Operational Risk Case Study

Delta airline uses merger so as to be able to expend its business. In 2008 the company merged with Northwest airlines. It operates in Europe, North America and Asia/Pacific regions. Once the merger was complete, Northwest Airlines and all its constituents become wholly-owned by Delta Airlines. The merger saw to it that Delta Airlines started operating in the Northwest for FY 2008. In the period of two month that is from October of 2008 the time the merger was completed to December of 2008, the company had increased it revenues to $2 billion. Having a flexible nature, allows Delta to improve customer services, and in the long run be able to achieve its strategic objectives.

Nissan Motor Company was one of the first Japanese Automobile companies to build facilities in North America. The company was reborn from crisis. They were rescued from bankruptcy in 1999 by Renault, and this sense of crisis still persists in the organization to this day. After the 9.0 magnitude earthquake hit the coast of Japan on March 11, 2011 Nissan Motor Company, just like they did in 1999 when they faced financial difficulties, focused on identifying and analyzing the risks by establishing a dedicated risk management function that was responsible for these activities.

Delta Airlines have transformed over the decades. They started out as a crop dusting company, blossomed into an airline company, fought litigations, went bankrupt, then resurrected it and merged with Northwest Airlines to become one of the biggest airline companies in the world. Their aircraft, operations, and cities and countries that they service have transformed and blossomed as well.

The level of risks increased as Delta expanded into unchartered territory within the Caribbean, Europe and Asia. The possibility of loss of market share was also probable as Delta decided that it was unable to compete on a level playing field with United Arab Emirates government backed airline - Emirates. The pre-tax income for 2015 was $7.2 billion, representing a $6.1 billion increase compared to the prior year predominantly as a result of lower fuel prices and strong non-fuel cost controls. Delta’s operating revenue increased $342 million compared to the prior year primarily resulting from their “Branded Fares” initiative and agreement with American Express. [3] Total operating expense decreased $5.3 billion from 2014 driven by lower fuel prices, partially offset by fuel hedge losses, higher salaries and related costs and profit sharing. During 2015, Brent crude oil averaged $52 per barrel and closed the year below $40 per barrel, which is significantly lower than the average of $99 per barrel during 2014. Salaries and related costs were higher as a result of increases in pilot and flight attendant block hours due to higher capacity and pay rate increases implemented in

Delta has been focusing on technological innovations but they need to keep on doing that to be profitable.

This report provides an examinaion of the current structure, performance, stragergy and management of Delta Airlines, along with an industry analysis of the airline industry. The report uses current and past financial and statistical data for the company along with other up to date material to determine Delta's current market position and future potential.

According to delta.com, Delta Air Lines began in 1924 as a crop dusting operation and has since then grown into one of the world’s largest airline competitors. With it’s social and environmental dedication, Delta prides itself on the service of it’s community and family. Being one of the world’s largest global competitors in the airline industry, Delta has made great strides but not without it’s share of setbacks.

The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being

Delta’s biggest expenditure is the cost of fuel. Delta knows that the cheaper you can purchase aircraft fuel, the more profit you can make in the long run. Since Delta’s merger with North West Airlines in 2008, Delta also gained a financial benefit of the merger in the buying power when it came to fuel contracts. The volume of fuel in which the combined planes used did result in significant savings.

From the humble financial portfolio as a crop dusting outfit in the mid twentieth century, to the multi-billion dollar portfolio of a major airline in the twenty first century, Delta Air Lines has risen as a successful business. The airline industry is directly affected by outside economic conditions and is also cyclical in nature. These factors make it very difficult for airlines to make predictions to stay financially afloat. Delta has ridden the bumpy path of the last twenty years and managed to survive. In the past twenty years there has been many events that

Delta’s unique ability to innovate leads to great profits. High labor costs and record-breaking jet fuel prices were factors in Delta’s bankruptcy filing, which, at the time, had $20.5 billion in debt, $10 billion of that accumulated since January

2. Why have all of the low-cost subsidiaries of full-service airlines, including Delta Express, failed?

The Airline industry has experienced continual problems with rising costs with both fuel and maintenance which has caused them to increase their fees to the consumers to pay for those rising costs. This paper will help explain what an airline such as Delta does to help alleviate such costs without forcing its consumers to flip the bill through high fees that consist of tickets, baggage fees and food. The costs of doing business in aviation today have spiraled out of control making it very expensive for both airlines and the

As with all airlines, Delta’s recent performance has been significantly impacted by industry shifts and external events. Terrorist attacks and escalating costs have significantly impacted Delta’s profitability in recent history (Rivkin 4). The company has also been losing valuable market share to the low-cost carrier Southwest Airlines throughout the southeast and specifically in the lucrative Florida market (Rivkin 8). JetBlue also began encroaching on key Delta routes, and this seems only likely to increase (Rivkin 9). Despite this, Delta has still performed better than any other legacy carrier (Rivkin 8). Still, recent history has brought several changes to this legacy carrier, and the company has turned its attention towards new competitive strategies.

4. Several major airlines filed for bankruptcy. Many airlines significantly decreased their capacity, reduced their routes and postponed purchases of new aircraft. Some airlines reported a 50% reduction in routes and flight frequency. All these events provided opportunities for the low-cost carriers not only to increase the number of flights but also to introduce services on new routes.