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Delta Airlines Strategy

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Delta Airlines Strategy
Delta Airlines
Board of Directors
Presentation
October 18, 2013
Consultants:

General Overview of Delta Airlines Strategy

DELTA’S CURRENT STRATEGY

COMPANY’S SANDBOX
High rivalry makes industry unattractive Profitability increasing, but still below cost of capital
Consolidation trend has reduced rivals helping profits

Trainer refinery acquisition: using vertical integration to address Delta’s largest expense
Metrics of improving flight completions, on-time arrival rate and decreasing mishandled bag to address customer satisfaction

RECOMMENDATIONS
• Trainer refinery: mitigate risks for success.
• Customer satisfaction: domestic differentiation strategy and international best in class strategy

Overview

Industry

Company

Strategy

Conclusions

Review

2

The Airline Industry: At a Glance

Across the Industry
• Slow, but positive, global GDP growth
• More financially-stable U.S. airline industry as merger integrations mature and restructured carriers emerge
• U.S. carriers maintain capacity restraint with growth less than GDP
• Inflationary pressures across all categories, with industry capacity discipline allowing for recovery of higher cost inputs
• Corporate travel demand remains solid with corporate travel spend to increase 5% for 2014

Overview

Industry

Company

Strategy

Conclusions

Review

3

Industry profitability improving, but returns still below WACC

Profits have been improving in the past three years… Overview

Industry

Company

…but the industry is still not having economic profits

Strategy

Conclusions

Review

4

Porter’s Five Forces: Airline Industry
Power of Suppliers: HIGH

Threats of Substitute: MEDIUM

• Powerful labor unions
• Aircraft and engine producers are both concentrated oligopolies
• Airports are local monopolies
• Airport services (handling, catering, cleaning) are also concentrated in a small number of firms, but low
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