There had been some hints throughout the past several months, but this time there is an official communication by the…
The Case for Flying Delta Air Lines
Over the next several weeks, AirlineGeeks staff writers will be completing a series focused on each of the major airlines based in the United States. We will take a closer look into the airline’s history, as well as where the airline stands today in proportion to its competition, and how it will attempt to differentiate itself moving forward in the 21st century.
For those who live in Atlanta, it would be almost unthinkable to have any other airline come to mind before Delta. Since its founding in 1924, back when it was called Huff Daland Dusters, the airline has been known for its firm roots in the deep south. However, Delta didn’t actually move its main hub and operations to Atlanta until 1943. At the time, the airline maintained a series of routes ranging from Dallas to Charleston, and found much success in its all southern routes.
Known for its conservative and calculated approach, Delta was never growing as rapidly as many of its competitors. That is until the 1970s when Delta began its acquisition phase, beginning with Northeast Airlines in 1972. This purchase gave the airline the opportunity to expand into the Northeastern part of the United States. Delta would continue its expansion and attempts to woo customers with its first frequent flier program in 1981 as well as the use of the first MD-11 aircraft in the United States in 1990. Finally in 1991, Delta began its biggest expansion yet with the purchase of Pan Am’s routes from the United States to Europe as well as intra-Europe flights based in Frankfurt, throttling the carrier into the increasingly competitive transatlantic travel industry.
Throughout its long history, the airline attempted to form multiple hubs around the United States in addition to Atlanta, such as a west coast hub in both Portland and Los Angeles. While these attempts were not always successful, Delta did eventually find their place in Detroit, Cincinnati, and Salt Lake City. However, the airline began encountering great difficulties in the early 2000s, selling off much of its Delta Connection short-haul fleet at a bargain price to SkyWest Airlines just to aid in its cash flow issues. Even with massive deals such as this, Delta was forced to declare bankruptcy in December of 2005.
Quick reorganization plans began to take place, with pilots, employees and even CEO Gerald Grinstein agreeing to take large pay-cuts. Layoffs were announced as well, with Cincinatti operations taking a major part of the hit as Delta sought to remove the city’s once hub status. US Airways, led by now American CEO Doug Parker, attempted a hostile takeover bid to merge the carriers throughout 2006 and 2007. Parker was able to come up with over $10 billion to fund the takeover, but was met with a very hostile response by Delta employees, who immediately began a media campaign titled “Keep Delta My Delta.” After several failed attempts and rejection by Delta’s board, US Airways bid was officially removed in 2007 right before Delta emerged from bankruptcy.
With a healthy cash flow quickly returning, Delta set it sights on its next expansion opportunity; merging with Northwest Airlines. The hope was that the two airlines, who had complimentary route structures, would be able to create efficiencies both at their hubs in the United States as well as form stronger international hubs in Paris, Tokyo and Amsterdam. In September of 2008, the deal was officially ratified by the two airlines to create the new Delta Air Lines, and was approved by the Department of Justice a short time after on the basis that it would not reduce competition and would instead create lower costs for all customers.
Since 2007 Delta has been led by CEO Richard Anderson, who has begun pioneering many major changes in the US airline industry. Under Anderon’s lead, the airline has greatly expanded its in-flight entertainment (IFE) options, upgraded both business and economy class seats, and created strategic partnerships with airline around the globe. Delta currently maintains a 49% ownership in Virgin Atlantic which is based in London, as well as a 3.55% share in China Eastern Airlines based in Shanghai.
Throughout the last decade, Delta Air Lines has established itself as the most dependable airline in the United States. It leads the way in least amount of flights cancelled and lost bags, and has the best on-time statistic in the domestic industry. These are important factors for all fliers, but particularly business travelers who need to be on time and ready to go for all of their meetings. Delta has significantly improved their business class to the new “Delta One”, offering more features, improved lounges and catering. Even the economy seats have gotten better, having expanded IFE systems and unbundled, cheaper fares to compete with ultra low-cost carriers such as Spirit and Frontier.
Unique to the industry, with the exception of the pilots, all other Delta employees are non-union staff. This has allowed for greater flexibility with any rapid changes for the airline, and has reduced costs compared to its competitors. Its employees are heavily focused in Atlanta, but have also seen more hiring and redevelopment of its hub at Laguardia Airport in New York City. By having significantly dominated hubs, Delta is able to reap the benefits and provide a more seamless customer transfer experience while having a higher cost per passenger with less competition.
While Delta has continued to see success in the United States, it faces an uphill battle against both the low-cost carriers flying over the Atlantic Ocean and the three major Middle Eastern carriers, Qatar, Etihad and Emirates, which are commonly referred to as the ME3. Delta’s CEO, Richard Anderson, has been very vocal against the Middle Eastern carriers, even going so far as to attack and link them to the terrorist attacks around the world. Comments such as this haven’t done the company any favors, as Delta, American and United have been fighting a losing battle to prevent more airlines from flying to the United States. Just recently Qatar Airways has announced a new route to Atlanta, and while Delta doesn’t fly to Qatar’s home in Doha, it signifies a growing trend of the ME3 offering more value to American customers looking to travel to the Middle East, Africa, and the rest of Asia where Delta does fly to.
For frequent fliers who are not big spenders, Delta has effectively killed any hopes of airline status thanks to its new revenue requirements and altered mileage earning system. In 2014, Delta became the first legacy airline in the United States to base airline miles earned not on the distance flown, but instead the cost of the ticket. In addition, requirements were made that customers must spend a certain amount each year on travel in order to earn airline status. Changes like these have reduced the amount of status members, and while the changes are positioned to reward fliers that travel and spend the most, they have effectively damaged the loyalty of any other travelers that cannot afford the more expensive tickets. Coupled with removing its award mileage chart (showing how many miles it takes to travel somewhere for free) and significantly raised mileage costs, the mileage program has been significantly devalued.
With the majority of airline mergers and consolidation now completed, Delta is poised to continue to flourish in a less competitive and mature US airline industry. It offers great amenities to business travelers, a strong network both domestic and abroad, and consistently is ranked one of the best airlines in America to travel with. However, thanks to growing pressure from international carriers both in the Middle East and Europe, the airline has a long road ahead as it hopes to maintain and grow its international routes. While many may argue that its mileage program is weak and the majority of its aircraft are old, Delta will continue to be a favorite for business travelers as it seeks to continue its on time record and award winning statistics for the years to come.
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