Delta Air Lines: What Good Goes Around - Assignment Example

Delta, including its wholly-owned subsidiaries, Atlantic Southeast Airlines (ASA) and Comair, served 176 domestic cities in 43 states, the District of Columbia, Puerto Rico and the US Virgin Islands, as well as 51 cities in 33 countries. With its domestic and international codeshare partners, Delta's route network covers 224 domestic cities in 49 states, as well as 223 cities in 89 countries. Delta is managed as a single business unit. The company mainly derives revenues from its passenger, cargo and other operations in North America, Atlantic, Latin America, and Pacific regions.

In their 2004 Company Report, the Delta Air Lines admitted that they are currently facing unprecedented financial losses, including a $5.2 billion net loss for 2004, and with considerable challenges and more work still ahead, Delta by the end of 2004 had made real progress pursuing focus on its Profit Improvement Initiatives (PII) and other cost reductions. Delta secured $2.3 billion of the $5 billion in annual benefits estimated as necessary to lower its cost structure and hit initial financial viability targets in 2006.

Increased costs resulting from high fuel prices in 2004 and heavy labor costs have forced the carrier to the brink of bankruptcy. As a result, the company has devised a complete reorganization plan that includes eliminating some 7,000 jobs (or 10% of its workforce) by the first quarter of 2006 (Euromonitor, October 2005). In addition to that, Delta launched improvements to their product, services, network, and fleet, adding passenger-friendly technologies and initiating refurbishment of aircraft interiors.

Delta's entire infrastructure was retooled to prepare for the early 2005 launch of two innovative and industry-leading initiatives: SimpliFaresTM and the redesign of Delta's route network. According to their 2004 Company Report,SimpliFaresTM permanently changed Delta's domestic pricing structure to be more competitive and consistent. Customers more frequently used our improved website, delta.com, to make reservations and purchase tickets. And, revenues from the increased traffic fueled by more satisfied customers helped offset the lower fares, exceeding expectations for the Cincinnati test market and accelerating the 2005 SimpliFaresTM rollout in the 48 contiguous states.

As the market for low fare passenger travel took share from regularly priced airlines, Delta launched a budget carrier line called Song. To differentiate from other budget carriers, Delta equipped Song's fleet of 36 Boeing 757s with in-flight entertainment that allows passengers to view up to 24 channels of satellite TV from their seats. Aside from that, Delta underwent massive rescheduling efforts as it restructured 51 percent of its network in a single day. Worth and the establishment of a continuous hub operation in Atlanta.

The resulting gains in efficiency and aircraft utilization allowed the redeployment of resources.