Delta Airlines - Essay Sample

Introduction

Delta airlines products are positioned as premium products which go for a high price. Delta airlines have been able to put more focus on providing premium prices which have been influential in the airline success by being able to charge high prices which makes it possible for the airline to cover for the fuel price surges in 2018 (Josephs, 2018). In 2018, more travelers paid for the Delta airlines premium seats which offer the passengers more leg room and high-end amenities. Competition has been high in the airline industry with a major competitor offering substitute products or low-cost products. In the premium high-end products, American Airlines gives Delta airlines significant competition due to the organization premium products and pricing and competes directly with Delta Airlines for the Premium market share. Lufthansa follows closely in competing for premium market share with Delta airlines by offering low-cost premium products which have been the reason behind the organization success (Josephs, 2018). Virgin America and Air Asia follow closely as recent major competitors by offering their customers cost advantage compared to using Delta Airlines services which are high priced. Delta Airlines products are premium priced and high-end services which make it easy for Air Asia and Virgin America to offer significant competition to Delta Airlines. From the product positioning map, it is clear that the primary source of competition for the airline are the low-cost airlines such as Air Asia and Virgin America who spend less acquiring new premium planes and upgrading existing fleets to meet the high-end market needs. However, despite the high-cost Delta Airlines managed to register significant profit growth. Most consumers relate high-cost airline products with safety which makes consumer loyalty and preference for Delta Airlines high and sustainable. Besides, Delta Airlines partnerships with Korean Airlines has offered the airline a strategic advantage to be able to launch its bid for the Asian market.

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Strategies and Objectives Favorable Market Position

Delta Airlines is faced by the significant challenge of maintaining its market share amidst ever-growing competition from the low-cost airlines and direct substitute airlines for premium products such as America Airlines (Josephs, 2018). To be able to maintain the airline market share and profitability in the long term Delta Airlines should undertake a strategic approach towards the market to gain competitive advantage. In the airline industry, an airline can achieve competitive advantage by minimizing cost, marketing, offering competitive prices and improved safety and comfort for the travelers. In most cases, coming up with a centrally thronged approach that takes into consideration different elements of gaining competitive advantage leads to the creation of a more sustainable and realizable strategy to gain competitive advantage.

Objectives

Sustainable Profitability

Profit making is the objective of every business, but sustainability plays a significant role in the continuity of a business. Business profitability means that a company meets its operational costs while ensuring that there is a return for the investors. The primary role of Delta Airlines existence is to increase the shareholder's wealth which requires successive profitability in the long term. To achieve the sustainable profitability objective of the firm the airline will need to position its products in a manner that increases the overall consumer needs to help the firm gain a competitive advantage in the market.

Maintenance of Market Share

Market share is a source of any business profitability and ensures that an organization continues to maintain its revenue streams. The market share determines the overall amount of revenue that an organization can be able to generate within an operating period and it is critical towards the sustainability of operations. Airlines are needed to acquire new aircraft and maintain the existing ones, and the market share significantly influence such decisions which help influence consumer perception on the overall organization health and aircraft safety.

Minimization of Operational Cost

Delta Airlines has recently increased its overall operational by renovating its airplanes as well as acquiring new aircraft to increase the overall premium space to meet the growing demand for premium services. With the airline strategic goal of venturing into the Asian market, the minimization of operational costs will be crucial towards the organization market sustainability. Profitability is highly determined by the firm overall operational cost with the decline in cost leading to the growth in profitability.

Streamlining Airline Partnership

Delta Airlines as a member of the Sky Team and other bilateral relationships with individual airlines require effective communication channels to ensure that the airline continues to benefit from the improved alliance and partnerships which can help the airline to increase its overall market share and to compensate for the growing domestic market share decline due to stiff competition.

Strategies

Revenue Maximization

Revenue maximization involves ensuring that an airline generates high revenues per flight by increasing the number of customers in the airline capacity. Revenue growth ensures that all the necessary steps are in places such as the use of competitive pricing and market research to ensure that the airline offers its customers irresistible deals which will increase the overall revenue generation and profitability (Boin, Coleman, Delfassy, & Palombo, 2017).

Aggressive Marketing and Friendly Customer Support

Marketing in the airline industry plays a significant role in beating the competition and at the same time ensuring the overall safety of all the stakeholders within an organization. The airline should use aggressive methods such as social media and mainstream media in their potential destinations to drive sales. Delta Airlines should seek to shape a customer-centric approach that seeks to ensure that the products are designed with the consumer needs in mind. As such, friendly customer support has been found to increase the overall customer satisfaction through responsive care that ensures that the needs of the travelers are continuously met in time.

Strategy Implementation

Delta airlines should implement the strategies promptly to increase sales and market share by creating a strategic task force that will be in charge of delivering the organization objectives by ensuring that the strategies are put rolling. Creating a task force for the implementation of the organization strategy implementation reduces the incompetence and confusion by ensuring that an organization strategic implementation is in the hands of responsible individuals. The airline should set up a budget for the strategies to prevent financial based challenges towards the implementation of the airline strategies. Lastly, it is vital for the strategies implementation success to be evaluated quarterly to improve the overall outcomes and make changes in areas that are deemed as ineffective.

Financial Projection and Expectations

Delta airlines has a strong financial standing, and it is positioned for further growth in the future due to its premium services and market expansion into Asia and in this case, China which is becoming a key air transport hub due to the increased traffic (Wenqian, 2018). In overall, Delta Airlines financial position is bound to improve due to sales growth and a decline in debt ratio which will increase the airline financial standing. In 2019, Delta airlines sales and operating profits are projected to be 46,667 from 44,438 in (2018) and 6,195 from 5,211 (2018) (Market Screener. n.d). These projections show significant growth in sales and profit for the airline, and this can be achieved and sustained through improved marketing and revenue maximization. This will be possible by the airline continued premium service development and shifting from buying new planes to leasing their planes which will significantly reduce the overall cost of operations.

Figure 2: Annual Income Statements and Projection (Market Screener. n.d).

Figure 3: Delta Airlines Financial Leverage (Market Screener. n.d).

References

Boin, R, Coleman, W, Delfassy, D, & Palombo, G. (2017). How airlines can gain a competitive edge through pricing. McKinsey & Company. Retrieved from https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/how-airlines-can-gain-a-competitive-edge-through-pricing

Josephs, L. (2018, October 11). Delta is getting travelers to shell out more for seats. CNBC News. Retrieved from https://www.cnbc.com/2018/10/11/delta-is-getting-travelers-to-shell-out-more-for-seats.html

Market Screener. (n.d). Delta Airlines Financial Forecast. https://www.marketscreener.com/DELTA-AIR-LINES-INC-49285/financials/

Wenqian, Z, (2018). Delta building its brand as the most Chinese-friendly US airline. China Daily. Retrieved from http://www.chinadaily.com.cn/a/201812/12/WS5c107067a310eff30329087d.html