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Essay: Delta Air Lines Inc. analysis

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The airline industry has over gone many changes in the past few decades. There has been deregulation, terrorisms attacks, fluctuating fuel prices among other formidable issues that have had a great deal of impact on the airline industry. The company that will be analyzed and researched in great detail will be Delta Air Lines Inc. A brief history on how the carrier started will be discussed, along with a SWOT analysis focusing on the operations management aspect. Additionally, industry competition will be briefly discussed as well as the state of the economy and its impact on the airline industry.
Brief Company Overview
Delta Air Lines Inc. was created in 1930 (“Delta Air Lines, Inc.”, 2018). Delta initially started off in the agricultural industry and later in 1934 commenced to transport passengers and cargo (“Delta Air Lines, Inc.”, 2018). Thanks to the US Post Office and their airmail operation which was created to increase manufacture of planes and qualified pilots, Delta Air lines as well as many other carriers, were able to transport passengers (Bilstein & Crouch, 2016). The success of this operation led the Post Office to agree with Congress on the Contract Air Mail Act of 1925 (Bilstein & Crouch, 2016). The Contract Air Mail Act of 1925 as well as the Foreign Air Mail Act of 1928, sponsored selected mail service routes and past these mail services to private airlines, which lead to monopolies (Garrison & Levinson, 2014). These financed routes allowed private carriers to sell seats to passengers to generate profits (Garrison & Levinson, 2014). The route that Delta was awarded was from Charleston to Dallas. Thanks to this Air Mail Act, six mayor airlines including Delta, dominated the US air travel until deregulation occurred in 1970’s; the airlines that were awarded the Air Mail Act still have their located in cities of the routes they were given in 1930’s (Garrison & Levinson, 2014). Delta is a company that have strong core values and cherishes honesty, integrity, respect, perseverance, and servant leadership (Delta Air Lines, 2014).
Service-encounter design
Service-encounter design concentrates on the encounter either directly or indirectly, between the consumer and workers (Collier & Evans, 2016). The fundamentals of service-encounter design that encourage performance excellence and customer satisfaction include consumer exchange behavior and skills; choosing the provider, development and enablement; recognition and reward; and recovery and warranties (Collier & Evans, 2015, p. 123). There is a saying that Delta employees say, “Delta takes care of its people, and we take care of Delta” (Fortune, 2017). Delta Airlines has the reputation have being a great place to work at; this is proven by the Fortune 100 best companies to work for where delta has made the list two years in a row (Fortune, 2017). Delta culture is heavily influenced by a set of values and principles outlined in a booklet that is handed out to every employee (Roberts, 2017). The booklet, Rules of the Road, addresses and encourages empathy for customers, humility, and respect for the competition (Roberts, 2017).
Additionally, Delta has a program that allows employees to interact with senior executives to address any questions or concerns (Roberts, 2017). It was the empowerment, values, and principles that are inculcated that led employees to deal with the computer outage that caused grounded flights with empathy and good cheer (Roberts, 2017). Although development and enablement are crucial for an organization to keep their employees satisfied, a more conventional method is by rewards and benefits. Delta is known for rewarding their employees well with suitable pays, a profit-sharing plan, as and a generous 401(k) (Roberts, 2017).
Customer Relationships
A Customer Benefit Package (CBP) is a collection of goods and services features that consumers utilize or experiences (Collier & Evans, 2015, p. 10). Customer benefit package is made up of a primary good or service and peripheral goods and services and on occasions a variant (Collier & Evans, 2015, p. 10). A primary good or service is the main product or service that the consumer seeks. On the other hand, a peripheral goods or services are additional products or services that improve the primary good or service. A variant is a feature that will depend on the organization or the location (Collier & Evans, 2015, p. 10).  Customer benefit packages allows organizations to visualize how goods and services are organized with one another (Collier & Evans, 2015, p. 10). By having a customer benefit package, organizations are able to fulfill the customer wants and needs by enhancing the primary good and service and giving the firm a competitive advantage over its competitors. Delta Air Lines primary service is the actual flight while their peripheral services include special meals, Delta Studio an entertainment service, free in-flight messaging over WI-FI, and their SkiMiles frequent flyer program. These unexpected and excellent services is what sets Delta Air Lines apart from their competitors and causes them to be viewed as one of the best carriers in the U.S.
For organization to flourish in today’s market, technology should be enforced to accomplish their goals. Alclear and Vision-Box are companies that provides biometric technology that allows businesses to offer their customers a secure and fast way to check-in such as an airport (Airlines turn to CLEAR and Vision box, 2018). Alclear manages a secured identification platform known as CLEAR that allows users to scan their fingerprints at check-in points. On the other hand, Vision-Box offers a similar technology, but instead of utilizing fingerprints they provide facial recognition technology for the same purposes. That being said, the German-based airliners, Lufthansa, recently adopted the facial recognition technology (Airlines turn to CLEAR and Vision box, 2018). The LAX airport in California is the home of this Lufthansa’s hassle-free system that allows passenger speed up the check-in process. Lufthansa is hopeful that other airlines will adopt this technology; additionally, they hope to extend the system to other locations (Airlines turn to CLEAR and Vision box, 2018). Meanwhile, British Airways found themselves in the trial phase of facial recognition technology. They incorporated this technology to various locations such as New York, Miami, and Orlando; not to mention that it already existed at the LAX airport (Airlines turn to CLEAR and Vision box, 2018). It is imperative to indicate that British Airways has already implemented this technology on its domestic flight departing Heathrow Airport located in London for all their passenger holding a UK, EEA, or Swiss passport (Airlines turn to CLEAR and Vision box, 2018).
The past few years Delta Airlines has been committed to delivering innovative solutions
to their customer that facilitate and enhance their traveling experience while seeking loyalty. Delta Sky Club members can now enjoy the use of fingerprint scanner that allows them
to accelerate the check-in process. CLEAR powers Delta’s fingerprint scanning technology in all
50 US Sky Club location in the continental US; permanent residents as well as US citizens are
eligible to use this technology (Steele, 2018). However, in order to commence utilizing this
service, Sky Club member must enroll in one of the 14 available kiosks across the country
(Steele, 2018).
Since the trial phase, Delta’s biometric system has seen improvements with the goal to
become a more user friendly.  The scanner possesses ergonomic finger support as well as an
angled fingerprint reader designed to optimize the readings, increasing the successfulness of each
scan (Steele, 2018). Additionally, it has an intuitive sound and lighting that alerts the user when a
successful scan has taken place (Steele, 2018). Lastly, the scanner was re-designed to
accommodate all the above features with an elegant and sleeker design (Steele, 2018). That being
said, the implementation of this technology is the latest example of Delta’s applied innovation
seeking to improve and ease customers’ experience while traveling domestically. A few
technological advances made by Delta include replaced ID checks touch point with fingerprint
scanners, RFID baggage handling, biometric-based self-service bag drop, and in-cabin internet
connectivity (Steele, 2018). All these improvements helped Delta to be named as one of the most
Innovative Companies Worldwide in 2018 placing them number 6 among other airlines (Steele,
Within the past several years the aerospace industry has seen an increase of the use of not
only hard technology but soft technology as well. Soft technology is the integration of the
internet, software, and information systems that offer data to organizations to improve goods and
services provided to its consumers. Delta Airlines are seizing the opportunity and attempting to
be innovators and integrate as much as technology as possible to gain a competitive advantage
and improve services. This type of technology not only benefits Delta Airlines but the entire
Aerospace industry. It will only be a matter of time when other airlines follow in the footsteps
of Delta and implement biometric technology.
Another technology that Delta has invested $50 million in is a technology that would reduce passengers losing their luggage (Mayerowitz, 2016).  Delta claimed to carry nearly 120 million checked bags in 2015, and only 1 out of 500 bags failed to arrive at the final destination on time (Mayerowitz, 2016).  Therefore, Delta is trying to implement a Radio-frequency identification (RFID) tag to each luggage that would help keep accountability of the bags (Mayerowitz, 2016). RFID is a technology centered on an integrated circuit with an antenna attached to the target (Lee & Özalp Özer, 2007). Information that pertains to what is in the container that would help to differentiate one tag from another as well as other relevant data can be stored in the chip (Lee & Özalp Özer, 2007). By using wireless technologies, readers can be installed to read the information on the tags without a necessary connection (Lee & Özalp Özer, 2007). The advantage of an RFID tag is that it doesn’t require to be positioned in a precise way in order to be scanned, unlike bar codes that need a clear line of sight in order to be read. RFID scanners can pick up the tag up to 20 feet away if it is a high-frequency tag (Lee & Özalp Özer, 2007).
Delta was looking to replace the traditional bar code tag for RFID if the implementation was successful (Mayerowitz, 2016).  The ten-digit number bar code process seems to be time consuming resulting in flight delays and luggage misplacements. Delta is also utilizing the RFID technology to track bags through the conveyor belt below terminals, in an effort to minimize luggage that falls off the belt or that gets stuck in a junction (Mayerowitz, 2016). Allegedly, Delta possesses approximately 5,200 RFID readers globally, and they were expecting to have the system up and running in 344 airports by the end of August of 2016 (Mayerowitz, 2016).  By the end of the year, they were hoping to have a smartphone application up and running that pushes notification to fliers if their bag would have missed its flight (Mayerowitz, 2016).
Delta claimed that in 2015 a total of 245,000 bags were mishandled, in which 208,000 of them arrived within 3 hours (Mayerowitz, 2016).  They also suggested that another 25,000 arrived within 12 hours and the remaining 12,000 were lost or took more than 12 hours to be delivered to its owner (Mayerowitz, 2016).  It is imperative to mention that Delta is not the only one utilizing this technology; the Australian airline Qantas has been using it since 2011; Qantas offers its customers to buy a permanent RFID tag for $23 that they can use when flying domestically (Mayerowitz, 2016).  In the past, airlines have expressed that RFID technglogy is too pricey, but Delta has not released the price per unit yet.  They assured that it is fewer than 10 cents each (Mayerowitz, 2016).  We must understand that there are limitations for this implementation, bags that are checked at the gate would have an RFID tag but items such as strollers and bags checked at a gate for regional jets would be tracked with RFID (Mayerowitz, 2016).  Another limitation is for Delta flights connecting to partner airlines, bags will have the traditional tag instead of the RFID (Mayerowitz, 2016).
Policy issues
Delta Air Lines is changing its policy on service and emotional support animals. They will demand passengers to divulge more information regarding the service animal (Arkin, 2018). Delta will start having their passenger that desire to fly with their service animals to provide proof the proper documentation regarding the animal’s vaccinations papers as well as proof of training 48 hours prior to their flight (Arkin, 2018). Furthermore, the client must provide a document authorized by a doctor or licensed mental health professional, authenticating that the pet can act accordingly on the flight (Arkin, 2018). This change in policy is due to an increase of reported incidents with ‘service animals’ that included barking, growling, lunging and biting (Arkin, 2018). These types of aggression are rare in service animals that are trained accordingly (Arkin, 2018).  These changes in policy can be detrimental to the company because not only does it increases the amount of work that Delta employees must do, it also means more work for the passengers. Although it might reduce the amount of incidents, it might make employees and passengers unsatisfied with the company.
System issues
The problem occurred when the company lost power at its operations center in Atlanta early on the morning of Aug. 8, causing computers needed to book in passengers and fly jets to be down for nearly five hours. The airline eventually canceled about 1,000 flights on the day of the outage and ground an additional 1,000 flights over the following two days. It also agreed to give affected customers refunds and vouchers for future travel.
Capacity Management
Capacity is the capability of manufacturing or a service system to achieve its objective over a designated time frame (Collier & Evans, 2015). Capacity and demand are directly correlated; demand’s instability in regards to the capacity level signifies a hindrance to airliners. When the demand contracts beneath capacity, then the profits are compromised. On the other, if demand rises then the capacity requires to be tailored to suffice the demand (Collier & Evans, 2015). Airlines such as Delta is in a perpetual battle to acquire the ideal symmetry between capacity and demand that yields maximization of profits. Delta’s approach to the concerning matter is a retrenchment on their capacity growth to mitigate a potential surpass of demand (Reed, 2016).
Despite this effort in 2016, Delta has proceeded with its capacity growth strategy.
It is imperative to acknowledge that airlines’ success is assessed employing the PRASM. The PRASM is an indicator susceptible to positive or negative variations in revenues in contrast to the preceding years that could be attractive to investors (Gosai, 2017). Additionally, Sibdari, Mohammadian, and Pyke (2018) have revealed three contributing exogenous constituents that alter the passenger demands and their correlation to capacity. Those three factors are fuel cost, unemployment rate, and passenger demand. They concluded that a surge in passenger demand is the consequence of smaller aircraft merge with more recurrent flights (Sibdari, Mohammadian, & Pyke, 2018). Meanwhile, higher fuel costs are linked to larger aircraft combined with less frequent trips. Moreover, increments in fuel cost and unemployment rate diminish the overall passenger demand (Sibdari et al., 2018). It appears that airlines, such as Delta accommodates flight frequency and aircraft sizes in a short-term basis to control capacity while sustaining load factors in response to oscillations in the three constituents (Sibdari et al., 2018).
Strategic Alliance Partnership
Having a competitive edge means possessing an advantage over your competition.  Companies want to beat out their competitors in order to earn higher revenue.  That is why many airlines have partnered up with several other carriers to gain a competitive advantage; SkyTeam is an example of said partnership. They are an international airline alliance that offers clients more destinations and routes. The airlines that make up SkyTeam are: Aeroflot, Aerolíneas Argentinas, Aeroméxico, Air Europa, Air France, Alitalia, China Airlines, China Eastern, China Southern, Czech Airlines, Delta Air Lines, Garuda Indonesia, Kenya Airways, KLM Royal Dutch Airlines, Korean Air, Middle East Airlines, Saudia, TAROM, Vietnam Airlines and Xiamen Airlines (Kelly, 2017). Founded in 2000, SkyTeam first airline members were Aeroméxico, Air France, Delta Air Lines and Korean Air.The organizations held a meeting in New York City to create an alliance. Following this coalition, SkyTeam Cargo was established which was made up by Aeromexpress, Air France Cargo, Delta Air Logistics and Korean Air
Cargo. In 2010 and later SkyTeam expanded and integrated airlines such as China Eastern, China Airlines, Garuda Indonesia, Aerolíneas Argentinas, Saudia, Middle East Airlines and Xiamen Airlines.
As a consequence of these new airlines joining the team, SkyTeam was able to cover more of ground such as Middle East, Asia, and Latin America, with hopes to expand to Brazil and India in the future. As previously mentioned, SkyTeam operates approximately 16,323 flights daily to 177 countries which allow passengers a network where airlines share responsibilities and arrangements. This facilitates making reservations and making connections between airlines easier. Therefore, this union between carriers streamlines the entire process, which leads to operational costs reduced that are reflected on the ticket for passengers. Another of the focuses for joining forces is that customers are able to earn and spend Frequent Flyer Miles with the participating airlines. In addition to offering perks such as Frequent Flyer Miles, SkyTeam members have access to 516 lounges worldwide. As more airlines join this union, the more benefits Delta can reap.
Industry competition
i. Large carriers
ii. Low cost carriers
Fuel prices
For an airline carrier to continue to compete in today’s market they must find ways to reduce expenses and increase profits.  Among the many expenditure an airline endures, jet fuel is considered one of the main costs. Jet fuel is attained through the transformation of crude oil at oil refineries. The procurement of low priced jet fuel is quite impossible due to the unstable prices of oil. However, Delta Air Lines have found a way, through great management and problem-solving skills, a way to overcome this barrier. Delta Air lines acquired an oil refinery. An oil refinery in Trainer, Pennsylvania owned by Phillips 66 closed due to the fact that the company determined it didn’t make economic sense to keep operating (Manuela & Wilfred, 2016).  There wasn’t a big difference in price between the barrel of crude and the barrel of the refined product. Delta acquired it for an astonishing price tag of $150 million, but it was expected to invest an additional $100 million to make the necessary upgrade (Manuela & Wilfred, 2016). This was an innovative idea from Delta because other major US airliners had different approaches to lower fuel cost. By producing their own oil, this will reduce the overall fuel costs by eliminating the middleman. They took into consideration financial statement from quarter 1 of 2010 to quarter 2 of 2015; the refinery itself reported profits of $19 million and $75 million for quarter 3 and quarter 4 of 2014 respectively (Manuela, & Wilfred, 2016). If the price of the crude oil increases drastically then the attempt to reduce fuel prices fails.
US Economy Impact
The U.S. airline industry has had many undesirable issues that have adversely impacted the industry such as economic losses, liquidations, disagreements within unions, and costly mergers in the past years. Despite these barriers and challenges, airlines have been experiencing economic success since 2009 (Helleloid, Nam, Schultz, & Vitton, 2015). According to the International Air Transport Association, North American airlines are projected to make roughly $12 billion of collective profit in 2014 and exceed $13 billion in profits for 2015 (Helleloid et al., 2015). Delta Air Lines, among four other large U.S. airlines have reported approximately over $2 billion in revenue in 2014 (Helleloid et al., 2015). It was a fusion of the economy improving, more competitive fuel prices, less competition due to mergers, increases in supplementary income, and lean thinking that has caused the profitability that many carriers are experiencing (Helleloid et al., 2015). However, these changes in profit has raised concerns with certain regulators and politicians (Helleloid et al., 2015). An investigation was issued as of July 2015 by the U.S. Department of Justice to investigate whether or not airlines had conspired to maintain ticket prices high (Helleloid et al., 2015). A proclamation was made by Senator Schumer inquiring about the discrepancies between the air fare prices and oil prices (Helleloid et al., 2015).
It is clear that the airline industry is a volatile commerce that has many external factors that heavily impacts the success and failure of the organizations. As discussed change is a constant factor in the airline industry. Carriers such as Delta Air Lines must overcome many barriers to be profitable in today’s market. Throughout this discussion we have learned there are several external factors that impact the airline industry that are often uncontrollable and unpredictable. But for those issues that can be controlled, airline management must be able to react and

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