Political-Legal Environment: Delta Airlines Delta Air lines is not immune to the political and legal structures that exist both domestically and globally. There are many factors that affect the political and legal structures for Delta in their domestic environment of the United States and also in the global environment of Europe. Teresa Cederholm in her article on MarketRealist.com states “The airline industry is widely impacted by regulations and restrictions related to international trade, tax policy, and competition” (2014) She goes on to elaborate further on issues that impact the airline industry such as “war, terrorism, and the outbreak of diseases” (2014). All of these issues require the government to set in and set different …show more content…
Cederholm states that “After the deregulation, passengers benefited from additional routes through the hub and spoke model [and] competition also increased” (2014). With the deregulation, customers saw a price drop in airfare causing using air travel more accessible to a wider range of Americans. In a Smith and Cox article on the Airline Deregulation, they state that “Airfares, when adjusted for inflation, have fallen 25 percent since 1991, and, according to Clifford Winston and Steven Morrison of the Brooking Institution, are 22 percent lower than they would have been had regulation continued” (2008). With the increased competition and lower prices, many airline companies have opted to merge instead of competing with each other. There have been mergers between U.S. Airways and American West, Northwest and Delta, United and Continental, AirTrans and Southwest, and American with U.S. Airways. According to Cederholm, “These carriers, along with JetBlue and Alaska, account for more than 90 percent of the U.S. market share seat miles” (2014). These mergers help the major airliners, such as Delta Air lines, with reducing competition with the low cost low frills airlines. The biggest barrier for Delta Air lines is with the European Union’s carbon emissions tax for all airlines traveling in and out of Europe. According to Crawley and Quinn, “under the mandate that
Delta Airlines in a major American airline company headquartered in Atlanta, Georgia, United States. The company was founded on May 30, 1924. They operate as an extensive domestic and international network. Delta currently operates a fleet of more than 700 aircraft and they employ approximately 80,000 people. In 2011 they were the world’s largest airline in terms of fleet size. Delta Airlines is a very successful company. Part of what makes them so successful is expansion, making good decisions in route selection and hubs location, being service oriented, having a strong operation management, being reactive in terms of prices, and offering low fares.
Delta airlines have multilateral and formed alliances with other airlines. This is beneficial since the airline is able to gain access to international airlines. By forming alliance, the airlines share
The United States Airline Deregulation Act of 1978 was a dramatic turning point in America. It was the first systematic dismantling of a comprehensive system of government control since the Supreme Court declared the National Recovery Act unconstitutional in 1935. It was also part of a broader movement that, with varying degrees of thoroughness, transformed such industries as trucking, railroads, buses, cable television, stock exchange brokerage, oil and gas, telecommunications, financial markets, and even local electric and gas utilities. Since the Airline Deregulation Act of 1978, the airline industry has experienced significant growth,
Delta Airlines is the largest airline carrier on the Atlantic Coast. In terms of scheduled passengers carried they were world’s largest airline with 277.6 billion in 2013. Also the second largest
The airline business is an industry that is competitive and unique, focussing on consumer choice and the responsiveness of airlines to changes in the external business environment. For any airline, this environment can be very complex as it is ‘hard for them to fully understand and impossible for them to fully control’ (The Times, n.d. p1). Virgin Atlantic is an international airline that is based in the UK. It was started by the entrepreneur Richard Branson in 1982 and now flies to 30 destinations around the world (Virgin Atlantic Airways Ltd, 2011). By looking at
The Risk of Entry by Potential Competitors – Since the deregulation of the airline industry in 1978 over 1,300 new airlines have opened for business. However, most now are bankrupt or merged with the other carriers to stay workable. The established giants were Delta (merged with Northwest), American Airlines (merged with U.S. Airways), United Airlines (merged with Continental), and now Alaska Airlines (merged with Virgin America). Now the Low-Cost Carriers (LCCs) are posing a massive threat which includes Southwest Airlines (merged with Air Tran), and JetBlue.
The SO category suggests three alternatives. The first alternative is to include airlines in India and China under the Sky Team alliance. By doing this, Delta can penetrate into untapped emerging markets and increase its presence. The reason we suggest India and China is because these countries were amongst the lowest to be affected by recession and Delta doesn’t have its prevalence in these regions (http://www.economist.com/node/15172941). Secondly, Delta can capitalize on creating its hubs in India strategically in the long run after gaining access to these markets. The airline will benefit from larger population in both the countries and the government in India encourages Foreign Direct Investment in comparison to China. The third strategy promote business traveler programs in the U.S. Business travelers spend more on their trips and are not as
1. There are a few trends in the US airline industry. One is consolidation, wherein existing players merge in an attempt to lower their costs and generate operating synergies. The most recent major merger was the United Continental merger, which is still an ongoing affair, but has created the largest airline in the United States by market share (Martin, 2012). Another trend is towards low-cost carriers. In the US, Southwest has been a long-running success and JetBlue a strong new competitor, but in other countries this business model has proven exceptionally successful. The third major trend is the upward trend in jet fuel prices, and the increasing importance that this puts on hedging fuel prices and capacity management (Hinton, 2011).
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.
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
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
Problems: Nearly all major airlines had done this unsuccessfully, proved unsustainable over time, never had a high-cost carrier transformed into a low-cost carrier.
3,4- The Airline industry and the market The airline industry is large, specially in the United States, mainly due to the “ Deregulation” of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air transportation industry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was found inefficient and in 1978 deregulation took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many new companies emerged and regional airlines saw deregulation as an opportunity to expand. Due to the rise in competition, by 1986 mergers started to take place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is determined mainly by price, studies revealed that half of the leisure travellers and on quarter of business travellers did not have a preference for a particular airline, which means that prices determined the
The airline industry can be considered an imperfect oligopoly. There are several large carriers that dominate long distance flights, and many small carriers that compete for short distance flights. Competition is fierce, and the return for most carriers is very low. Some airlines are trying to differentiate themselves, like JetBlue for example, by offering superior services at low prices. Other low cost airlines, like Southwest, offer low costs with no frills. Most airlines offer a frequent flyer programs in order to develop brand loyalty. In recent years there has also been several alliances formed between airlines. These alliances enable
The years since regulation have been rocky for the airline industry. Airline after airline has declared bankruptcy and either ceased existence or emerged as a weaker airline. The surviving airlines have done so by merging and protecting their territory with tactics not even dreamed of in most industries. Robert Crandall said it best when he noted, "This is a nasty, rotten business (Petzinger,1995)." You would think that with the competition allowed by deregulation that a large number of new names would exist, but that does not seem to be the case. Most Americans still travel on American, Delta, United, US Airways, or Continental (Kane, 2003). The only true champion of deregulation is Southwest Airlines, whose success is paving the way for others such as JetBlue, but the obstacles are enormous. Initially, the airlines went after each other by slashing fares and driving competitors out of business. The industry quickly learned that although this tactic was effective, it was not profitable, and it was more economical to focus on controlling the air out of a few cities (hubs) than to attempt to directly compete in every single market. Since most of the major airlines already had key cities in which they controlled most of the takeoff and landing slots, airlines could charge higher fares and take in greater profits without any real head to head