Recent Post

Searching...
August 29, 2013

Microeconomics and Macroeconomic environment of Delta Airlines



Microeconomics and Macroeconomic environment of Delta Airlines
Delta Airlines has faced highs and lows in its journey towards becoming the best airline. 
The ability of Delta Airlines to earn tremendous profit is said to be the direct outcome of sound decision making in the difficult economic environment. The airline has remained cautious in the early stages of an uncertain recovery, said Richard Anderson, Delta's chief executive officer. "My thanks go out to the Delta people who delivered great customer service, ran a solid operation, and moved forward with our merger integration, all against the backdrop of a very challenging economy."
The airline came on the verge of bankruptcy due to stiff microeconomics and macroeconomic conditions globally. But somehow the company managed to gain competitive advantage by taking right decisions at the right time. The timely merger of Delta airlines with Northwest Airlines made it the world leader in terms of revenue and traffic. The U.S. Delta Air Lines bought Northwest Airlines for $ 2.8 billion, or about 2.1 billion euros. The merger completed in April 2008 after the green light given by the U.S. authorities, including the Department of Justice.
The company resulting from this merger figured as a behemoth in the market, with the combined annual turnover of Delta and Northwest Airlines $ 35 billion. Headquartered in Atlanta, the company, called Delta, serves "66 countries and more than 375 cities worldwide, more than any other airline," says Delta Air Lines in a statement. It also employs nearly 75,000 people worldwide.
The skipper of Delta, Richard Anderson, who left to head the new company-, is very confident about its ability to operate in an "airline industry impacted by economic difficulties," characterized by extremely volatile fuel prices. The price of energy has indeed sealed the results of Delta and Northwest Airlines. On October 22, the latter reported a net loss of $ 317 million in the third quarter due partly to its advance-purchase program of fuel, introduced when the price of oil was at its peak. The balance in the third quarter of Delta Air Lines was also highly impacted by the price of kerosene. The company, like its counterpart, published net losses totaling $ 26 million.
Through the combined entity of their merger, Delta and its new subsidiary wanted to "increase its flexibility to adapt to economic challenges." The macro-environment of Delta includes different factors such as the general economy and the influence of various demographic trends that refer to the dispersion of the population and business.  The macro-environment includes the governmental entities that are responsible for regulating the airline industry, the security of airports and the screening of passengers and the various local governments that own and operate the major airports that Delta serves. (Hax, 2009)

Human Resource Management at Delta Airlines
Delta Airlines places a huge importance on the organization culture. In order to ensure quality workforce and maxim performance, the airline, from time to time, plans and develop a safety and customer-centric culture continually by infusing a learning-oriented and lively workforce. The sense of community is instilled into the minds of employees. The employees are trained to be able to respond to the ever-increasing customer needs and changes within the organization. Delta Airlines employ an employee-centered strategy which in turn encourages the employee to make full participation in the workings of the company and get the feeling of being empowered, motivated, and committed.
The company’s first and foremost need is to be extremely customer-centric, this is to say, it should be aware of the demands, needs, and complaints of the customer. Given its priorities, the airline lays a strong emphasis on recruitment, selection, and employee empowerment, hands-on management style, succession planning, and the organizational development function.
Recruitment, Selection, and Orientation

The airline has put in place various sourcing strategies with an objective to attract a diverse range of high-performing and exceptional candidates. There is a transparent selection process in the company which ensures objective and fair selection through the use of relevant criteria. The company has implemented orientation processes in order make sure that they newly hired staff and candidates are fully aware of the organizational, central values, key policies and procedures.
There is a cyclical performance management system in place. Through this system, the performance targets are agreed between staff and supervisors and evaluated and reset at least annually. It is made possible by aligning the research staff performance appraisal criteria with agreed research success factors.
The company believes in the establishment of an overall framework for the staff development. The company has linked staff development with performance management processes and is able to track down its own development plans. There is a proper framework in place that guides staff on expected personal and business conduct in the workplace. Various guidelines are published and distributed among the employees on different facets of personal and business conduct.
The airline has implemented a professional job evaluation system to ascertain job levels and compensation. This system clearly defines, apply and communicate in selection process the attitudes, skills, knowledge and performance level necessary for the career development. It has also ensured implementation of various systems to streamline the management of benefit transactions.  The company also strives to maintain effective filing systems to strengthen administration of benefits.

The competitive advantage of Delta
The consistent growth and competitive advantage that Delta has shown over years can be partially attributed to its successful transition of leadership. As a matter of fact, in the early days of airline industry, airlines were run by the people who were known as aviation pioneers in the first and then businessmen. 
Many of those leaders used to be the stockholders who flatly refused to transfer their power or train and equip their successors to run the company. As a result, the companies used to face stiff crisis after the demise of those leaders. This period may be described as one in which readjustment to the new management was difficult and troublesome.  Delta made an exception in this regard as the CEO Woolman began to deteriorate; he was made to relinquish some of duties to the board members. As a result, his death did not impact the company as negatively as it did in the case of other airliners.
With new consensus-style management in place, Delta quickly become known for its well-grounded planning strategies and management teams in the airline industry.  It also gained reputation for its congenial relationships and treatment of its employees. The company treats its workers as family. By maintaining pay and benefits above the unionized competition, Delta was able to keep the majority of its employees non-unionized. The environment and management style of the company has much to do with the competitive advantage of any company.
Legal and Ethical Issues of Delta

The journey of Delta has been a bumpy ride as the company has had to deal with the legal issues.The company faced a labor disputes at the beginning of the 21st century. The expiration of the Delta pilots' contract in May 2000 was followed by several months of unproductive negotiations. When the impasse dragged into December, the pilots retaliated by refusing voluntary overtime during one of the airline's busiest seasons, forcing Delta to cancel 3,500 flights over the course of the month.
The New Year brought little relief, and another 1,700 cancellations followed in the first ten days of January 2001. While the company enjoyed net profits of $897 million in 2000, and saw its total number of passengers reach an all-time high of 120 million, it was clear Delta still faced several unresolved issues, both with customer service and labor, as it continued on its quest to become the nation's leading airline.(Formisano, 2009)
Another major legal issue that the airline had to confront was the bankruptcy protection. In 2006, the company faced legal issues over its pilot’s pensions and was given a date to file its reorganization plan. The company had already lost more than $11 billion over the last five years and had to file for Chapter 11 bankruptcy protection in New York on 14th September same year.
Delta officials said they were working to save the pension plan, but were unsure whether they could do it.
In order to preclude the legal issue from mounting again, Delta has adhered strictly and dedicatedly to its mission and vision statement which can be read as:
 We are dedicated to being the best airline in the eyes of our customers. We will provide value and distinctive products to our customers, a superior return for investors and challenging and return for investors and challenging and rewarding work for Delta people in an environment that respects and values their contributions.
Corporate Social Responsibility
Corporate Social Responsibility (CSR) is a concept where companies integrate social, environmental, and economic activities and in their interactions with their stakeholders on a voluntary basis. It is helpful in the business contribution to sustainable development issues.  CSR is not and should not be separated from strategy and business operations: since it is about integrating social and environmental concerns in these strategies and operations. CSR is a voluntary concept.
Social responsibility of business must not be confused with philanthropy. Indeed, while sponsorship is conducted separately from the daily activity of the company, CSR is much broader, since it applies primarily to the heart of any company's business in areas where it is recognized as efficient.
In terms of corporate social responsibility, Delta has not lagged behind. The company treats it as its responsibility to actively participate in making the environment better.
"Delta is firmly committed to our environment, safety, and social responsibility. We demonstrate these commitments in hundreds of ways throughout the world on a daily basis as we partner with our employees, vendors, customers, civic, and non-profit organizations to make a difference in the communities where we live and work. Many of our programs are award-winning and industry-leading. We don’t do them for the awards. We do them because they’re the right thing to do."(Duane, 2008)
Delta is proud to embrace diverse people, thinking, and styles. The company has promoted the culture of global inclusion and proudly represents the people of all languages, ethnicities, culture Delta is a culture of global inclusion and represents people of all languages, ethnicities, cultures, gender identification, races, ages, sexual orientation, educations, religions, work experiences, family status, capabilities, political views, geographical and regional identification, values, skills, personalities, education, citizenship status, socioeconomic backgrounds, community memberships and even communication styles. Whether you are an employee or our customer, we believe it is these differences that strengthen and define our airline with global diversity serving as a core Delta value.
In support of this goal, Delta is a proud sponsor of the United Negro College Fund, the Dr. Joseph Lowery Scholarship at Morehouse University, Pride celebrations in New York, Atlanta, and Minneapolis as well as many other causes. The company is also playing its vital role in making the global environment better. The company is contributing its part in conserving resources, supporting the programs and research of alternative fuels. In 2007, the company became first to launch a carbon offset program.
In 2009, Delta’s In-Flight Recycling program diverted over 2 million pounds (1,000 tons) of aluminum, mixed paper and plastic from domestic flights serving 29 cities. Delta still continues to recycle an average of 1 million individual aluminum cans each month. In-Flight Recycling has fully funded the building of two Habitat for Humanity Homes (Atlanta in 2008 and Cincinnati in 2009) and will have a similar opportunity in 2010.(Doganis, 2006)

Corporate Strategy
In order to understand the contemporary financial position and standing of the organization it is quite important to develop an understanding the marketing strategy that the organization has adhered to in different phases of its financial and market development. The chronological analysis of the marketing strategy that has been implemented by the organization in different developmental phases will prove helpful in this understanding.

Since the 1980s the marketing strategy that has been followed by the organization has been based upon the structuring and designing of an aggressive based corporate strategy. A key reason behind the formulation of such a strategy can be the rampant and unprecedented boom in the aviation sector that was taking place at that time.
It was the time when other competitors like TWA, Texas Air and Northwest were undergoing rapid expansion and consolidation processes and hence in comparison to this Delta Airlines seemed quite small in terms of its development. So intense was the level of competition being demonstrated that Delta Airlines announced to take over the Los-Angeles based Airline Company known as Jet America. The deal was finalized with a heavy disbursement of $18.7 million but was never able to materialize.
After the couple of years when in 1987 Ronald Allen took over the administrative functions of the organizations negotiated a $15 million deal with Walt Disney World to become the official airline of the entire organization. In the midst of establishing its leverage and increasing its market share among its competitors Delta took another aggressive approach in the year 1991 by signing a $1.7 billion of purchasing assets from Pan Am, however the entire so termed ‘conservative’ move by the company turned into a bitter experiment by the end of 1992 as continued surge in global oil prices and economic turbulence did not materialize the benefits that the company eyed in terms of extraction from this agreement. (Shetty, 2010)

Operational Strategy
In order to completely fulfill and satisfy the different criterions of the sales method Delta Airlines has launched a number of different marketing ventures and explored a couple of such frontiers through the help of which they can also boost or surge the revenues that they can extract.
The airline has long been associated with the reputation that it pays its employees with the most lucrative and juicy salaries and therefore in order to compensate for the expenses of the organization it charges more than other airlines from its customers. In order to restructure their policy and simultaneously counter and weather the recessionary effect of the economic turbulence the airline decided to launch Sky Bonus in collaboration with Skymiles.

           
 










References

Duane, Ireland (2008) “Understanding Business Strategy: Concepts and Cases” Cengage Learning
Doganis, Rigas (2006) “The airline business” Routledge
Hax, Arnaldo (2009) “The Delta Model: Reinventing Your Business Strategy” Springer
Formisano, Roger (2003) “Manager's guide to strategy” McGraw-Hill Professional
Shetty, Netra 2010 ‘Marketing Strategy of Delta Air Lines, Inc’ published on December 17th, 2010,








0 comments:

Post a Comment