Delta Case Analysis

Identify the important facts surrounding the case

Delta does business globally in 503 cities in 94 countries and is the third largest airline in the United States. In 2003, Delta’s daily needs included 7.3 million gallons of fuel, 109,000 meals and snacks, 151,000 bottles of water, 87,000 cans of soda, and 219,000 pounds of ice. Its daily operations also required large amounts of information relating to such areas as flight schedules, gate information, baggage handling, customer service, and tower operation. To be competitive in the airline industry, Delta required an efficient flow of operations. However, accurate advanced planning is nearly impossible because of such elements as changing economic realities and weather conditions, and unexpected maintenance issues.

Delta Air Lines operates in a competitive industry. Amongst its competitors, its two largest were American Airlines and United. To survive in the industry it was necessary to employ and maintain technologically efficient and cutting edge systems. However, Delta systems of operations were mainly paper based; they still used pneumatic tubes to move information and they made little use of the internet. As a result, the company lacked a competitive edge. The technology it had was based on various departments independently purchasing the technology they needed and hiring their own IT staff. In 1996, Delta was still known for its expensive airfares, poor service, limited leg room on flights and use of out-dated inefficient processing systems.

The airline industry became increasingly competitive with the arrival of the low-cost carriers, such as, JetBlue, Southwest, and Airtran. These competitors were taking customers away from the major airline companies. Delta projected that 40 percent of their customers chose low-cost carriers, which was a higher percentage than any other airlines. During 2002, 80 percent of Delta’s New York to Florida market was taken away by JetBlue. Eventually, Delta’s monopoly over the Atlanta and Los Angeles route was lost due to the entrance of AirTran and JetBlue. On January 29 2003, Delta tried to segment its market even further when it announced the formation of Song, an independent subsidiary. Song’s objective was to provide the same type of no-frills, cut rate service as Southwest and the other low cost carriers. Delta however fell short of its plan and so Song was dropped.

After September 11th, 2001, the airline industry experienced a significant drop in travel. The reasons for the airline industry downfalls also included a weak U.S and global economy, a tremendous increase in fuel costs, fears of terrorist’s attacks, and a decrease in both business and vacation travel. Even though the airline industry endured a lot of hardship, after September 11th Delta’s financial condition appeared better than that of most major carriers.

Delta’s management had acknowledged that their strategies were not as competitive with the other airlines in the industry. Delta hired an expert Charlie Feld, who assisted them in implementing a modernized information system infrastructure that would be more advanced than that of their competitors. In 1997 Delta, under Feld, developed the Delta Nervous System (DNS) which would allow them the use of telecommunication technology to connect its applications and databases, so the data would flow simultaneously to wherever they are needed. This new information system and infrastructure would allow them to compete with industry competitors and save millions of dollars.

Identify the key issues

Delta needed to revamp and restructure its business strategy as a whole. It had to change the way it conducted its business in order to maintain market share and profitability. Delta’s key issues include the economic effects of September 11th terrorist’s attacks, their maintenance of low-cost services, and the improvements in their information systems and infrastructure to gain some competitive advantage in a highly competitive industry.

The events of September 11th had tremendously affected the airline industry. Prior to those events, the industry was already facing challenges due to a weak economy. Fuel cost had risen sharply, and had therefore increased the operational