What Are The Strengths And Weaknesses Of America Airlines

Decent Essays
Q3 - OE_Strengths
What do you see as Delta’s particular strengths?
"Atlanta Hub and non-union work force. And quality of service."
Q4 - OE_Weaknesses
What do you see as Delta’s particular weaknesses?
"On the West Coast the international connectivity is not great. It's great out of Atlanta and New York, but not on the West Coast."
Q6 - OE_StrategyElements
Based on communications from Delta, what are the main elements of management’s business strategy?
"Focus on high quality service, increase their share of corporate travel. Get a premium product. Segment the cabin in order to participate in all segments of the market without giving up yield. Increased presence in New York. And re-configuring their Pacific network to do more direct flights
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First of all the industry is not as consolidated as it appears. Alaska Airlines has national ambitions Jet Blue has national ambitions. Spirit Air has national ambitions, so even though today there are the big four controlling about 70% of domestic capacity, Delta's share is going to decline over the next five years because Jet Blue and Alaska Air are very good competitors with very good products. And Spirit Air is built to do extremely well in a cyclical downturn, so they will get stronger and not weaker. And if Spirit Air merges with Frontier, which I expect, that will be a seventh viable national carrier, and that is too many. Pricing is doing well now because we are at the good part of the economic cycle and demand is strong. If demand weakens, which it will, I don't think the industry is consolidated enough to hold the line on pricing. And margins are very, very high, which attracts competition. We're at the peak of the economic cycle and margins are headed lower and not higher and I don't believe the industry is consolidated enough for pricing to remain stable in a downturn. I don't think Delta is going back to the brink of bankruptcy, but earnings are going to go…show more content…
"5 [6-pt scale]. Just low-single digit PRASM growth plus 1-2% captivity growth, plus stable margins, and stock buy backs."
On the six-point scale where 6=extremely important and 1=not too important, how important do you believe "Invest in partnerships/acquisitions" is for Delta to pursue as a capital deployment initiative?
"4 [6-pt scale]. The partnership deals make sense, given how they've been structured so far."
Q19a - OE_MostImportantThingsNeedToKnowMoreAbout
What are the two or three most important things you need to know more about in order for you to have greater confidence in Delta as an investment?
"I'd like to know whether or not they are going to buy Alaska Airlines, but they won't tell me that. But to get excited about the airlines right now I want to see another round of consolidation to bring it down to five companies, preferably four. Delta plus Alaska Air would be phenomenal. It would save Delta billions of dollars in capital expenditures, which would otherwise be made in an attempt to build out the Pacific
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