Design Strategy Delta Airlines Srividya Krishna Prasad Index Overview Research & Analysis Design ➔ About Delta ➔ Competitive Matrix ➔ Preliminary design concept ➔ ➔ PESTLE Client’s Need ➔ Ideal design ➔ Initiative for COVID ➔ Predispositions ➔ Triple bottom line ➔ Analysis from Framework ➔ Secondary Research - 4P ➔ Insights ➔ Strategic design - SWOT ➔ Strategic Balancing - Business Model Canvas 1 2 3 1 Overview ➔ About Delta ➔ Client’s Say ➔ Summary of what I know ➔ Analysis from Framework - 4P - SWOT - Business Model Canvas About Delta ➔ Delta Air Lines operates 878 commercial aircraft, making it the second largest airline fleet in the world. ➔ In the past, Delta purchased or leased older generation aircraft and it flies aircraft for 20–30 years, much longer than most other major airlines. ➔ This makes Delta's one of the oldest fleets of any United States airline, with an average fleet age of 14.9 years. “We should be prepared for a choppy, sluggish recovery even after the virus is contained, I estimate the recovery period could take two to three years.” Ed Bastian,“ CEO, Delta Airlines Delta’s Initiatives for COVID ➔ To align capacity with expected demand, Delta is reducing system capacity by 15 points versus its plan, with international capacity reduced by 20-25 percent, and domestic capacity reduced by 10-15 percent. ➔ Parking aircraft, and evaluating early retirements of older aircraft ➔ Delta also made cash flow decisions by deferring their capital expenditure, voluntary pension funding and share repurchases. ➔ In addition, the recent fuel price decline provides approximately $2 billion of full-year expense benefit. Analysis Framework - 4P Product. Place. Delta Air Lines provides scheduled air transportation and The company is headquartered and has its largest hub at cargo services for general passengers, professionals and Hartsfield-Jackson Atlanta International Airport in Atlanta, commercial customers. Georgia. Delta offers more than 13,000 daily flights, with 326 destinations in 59 countries. Promotion. Price. Operates a website at www.delta.com, which provides The airline, known for customer care and luxury, has maintained information on the Company’s services, schedule, its upper middle class and business travel customer base. While destinations and regulations. many airlines continue to cut costs to compete with emerging low-cost airlines, Delta is continuing the serve the upper-class The company also operates a direct sales team, which market where it thrives. can arrange bookings over the phone. Operates its own kiosks across numerous airports worldwide, through which customers are able to access assistance. Analysis Framework - SWOT Strength Weakness ➔ Strategic merger of Northwest Airlines ➔ Overdependence on the North American market ➔ Strong Brand Equity and brand presence ➔ High debt obligations causing financial issues ➔ Strong hub in Atlanta ➔ It has near about 5000 flights every day ➔ Has a strong employee force of over 75,000 people A fleet size of over 700 caters to 250+ destinations Opportunity Threats ➔ Buy more aircrafts under the current market ➔ Intense Competition ➔ Leverage on SkyMiles, Delta is the only airlines to ➔ Reputation damage as Delta was rated worst airline have no expiration date of the extra miles offered by USNews.com ➔ Capitalize on growing market for aircraft ➔ Raise in fuel prices maintenance, repair, and overhaul (MRO) ➔ Delta is well positioned to capitalize on growing US regional airline industry Key partner Key activities Value proposition Customer Customer relationship segments Code sharing partners, - Air transportation Being one of the 3 Company. is able to extend Dedicated. Assistance While many airlines - Cargo services major US carriers, its own services, selling continue to cut costs connecting flights for - Refinery : Production Delta's diverse fleet to compete with airlines such as Alaska of jet fuel, gasoline combined with their Airlines and WestJet and diesel. emerging low-cost extensive reach in the through its own sales airlines, Delta is domestic and channels continuing the serve international markets Joint Venture Partners, the upper-class provide customers with which the Company Key Resources Channels market where it with premium end to provides joint services, thrives. - Operates a website such as its deals with Air - Fleet of aircraft, end connectivity France - KLM - Alitalia, and - Operates a direct sales - Ground facilities, between major Virgin Atlantic; team - Oil refinery assets business hubs and - operates its own kiosks - Sales channels tier two cities alike. Cost structure Revenue Streams Incurs costs in relation to the acquisition and maintenance of its aircraft,. the purchase and supply. of consumables – in particular jet - Passengers fuel, the operation and maintenance of its oil refining assets, its - Cargo implementation of sales and marketing programs, the maintenance - Other - aircraft maintenance, staffing etc., of its physical infrastructure and ground support facilities. 2 Research ➔ Competitive Matrix ➔ Secondary Research ➔ Insights Competitive Matrix Southwest Airlines American Airlines United Airlines Delta Segment Customers preferring Customers preferring Business / Leisure travelers Passengers preferring comfort/punctuality comfort/punctuality / Luxury seekers reliability, safety and comfort Target Group Price sensitive customer Middle class/Upper Upper middle class / HNIs Frequent Business travelers, middle class Middle class/Upper middle class Positioning Low cost American airline Premium American Premium airline with high Passenger Airline Airlines quality of service USP Largest low cost carrier in Excellent quality of Largest airline holding World's Largest and America's United States onboard entertainment company in the world oldest operating Airline Routes Domestic only and Domestic and Domestic and International Domestic only and International is limited to International (only europe) International is limited to north north american continent american continent and Europe PESTLE Political. ➔ The company operates under the laws of the United States of America. ➔ Since Delta Air Lines is operating in hundreds of countries, they also have to adhere to all the laws and policies of those countries. ➔ Tax regulations and laws concerning business, operating conditions and pollution change all the time. ➔ Not all governments run the same as the United States and many have different sets of laws and taxes that businesses from around the world have to respect. ➔ By being aware of these international laws and tax regulations the company will be able avoid potential lawsuits and disputes run operations smoothly. PESTLE Economic. ➔ Economic conditions will determine how much consumers are willing to spend depending on the current situations that are happening in the various regions. ➔ Association survey found 40% of recent travelers anticipated waiting at least six months after the virus is contained before flying again. ➔ This decreases the demand for air travel and consumers will try to use their own means of transport. ➔ The fuel price have drastically reduced giving Delta an advantage. ➔ As the economy slowly improves, consumers will have more money to spend on vacations and leisure travel. ➔ Other economic factors that Delta Air Lines needs to be on top of include the interest rates, exchange rates and expected inflation that the company will face operating in different regions around the world. PESTLE Social. ➔ The entire society including businesses and people are benefited by the wide network of flights globally. ➔ Airliners face threats from wars, political instability and social unrest. ➔ Due to COVID 19, there is a social unrest all over the world. This led many consumers to cancel and develop a fear of traveling on planes. ➔ The consumer’s paranoia led to decreased revenue across the board for Delta airlines PESTLE Technological. ➔ Delta Airlines has a well documented history of utilizing technology from the use of mainframe computers, early adoption of jet aircraft, and integrating Northwest’s and Delta’s online websites and booking system. ➔ Moreover, the use of mobile devices has grown across the world. Delta has always been steps ahead with using technology to accommodate the consumer experience when flying with their company. ➔ Passengers were able to use the Internet to book, change, cancel their flights with the click of a button ➔ Technology has added pace to people’s lives who can check and book tickets using their cell-phones. PESTLE Environmental. ➔ The airlines industry is responsible for around 2% of the entire emissions globally. ➔ Sustainability is an important concern for the airlines companies just like the other businesses across the world. ➔ Delta also takes its environmental responsibility seriously and has made improvements across its operations both on the ground and in the air. ➔ Delta has started several initiatives across its operations to cut down on its CO2 emissions. ➔ Delta has managed their environmental impact better by achieving higher customer loyalty and also grown a larger customer base compared to competitors ➔ Delta has invested in environmental initiatives. PESTLE Legal. ➔ There are several legal risks and the airlines have to do their best to remain compliant. In 2017, Delta signed a settlement agreement to protect workers that operate baggage handling vehicles. ➔ These settlement agreements are highly effective tools used to ensure that the Delta is addressing the hazards that could kill the workers. Predisposition