Introduction
Globally, air transport plays a significant role in people’s lives by broadening their leisure and cultural experiences. It helps people access far-distant and remote areas as fast as possible. In the U.S., many major commercial air carriers, including Delta Air Lines, American Airlines, Southwest Airlines, and United Airlines, among others, facilitate air transportation.
Delta is the oldest in the U.S. and has about 6,700 daily departures, the highest in the nation (Delta Air Lines, 2023). With a long history of mergers and acquisitions, it has grown to become a highly preferred commercial air carrier. This paper will comprehensively analyze the company, focusing on its history, structure, economic and competitive characteristics, alternative products and services, and how it attains its competitive advantage.
History
Delta Air Lines is an American airline founded on 2 March 1925. It is one of the oldest airlines still operating in the U.S. The airline has been in air transportation for about a century. Its roots can be traced back to 1925 with Huff Daland Dusters, which was founded in Macon, Georgia, before relocating at some point (Gay, 2019). Huff Daland Dusters was the only commercial agricultural flying organization that owned about 18 aircraft during this period.
Globally, this organization was considered the top company with the largest privately owned fleet. This organization initially focused on transporting agricultural produce to the market, either from producers or manufacturers (Aten, 2022). With time, Huff Daland Dusters’ operations expanded, and it had to change its headquarters from Macon to Monroere in Los Angeles. It operated in Los Angeles, California, and Florida during this time.
The airline continued its operations in 1926, with more funds coming in. In 1927, Huff Daland Dusters expanded to Peru, beginning the transportation of passengers and mail. The following year, in 1928, the organization’s founder, C.E. Woolman, offered to buy it (Gay, 2019). He later renamed it Delta Air Lines and expanded its operations to include stops in many other areas, such as Texas, Dallas, Monroe, and Shreveport. In 2019, it focused on passengers alone and operated its first-ever international flight (Aten, 2022).
In 1940, it became a dedicated commercial airline with larger aircraft that offered its customers exceptional travel services (Gay, 2019). The company continued to invest in expanding its operations and became the market leader by a significant margin. Delta Air Lines continued its investment spirit and began operating larger planes and crews. By 1953, the organization had grown into a substantial company with expanded international operations, becoming a larger global airline (Aten, 2022). Over the years, it has made significant investments in its operations, giving it a competitive advantage.
It had implemented improved safety measures and tools in its planes, ensuring customers were comfortable during their flights. With time, it incorporated updated technology in flights and operations, making it a top player in the industry for many years (Gay, 2019). To date, the company is considered one of the major airlines in the U.S., and it is significantly competitive globally.
Economic, Structural, and Competitive Characteristics
The company’s economic, structural, and competitive characteristics have undergone significant changes following deregulation. Before the deregulation, Delta and other airlines in the U.S., including United Airlines and Southwest Airlines, operated in an environment with many regulations. The U.S. government controlled most of its operations, including schedules, routes, and pricing of its flights.
For instance, Hassan et al. (2021) note that before the deregulation, the Civil Aeronautics Board (CAB) had the authority to regulate all domestic flight routes. It sets more routes, schedules, and fares for the flight companies (Wong, 2022). This board also played a significant part in managing airlines’ competitions. It ensured that passengers from the rural areas of the U.S. also had access to the flights, even though the passenger demand was significantly low. This led many airlines to exit the market. It meant that Delta mostly operated as a monopoly in some markets during the pre-deregulation period.
Following deregulation, numerous changes occurred, and many new airlines, including Delta Air Lines, began expanding and entering new markets. In October 1978, U.S. President Jimmy Carter signed the Airline Deregulation Act into law. Unlike the previous one, the Airline Deregulation Act “removed federal government control over many critical aspects of the aviation industry” (Singh, 2022, p. 1).
With the airlines having more freedom to control their schedules, routes, and fares, the U.S. market experienced significant shifts, with most of the impacts being felt to date. The new policy offered many airlines greater autonomy and allowed them to have more control over their operations. Unlike before deregulation, it was now easy for many startups to enter the market and existing ones to continue growing. Ultimately, the U.S. market started experiencing higher competition.
Delta Air Lines was compelled to adjust to the new competitive environment. In the 1980s, it was among the top five airlines in the U.S. (Aten, 2022). During this period, reports indicated the significant impact of deregulation on the airline and how it nearly pushed it out of the market competition (Singh, 2022).
All these events occurred as other carriers that had made significant opportunities from the law continued with passenger transport and state-to-state expansion. However, the company faced many issues affecting its operations, including labor costs and its outdated expansion strategy. To keep pace with the rapidly rising competition in the market, the company developed a new strategy that aligns with the new law and market changes.
The first thing Delta Air Lines did to stay competitive and thrive was to incorporate innovative technology into its operations. The introduction of the new policy led to the emergence of carriers such as JetBlue and Southwest, which offered relatively low fares. Therefore, Delta had to develop new cost-cutting strategies to remain competitive in the market. Incorporating innovative technology would help the airline keep up with the lowered fares nationwide (Singh, 2022). The new technology enabled the airline to predict demand and offer the optimal mix of bargain fares and full prices for all seats offered throughout the year (Schiller, 2019). It was outshining its competitors with these technologies.
Route Structure and Product Alternatives
Over the years, Delta Air Lines has offered route structure and product alternatives to reach a wider audience. For instance, the organization offers its customers flights both internationally and domestically. Through this, it has allowed its customers to choose flights that head to different locations around the nation and the globe. This has made the carrier more diverse in the market.
Secondly, the company also offers connecting and non-stop flights to its customers (Delta Air Lines, 2023). This allows its customers to choose flights that meet their travel needs significantly. Studies indicate connecting flights are always cheaper than non-stop flights (Ren, 2020). However, connecting flights may lead to delays and disembarkation, while non-stop flights are often more timely.
Additionally, Delta Air Lines offers three main fare classes for its domestic flights. These three main fare classes include Main Cabin, Basic Economy, and Delta Comfort. They all offer customers the opportunity to choose from different fares charged by the organization. Of the three, the Business Economy class is the most affordable, while the Delta Comfort is the most expensive, as it offers more services (Delta Air Lines, 2023).
On the other hand, the organization’s international flights offer customers three different fare classes. These fare classes include Delta Premium Select, Delta One, and Delta Comfort. Delta One offers affordable fare prices to customers, while Delta Comfort is relatively expensive due to its additional services.
Over the years, Delta Air Lines has made a significant investment in innovative technology, enabling it to offer product differentiation and provide customers with exceptional flight experiences. For instance, the carrier reported in 2021 that it was planning “to outfit more than 550 aircraft with high-speed, streaming-quality Wi-Fi service by the end of 2022” (Staff Writer, 2021). The organization noted that the flights would offer customers an experience that resembles or exceeds what most of them have at home. It has consistently utilized data analytics to help determine what customers expect and enhance its services.
The Roles of Departments
Delta Air Lines has many departments that facilitate all its operations within the industry. One of the most important departments within the organization is the customer care department. It charges the customer care department to ensure the carrier prioritizes customer interests while operating and developing policies. This department is the core of the organization’s operations, as it ensures that it has developed loyal customers by meeting their personalized needs (Delta Careers, 2023).
The other essential organizational department is the human resources (HR) department. The HR department is responsible for managing all workers in the company. Its roles include monitoring employee behavior and attending to their tasks, guiding them in the required direction, and encouraging them to align their efforts with the company’s interests (Delta Air Lines, 2023). It plays a significant part in planning flights and ensuring that everything in the organization runs smoothly.
The flight operations department is also another important department in the organization. While the human resource department ensures that employees act according to the organization’s policies and controls the smooth running of the organization, the flight operations department handles all the operational tasks. This department ensures the effective planning, development, and execution of flight operations, including route and schedule planning (Delta Air Lines, 2023).
On the other hand, Delta Air Lines’ marketing and sales department helps promote the organization’s products and services, analyzes existing and emerging market trends, and develops programs to foster customer loyalty (Delta Careers, 2023). They aim to attract customers to the organization’s products and services.
Cost Structure and Competitive Advantages
Different organizations in the airline industry have varying cost structures depending on their routes, flights, and services offered. According to Gudmundsson et al. (2022), the cost structure of an organization refers to the cost proportions and types utilized in all its operations. They can either be classified as variable or fixed costs. Variable costs often fluctuate depending on various situations, whereas fixed costs remain constant. The Cost structure of Delta Air Lines includes variable, controllable, and fixed costs.
The organization’s variable costs encompass all expenses incurred during its operations, which vary in proportion to the output level, including maintenance and fuel costs. On the other hand, fixed costs are the organization’s expenses that remain unchanged regardless of the output level, like rent, salaries, and aircraft leases. Lastly, like labor costs, the company’s controllable costs can be reduced or managed. This cost structure has enabled the organization to operate efficiently and stay competitive in the industry.
Delta Air Lines has employed various methods to achieve competitive sustainability compared to other airline companies. Over the years, it has significantly adjusted its cost structure to keep pace with industry changes and continue thriving (Almansur et al., 2020). This has consistently provided the organization with a competitive advantage over other firms.
Other methods introduced by the organization involve cutting costs, such as investing in innovative technology and reducing overhead costs. For instance, when the company struggled to keep up with lowered prices during the deregulation period, it had to invest in innovative technology to remain competitive with market entrants, such as JetBlue (Singh, 2022). These strategies have ensured that the carrier still exists in the market after almost a century.
Revenue Management
Delta Air Lines employs various revenue management methods to stay competitive in the airline industry. Revenue management involves applying different strategies to predict the behaviors of an organization’s customers (Yeoman, 2022). Over the years, the company has utilized revenue management methods to increase its profits by ensuring that it offers its products to the right customers at the right time.
It achieves this by allocating more resources to conducting data analysis on the purchasing behaviors and preferences of its customers, as well as determining general demographic trends. Due to its commitment to innovative technology, the organization has often utilized algorithms in its revenue management system (Delta Air Lines, 2023). This system incorporates numerous factors, including the time, route, day, and seasonality of a given flight, to determine the fare charges that should be implemented.
Many organizations in the airline industry and others have significantly utilized algorithms for revenue management. For instance, according to Karbassi et al. (2020), the airline market has become significantly more competitive over the years, forcing many companies to generate low revenues. They have then tried to implement various strategies to effectively manage their revenues during this period, including the use of algorithms.
A study to determine the effectiveness of algorithms in revenue management within the Iranian airline industry suggested that a binary differential evolution proved more effective (Karbassi Yazdi et al., 2020). Other industries, such as hospitality and tourism, have also remarkably applied algorithms in their revenue management system. For instance, HajMirzaei et al. (2021) note that the use of algorithms in hotel revenue management systems proved effective in many ways. Therefore, the algorithm has proven effective for many organizations in revenue management.
Conclusion
In conclusion, over the course of nearly a century, Delta Air Lines has become the most successful major American commercial airline. It is currently one of the most innovative and customer-centered airlines globally. The airline offers customers various route structures and product options to meet their unique needs. It has also implemented various cost-cutting measures to help it attain sustainable competitive advantages over other airlines. The company continues to grow and succeed in the industry, with many customers preferring it.
References
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