analysis of delta ailines

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Delta Airlines services over 180 million passengers a year in 323 destinations in 59 countries around the world (Reuters, 2017). Apart from its industry-leading global network, the carrier was recently named one of Fortune's top 50 most respected firms. It currently employs over 80,000 employees worldwide, and its mainline fleet consists of about 800 aircraft (Reuters, 2017). In addition, the company has spent billions of dollars in global products and services, as well as airport infrastructure, with the aim of improving consumer experiences on both the ground and in the air when opposed to competitors. With its alliance, the airlines offer at least 1,500 flights daily connecting central hubs across the world (Reuters, 2017). The following discussion utilizes PESTEL analysis to explain how various factors in Delta’s microenvironment affect profitability and business.

PESTEL Analysis

PESTEL Analysis of Delta Airlines

Political and Legal Factors

Airline Deregulation Act of 1978

High regulation of air travel industry

9/11 terrorist attack

Technological Factors

Technological advancement

Online reservation

Economic Factors

Global economic down turn

New Asian Market

Unpredictable fuel costs

Environmental Factors

Fuel efficiency to reduce global CO2 emission

Cooperate social responsibilities

Social Factors

Safety doubts after 9/11

Demand for new services

Increase in population of millennial generation

Political Factors

Similar to any other business, political force can have a significant impact on airline industry. Delta Airline commercial activities span several countries with different political environment and governments, which can have a profound and direct influence on the firm. In the U.S, implementation of 1978 Deregulation Act eliminated several hindrances that reduced barriers, which affected airline business (Stalnaker, Usman, & Taylor, 2015). As a result, the market has seen a tremendous boost in business and revenue over the past 35 years as well as an increase in competitiveness (Stalnaker et al., 2015). However, it is different in some markets and countries highly regulated, which increase hurdles to profitable business. Fortunately, most governments noted the impact of political factors on aviation commerce, eased regulations, and partnered with airline companies to create a favorable environment suitable for the industry.

Economic Factors

As observed in 1930s, apart from business class economy, a recession can also severely affect airline business and industry. During the 30s recession, carriers and passengers were forced to cut down costs, which influenced business profits and employment level on a global scale (Stalnaker et al., 2015). As a result, every airline company felt the pressure due to reduced customers purchasing ability. Evidently, performance of airline brands heavily relies on global economic scenario. As such economic stability and prosper determine revenue and profits within the industry. In addition, the rising middle-class population across the world is good news for brands like Delta, since travelers’ number increases, as they tour business and leisure locations. Henceforth, as developing countries’ growing demand for airlines such as Delta is projected to increase due to an increase of people using air travel if the world’s economy stays stable. Another economic factor affecting aviation industry is unpredictable oil prices because of instability in the Middle East. High oil prices increase demand for fuel efficient craft to maintain traveling rates at a sustainable and pocket-friendly level (Stalnaker et al., 2015). Delta has to invest in purchasing fuel efficient plane to ensure that it is not affected by the oil prices in future. Furthermore, it has to be innovative to maintain competitiveness, as according to International Air Transport Association, aviation market is shifting from west to east over the course of next 20 years (Recio, 2016).

Social Factors

As studied, social factors have a significant role, when it comes to demand for air travel. Demographic changes are one of the aspects that will affect air industry in future considering the increase of millennial generation that prefers it as the means of transport. Social capital generated by this industry is also an essential element behind the rising popularity of airlines (Stalnaker et al., 2015). In fact, the business is one of the largest employers globally. For instance, as earlier indicated, Delta airlines alone has employed more than 80,000 of people. The society including people and businesses are benefitting from rapid movement facilitated by the vast network of flights globally. Both of these social factors create a mutual benefit for the airline industry and society, which is projected to strengthen every year. As such, Delta Company is likely to be affected positively by the social force in the global market. Finally, terrorism, especially after 9/11, has changed aviation market due to fear of safety (Lai & Lu, 2005). For instance, after the 2001 attack, airline industry in the U.S lost a total of $ 55 billion (Lai & Lu, 2005). In this regard, Delta Airlines has to be vigilant and improve safety measures continuously to ensure that future terrorist attacks will not destroy its brand, especially with the current trends of ISIS.

Technological Factors

In the present modern society, technology has become more important for businesses than ever, as it creates convenience and efficiency. Engineers are focusing on creating more fuel efficient and safer aircraft with release of every make (Stalnaker et al., 2015). In addition, information technology has transformed the airline industry from booking to managing operations within an airport or craft. Moreover, digital technology has become one of the primary platforms used for advertisement due to the high rate of Internet and mobile phone use across the world (Stalnaker et al., 2015). In fact, technology has added pace to human lives in that it is currently possible to pay, check, and book an airline ticket using a cell-phone. As such, Delta has to continuously adjust and adapt the rapidly changing technology driven business world.

Environmental Factors

According to statistics, airline industry is responsible for about two percent of entire global emissions. In modern world, sustainability has become a priority for airlines too, just like other businesses. In the air travel industry, companies have focused on cutting down carbon IV oxide emission up to half since 1990. Delta takes its environmental responsibility seriously and has improved its operations both on the air and ground (Morrow, 2015). Additionally, it has started some initiatives across its operation to minimize emission of CO2. All of these activities indicate how the company is committed to sustainable development goals of the 21st century (Morrow, 2015). Notably, compliance to cooperate social responsibilities not only ensures that environment becomes healthier, but also provides it with a good image in the public domain. Brands that have managed environmental impact better have better achieved higher customer loyalty and base compared to their competitors. In this regard, Delta requires investing more in environmental initiatives, as it is highly beneficial company regarding growth and expansion.

Legal Factors

Although 1978 deregulation helped airline industry significantly, still many legislations exist that can affect the business both domestically and internationally. These laws are related to passenger security, especially after the 9/11, labor, environmental, and financial markets. (Stalnaker et al., 2015) Overall, the business environment faces numerous legal risks that airlines have to remain compliant. For instance, in 2017, Delta signed settlement agreements with OSHA to protect employees that operate vehicles that handle baggage (United States Department of Labor, 2017). Such arrangements are signed to ensure that firms address hazards that may harm or kill staffs at work, and therefore, they are inevitable.

Conclusion

The above PESTEL analysis for Delta Airlines has highlighted six essential factors affecting the internal macro environment. By taking into consideration these elements, it can be concluded that cost of doing business, competition from new Asian market, unpredictable oil prices, demographic factors, terrorism, and digital technology affect profitability and viability of Delta airline across the world. Regulations and rules imposed and sustainable development goals influence the company’s prosperity as well. As such, it will require the company to be flexible to efficiently adapt the ever changing aviation business environment and remain competitive.

References

Lai, S. L., & Lu, W. L. (2005). Impact analysis of September 11 on air travel demand in the USA. Journal of Air Transport Management, 11(6), 455-458.

Morrow, A. (2015). Driving environmental sustainability on the ground, in the air. Delta News Hub. Retrieved on July 23, 2017 from http://news.delta.com/driving-environmental-sustainability-ground-air

Recio, A. (2016). Asia Pacific: The World’s Fastest Growing Aviation Market. Knect365.com. Retrieved on July 23, 2017 from https://knect365.com/gad/article/9a586c65-a7e0-4b8d-85a5-4409bc2fc613/asia-pacific-the-worlds-fastest-growing-aviation-marke

Reuters. (2017). Delta Air Lines Inc. Retrieved on July 23, 2017 from http://www.reuters.com/finance/stocks/companyProfile?symbol=DAL.N

Stalnaker, T., Usman, K., & Taylor, A. (2015). Airline economic analysis. Oliver Wyman.

United States Department of Labor. (2017). Delta Air Lines signs agreement with US Department of Labor’s OSHA on seat belt compliance measures to protect airline industry workers | Occupational Safety and Health Administration. Retrieved on July 23, 2017 from https://www.osha.gov/news/newsreleases/national/04162012

November 17, 2022
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Travelling Life

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Airline Customer Investment

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