Delta Airline: Planning, Management and Organizing Functions

The air transportation industry is competitive, particularly for leading carriers that have to develop and implement new business and operation strategies to maintain their market share. Delta airlines is an example of a leading carrier that has had to contend with numerous challenges since the airline’s decades of operation. In 2005, Delta airlines filed for bankruptcy despite being a major industry actor. In the air transportation industry, turning a profit can be difficult for a number of reasons. Evaluating Delta’s innovative managerial and operational practices reveals the carriers revitalization of innovation in the air travel industry. 

Planning

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Firstly, air transport is a high risk business, and any accidents particularly in the passenger service sector can result in loss of lives with the attendant legal and financial ramifications. Major carriers have also been marred by poor employee relations, a status quo that typically exposes the airlines to costly legal liabilities (Kaufman, 2017). 

A reduction in downtimes is crucial in the airline industry as downtimes result in ticket cancellations which in turn erode an airline’s revenue. For this reason, Delta airlines had to streamline its core operations in order to ensure reduced exposure to downtimes. Delta’s organizational structure centers on its core operations that include partner networks and market operations. The partner networks include Delta’s vendors, businesses the airline holds shares in and employees (Anderson, 2014; Kaufman, 2017). It is through its partner network that Delta manages its day to day operations that can be categorized as activities, resources and support services. 

Delta airline’s use of older aircraft has also enabled it to reduce on acquisition expenses, a strategy that has enabled the airline offer lower prices to its customers compared to its competitors. Unlike Delta’s competitors that rely on newer aircraft, an approach that compels them to operate with fixed costs to recoup capital acquisitions, the airline’s introduction of used aircraft has afforded the airline flexibility (Anderson, 2014). With used aircraft, Delta is in a position to cost-effectively scale it operations in response to market forces without exposing itself to the high fixed costs that are disadvantageous during economic downturns.

Organizational structure

Delta’s activities include logistics, developments, operations, marketing and sales, information technologies, brand and services management (Vinod, 2018). The management of the Delta’s resources encompasses fuel refinement and distribution, employee welfare, termini management, fleet acquisition, maintenance and overhaul, content development and support services. The aim of Delta’s partner networks is the creation of value, an example being its fuel management and aircraft maintenance operations that have increased the airline’s revenue streams (Anderson, 2014).  

Equally important in Delta’s organizational structure is its market operations. In contrast to its partner networks, Delta’s market operations aim at capturing value. The airline’s market operations includes customer relations and customer liaison channels. Given the traditional rigidity in airline management particularly in relation to emerging market trends, Delta has made considerable organizational investments in how its customers perceive the airline. Delta’s customers include travel agents, advertisers, and importantly, passengers. The channels that delta uses to sell and market its products and services include its main website, listed landline and cellular telephone numbers, in-flight offerings, and partner airlines.

Strategic planning 

Delta airlines transports both passengers and cargo, a mix of services that enable it offer even more defined products and services. As a global operator, Delta airlines offers its clientele the option of travelling to hundreds of destinations both domestically and internationally. Delta’s services prioritize customers’ experience and satisfaction as these are factors that are underpin the airline’s sales and marketing operations. In order to attract and maintain customers, Delta airlines competitively prices its travel packages, alongside offering incentives that include frequent fliers reward programs and better cabin services. 

In lieu of rewarding its frequent fliers using miles flown, Delta considers the dollars customers have spent on its services and accords them reward point using expenditures, a departure from similar programs of its competitors. Delta has been able to offer lower prices though other acquis ions. To illustrate, in order for the airline to minimize its exposure to fluctuations in fuel prices, Delta airlines acquired its own refinery and fuel transportation and storage infrastructure (Manuela et al., 2016). The operation of a refinery has enabled stabilize Delta to stabilize its fuel supplies, in addition to improving fuel hedging (Anderson, 2014). 

Major carriers such as Delta and United Airlines have come under significant pressure from the proliferation of smaller carriers that serve specific routes in recent decades. Consequently, Delta effected a merger with Northwest airlines was one of the strategic alliance Delta airlines effected, a move that expanded the latter’s revenue through the addition of new routes and passenger and cargo traffic. Additionally, Delta bought minority shares in overseas carriers that include the United Kingdom’s Virgin Atlantic, GOL provider in Brazil and Aeroméxico (Anderson, 2014). 

Managerial Capabilities

Delta’s management structure is informed by the variability of its core operations. In order to remain competitive post-recession and bankruptcy, Delta recruited managers that were capable of adapting administrative paradigms to emerging market conditions. Delta’s senior executives and managers had to depart from the airline’s origins as a legacy carrier. An example is in the merchandising its domestic flights, a move that improved the experiences it offers its North American customers. 

To improve its overall operational and strategic innovations, Delta airlines recruited managers with diverse competencies to major positions. A major task for its top management during the 2008 global recession was to mitigate the erosion of revenue from the depression and the airline’s subsequent bankruptcy declaration (Anderson, 2014). In this respect, Delta’s managerial ranks had to adopt new was to ensure the success of the airline’s short and long-term operational objectives (Kaufman, 2017). By acknowledging extant market trends, Delta airlines was able to determine the kind of management it required to introduce practicable operational and strategic innovations (Antón et al., 2018). 

An example of Delta’s novel approach to management is its acquisition of an oil refinery. By diversifying into not only the supply, but also the processing and transportation of fuel, Delta airlines had to source for new skills to successfully integrate their fuel segment with the airline’s exiting core operations (Manuela et al., 2016). As a result, Delta’s management now boasts insights in the management of fuel, from purchases to hedging, transportation, storage and retailing. By handling the chain of its own fuel supplies, the airline has been able to cut its fuel-related expenditures up to 10 cents less in comparison to the industry average (Anderson, 2014). 

As part of improving Delta’s customer experience, the airlines has taken advantage of the permeation of information technologies (IT) to offer differentiated products and services to its customers (Vinod, 2018). Delta now retails a bulk of its ticket sales online, a move that has not only connected the airline directly with its customers, but also cut its operating costs (Vinod, 2018, Anderson 2014). Further, IT has facilitated vertical and horizontal interactions in managerial hierarchy can co-occur, an example being the productive collaboration of Delta’s work teams in the partner networks and market operations globally (Kaufman, 2017). An inclusive managerial workplace have fostered Delta’s recent industry innovations, particularly in the improvement of airline’s customer services (Antón et al., 2018). 

Internal and External Functions Affecting Management

The fluctuation of fuel prices continue to present a constant challenge to the profitability of airlines. In order to mitigate exposure to the vagaries of fuel prices, Delta airlines acquired its own refinery (Manuela et al., 2016). The acquisition was an industry first that enabled Delta maintain access to low priced fuel. Equally, Delta had to develop new management paradigms to fit its acquisition of a refinery with the airline’s core cargo and passenger operations. In tandem with stabilizing its fuel supply, Delta increasingly retired older, larger aircraft and opted for the newer generations of narrow-bodied, fuel efficient aircraft.   

Keeping the number of its unionized employees low is one of Delta’s strategy that ensures the airline retains a skilled workforce while at the same time reducing redundancies that come with strikes and legal actions (Antón et al., 2018). The U.S’ history unionization has over the decades resulted in powerful employee advocacy organizations that can make it difficult to innovate employee compensation. Employee involvement programs like Delta’s employee shareholding in the corporation has afforded the airline the flexibility in managing its human resources that would not be possible if its employees were wholly unionized. 

To reduce remuneration-related liabilities, Delta airlines opted to effect an employee profit-sharing plan in 2007. The plan involved sharing out 10 percent of the profits before taxes and other compensations with employees (Anderson, 2014). The profit-sharing plan was an industry first when Delta airlines adopted it and continues to differentiate the airline from its competitors. Equally, Delta airlines introduced a stock ownership plan after its merger with Northwest airlines (Antón et al., 2018). Like the profit-sharing plan, Delta enabled staff in various employee categories to own stock in the airline. The collaboration of its employees is paramount to Delta’s operations. Delta’s employees are not only highly trained, but are also shareholders in the airline (Kaufman, 2017). This approach in Delta’s employee management strategy enabled the airline to elevate employees to a core resource for the airline, espousing the participation-commitment model (Antón et al., 2018; Kaufman, 2017). In owing part of the airline, Delta’s employees have been able to offer high quality services to their customers at competitive rates. 

Adverse weather developments can also impact the margins in the airline industry. The destruction or incapacitation of major facilities such as airports and refineries due to severe weather can lead to airlines losing revenue. Severe weather events can result in air traffic accidents, a delay in scheduled flights and interrupted supplies, particularly fuel supplies (Manuela et al., 2016). To illustrate, the hurricane season in the United States has in the past disrupted domestic air travel, a development that resulted in reduced revenue due to cancellations and reduced ticket sales.  Further, negative economic shifts such as a receding global economy in 2005 saw a retraction of airline margins, the result of the high operating costs the industry at the time. 

References

Anderson, R. H. (2014). Delta’s CEO on using innovative thinking to revive a bankrupt airline. Harvard Business Review https://hbr.org/2014/12/deltas-ceo-on-using-innovative-thinking-to-revive-a-bankrupt-airline 

Antón, M., Ederer, F. Giné, M., & Shmalz, M. (2018). Common ownership, competition, and top management incentives. European Corporate Governance Institute Paper No. 511/2017, 1-59. www.ecgi.org/wp

Kaufman, B. E. (2017). “Great in Theory but Tough in Practice: Insights on Sustaining Advanced Employee Involvement at Delta Air Lines” In Advances in Industrial and Labor Relations, 2017: Shifts in Workplace Voice, Justice, Negotiation and Conflict Resolution in Contemporary Workplaces. https://doi.org/10.1108/S0742-618620180000024005 

Manuela Jr, W. S., Rhoades, D. L., & Curtis, T. (2016). An analysis of Delta Air Lines’ oil refinery acquisition. Research in Transportation Economics, 56, 50-63. 

Vinod, B. (2018). Evolution of yield management in travel. Journal of Revenue and Pricing Management – online doi:10.1057/rpm.2016.15 

Appendix

Organization Chart

C:\Users\Cardinal Black PC\Downloads\A3 Organization.jpg

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