Strategic Analysis for Delta Airlines Corp.

By: Rania Djamaluddin

1) IntroductionDelta is America’s fastest growing international carrier.

It was founded in 1928 in Monroe, LA.The present head quarter is in Atlanta, Georgia.

Flights to 458 destinations in 99 countries

They filed for reorganisation on the 14th Sept ’05 under Chapter 11 of the U.S Bankruptcy Code.

2) Vision and Mission Statement

They want to stand for safe and reliable air travel.

Distinctive customer service and hospitality from the heart.

They believe they are the leaders in the business.

They strive to provide value.The want to improve the environment.

3) a. Porter Five Force AnalysisDelta Airline falls into three major industries which are;

International airline industry Domestic American Airline Industry

Service industry

Porter Five Force Analysis cont.

High

Medium

High

High

High

CPEST

Competition - Domestic

- International

Political and Legal factors - Government restrictions Economical factors - United States has a stable economy, big businesses and many travellers

CPEST cont.

Socio-cultural factors- Environmentally conscious- Launched ‘Delta’s Force for Global Good’

- Target Business class

Technological factors - Technically experienced- Buy only new planes - Offer technical services to other Airlines

3) b. EFE Matrix for DeltaOpportunities Weight Rating Weighted

Score1. First mover’s advantage. 10% 2 0.2

2. Domestic and international expansion strategy

15% 3 0.45

3. New and revamped planes 10% 2 0.2

4. Customer service initiatives (self-serving kiosk and e-ticketing)

8% 1 0.8

5. Maximise the frequent travellers air miles program.

12% 3 0.36

EFE Matrix for Delta cont.

Threats Weight Ratings Weighted Score

1. Fierce of competition 10% 2 0.2

2. Union Labour (Labour strikes can cause bankruptcy)

5% 3 0.15

3. Rising fuel prices and low fares

10% 1 0.1

4. Terrorist attacks 5% 2 0.l

5. Carbon footprint 15% 3 0.45

TOTAL 100% 3.01

3) c. Competitive Profile Matrix

Delta American Southwest

Weight

Rating

W.Score

Rating

W.Score

Rating

W.Score

Routes 0.2 4 0.8 3 0.6 2 0.4

Advertising 0.3 3 0.9 4 1.2 2 0.6

Financial Position

0.15 2 0.3 2 0.3 2 0.3

Service Quality

0.2 3 0.6 3 0.6 2 0.4

Customer Loyalty

0.15 3 0.45 3 0.45 2 0.3

Total 3.05 3.15 2.0

4) a. Financial Analysis including a comparison with the industry

Financial Ratios

Liquidity Ratios

2006 2005

Current Ratio 0.93 0.85Quick Ratio 0.90 0.82Leverage RatiosDebt to-total-assets ratio

0.33 0.32

Activity Ratios

Activity ratios

2006 2005

Assets Turnover

0.87 0.81

Profitability Ratios

Profitability Ratios

2006 2005

ROA (0.316) (0.190)

ROS (0.36) (0.24)

In Comparison with The Market (over the 5 years average)

Company Industry Sector

Sales Growth rate

4.35 16.65 11.12

Net Profit Margin

(22.49) 2.77 7.36

Assets Turnover

0.87 0.92 1.15

In Comparison with The Market over 5 years average

Financial Strength

Company Industry Sector

Quick Ratio

0.90 0.86 1.10

Current Ratio

0.93 1.12 1.38

4) b. IFE Matrix for DeltaStrengths Weight Rating Weighted

ScoreExpansion of super hub in

Atlanta 10% 4 0.4

Good corporate social responsibility

15% 3 0.45

Only airline in the world to serve over 300 destinations

10% 4 0.4

Better In Flight entrainment when compared to competitors

5% 4 0.2

Majority of their employees are non-unionized

10% 3 0.3

IFE Matrix for Delta cont.

Weakness Weight Rating Weighted Score

Chapter 11 ( filed in 2005) 15% 1 0.15

Government restrictions 10% 1 0.1

Various increased costs post 9/11

5% 2 1.0

Gross margin (5 year avg) is lower than industry as well as sector

10% 2

0.2

Route eliminations 10% 2 0.2

Total 100% 3.4

5) Existing StrategiesConcentric DiversificationProduct Development Forward Integration Market Penetration

6) a. TOW’s Matching(O&S) To expand its domestic and international routes by using its current leading reputation

(W&O) Increasing sales by competing more aggressively with competition and cutting down on direct expenses

(T&S) To market their ‘Force for Global Good’ by making the public more aware of how much Delta is contributing to the environment

TOW’s Matching cont.

(S&O) To increase customer loyalty

(T&W) Capitalizing on market share by acquiring new routes world wide

6) b. McKinsey-GE Matrix

High Strength Medium Strength

Low Strength

High Attractiveness

Medium Attractiveness

Low Attractiveness

service

Domestic

International

6) c. Future StrategiesTo increase customer loyalty

Invest to expand existing segments

Build on existing strength in order to maintain competitive ability and even to challenge for leadership

7) ConclusionWhat could go wrong? Technology advantages can be copied Overweight people could get offended People become even more price sensitive and don’t care about added value or extra amenities Unable to win over budget-minded fliers with offers of better service and lower fares

Conclusion cont.

What strategies in the future we recommend for the company…

Market their ‘Force for Global Good’ better

Expand into the Asian continent (India and China)