employees and the

communities they serve. In 2020, Delta provided its employees with the equivalent of two

months of additional pay in the shape of profit-sharing incentives. The decision cost the

company $1.6 billion, but according to CEO Ed Bastian, "it is well worth it" (Delta, 2023).

Delta is further enhancing its internal culture through strategic means by creating an army of

devoted workers who are truly rewarded for their dedication, particularly considering that the

bonus is an addition to company benefits. It incentivises the staff to go above and beyond

daily, to place the organisation first while they are on the payroll. These initiatives are

ongoing for the company, particularly considering the COVID-19 crisis. Delta was the only

global U.S. airline to avoid involuntary furloughs for our ground and flight attendant

divisions, primarily due to the sacrifices made by Delta employees (McKenna, 2018).
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Although the road to recovery has been lengthy and rocky, the people of the Delta have

proven to be equally resilient. During the pandemic, 40,000 employees volunteered to take an

unpaid leave of absence, and nearly 17,000 decided to leave the company via an optional

package, thereby safeguarding employment for others. Undoubtedly, Delta's high ranking

among U.S. airlines plays a significant role in the company's culture, affecting various factors

relating to how consumers perceive their product and service. Customers will observe when

you hire employees who genuinely look forward to going to work.

Fortune ranked the airline as one of the top 100 companies to work for in the United States,

citing its astonishingly low 2% annual attrition rate (McKenna, 2018). It is confusing to

consider that for a company that employs more than 90,000 people, less than 2,000

employees per year out of 90,000 employees. The airline industry is one of the most complex

industries in the world because of this, it requires unique individuals to labour within it

(Barney & Hesterly, 2020).

Delta Business Strategy

Mckinsey 7S Delta Analysis

Like many other airline companies, Delta is challenged by fluctuating fuel prices, terrorist

attacks on aircraft or terminals, the global epidemic, and the need to maintain market

competitiveness. Delta Airlines has separated itself from its three greatest rivals by remaining

focused, more assertive, and more effectively managed overall. The McKinsey 7 S strategic

tool will analyse Delta's competitive advantage in the airline industry. The McKinsey 7S

model provides a multifaceted structure for analysing the current condition of an organisation

and determining where it can adjust to attain its goals.

The strategy of Delta Air Lines is clearly defined and communicated to all employees and

stakeholders, guiding behaviour for goal attainment, confronting competitive pressures, and

incorporating shifting consumer trends and demands. SMART Short- and long-term goals are

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established, and the strategy considers competitive pressures and competitor activities. The

strategic direction of Delta Air Lines is flexible and adaptable, enabling the company to

remain competitive and pertinent to its target consumer groups. This allows them to

determine gaps in the market and address them through product offerings and marketing

activities. In addition, they can anticipate changes in the consumer market and adapt their

strategies accordingly.

Delta Air Lines has a streamlined organisational structure, interdepartmental coordination,

internal team dynamics, and a hybrid structure combining centralisation and decentralisation.

The organisational structure of Delta Air Lines is a hybrid of centralisation and

decentralisation, with communication systems that enhance the overall organisational

structure.

Delta Air Lines favours decentralised decision-making in the majority of cases. At Delta Air

Lines, job functions are intended to be carried out responsibly, and employees frequently set

their objectives in coordination with their supervisors. Learning and progressive

organisations support the organisational hierarchy, with fewer managerial levels in between

and greater access to senior management and leadership. Interdepartmental coordination is

efficient and well-organised, whereas internal team dynamics promote cooperation and tasks

requiring collaboration. Support is provided for centralisation versus decentralisation, while

communication systems facilitate the free passage of information.

Creativity, Honesty, Transparency, Accountability, Trust, Quality, and Heritage are

fundamental values of Delta Air Lines. All activities and operations are conducted with the

highest ethical and moral standards, and all job duties and responsibilities are consistent with

the organisation's fundamental values. Delta Air Lines employs a participative leadership

style to involve and engage its employees in decision-making and managerial decisions.

Delta Air Lines utilises participative leadership to increase employee motivation and

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commitment to the organisation. It is highly effective in attaining the organisation's business

objectives and vision, and employees feel their suggestions, feedback, and input are valued.

In addition to fostering cooperative and collaborative cultures among employees, systems,

teams, and departments, the company routinely creates project teams. The human resource

management system and organisational training facilitate the development of all employees

equitably and transparently.

Delta Air Lines’ global operations employ many employees who receive internal and

external training to improve their skill levels. The number of personnel varies from country to

country, and the global team is inclusive and collaborates with members to achieve business

objectives. Delta Air Lines has a system for identifying potential requirements for capabilities

and capacities and will arrange for recruitment and training if necessary.

Delta Air Lines has an impressively skilled and capable workforce. It defines tasks and job

roles and recruits and trains employees based on their skill levels. Skill management is

essential to the company's competitive advantage because it provides a unique and

irreplaceable competency.

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External Environment of Delta

Microenvironment Factors

DELTA Porter’s 5 Forces Analysis

Michael E. Porter devised his Five Forces framework in 1979, designed to assess a

company's industry position and anticipate future horizontal and vertical threats (Mello,

2019). The Airline industry is highly competitive, with major airlines flying to the same

destinations from the same airports at roughly the same prices.

With the intense airline competition, Delta's traditional United and American competitors are

ever-present. Still, the company must confront significant competition from the rising

prominence of low-cost airlines, notably Southwest, JetBlue, and Spirit. Customers' air travel

experiences are astonishingly similar regardless of the airline chosen, so airlines are

perpetually at risk of losing customers to competitors. These competitive threats are managed

by extensive marketing campaigns emphasising brand recognition and the company's

enduring reputation.

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Due to the cost and effort required to transfer from one carrier to another, purchasers have

enormous bargaining power over airlines. Besides, the Emergence and explosive popularity

of third-party trip-booking websites and smartphone applications exacerbate this problem for

airlines. Customers can access websites or mobile applications that compare rates across all

carriers, input their trip itineraries, and select the most cost-effective option that fits their

schedules.

One of Delta's responses to the market force is undertaking market research and offering

more direct, low-cost flights to the most frequently searched-for destinations on third-party

platforms.

New competitors pose a minimal threat to Delta. High entry barriers exist in the airline

industry, with no airline founded in the 21st century holding a market share of more than 2%.

JetBlue, founded in 1998, is the most recent airline to make an impact, but its market share is

still less than one-third of Delta's.

Given Delta's status as the world's largest airline based on passenger revenue in 2019,

suppliers' negotiating leverage is powerful. The threat of substitutes is not a product or

service that directly competes with the company's offerings but one that serves as a substitute

for them. Unless a new technology replaces air travel as the quickest and most reasonable

means to travel large distances, Delta faces little competition from alternative modes of

transportation.

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 FORCE LEVEL

Threat from existing competition Strong

Threat from buyers Strong

Threat from suppliers Weak

Threat from new entrants Weak

Threat from substitute products Weak

Macro Environment Factors

DELTA PESTLE Analysis

Political and Legal

Delta Air Lines must incorporate political and legal factors into its strategic planning to

mitigate systemic risks. Although travel bans are being lifted from the pandemic, the Russia

and Ukraine war has affected the airline with them, severing ties with Aeroflot, rerouting its

aircraft, and increasing ticket prices due to geopolitical risks.

Economical

Purchasing Old aircraft and Vertical Integration are two aspects of Delta's operating strategy

that help the company save money in novel ways. Delta drastically reduced its petroleum

costs through this system, thereby saving money (Sam C, 2015). Although it offers

tremendous value to the business, it is common and straightforward to imitate.

Social

Delta Air Lines must take into account social factors, such as demographic trends, equality

and power distance, and gender roles when conducting macro-environmental analysis in

order to design effective marketing messages and achieve corporate objectives. Delta Air

Lines should establish local teams and alliances to comprehend societal norms, class

distribution, online purchasing behaviour, spending patterns, and consumer ethnocentrism.

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Technological

Social media marketing, technological innovation, and level of development are examples of

technological factors. Delta Air Lines Delta became the first U.S. global carrier to offer free

in-flight mobile messaging, adding more Wi-Fi and seatback entertainment.

Research and development are essential for maximising profits and reinvesting those profits

in future disruptive technologies. Reduced product life cycles necessitate that Delta Air Lines

develop new products rapidly, diversify its product portfolio, incorporate flexibility into the

value chain, and cultivate healthy business relationships with value chain partners.

Environmental

Latest natural disasters are not only an economic problem but also an environmental problem,

as all disaster-affected areas are popular vacation destinations. Before these locations are

entirely reconstructed, time will pass, and the airline industry will lose millions. Natural

disasters in the incorrect locations can cause airlines to incur enormous losses. Due to the

high cost of petroleum, airlines should also consider affordable, more eco-friendly

alternatives (Cederholm, 2015). In 2022, Delta increased fuel efficiency by 4.2%, saved 10

million gallons of fuel, and collaborated with Aero Design Labs to test drag-reduction

technology. They were Awarded Green Partner in Travel Award and North American

Environmental Sustainability Airline/Airline Group of the Year (Delta,2023).

Delta Business Strategies

Differentiation and Focus

The business strategy utilised by Delta places a significant emphasis on providing exceptional

levels of customer service. The corporation prioritises providing excellent customer service,

as seen by the multibillion-dollar investment it has made in expanded training programmes

for customer service representatives to increase the quality of service provided to customers.

Tim Mapes, senior vice president and chief marketing and communications officer for Delta,

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presented during the online Master of Marketing conference organised by the Association of

National Advertisers (ANA). He claimed that the values that a company holds and the

organisational actions that are recognised to relate to those values are the sources of

consistency (Parker, 2023). The pandemic caused by COVID-19 has required the deployment

of additional health and safety standards, in addition to the modification of its in-flight

service. "Inspiring frontline customer service agents" are a prime example of how Delta's

"branding from the inside out" philosophy can be implemented. These agents can give

exceptional service even in the most challenging of situations.

Competencies and Competitive Advantage

Delta has adopted a sharper strategic focus on its raison d'être and fundamental competencies.

It has a lengthy history of working with its labour groups and has prevented the unionisation

of several significant groups. According to the Railway Labour Act, contracts do not expire

but become "amendable" instead. Delta has a history of initiating negotiations prior to their

amendable date and concluding a new contract around that date (Baldanza, 2022). The

average age of Delta's aircraft fleet is 17 years. When the pandemic struck, Delta acted

decisively, suspending their fleet of Boeing 777s and 717s, while their rivals were not nearly

as decisive.

Delta has taken some near-term write-downs on its investments in global airlines, giving

them access to the economic returns available in markets they cannot independently serve.

This has given Delta a literal seat at the airline table in other geographies, allowing them to

act more swiftly and capitalise on trends before their competitors know them (McKenna,

2018). Delta has introduced the industry's first Basic Economy fare to compete with low-cost

carriers. Delta has maintained its commitment to providing excellent service to its high-

paying business travellers and has maintained the most prolonged blockade of middle seats

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for passengers during the pandemic. Due to their extensive service, high reliability, and

attention to detail, Delta has distinguished itself as the airline to rival the most prominent U.S.

airlines. Due to their fleet strategy and oil refinery, they have maintained the most prolonged

blockade of middle passenger seats during the pandemic. Due to their reliance on business

travel and international focus, however, they will emerge 15% smaller than before the

pandemic. Delta and the rest of its large competitors lack the features that make low-cost

carriers much better positioned at this time, so it will likely lose market share to this group.

Delta is the airline to rely on if a business-focused airline is to survive and flourish.

Value Added and Supply Chain

Value creation is the most fundamental function that resources are responsible for in an

organisation. Every organisation has to take precautions to guarantee that, during its

existence, they do not lose value; otherwise, it will not be able to continue existing (Lynch,

2021). Delta has spent years working on their company's value to improve passenger comfort

in the air and justify charging higher fees for airline tickets. Delta has upgraded its in-flight

offerings to include better food, craft beer and other movies. In addition to these

enhancements, Delta began providing complimentary meals on flights to customers in ten

domestic markets. Delta is always looking for ways to improve the overall customer

experience, and one of the ways it accomplishes this is by carrying out its research. Delta has

utilised heart rate trackers to track the customers' heartbeats at 11 different stressful periods

throughout the trip experience. These moments consisted of searching for a parking spot at

the airport, passing through security and boarding the aeroplane. By carrying out these

procedures, Delta searches for methods to enhance the overall quality of the travel experience

at every point. Among these enhancements include the modernisation of airports and Wi-Fi

networks and the research into and implementation of line management strategies utilised by

businesses such as Disney (Birkner, 2017).

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FIG 1.3 – Value Chain analysis (Marketline,2022).

Strategic Recommendation

Based on the analysis and evaluation of Delta Airlines' current strategic focus, the following

strategic recommendations are proposed:

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1. Delta Airlines should increase its social media presence and target millennials; social

media can be used to engage with customers and obtain feedback, to target millennials,

2. Offer maintenance services; the global market for aircraft maintenance is valued at

$87 billion and is anticipated to expand at a 4.6% CAGR over the next eight years. Delta

Airlines can use its maintenance division as a business opportunity to begin providing

maintenance and overhaul services to other airlines.

3. Leverage emerging technologies to enhance the customer experience and boost

customer retention.

4. Enhance the customer loyalty programme with extra advantages and incentives. It

may improve consumer retention and allegiance.

5. Delta Airlines ought to prioritise sustainability and reduce its environmental footprint.

This can be accomplished by introducing fuel-efficient aircraft, utilising biofuels, and

reducing the use of disposable materials on voyages.

Conclusion

Delta Airlines has an established brand reputation and a competitive edge in the aviation and

tourist industries because of its commitment to quality service. Delta can increase its

performance and keep its place as one of the leading airlines in the world if it continues to

emphasise the gratification of its customers, the effectiveness of its operations, elaborate and

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ensure the company culture gained is preserved and safeguarding the environment. The report

presents some strategic recommendations that, if implemented, might assist Delta Airlines in

accomplishing these goals and remaining competitive in the sector.

References

Baldanza, B. (2022) Five reasons why Delta Airlines outperforms its three largest
competitors, Forbes. Forbes Magazine. Available at:
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2023).

Barney, J.B. and Hesterly, W.S. (2020) Strategic management and competitive advantage:
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Birkner, C. (2017) How Delta's focus on customer experience turned a bankrupt airline into
a powerhouse Brand, Adweek. Adweek. Available at: [Link]

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 marketing/how-deltas-focus-on-customer-experience-created-a- powerhouse-brand/
(Accessed: April 23, 2023).

Brandirectory (2022) Airlines 50 2022: The Annual brand value ranking, Brandirectory.
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Cederholm, T. (2015) Must-know: External factors that influence the airline industry, Market
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Delta (ed.) (2023) Delta spotlights strengthened competitive advantages and brand
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Lynch, R.L. (2021) Strategic management. Los Angeles, LA: SAGE.

McAbee, J. (2020) Even Delta Air Lines is getting the culture thing right, The Jellison
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McKenna, E. (2018) Merrimack College Merrimack ScholarWorks, Delta Airlines: A

Strategic Analysis. Available at:
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Mello, J.A. (2019) Strategic Human Resource Management. Australia, AU: Cengage.

Parker, B. (2023) Delta Airlines Swot Analysis (2023), Business Strategy Hub. Available at:
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WARC (2020) How empathy drives delta air lines' strategy: WARC, WARC An Ascential
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APPENDIX

FIG 1.3 – Illustrates Delta Financials

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FIG 1.3 – Illustrates Delta Network and Operations

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