Free «Internal Environment and Competitive Advantages of Delta Airline» Essay
Delta Airlines Inc. is one of the major global airlines providing the scheduled air transportation for cargo as well as passengers throughout the United States and the six continents of the world. It rates second after Southwest Airline in terms of domestic revenue passenger miles. Delta primary source of profit includes passenger revenue, cargo and airport services. The company obtained an oil refinery based in Pennsylvania, which continues to comprise a new stream of income. A strong worldwide route network provides Delta Airline with the ability to have an influence in the majority of major international and domestic markets. The company’s route network depends on a system established around Delta hub and other international gateway airports. The substantial route network system obtains support from the diverse fleet of aircraft with varying size and ability, which enables a flexible adjustment of aircraft to a range of particular networks. The essay examines Delta Airline internal environment functioning with a detailed focus on the company’s strengths, weaknesses and resources before identifying the core competencies of the carrier.
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Delta Airline benefits from numerous substantial strong points aiming to remain competitive in the airline industry. One of the significant positive accomplishments of the airline is their vast customer base both domestic and international due to the recent acquisition of Northwest Airlines and the alliance with other firms. The Delta Airline trail Southwest Airline by merely 1% in domestic revenue per passenger miles market share (Park, 2014, p. 75). Delta Airline is a market leader in profit per available seat mile, customer satisfaction, and on-time performance. As one of the founding members of the Sky team airline alliance, Delta Airline has a broad access to a wide customer base, unlike many other competitor airlines. The broadening use of code-sharing (an agreement between carriers, wherein an airline operated flight is jointly marketed as a flight for the various parties to the agreement) with Northwest, Sky Team Alliance, Continental and numerous other airlines around the world has developed the company’s marketing capabilities and consequently improved on Delta Airline customer base (Luo, 2013, p. 28).
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The second major strength of the Delta enterprise lies in the ability to obtain the capital market facilitated by the size of the company’s profits gained from regular operations. The company also exercises the conservative management of the balance sheet increasing their ability to attain capital market (Luo, 2013, p. 29). The oil prices impacts are expected to contribute positively to their capacity to access more funds in the future resulting in the rise of company’s profit because of the declining oil prices.
Healthy, loyal workforces that range from permanent employees to students under internships contribute to the airline’s successful moves. The long Delta Airline history spanning for over 80 years as a carrier has instilled a sense of strong brand equity and brand presence history into its image. Its powerful employee base of over seventy-five thousand people has a legendary sense of loyalty highlighted in 1982, when the personnel accepted a voluntary pay cut to rescue the company from financial difficulties (Luo, 2013, p. 37). The finance raised from the pay cut purchased the first Delta 767, its largest aircraft at that time, which came to be known as the “Spirit of Delta.” That unprecedented move by the Delta workers enabled the company to return to profitability for several years.
Delta Airline is committed to constantly improving the customer experience through various innovative technology. The airline excels and differentiates itself from the rest of the competitor aviation industry through the integration of technology into their fleet of aircraft. The substantial types of technological advances are employed within the planes in an attempt to enhance the positive customer flight experience. These range from the video and audio entertainment on board all their aircraft to the innovative idea of enabling the passengers to connect their Apple iPod portable video and music player. The facility allows the passengers to charge the device as well as display the content onto the personal passenger television in front of each seat to enjoy while travelling. It is worth noting that Delta was among the first aviation firms to introduce airport kiosks, which were a significant industry innovation in the recent past (Park, 2014, p. 88). The airline also continues to endeavor successfully attempting to revolutionize the customer service through innovative information technology incorporation into the aircraft.
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Delta Airline benefits greatly from the location of its hub. The airline hub is in Atlanta, where the most traveled airport in the world is located. Hartsfield-Jackson Atlanta International Airport accepts more than one million aircraft flights with a record number of passengers exceeding ninety million of travelers annually. Hartsfield-Jackson Atlanta International Airport is among the main Delta Airline hubs in the United States with other strategic hub and gateway airports operating in Los Angeles, Detroit, Amsterdam, Minneapolis, New York-JFK, Salt Lake City, Paris-Charles de Gaulle, Seattle, and Tokyo-Narrita (Moreira, 2014). Delta completely controls three out of the airport’s six concourses and enjoys major gate access within the remaining three concourses. As a result, the company flies at least more than 50% of all the passengers departing from the airport providing the business with a marked advantage over its main competitors (Kabue & Kilika, 2016). The other airlines experiences difficulties in coming and controlling the tremendous majority of the flights in one of the world busiest airports in competition with Delta Airline. It is the leader in global destinations with its services available in over 250 destinations and with a comfortable and confident over thirty-seven destination dominance of the flights across the Atlantic. Delta Airline has also for a long time been the only dominant carriers from the US serving flights destinations in Africa.
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Luxury comes as one of the significant attractions associated with Delta Airline. Numerous passengers are keen on luxury and amenities, and Delta Airline ensures its customers enjoy the best standards of these by installing the seats with massage features and a sleeper suite product for the customers taking long international flights. The economy class seats also have some form of luxury provided with an increased legroom and a better half-moon design of the row that contributes to privacy and rest during the flight (Park, 2014, p. 77).
Any company with great operational achievements also experiences some weaknesses. One of the Delta Airline weak sides is grounded on its overdependence on the North America market. The dependency appeared because of the merger with the Northwest Airlines, which operates only in North America. Delta depends on them to raise over a half of their revenue, presupposing any change in that region market would significantly affect the Delta Airline revenues. Another disadvantage would be the bankruptcy that led the company to involve itself in serious debt obligations. The company cited fuel prices and labor cost as the major contributors to the airline’s bankruptcy back in 2005 (Barney & Hesterly, 2010). Delta Airline has significantly reduced the debt, but a sizable amount of debt still remains, preventing the company from operating full force. The high debts lessen the ability of the airline to pay principal and interest as well as reduce its capacity to fund working capital and numerous other necessary corporate requirements. The current increase in strength of the dollar against other currencies is also negatively affecting its international flights, although such change affects all airlines providing international flights. The oil prices currently record the lowest level in years; the expected increase in fuel prices in the future has been projected to cause a reduction in the airline profitability as well.
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Having examined the general internal environment of Delta Airline, the paper now focuses on the company’s core competencies. Delta core competencies are the strategic resources and capabilities providing the airline with a source of competitive advantage over its rivals. For any of the Delta resources or capacities to provide a sustainable competitive advantage, it must be valuable, rare, inimitable, and well-organized (Kabue & Kilika, 2016). Delta Airline controls the majority of gates at the Northern Kentucky International Airport/ Cincinnati (CVG) gaining it with a significant privilege in numerous markets. The travelers from around the world have rated CVG as one of the best airports for convenience and services offered for the recent ten years. The possession of this resource enables Delta Airline to significantly minimize the competition level in that city. This asset/resource has enormous value to Delta because it controls and dominates air travel in that desirable hub city. The ability of this profitable resource to help the firm limit the threat and give the opportunity to freely and beneficially exploit it enhances the competitive position of Delta Airline (Hafeez, Yanbing Zhang, & Malak, 2002, p. 30). Delta has a virtual control of Cincinnati air traffic, which is also a rare advantage as other competitive carriers do not possess such resources in that region.
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Delta brand name has been developed for over 80 years with its quality listed as one of the inimitable or non-substitutable core competencies. This resource, however, does not possess the value or rareness meaning it does not provide a significant competitive advantage unlike its influence and high-class services. Delta’s virtual control of Cincinnati and some other major cities’ air traffic has been sustained for more than ten years meaning that the competitor companies may not be able to substitute it or imitate the advantageous benefits of the resource for the next significant period. Delta, possessing numerous aircraft of different sizes provides the airline corporation with the flexible organizational capacity to exploit the Cincinnati asset to a sufficient level to gain an advantage. As a result, the additional control of Northern Kentucky International Airport by Delta Airline fulfills the four criteria requirement necessary to categorize the resource or capability under distinctive competencies. The asset is valuable, rare, inimitable and organized, offering a stable competitive advantage to the Delta Airline Inc.