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Delta Airlines Essay

Delta Airlines has been one of the strongest airlines operating in the United States, in 2002 it was the third-largest passenger carrier in the world in terms of revenue and the second-largest in terms of passengers flown (Rivkin & Therivel, 2005 p8). At present, however its profitability and growth is threatened by the rise of low cost carriers like Southwest and Jetblue. The low cost carriers have gained significant inroads into Delta’s prized Florida market, coupled with this is that legacy carriers operating in hub and spoke have lowered fares, and regional airlines were also competing with their midsized markets.

Faced with these problems, the management team of Delta had met up with consultants to help them wade through this situation. The team had several options lined up for Delta to consider as a response to the threat of low-cost competition. This included the option of continuing with the present arrangement wherein mainline Delta, Delta Express and Delta’s fleet of regional jets against the existing low cost carriers, to modify Delta Express so that it would become a true low cost carrier or to integrate it with the mainline Delta.

Another remedy would be to launch a new low cost subsidiary which

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in reality would be costly for Delta but can still be feasible, although it should be explained to shareholders and industry analysts. Considering the present situation in the airline industry and the track record for the failure of loc cost subsidiaries, it would seem that modifying or integrating Delta Express is a more viable option.

Delta Express is already in operation and is up and running, if Delta would want to launch a new low cost subsidiary which

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would spell millions of investments, it would make sense to develop what presently exists. Or Delta could look into expanding its mainline fleet by integrating Delta Express, this would save them costs in leasing new aircrafts and establishing flight routes as well as being able to retain its market.

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