Presentation Transcript

1. Module 1Regional Airlines-Delta Airlines

   Laura Conti
2. Main Activities of Regional Airlines Scheduling domestic air transport  Transporting charter domestic passengers Scheduling domestic cargo and freight air transport (excluding air couriers)  Scheduling domestic mail air transport Transporting commuter domestic passengers 
3. Revenue When the recession hit in 2009, demand in the airline industry decreased With less disposable income, people did not have the money to buy plane tickets and this resulted in a 16.3% decrease in revenue Revenue rose in 2010 as the economic conditions improved Revenue is anticipated to increase 0.4% in 2013 as more Americans decide to travel by air
4. Revenue continued.. Industry revenue is expected to grow positively over the next five years (estimated average annual rate of 1.5%) As businesses recover, there should be an increase in air travel Consumers will be more likely to spend money on air travel as the economy recovers Over the next five years, the US dollar is expected to remain relatively weak, which could increase the demand from foreign tourists
5. Biggest Risk/External Drivers for Airlines Oil and jet fuel prices Airlines saw a benefit as oil prices decreased in 2013 Disposable income Air travel is expensive As disposable income decreases, people cannot afford plane tickets
6. Biggest Risk/External Drivers continued.. Corporate profit Business travelersare a large portion of airline customers. Therefore, when businesses are doing poorly and cannot afford to pay for travel, air travel demand declines. Corporate profit is expected to increase in 2013
7. Regional Airline Industry Participation Industry participation declined over the past five years The total number of firms has decreased due to mergers and acquisitions, consolidations and bankruptcies United Airlines and Continental Airlines merged in 2010, creating the world's largest airline These patterns show that many companies are having difficulty sustaining operations The industry has lost many firms over the past decade because of heavy losses sustained over time The number of firms is projected to decreased in the next five years due to competition from low cost airlines
8. Regional Airline Competition Very competitive Largest Competitors Delta – 18.1% United – 16.1% Southwest – 12.4% American – 10.3% United – 7.7% Airlines compete in a variety of different areas including: price frequency and capacity route offerings loyalty programs promotions rewards and service quality Differing levels of competition based on the segments of the industry (ex. Low cost airlines are price competitive) Threat of substitution: Must attract customers from alternative modes of transportation such as cars, trains, buses
9. Buyer/Supplier Power Buyers of airline tickets have medium power because if airlines have prices that are too high, consumers will just use a different airline or a different mode of transportation. It is very easy for the buyers to switch airlines or modes of transportation. Suppliers of oil have more power than the airlines since oil is a resource in high demand and is necessary for air travel. Suppliers of aircrafts also have mediumpower because there are only two main companies that make aircrafts (Boeing and Airbus)
10. Regional Airline Barriers to Entry High barriers to entry as the cost of capital is very high There are also high barriers to success within the industry customer loyalty to certain airlines proven safety records reliability
11. Delta Airlines Delta has 18.6% of the market share in the domestic airline industry Delta and Northwest Airlines merged in 2008 Headquarters: Atlanta, Georgia Annual passengers: greater than 160 million
12. Delta Airlines Delta provides scheduled air transportation for passengers and cargo throughout the United States and around the world Its route network is centered around a system of hub and international gateway airports including: Amsterdam Atlanta Cincinnati Detroit Memphis Minneapolis-St. Paul New York – LaGuardia New York-JFK Paris-Charles de Gaulle Salt Lake City Seattle Tokyo-Narita
13. Delta Airlines SkyTeam Delta has alliance arrangements with other SkyTeam carriers. With this alliance, Delta can link its network with the route networks of the other member airlines. This allows Delta to provide: opportunities for increased connecting traffic enhanced customer service through reciprocal codesharing frequent flyer arrangements airport lounge access programs coordinated cargo operations
14. Delta Airlines Transatlantic joint venture with Air France-KLM and Alitalia Share revenues and costs, as well as joint marketing and sales activities, joint pricing and revenue management, network planning and scheduling with respect to the parties' operations on joint venture routes Covers routes between North America and Europe Transpacific joint venture with Virgin Australia Airlines Joint venture covering operations on certain transpacific routes between North America and the South Pacific Proposed transatlantic joint venture with Virgin Atlantic (December 2012) Joint venture agreement with respect to operations on non-stop routes between the United Kingdom and North America Equity investments in two large carriers that operate in Latin American (primarily Brazil and Mexico)
15. Delta Airlines Regional carriers Delta controls: scheduling pricing reservations ticketing and seat inventories Delta receives all ticket, cargo, mail and in-flight and ancillary revenues associated with these flights (Delta pays these carriers a certain amount to have control)
16. Delta Airlines Monroe Energy, LLC and MIPC, LLC (collectively, “Monroe”), acquired the Trainer refinery and related assets strategy to mitigate the increasing cost of the refining margin Delta is paying Agreement to trade non-jet fuel products for jet fuel with Phillips 66 Delta hedges against fuel price risk and is actively engaged in managing fuel price risk through hedging programs designed to reduce financial impact from changes of jet fuel prices
17. Delta Airlines Other Businesses Cargo Carry cargo on normal passenger flights Delta TechOps, Delta Global Services, MLT Vacations and Delta Private Jets aircraft maintenance repair and overhaul (“MRO”) staffing services for third parties vacation wholesale operations private jet operations
18. Delta Airlines Distribution Tickets are sold through multiple distribution channels such as telephone reservations, delta.com, global distribution systems, and online travel agencies Delta.com reduces distribution costs and allows Delta to be in closer contact with its customers Delta launched a new delta.com platform in November 2012 which will hopefully increase purchases through that channel
19. SWOT Analysis
20. Websites http://news.delta.com/index.php?s=18&cat=47 Delta 10K http://clients1.ibisworld.com.proxy.library.nd.edu/reports/us/industry/majorcompanies.aspx?indid=1125