Overview Of The Airline Industry

Embracing new technology was a crucial strategy by every airline industry in America. Digital operation helps companies to decentralize its services and also reduce the cost of labor. By 2004, almost all airline industries had advanced in to a digital company. Despite Southwest’s development of a ticketless travel personal computer reservation, Delta changed the internal and external environment with a significant commitment and investment in technology and innovation to enhance customer satisfaction. Delta management team focused on technological innovation and creativity to ensure quality service provision. Economists argue that large amount of online and media advertising has increased competition among the airline companies. This has enabled companies to persuade its customers hence expanding its markets. Despite this, the practice of online management by Delta always reflects the culture of a society. Where technology is likely to lead to increased performance and motivation, then management of Delta encouraged culture through competition, through contests or by publicizing results and performance.

Over the past decade, American airline industry has faced significant transitions in environment of operation, including economic recession, technological changes and high volatile fuel prices. As a result of such changes, the companies are facing a considerable financial challenge that has resulted to bankruptcy. Airline have responded to these challenges by introduction of online transaction with customers hence introducing new affordable passengers and reduced number of schedules. Although the operation costs were significantly increasing, airline companies developed financial strategies aimed at stabilizing inflation status in the industry. The emergence of harsh economic recession has reduced the capacity of passengers using the industry. The demand of air travel has been regularly decreasing as consumers are overcome by the expensive travelling cost.

From 2002, America’s airline industry started experiencing over-capacity in passenger and cargo. This resulted to expansion of e-business and purchase of technologically updated aircrafts. Delta advanced in to a digital a company in 2000 and also purchased 500 seat Boeing 787. This revolutions transformed the industry in to a competitive environment with the aim of satisfying the growing capacity. Airlines developed building blocks of high performance by focusing on market strategies, distinctive capabilities and performance autonomy. Strengthening market share was another ambition for companies to penetrate the superior markets. Delta strive to achieve a dominant domestic market position and establishment of a strong local operational presence. Despite the growing financial strains in the industry, the companies are maximizing the available resources to expand in to new markets. This will also transform the companies hence adopting to restore profitability.

The airline industry is also the advanced technology to develop organizational capacity. Attaining strong and reliable organizational capacity is another organizational goal that Delta airlines focused on. The organization structure was strategized to ensure provision of the highest quality travelling services to customers. Most airline industries developed quality management techniques to ensure that each secured customers at their capacities. To achieve this, companies created friendly environment for the employers through increase in basic pays and putting them in to reward programs. Straszheim, M. R. (1969) argues that organizational capacity can result to development of a clearly defined strategy gives strategic intent and drive to an organization. After companies advanced technologically, airline industry was characterized by strategies which are equally important to the business as well as the community in which the industrial operation consequently affects. This helped companies in identification of the company’s long-term goals, implementation of specific course of action and using available, necessary resources to realize the goals.
(Straszheim, M. R. (1969). The international airline industry. Washington)

Competition

Airline sector in the United States economy is characterized by strong competition, and competitors are taking their operations in a frequently changing market atmosphere. The airline industry was named the most competitive industry in the United States since 1990s. Although Delta had the strongest competitive advantage, the changing economic and technologic forces did not favor any individual company (Hanlon, 1996).

Southwest and American airlines are the biggest threat in the industry. Although the industry is generally characterized by high fixed cost and low operating profits, Delta established significant strategies to enable it maintain its future customers at the lowest cost. Southwest developed its e-business model few years after delta advanced in to a digital company. This saw the operating profits of Delta decrease by more than 10% in the subsequent years. Despite being successful in implementation of bookings, Brook and Dyer (1996) argue that Southwest gained much loyalty from the customers and other stakeholders in the industry than any other Airline (Hanlon, 1996).Competition in the industry varies internationally, nationally, regionally and the cargo size carried. Delta has been forming alliances with the aim of strengthening its competitive advantage through service diversification. Alliances with Virgin Atlanta and northwest airlines was one of the biggest achievement of Delta in securing a reliable competitive position in United States airline industry. These mergers and alliances created a global carrier that can compete both in domestic and international markets (Hanlon, 1996). This was a big blow to its competitors like Southwest which never formed international alliance with major airlines. Alliance is an effective way to compensate higher fuel prices. By 2008, Delta had the most stable record fuel prices in the industry. Efficiency, ability to fund operating expenses and long-term investments, and increase in international operations has ensured a secure competitive advantage in the industry.
Development of e-business increased online competition for customers through web rivalry. Airline companies developed cheap and accessible website for customer to timely purchase travelling tickets and get information on changing market trends. In addition to reliable sites, Delta established the fastest wireless network within the airport to enhance easier communication between employees in the plane and the technical team at the airport. This facilitated safety services and sustainability measures against accidents. (Hanlon, J. P. (1996). Global airlines: competition in a transnational industry. Oxford)

Customer Feedback

Development of e-business led to perfect and timely communication between the company and its customers. This resulted to a stable and reliable customer relationship in the airline. The new electronic model was able to specify the type of relationship the company needs to establish with each customer. The website of the company provided an efficient communication channel for the passengers to forward complains and views concerning the services provided. The company transformed their model to radically different one, where customers personally have a direct communication with the customer service providers online. Delta used the analytic tools to provide qualitative data on site passenger behavior. Although it does not give a direct feedback, it is a popular way of getting direct information from customers. Customers could provide feedback, as verbal and nonverbal reactions to the communicated message. The management pay close attention to this feedback, as it is the only thing that can give confidence that the passengers has understood the message. (Rogers, 2004).The management at Delta established annual general meeting with its customers to ensure a complete communication. The online customer services could evaluate questions, suggestions and complains from the customers, which were then addressed during the meetings. Although not many passengers appeared for such meetings, the issues could be addressed hence improving company’s performance. Delta also developed online communication networks between the employees and customers. The strategy was used to improve the quality of services provided. To achieve this, Delta established wireless enabled network within the airports and inside the planes. Passengers enjoyed free internet services which enhanced customer-customer communication. The passengers could exchange ideas concerning the services provided and develop a common feedback to the customer service. (Rogers, 2004)Apart from online interaction, the company communicated with its customers through the media. Although media was one way channel, it was the most effective, cost effective and timely technique to globally communicate to customers. The company also used campaign trails to reach all its customers, especially in the outcasts. This included event organized to celebrate achieved missions and goals and also promotional events aimed at rewarding loyal customers. (Peppers, D., & Rogers, M. (2004). Managing customer relationships a strategic framework. Hoboken).

Income Sources

Delta’s financial condition is very appealing to its stakeholders. According to company’s annual reports Delta has been operating under increasing revenues since it developed the e-business model (Morrell, 2002). The major source of income for Delta airlines is the sale of travelling tickets. This covers about 70% of the total revenues generated. In 2012, the company reported revenue of about $36.6 billion which was about 5% increase from 2011. This was brought by increase in the number of passengers in that financial year. The company also earns income from sell of shares. Delta CEO Anderson Richard argue that the company’s return to profitability started in 2010 when the company made $1.71 per share leading to income of about $1.5 billion in 2011.Disposal and leasing of assets is another source of income to Delta. According to the management, lending out brought more revenues than disposal of assets. Priceline was the most convenient partner in disposal of excess and unused furniture (Morrell, 2002). In 2011 Delta earned about $2 billion from disposal and leasing of assets. This revenue was used in development of both employees and customer reward program. Delta makes revenue from non-tickets including in-flight food, baggage charges and travel insurance. The company made about $22 billion from these in 2011. These ancillary revenue are used to provide a boost for runway fuel bills. The company also made revenues from telecommunication services. Economists argue that aviation industry are indirectly charging customers for internet related services. From the SWOT analysis carried in 2012, Delta developed cost saving strategy to save on the generated revenues. Fuel hedging program and operational improvement were developed through effective flight scheduling, older less fuel efficient fleet, improving maintenance process and maximizing crew resources.
(Morrell, P. S. (2002). Airline finance. Aldershot, Hants, England, Ashgate.)Impact of digital sourceDigital source has brought positive development strategies to Delta hence currently enjoying superiority in the airline industry. In 1994, the company became the first airline in the industry to technologically advance its operations hence meeting customer satisfaction, Delta airlines grouped its customers according to needs, behaviors and attributes. Internet has become a distribution channel for sale of tickets. Over 1.5 billion people globally use the internet hence Delta is able to minimize communication cost with its companies (Teneja, 2002).Digital source has contributed to the profitability of Delta. The internet works as management and distribution channel tool. Digital business have the advantage of management cost reduction hence becoming a key element in improving operating profitability. Digital source has also enabled Delta to work correctly with the current market situation. The company’s website ensures that all the markets in the industry are accessed (Teneja, 2002).
The fast search engines in the company’s website have enhanced easier access to the site by passengers. Digital business has strengthen relationship between the company and customers. This ensures easier communication and timely attendance to the customers’ preferences. A strong Customer relationship improves the competitive capacity of the company. Since the Delta advanced as digital company, its competitive advantage has been gradually strengthening. E-business ensured awareness of who to be addressed and the requirement of the passengers. This can help delta to utilize the available resources to ensure achieving the management target towards customer satisfaction. Aside from the opportunity to visit a wide variety of on-line shops, e-business allows customers to check complete information about a certain new service. In addition to that, there are no sales persons pressuring the customer into buying a product. (Taneja, N. K. (2002). Driving airline business strategies through emerging technology).

Product Development

Delta’s product management is well defined in its annual reports. Most airline companies in United States demonstrate strategies in their operations which is directed to support their target costing process. Delta airlines have an effective management structure which respond to customer demands through a streamlined product development process. (Meryer, 1981). This was aimed at strengthening the competitive advantage of the Airline. Delta had introduced quality management techniques through their web. Online team with special knowledge on quality improvement techniques was established to ensure product development hence satisfying passenger needs.  This team is aimed at developing new technique of production to secure the markets. (Oster, 1981).

Delta airline have done international alliance with other airlines and airline related industries like hotels to ensure effective product development. In 2012, Delta announced alliance with Virgin Atlantic. Delta acquired 49% of Virgin’s shareholding. This helped Delta to utilise the excess production capacity and maximise its available resources. The alliance led to easy access to cost friendly travelling tickets to passengers. Since Delta advanced to a digital company, it has also formed alliances with international hotels. This strategy was aimed at providing meals and beverages within the airports and also inside the planes. Passengers travelling in odd hours can also access cheap accommodation (Meyer, 1981).

Delta airline established a quality management team to ensure quality services to the passengers. The team was aimed at product development as to the preference of customers. To achieve this, Delta introduced training programs for both executive and general employees to enhance new consumer favouring techniques in service provision (Meryer, 1989). The company also used performance appraisal system to ensure employees deliver to their maximum capacity. Although the Delta linked employee performance appraisal with employee reward program, the employees were motivated more on satisfying the customers’ preferences. Economists argue that, the product development strategy has been the best ever in the airline industry. The sustainability of Delta was as a result of regular development of new products and maximisation of its e-business model. Many customers need to be satisfied by new products and services.

 (Meyer, J. R., & Oster, C. V. (1981). Airline deregulation: the early experience. Boston)