delta airlines business plan

ASMs (vs. 2019)

~90%

~100%

100%+

Total Adjusted Revenue (ex-Refinery)

-

-

> $50B

NF CASM (vs. 2019)

Up 7% to 10%

Up Low to

Mid-Single Digits

Up Low

Single Digits

Fuel ($ / gallon)

$2.20 - $2.30

$2.20 - $2.30

$2.20 - $2.30

EPS

-

-

> $7.00

Gross Capital Expenditures

~$6B

~$5B to $5.5B

~$4.5B to $5B

Free Cash Flow

-

-

> $4B

Adjusted Net Debt

-

-

~$15B

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Delta Air Lines: Business Model, SWOT Analysis, and Competitors 2024

Inside This Article

Introduction

Delta Air Lines is one of the largest and most well-known airlines in the world. Founded in 1924, Delta has grown significantly over the decades, becoming a key player in the global aviation industry. As we look ahead to 2024, understanding Delta's business model, its strengths, weaknesses, opportunities, and threats (SWOT analysis), as well as its major competitors, is crucial for anyone interested in the airline industry. This article aims to provide a comprehensive overview of Delta Air Lines, offering insights into its operations, market position, and future outlook.

What You Will Learn

• Delta Air Lines' Business Model: An in-depth look at how Delta operates, generates revenue, and maintains its market position.
• SWOT Analysis for 2024: A detailed analysis of Delta's strengths, weaknesses, opportunities, and threats.
• Competitors Analysis: An examination of Delta's major competitors and how they stack up against Delta.
• Frequently Asked Questions: Answers to common questions about Delta Air Lines.

Key Takeaways

• Delta Air Lines has a diversified revenue stream and a strong market presence.
• The company faces challenges such as fuel price volatility and increasing competition.
• Delta's strengths include its extensive route network and strong brand reputation.
• Opportunities for Delta include expansion into emerging markets and leveraging technology for better customer experience.
• Major competitors include American Airlines, United Airlines, and Southwest Airlines.

Delta Air Lines' Business Model

Revenue streams.

Delta Air Lines generates revenue primarily through the following streams:

• Passenger Revenue: The largest source of revenue, generated from ticket sales for domestic and international flights.
• Cargo Revenue: Earnings from the transportation of goods and mail.
• Ancillary Services: Includes fees from baggage, seat selection, in-flight services, and loyalty programs.

Operational Strategies

Delta employs several strategies to optimize its operations:

• Fleet Management: Delta operates a mix of owned and leased aircraft to balance costs and operational efficiency.
• Hub-and-Spoke Model: Delta uses major hubs such as Atlanta, Detroit, and Minneapolis to connect passengers to various destinations.
• Customer Experience: Focuses on providing a superior in-flight experience with amenities such as Wi-Fi, entertainment systems, and premium seating options.

Cost Management

Delta employs various cost management strategies to maintain profitability:

• Fuel Hedging: To mitigate the risk of fuel price volatility, Delta engages in fuel hedging contracts.
• Operational Efficiency: Investments in more fuel-efficient aircraft and technologies to reduce maintenance and operational costs.
• Labor Relations: Maintaining strong relationships with labor unions to avoid disruptions and manage labor costs effectively.

SWOT Analysis for 2024

• Extensive Route Network: Delta's global network covers over 300 destinations in more than 50 countries, providing significant market reach.
• Brand Reputation: Delta is known for its reliable service, customer satisfaction, and strong brand loyalty.
• Financial Stability: Delta has a robust financial position, with strong cash flow and liquidity.
• High Operational Costs: The airline industry is capital-intensive, and Delta's high operational costs can impact profitability.
• Dependency on Fuel Prices: Despite fuel hedging, Delta remains vulnerable to fluctuations in fuel prices.
• Labor Disputes: Potential for labor disputes can disrupt operations and affect financial performance.

Opportunities

• Expansion into Emerging Markets: Growing middle-class populations in Asia and Africa present opportunities for expansion.
• Technological Advancements: Leveraging technology to enhance customer experience and operational efficiency.
• Sustainability Initiatives: Investing in sustainable aviation fuel and greener technologies to meet regulatory requirements and consumer expectations.
• Intense Competition: The airline industry is highly competitive, with pressure from both traditional carriers and low-cost airlines.
• Economic Downturns: Economic instability can lead to reduced travel demand, impacting revenue.
• Regulatory Changes: Stricter regulations on emissions and safety can increase operational costs.

Competitors Analysis

American airlines.

• Market Position: One of the largest airlines globally by fleet size and revenue.
• Strengths: Extensive domestic and international route network, strong alliance partnerships.
• Weaknesses: High debt levels and operational challenges.

United Airlines

• Market Position: A major player in both domestic and international markets.
• Strengths: Strong presence in major hubs, diverse revenue streams.
• Weaknesses: Customer service issues and operational disruptions.

Southwest Airlines

• Market Position: Leading low-cost carrier in the United States.
• Strengths: Low-cost structure, strong brand loyalty, and no baggage fees.
• Weaknesses: Limited international presence and reliance on the domestic market.

JetBlue Airways

• Market Position: Mid-sized carrier known for its customer service.
• Strengths: High customer satisfaction, innovative services, and competitive pricing.
• Weaknesses: Smaller network compared to major carriers, higher cost per available seat mile.

International Competitors

• Lufthansa: Strong presence in Europe, extensive route network, premium services.
• Emirates: Leading international carrier with a focus on luxury and long-haul flights.
• Qatar Airways: Known for excellent service, extensive global network, and rapid expansion.

Delta Air Lines remains a formidable player in the global aviation industry as we approach 2024. With a strong business model, extensive route network, and focus on customer experience, Delta is well-positioned to navigate the challenges and opportunities ahead. However, it must continuously adapt to the competitive landscape, economic fluctuations, and regulatory changes to maintain its market position. By leveraging its strengths and addressing its weaknesses, Delta can continue to soar in the coming years.

Frequently Asked Questions (FAQ)

1. what is delta air lines' main source of revenue.

Delta's main source of revenue is passenger ticket sales for both domestic and international flights.

2. How does Delta manage fuel price volatility?

Delta employs fuel hedging contracts to mitigate the risk of fuel price volatility.

3. What are Delta's major strengths?

Delta's major strengths include its extensive route network, strong brand reputation, and financial stability.

4. Who are Delta Air Lines' main competitors?

Delta's main competitors include American Airlines, United Airlines, Southwest Airlines, JetBlue Airways, as well as international carriers like Lufthansa, Emirates, and Qatar Airways.

5. What opportunities does Delta have in 2024?

Delta has opportunities in expanding into emerging markets, leveraging technological advancements, and investing in sustainability initiatives.

6. What are the potential threats to Delta Air Lines?

Potential threats include intense competition, economic downturns, and regulatory changes.

7. How does Delta Air Lines enhance customer experience?

Delta enhances customer experience through amenities like Wi-Fi, in-flight entertainment systems, premium seating options, and excellent customer service.

8. What is Delta's strategy for maintaining operational efficiency?

Delta maintains operational efficiency through fuel-efficient aircraft, advanced technologies, and effective labor relations.

By understanding Delta Air Lines' business model, SWOT analysis, and competitive landscape, stakeholders can gain valuable insights into the company's future prospects. This comprehensive overview provides a clear picture of where Delta stands today and where it is headed in the future.

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Five reasons why delta airlines outperforms its three largest competitors.

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LOS ANGELES, CA - FEBRUARY 10: (L-R) Delta Air Lines president Ed Bastian, broadcast journalist Lu ... [+] Parker, Los Angeles Mayor Antonio Villaraigosa and recording artist John Legend attend a Delta Corporate Reception. Delta stays more focused on business travel than its largest competitors.

The U.S. Airline business continues to evolve, with low-cost carriers gaining presence and large airlines repositioning themselves for a post-pandemic demand level. The four largest airlines in the U.S. — American, Delta, Southwest, and United — each hold a roughly 20% market share and yet each has unique strengths and weaknesses. Even if lower-cost carriers gain share over the next few years with more emphasis on leisure traffic, these four airlines will collectively dominate air traffic in the U.S.

Yet despite their similar shares and common focus of aiming to carry higher-fare paying customers, Delta Airlines has distanced themselves from their three largest competitors by being more focused, more aggressive, and just overall better managed. Here are five things that Delta does that separates itself apart:

Domination of More Hubs

If you live in Atlanta and travel for business, Delta Airlines is the only real option you have given their scope of service. Similarly, if you live Dallas, American is your go-to airline. This is because business travelers value diversity in destinations, good frequency, and reliable service often over the price paid. This relationship has been documented and studied and tends to be summarized as the “S-curve” show here:

Having a dominant seat share in a market tends to win that airline most, if not all, of the buss ... [+] traffic in that market.

As this graph shows, having a small share of seats in a market means attracting almost none of the business travel. But once meeting a certain share threshold, almost all of the business traffic chooses the same option. Delta bests their competition because they are in this sweet spot of the S-Curve in more locations and for a higher percent of their capacity. They own this position not only in Atlanta, but also in Detroit, Minneapolis, NY’s LaGuardia, and are growing their position in Seattle to create this effect. By comparison, American has this position only in Dallas and Charlotte, though some may argue Miami is a stronghold but that has been withering. United is in the worst position of the big three, fighting with American and Southwest for Chicago, fighting with two carriers for Denver, and Newark’s increased competition thanks to losing its slot protections and Delta’s build up at LaGuardia and JetBlue at JFK. Houston meets this standard for United, and maybe San Francisco too, but this is smaller amount of their system under their price control. As a result, United and American must compete for more of their business traffic than Delta must. When you know that a large percentage of your most premium revenue has no real competitor, it gives you a lot of flexibility. Southwest has this benefit for small business travelers given their high frequency service in and among many big cities but has struggled to carry the highest-paying corporate traveler.

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Interestingly, this S-Curve relationship does not hold for price-sensitive leisure travelers. That’s why low-cost carriers, often with small market share in big places, can still earn their capacity share of those travelers.

Better Labor Relations

Delta has a strong history of working with their labor groups, and has even kept several big groups non-union. Under the Railway Labor Act, the law that governs collectively-bargained agreements in the airline business, contracts do not expire but instead become “amendable”. Delta has a track record of beginning negotiations before their amendable date and signing a new deal on or close to that date. By comparison, contracts at American and United have often taken years to sign after their amendable dates, and each company has a long history of mistrust between the company and their major unions.

A common phrase in the airline business is that “weak management creates strong unions.” This has some truth in that unions fill in where the company fails for employees. If a company does not communicate regularly and openly, and provide good avenues for feedback with follow-though, the union provides that. If the company does not willingly offer market based wages, work rules, or benefits, the union bargains on their behalf. By this measure, Delta has managed better than their primary competitors, because while we may not see how the sausage is actually made, the result is a tastier link when it comes to labor relations at Delta. Southwest also is considered to have good relations but cracks have been shown recently, including when their flight attendants quickly denounced a plan for temporary wage reductions in lieu of furloughs due to demand weakness.

Smarter Fleet Strategy

Delta operates an older fleet of aircraft. With an average of 17 years in service for their planes, this makes their fleet older than American’s 11, Southwest’s 12, and United’s 14-year old fleets. Yet when you board a Delta plane you often have no idea how old the plane is because of their investment in interiors. Plus, Delta, through their Technical Operations division, is able to maintain high dispatch reliability for this fleet giving Delta both a lower-cost fleet with no sacrifice to operational integrity.

Delta was also aggressive when the pandemic hit, grounding their fleet of Boeing 777s and 717s while their competitors were not nearly as decisive. While I wouldn't give Delta credit for not owning the Boeing 737MAX when it was grounded, this isn't coincidence either as they tend not to own the newest planes and keep their fleet flying with good maintenance. American has a newer fleet that has resulted in their sky-high debt load. United has actually, and curiously , tried to claim that it is a strategy to keep more wide-body planes for the big snap-back in long-haul demand. Southwest keeps things simple with one airplane type but has found that even within that one airplane, problems with specific models can cause significant disruption.

Global Airline Investments

Like all airline investors, Delta has taken some near-term write offs for its investments in global airlines. While their biggest competitors tout their alliances and partnerships with airlines around the world, Delta has taken equity positions in airlines in Latin America, Europe, and Asia. This not only has reorganized the playing field among the big alliances somewhat, but also gives access to the economic returns available in markets they cannot serve on their own.

In the near-term this may look to be a weakness in their strategy, and yet as demand returns I believe this will again be considered a strength. This gives Delta a literal seat at the table of airlines in other geographies, so they can act more quickly and take advantage of trends before their competitors are even made aware. Southwest’s recent international expansion broadens their view somewhat, but their code-share relationships have been limited and not particularly successful. Delta is more global than American and United, and as a long-term strategy this positions them ahead of their competitors.

Clearer Strategic Focus

As evidence by all of the above, Delta has a clearer focus on why they are in business and what their core competencies are. Leadership at both American and United has spoken publicly about the threat of low-cost carriers in their markets. Delta has stayed focused on serving their high-paying business travelers well, but then introduced the industry’s first Basic Economy fare to compete with low-cost carriers. Delta does not apologize for its high fares, and enough passengers have historically chosen them deposit this because of they breadth of service, high reliability, and attention to detail that beats what their competitors do. Delta held out the longest in blocking middle seats for passengers during the pandemic, in part because of a fleet strategy that made this less costly for them to do so. They bought an oil refinery that helped the whole industry in that it kept refining capacity online that otherwise would have been shuttered. In these, and many other ways, Delta has distinguished themselves as the carrier to beat amount the largest U.S. airlines.

This does not mean they are out of the woods, however. By their own admission, they will emerge to be 15% smaller than pre-pandemic. Their reliance on business travel means they will be the most hurt when all of this traffic does not return . Their International focus means this part of their network will take more time to recover. The features that make low-cost carriers much better positioned at this time still elude Delta and the rest of their large competitors, so losing share to this group is likely. But if a business-focused airline is to survive and thrive, Delta is the one to bet on.

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Delta Airlines Mission Statement | Vision | Core Values | Strategy (2024 Analysis)

Company: Delta Airlines CEO : Ed Bastian Year founded: 1925 Headquarter:   Atlanta   Employees: : 83,000  Type: Public Ticker Symbol: DAL Market Cap ( Sept 2022): $19.98 billion Annual Revenue (2021) : $29.89 billion Profit | Net income ( 202 1):  $280 million

Products & Services:  In-flight ǀ special services ǀ check-in options    Competitors: United Airlines | American Airlines | Southwest Airlines

Did you know? Delta Airlines is the most awarded airline service in the US because of employees’ professionalism, dedication, and passion. Top magazines such as Wall Street Journal , Fortune , and Business Travel News have recognized the company for serving more than 200 million passengers annually.

Typically known as Delta, the company is one of the major airlines in the USA and a legacy carrier. The airline is also among the oldest services in operation. Established in 1925, Delta Airlines has grown its market base through differentiated and client-tailored services.

It has become a first choice among people with a vast inter-state demand. Since 1900, the company has dedicated itself to meeting customers’ demands. It has served over 200 million passengers annually over the years.

Headquartered in Atlanta, Georgia, it’s among the world’s most trusted and oldest airlines, with over 80,000 employees who take pride in the company’s significant success. The company has evolved enormously since its inception. Delta has offered new opportunities as a global airline by running operations across 275 destinations in 50 countries.

Delta Airlines is one of the leading global airlines with a mission to create innovative opportunities and expand its horizons by connecting communities and people.

Delta Airlines generates annual revenue of $29.89 billion.

Table of Contents

Delta Airlines Mission Statement

“Making Connections”

Delta Airlines is well-known as one of the purpose-driven brands in the USA. Its concise yet impactful mission statement shows unwavering commitment to improving people’s lives. The company takes pride in its workforce and understands its obligation to make traveling easy and hassle-free. Some of the critical components of Delta Airline’s mission statement are as follows.

Mission Statement Analysis

• Putting Passengers First

Putting its customers first is the mission that the leading airline company embraces as a customer-oriented corporation. This goal in the mission statement also indicates the compassionate services Delta Airlines delivers to its customers with help from 80,000 competent employees. The company considers its employees the heart of its services in everything it does.

Delta Airlines has always been committed to creating a people-centric culture that many workplace experts have recognized and appreciated. The company ensures to improve services by implementing a culture and customer-focused hiring efforts. The company’s leaders revise and upgrade policies to attract more customers and retain a competent workforce.

• Addressing and Improving Environmental Impact

The mission statement reflects that Delta Airlines is focused on addressing and managing its jet fuel use. The company works hard to lower its net aviation emission by 50 percent by 2050. In addition, the company encourages its people to get creative in reducing their individual impact.

Beyond that, Delta’s people are coming up with innovative solutions to reduce their impact by limiting waste, recycling, and engaging customers, and employees.

• Supporting Diversity and Inclusion

The aim to “connect people” in the leading airline’s mission statement demonstrates the company’s belief in supporting diverse communities. Delta Airlines’ three-year plan outlines its strategy to increase diversity in the company, specifically in its leadership roles. The company also promotes accountability. According to the company, diversity is more like a journey that takes effort and time to show results.

• Building Healthy Communities

Delta has pledged to invest one percent of its profit (ten million) in various charitable causes. The company firmly believes in improving the community it works for and serves. This goal is reflected in the airline company’s mission.

Delta Airlines is committed to compensating its 80,000 workers for a service day with community partners of their choice. It proudly shares the impact these efforts create across the world.

• Leading the World Safely

Delta Airline’s commitment to its employees and customers begins with their safety. One of its objectives is to provide customers with the safest traveling experience.

Delta Airlines Vision Statement/ Purpose

“The world. Reflect on the world. Respect the world. Our purpose is beyond flight.”

Delta Airlines values its customers and considers them a part of the family. The vision statement indicates the company’s desire to personalize its services and make maximum impact. The statement contains the following characteristics:

• Improving Global Reach

Delta Airlines has expanded its destinations over the years to facilitate its customer base. The company’s ambition is to become a global entity. The company also sets itself apart from other airlines by providing quality customer care to build a strong image beyond its local audience.

The company’s current efforts to teach sign language to employees show its determination to support inclusiveness.

• Becoming a Dependable Airline

The desire to serve “beyond flight” in the vision statement demonstrates Delta Airlines’ ambition to be an airline that people rely on. In addition to unparalleled travel services, community involvement and company engagement are other ways to serve people. These efforts have increased the company’s popularity among consumers.

Delta Airlines Core Values

Delta Airlines possesses strong core values , including integrity, honesty, leadership, and perseverance. These values serve as the rules that define the company’s identity and build a solid foundation for the company’s culture.

The company’s culture truly reflects these values as they guide employees and help them align their personal and professional goals.

Using these values, Delta Airlines has distinguished its stakeholder treatment and customer services over the years, helping it rank among the top most sought-after airlines in the world.

 References & more information

• Delta Airlines The Delta Customer Experience Delta Airlines,
• Delta Airlines, Corporate Stats, and Facts Delta Airlines,
• Delta Airlines, Delta: America’s most-awarded airline Delta Airlines,
• Delta Airlines, Delta No. 18 among Fortune’s World’s Most Admired Companies Delta Airlines,
• Delta Airlines Delta is ranked the No. 1 US airline by Wall Street Journal . Delta Airlines,
• Delta Airlines, For the 11th consecutive year, Delta was named No. 1 in Business Travel News Survey. Delta Airlines,
• Delta Airlines, Fueling a Sustainable Airline: Why Delta’s promise to connect the world begins with caring for it . Delta Airlines,
• Featured Image by  Miguel Ángel Sanz

 Tell us what you think? Did you find this article interesting? Share your thoughts and experiences in the comments section below.

Kevin Johnson

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Delta spotlights strengthened competitive advantages and brand momentum

Airline announces three-year financial targets and outlook, details customer-centric approach at Capital Markets Day as it presents strategic priorities to lead through and beyond the recovery

News provided by

Dec 16, 2021, 06:55 ET

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NEW YORK , Dec. 16, 2021 /PRNewswire/ -- Delta Air Lines (NYSE: DAL ) today presents its plan for leading the air travel industry through the next phase of the recovery, powered by an intense focus on customers, the strength of its trusted consumer brand and its values-based, people-centric culture of service.

The airline is presenting its strategic priorities at its Capital Markets Day for the investor community, hosted at the New York Stock Exchange in New York City .

"It's clear that the pandemic stress-tested the people of Delta in unprecedented ways, and our competitive advantages not only endured but were strengthened throughout the crisis," said Ed Bastian , Delta's CEO. "Delta is outperforming the industry, and our path forward to leading the next phase of the recovery is taking shape thanks to the incredible work of our 75,000 people worldwide."

During the event, senior leadership will discuss how Delta is expanding its platform to create value over the long term. Highlights from the day will include:

• Competitive Advantages:  Delta's actions during the pandemic further strengthened its competitive advantages and enhanced its position as a trusted consumer brand.
• Industry Leadership:  Delta is leading the industry operationally and financially by demonstrating agility, operational excellence and discipline.
• Brand Preference:  Delta continues to elevate the customer experience through its best-in-class service and by investing across the travel ribbon, enhancing brand preference and loyalty.
• Earnings Power:  Delta expects to deliver meaningful profitability in 2022 on its path to improved earnings power beyond pre-pandemic levels by 2024.
• Financial Foundation:  Delta's top financial priority is restoring its financial foundation, with a focus on efficiency and cash generation to achieve investment grade metrics by 2024.

"As our profitability improves, we are focused on reducing debt and strategically investing to build on our leadership position," said Delta CFO Dan Janki . "We have a compelling strategy that we believe will allow us to exceed 2019 financial performance, deliver industry-leading margins and generate significant cash to de-lever the balance sheet over the next three years."

Delta's financial targets will be discussed in greater detail at the event, and include the following:

Financial Targets:

Additional Metrics and Assumptions:

• 2024 operating margin in mid-teens
• 2024 operating cash flow > $9B
• 2024 adjusted debt / EBITDAR between 2.0x and 3.0x
• 2024 ending liquidity between $5B and $6B
• 2024 ROIC in the mid-teens

"As we look ahead, our priorities are strengthening our trusted consumer brand, restoring our financial performance and building a better future for our people and our planet," Bastian said. "Our ambition is to transcend the industry and create significant long-term value for our people and our owners. As reconnecting the world becomes more important than ever, we are accelerating our path to reshape and redefine air travel."

Delta also issued an investor update, raising December quarter financial guidance. The airline now expects to generate an adjusted pre-tax profit of ~$200 million in the December quarter.

Capital Markets Day will begin at 8:15 a.m. Eastern Standard Time and includes presentations from Bastian and Janki as well as Delta President Glen Hauenstein and President-International Alain Bellemare. It also will feature a Q&A with Bastian and Stephen J. Squeri , Chairman and CEO of American Express, in which they will discuss the growing value of the partnership between the two companies in the recovery and beyond.

Attendance in person is by invitation only. Presentation slides and a live webcast will be available on Delta's Investor Relations website at https://ir.delta.com . A replay of the event will be available shortly after the event.

About Delta

Delta Air Lines is the U.S. global airline leader in safety, innovation, reliability and customer experience. Powered by our employees around the world, Delta has for a decade led the airline industry in operational excellence while maintaining our reputation for award-winning customer service.

Today, and always, nothing is more important than the health and safety of our customers and employees. Since the onset of the COVID-19 pandemic, Delta has moved quickly to transform the industry standard of clean to ensure a safe and comfortable travel experience for our customers and employees.

With our mission of connecting the people and cultures of the globe, Delta strives to foster understanding across a diverse world and serve as a force for social good.

Forward Looking Statements

Statements made in this press release that are not historical facts, including statements regarding our financial targets, should be considered "forward-looking statements" under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees or promised outcomes and should not be construed as such. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments and strategies reflected in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the material adverse effect that the COVID-19 pandemic is having on our business; the impact of incurring significant debt in response to the pandemic; failure to comply with the financial and other covenants in our financing agreements; the possible effects of accidents involving our aircraft or aircraft of our airline partners; breaches or lapses in the security of technology systems on which we rely; disruptions in our information technology infrastructure; our dependence on technology in our operations; our commercial relationships with airlines in other parts of the world and the investments we have in certain of those airlines; the effects of a significant disruption in the operations or performance of third parties on which we rely; failure to realize the full value of intangible or long-lived assets; labor issues; the effects of weather, natural disasters and seasonality on our business; the cost of aircraft fuel; the availability of aircraft fuel; failure or inability of insurance to cover a significant liability at Monroe's Trainer refinery; failure to comply with existing and future environmental regulations to which Monroe's refinery operations are subject, including costs related to compliance with renewable fuel standard regulations; our ability to retain senior management and other key employees, and to maintain our company culture; significant damage to our reputation and brand, including from exposure to significant adverse publicity; the effects of terrorist attacks, geopolitical conflict or security events; competitive conditions in the airline industry; extended interruptions or disruptions in service at major airports at which we operate or significant problems associated with types of aircraft or engines we operate; the effects of extensive government regulation we are subject to; the impact of environmental regulation, including increased regulation to reduce emissions and other risks associated with climate change, on our business; and unfavorable economic or political conditions in the markets in which we operate or volatility in currency exchange rates.

Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and our Quarterly Report for the quarterly period ended September 30, 2021 . Caution should be taken not to place undue reliance on our forward-looking statements, which represent our views only as of the date of this press release, and which we undertake no obligation to update except to the extent required by law.

Non- GAAP Financial Measures

Delta sometimes uses information ("non-GAAP financial measures") that is derived from the Consolidated Financial Statements, but that is not presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"). Under the U.S. Securities and Exchange Commission rules, non-GAAP financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.

Delta is not able to reconcile forward looking non-GAAP financial measures without unreasonable effort because the adjusting items will not be known until the end of the period and could be significant.

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Delta Airlines: Flying High in a Competitive Industry

Despite stiff rivalry in the airline industry, Delta consistently finds innovative ways to soar above the rest.

The US airline industry is known for its low margins and intense competition. In such a crowded, high-risk marketplace, alignment between business and operating models is essential. One company that has shown effectiveness in aligning these models is Delta Airlines.

Delta’s history illustrates all too well the risky, cutthroat environment of the airline industry. In 2005 Delta filed for bankruptcy protection, despite then being the 3 rd largest airline in the United States. At the time, the industry faced eroding margins due to steep hikes in fuel prices and increased competition from low-fare carriers [i.] Emerging from bankruptcy, Delta needed to align its business and operating models in a way that would allow it to serve its customers while not repeating the same mistakes, such as high fuel and fixed costs, that led to its 2005 bankruptcy.

Fast-forwarding to 2015, Delta has become an industry leader. In 2013 the company boasted the highest net profit in the history of the industry, and is currently the world’s largest airline by passenger volume [ii.] Delta achieved this success through its business and operating model alignment. Delta’s business model focuses on attracting corporate travelers, a segment characterized by high margins and low price sensitivity. Delta also strives for a flexible business model that focuses on shifting their cost structure from fixed to variable costs as much as possible. Together, this model allows the company to scale up or down to meet demand, while maintaining higher margins than competitors.

Delta’s operating model supports its business model through four key activities: purchasing used aircraft, vertical integration, low-unionization of labor, and industry-leading customer service. Airlines are known for their high fixed costs, with many airlines opting to purchase expensive new aircraft that come with low maintenance costs but high acquisition costs. Delta’s strategy, however, has been to purchase used aircraft, which offer cheaper acquisition costs but higher maintenance costs. This model leaves Delta with lower fixed costs but higher variable (maintenance) costs, allowing them to quickly scale up or down to meet demand, while not being burdened by the same level of fixed costs of other airlines [iii.] This creates sustained competitive advantage and reduced operational risk in the event of rapid increases or decreases in volume.

Delta’s operating strategy also includes owning their own fuel refinery. Although fuel hedging and futures trading have become standard for airlines, Delta has taken this further by owning a source of low-cost fuel, protecting them from cost spikes [iv.] Through vertical integration Delta reduced its per-gallon fuel prices by $.10 in the first quarter of 2014 [v.] If fuel prices rise, Delta is positioned to respond to this pressure and maintain its competitive price advantage.

Pathways to Just Digital Future

Delta’s operating strategy also translates directly into its workforce. Airlines are known for high unionization rates, with approximately 50% of airline employees unionized. Delta’s unionization rate is closer to 18%, allowing it to keep base wages lower [vi.]   Instead of offering high fixed wages, Delta instead offers industry-leading profit sharing plans. This allows Delta to shift a portion of their labor costs from fixed to variable, allowing the airline to remain competitive even in market downturns, and reducing the risk of an employee strike. In 2014, Delta’s profit sharing program yielded nearly one month’s salary to each employee [vii.]

Delta’s business model also focuses on delivering high customer service to appeal to their core demographic, business travelers. Delta’s commitment to customer service is evidenced by their recent multi-billion dollar investment in enhanced training programs for customer service agents, designed to improve the customer experience. Delta’s commitment to customer service also led to their development of the first mobile bag tracking feature on smartphones [viii.] Delta has even focused on creating a more lighthearted atmosphere in-flight, finding ways to bridge safety and fun in recent in-flight videos seen below. These new changes have been well received by business travelers, leading to Delta’s #1 ranking by corporate clients four years in a row by Business Travel News [ix.]

Delta is a solid example of a company that learned from its previous mistakes. The 2005 bankruptcy served as a wake up call for the company to better align its core business and operating models. This new improvement in alignment and strategy has led to gaining competitive advantages with respect to fuel prices, labor, customer service, and greater operating cost flexibility. With this new strategy in place, Delta is well positioned to see its profits reach new heights.

[i.]  http://money.cnn.com/2005/09/14/news/fortune500/delta/

[ii.]   http://www.deseretnews.com/article/865601066/Delta-tops-list-of-most-profitable-airlines-in-2013.html?pg=all

[iii]   http://marketrealist.com/2014/06/deltas-capacity-current-size-future-purchase-commitments/

[iv.]   https://hbr.org/2014/12/deltas-ceo-on-using-innovative-thinking-to-revive-a-bankrupt-airline

[v.]    http://marketrealist.com/2014/06/deltas-unique-strategy-owning-refinery-contain-fuel-costs/

[vi.]   http://marketrealist.com/2014/06/delta-airlines-margins-highest-among-peers/

[vii.]  http://www.hrcapitalist.com/2014/04/how-delta-airlines-de-unionized-17000-employees.html

[viii.]   http://www.airlinetrends.com/2012/06/08/innovative-airlines-2012-delta/

[ix.]    http://news.delta.com/delta-named-top-airline-business-travel-news-readers-fourth-consecutive-year-1

Student comments on Delta Airlines: Flying High in a Competitive Industry

As a Delta frequent flyer, the changes you highlight are evident in their day to day operations and their customer service. I remember when there was much debate about Delta purchasing their own refinery. Many analysts saw it as a risky move, but Delta was looking long-term, and saw the vertical integration as a potential competitive advantage. The customer service is also industry leading. I maintained loyalty to the program, and became less price sensitive as a result. Delta saw the value in the intangibles, and created value. Overall, very good choice for your project. This is a stellar example of a company whose operations are aligned with its core business strategy.

Great write-up Sam. I generally dislike domestic air carriers but Delta definitely stands out in terms of quality and service. Their fleet appears newer, flight attendants are friendlier, and their food/beverage service is superior among the U.S. carriers. Although I agree that focusing on business travelers is ideal, I wonder if recent competition in the industry is pushing Delta to adjust its strategy. Southwest Airlines is now a player for business travelers and the recent merger of American/U.S. Airlines has further increased the competition. With each airline focused on the profitable business segment, how does Delta continue to differentiate itself? In addition, does the traditional hub-and-spoke model result in greater operational efficiency (personally I think it leads to more inefficiencies)?

Sam – I enjoyed your post, and as a recent Delta convert, I was interested to read more about the business and operational efficiencies behind the scenes that seem to have led to a more pleasant flying experience. For business and personal travel, I have traditionally gone with other domestic carriers because of corporate alliances and geographic locations – but have recently been flying Delta more frequently and have been very impressed! Honestly, I was unaware of some of the vertical integration and ownership of the refinery – but I feel like some of the business efficiencies realized are parallel to some of the improvements in customer experience – and are all focused on delivering value through the whole experience by capitalizing on even the smallest of details. I agree that Delta has a business-traveler approach – but this replication for customer service for personal travel has greatly persuaded me to fly Delta for all types of flights. I think the company has done an amazing job, recovering from and rebranding the company following bankruptcy – and that they have been successful in business efficiencies, and am curious how they will continue to distinguish themselves in the future. As other carriers, such as Southwest and the recent USAir/American merger attempt to emulate some of their practices – will they be able to continue to differentiate themselves as both the carrier for business and personal travelers? I know I am committed to continuing to use Delta and am excited to see how they further reinvent themselves in the future!

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Delta Air Lines Confirms Plan To “Unbundle” Business Class: Pay For Only What You Need

by Gary Leff on July 12, 2024

J.P. Morgan’s Jamie Baker asked Delta President Glen Hauenstein about the idea during the call,

Glen, this concept of unbundling the front cabin is one that I’ve been thinking about, in part because unbundling and segmenting the rear cabin has been such a success for Delta and a few others. I want to be careful about asking about future pricing on that. But I’m curious what the pros and cons are in terms of possibly going down this path? Or is one price for all how we should continue to think about the D One cabin?

Hauenstein confirmed that they’re planning a basic business product, and that they’ll be announcing it at their Investor Day this fall, “We’ve talked conceptually about that. I think we’ll be giving you more details as we go, but we’re not ready to talk about the details of those plans moving forward. I think the investor day this year should be very exciting.”

Delta wouldn’t be the first airline to do this, but if Delta does it then we’ll certainly see more follow. First, because other airlines think Delta is smarter than they are – if Delta does it, it must be right. Second, because Delta owns significant stakes in airlines around the world like Air France KLM, Virgin Atlantic, Korean Air, LATAM, and more.

So what is an ‘unbundled’ business class like? British Airways charges for advance seat assignments in business class, unless you have status or are on a full fare ticket.

Emirates started selling ‘basic business class’ fares in 2020. Qatar Airways followed, restricting access to lounges and to advance seat selection on the cheapest business class tickets. Finnair’s 2021 entry into this space was absolutely brutal:

You might buy a business class ticket from Europe to Asia in business class, have to check in with economy passengers, get turned away at the lounge and pay for checked bags.

While Basic Economy has caught on and had mixed results, it’s going to be a lot harder to do with Business Class and that strategy will probably cost an airline more than it’ll generate in incremental revenue. Your cable television bill helps explain why.

Basic economy isn’t about what most people think it’s about. It isn’t primarily a way to get customers to spend a little more on each ticket, maybe $20 more each way. It’s a tool for price discrimination – to segment business travelers from leisure travelers.

Traditionally business travelers bought expensive last minute tickets, while leisure travelers bought cheap tickets far in advance. Fare structures promoted this. When a plane takes off with empty seats, they can never sell those seats ago. That’s call spoiling inventory. And since there’s almost no extra cost to carry an additional passenger once a plane is flying anyway (a little extra fuel based on the weight of that passenger in coach), any money they get is worthwhile.

However airlines don’t want to sell tickets at a lower price than a customer is willing to pay. So they work hard to charge high prices to those willing to pay high prices, yet still fill those empty seats with low fares.

Those strategies broke down over time as low cost carriers became more prevalent and adopted different pricing strategies – one way tickets for half the price of a round trip (so no Saturday stay required), cheap fares available at the last minute. Major carriers had to match or lose those incremental sales, but matching meant that business travelers could buy the cheap tickets too. That hurt the revenue they earned from their most lucrative customers.

Corporate travelers have largely gone along. Big businesses haven’t required their employees to book the cheapest Basic Economy fares. An airline can offer cheap fares with restrictions to leisure travelers, while charging higher non-Basic prices to business travelers.

Restrictions on basic economy have been reduced in some cases. Only United Airlines restricts you from bringing a carry-on bag on board with these fares, and won’t allow you to skip the check-in lines if you aren’t checking bags. When United Airlines rolled out Basic Economy in pre-Covid times it cost them $100 million from customers booking away onto other carriers . American Airlines has change penalties and lower mileage-earning.

Business Class Is Different

For a decade , since Basic Economy debuted, there’s been discussion of whether Basic Business could make sense. It largely didn’t. However there may need to be deeper thinking about how to make it work with changing consumer behavior as business class has become a premium leisure phenomenon and not just a corporate managed travel one (it was called business for a reason).

Up until now airlines have been able to retain their traditional restrictions on deeply discounted business class fares, differentiating leisure travelers from business travelers. Those cheap business class tickets have historically had to be purchased about 50 days in advance of travel which doesn’t work well for business customers. Airlines haven’t needed Basic Business. And the prices on the table to incrementally purchase services bundled with business class tickets have been so high that they likely would have meant more people buying Basic Business, and lower total revenue to the airline, as I’ll explain in greater detail in the next section.

So how do you continue to segment customers willing to pay more from those you need to discount to generate business from? It’s hard. The traditional strategies all have problems.

No carry on bag. This is a significant restriction for short distance flights, where time spent at baggage claim is a meaningful portion of the total journey, and where turning around the same day or after just a few days is common. For longer journeys where people are buying flat bed seats the ability to only bring what you need for the flight itself into the cabin isn’t a significant restriction.

No lounge access. The savings from one less person using a lounge is very low. If you set the price equally low people may buy it but it won’t do the job of Basic Business in keeping high fare customers from buying the fares. If you set the price of lounge access high, people will forego it and trade down to Basic Business. It will cost the airline more revenue (people opting for the lower fare) than they’ll generate in savings, and won’t be enough of a reason for people to spend say $500 a ticket more. That’s an expensive waiting room >

In any case the choice often isn’t between spend $500 for lounge access on an itinerary or have nowhere comfortable to wait. A customer can use a pay-in lounge. Many airlines offer lounge day passes for less. They can get a credit card that comes with Priority Pass. Their elite status may entitle them to lounge access even if their fare doesn’t. Or they could take a small fraction of the money and have perhaps a better meal than the lounge would offer inside an airport restaurant.

Non-refundable and non-changeable. This is a big restriction when buying tickets 50 days in advance, much less so close to departure. However booking a couple of weeks out, it could make sense for someone whose plans are meaningfully likely to change to spend a couple hundred extra dollars to ensure the entire fare isn’t wasted.

While the concept of Basic Business – the need to segregate high fare passengers from low fare ones in order to discount available seats without cannibalizing revenue (allowing people who would pay more to get their tickets for less) – is an intriguing one, no one has come up with a way yet to make it really work.

Furthermore, much of the benefit of unbundling domestic economy is driven by the tax code . U.S. airlines save the 7.5% federal excise tax on airfare when part of the ticket cost is moved out of the fare and into fees. But that benefit doesn’t apply to international, and there aren’t as many premium passengers so it doesn’t scale as well domestically.

Why Bundling Services Makes More Sense Than Unbundling When Marginal Cost Is Near Zero

Cable TV providers bundle ‘packages’ of channels instead of selling each channel individually because it is profit-maximizing to do so. The cost of adding another customer to a television company’s access to Fox News or ESPN is near zero, and so a bundled strategy makes sense. And notice that even new ‘cut the cord’ TV streaming providers are pricing the same way even though they’re built from the ground up.

Let’s take a simple example.

Customer A will pay up to $100 per year to get news channels, but only $10 a year for sports channels.

The cable company might sell sports and news each for $99. Customer A would buy sports, customer B would buy news. And the cable company would generate $198.

Instead, if they bundle sports and news into a $109 package, customers get both channels at a price that’s worthwhile to each and the cable company generates $218.

The cable company gets more money, and consumers get more channels which are worth more to them than what they have to pay.

When the cost of providing a service is next to zero, then bundling is the clear profit-maximizing strategy. By the way it’s why as on board internet bandwidth has grown there’s been a move to bundle internet in with ticket prices (‘make internet free’). That wasn’t possible when there were tradeoffs between one passenger’s use of bandwidth and another – and indeed was still a challenge when Delta tested the free model. This is why I started predicting eight years ago that inflight wifi would be free within 10 years (so by 2022). People thought I was crazy but the logic was sound.

Putting carry on bags in overhead bins rather than the checked baggage hold, giving a business class passenger access to a lounge that the airline is already operating and stocking with food and beverage just doesn’t come at a significant marginal cost.

If it costs $50 to add a customer into a lounge, and some customers value that access at $75 and others $300, charging $250 is going to keep out customers and give up the $75 – $249 they’d have been willing to spend. It’s going to cost an airline revenue.

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About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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What a surprise!! Timmiboy cheerleading for Delta as usual. And doing it with plain lies as usual too. Maxpower is absolutely right Timmiboy. There’s no way to know the profitability by regions. So, you’re simply lying. End of story.

” United made $2 billion less than Delta on a system basis in 2023. There are good reasons for that difference. The sooner you explain WHY UA makes less money – and not try to use some cop out about unfair advantages in ATL, DTW, SLC and MSP which have next to nothing to do with international profitability, the sooner I’ll stop regurgitating the same data sources that you want to pretend don’t exist.”

I’ve told you the reason many times, but you keep lying. The ONLY reason Delta reports higher profits than United, THE ONLY, is because they play financial games with their refinery to have much lower fuel costs. Thats it. It’s so plain to see looking at the fuel price they report and the fuel expenses on the income statement. 1Q 2024 is not the right quarter to see it because United was affected by the grounding of the Max 9, but let’s take a look at 4Q 2023. Operating income for Delta 248 million higher than United. Fuel expenses for Delta 374 million lower than United. You know basic arithmetic Timmiboy, right? Without the difference in fuel, United operating income is higher than Delta’s by more than 100 million. So Timmiboy, stop all that crap about regions, premium cabin, loyalty program, service, etc, etc. You’re lying. It’s just FUEL. It’s the games Bastian plays with the refinery.

strike out, Marco. Delta has accounted for its refinery separately and transparently since the day it put it into service.

It has made over $1 billion for DAL in some years but is on a run rate of just a couple hundred million dollar savings for Delta this year – 1/10th of the profit difference between Delta and United.

And Delta’s fleet is 6.5% more fuel efficient than United’s and about the same for American – in part because of the 777 which is the least fuel efficient widebody in the US carrier fleet and in part because of AA and UA’s higher usage of RJs.

and then, once again, listen to the Air Show and let those folks tell you why Delta’s fleet and maintenance expenses are so much lower

United could have done everything that Delta now has as profit advantage but Delta did it while AA and UA have floundered strategically for decades.

DL now makes a revenue premium over the Pacific – the area where UA is strongest and DL specifically noted that it easily covers the cost of capital over the Pacific which means there is alot more Delta capacity coming to Asia and the S. Pacific – and Delta will win the revenue that UA has long depended on to run the company.

I get the finances and strategies perfectly. You and MAX cannot admit that DL runs a better business and airline because your identities are wrapped up in UA’s success while I just note the facts.

Would the price of bundled business seat cost more than currently?

Jon, I did not try to compare DL business class to the ME 3.

I did note that DL competes primarily with AA and UA – and JD Power surveys say that DL offers a superior product to AA and UA.

and Delta doesn’t even fly to the Middle East or any markets that logically flow over the Middle East other than a stray 5th freedom route from NYC to Italy which does more harm to AA than DL – which is probably why EK started MIA-BOG

One lie after another Timmiboy. You just can´t stop.

“It has made over $1 billion for DAL in some years but is on a run rate of just a couple hundred million dollar savings for Delta this year – 1/10th of the profit difference between Delta and United”

In the last 4 quarters (up to Q124) fuel expenses for DAL 10991 million and 12431 for UAL. The difference is 1440 million. In that same period, the difference in operating income is just 1114 million. You can keep lying but the numbers are clear. The difference is just fuel. Without the fuel difference, UAL makes more money.

“And Delta’s fleet is 6.5% more fuel efficient than United’s and about the same for American – in part because of the 777 which is the least fuel efficient widebody in the US carrier fleet and in part because of AA and UA’s higher usage of RJs.”

More bullshit. Gallons consumed are very similar. The difference is in the price. Delta gives their refinery a 6-cents margin for gallon while the market margin is 20 cents per gallon. That’s how they manage to have a price 12/15 cents lower than the rest of the airlines. Before you write, read the financials and stop lying.

If the refinery was the solution, why did UA fail to get its own refinery when it tried?

No, son, Delta’s profit advantage comes from its passenger revenues.

The refinery is not coming close to making a difference in profits this year.

Denial is not a river in Egypt. It is where you live.

I’m not the other “Marco”, but let’s be clear that UNITED is the prime US carrier, with the best network, best hubs, best alliance, great mileage program, and superior technology. We don’t really fly Delta or American, except for emergencies or if living in one of their hubs.

@ Tim — Nickeling and diming BUSINESS CLASS passengers will simply drive them and their large revenue away. What a stupid idea. This disaster will rank up there with Delta’s massive failure in screwing its elite members in late 2023. And, no, this isn’t about me. I know multiple people who have moved on to other airlines because of DL’s greed and arrogance. Hauenstein needs to go away now.

big M Marco, if that were true, then UA should be able to turn it into more profits – but they don’t.

As much as some want to argue, otherwise, UA flies the most capacity of any US airline – and of any airline in the world, but generates less revenue than DL and less profit than a number of global airlines – and just 60% of DL’s profits.

UA clearly flies a lot of capacity that does not add to its bottom line because it is so fixated on status and market position and, more recently, made the decision during covid NOT to retire older less efficient aircraft so has been trying to fly them all and made disastrous decisions in the process including dumping tons of capacity into Asia and S. Pacific markets last winter which resulted in a Pacific loss for them while Delta made money – and DL says it is making enough money that it can justify expanding its network because it more than covers the cost of expensive new aircraft and not just make a marginal profit.

Scott Kirby said when he got to UA in 2017 that he intended for United to make as much money as DL and yet 7 years later there is a huge gap – because he is fixated about size and market position while DL is fixated on making money first which starts with providing the best service among US airlines and getting the most revenue for it.

UA has the potential to be much more profitable than they are now but they will have to change their mindset about capacity – both domestically and internationally – and use some of the massive number of aircraft orders it has to massively retire some of its older, less efficient aircraft . And it is certain that AA and UA will follow DL’s lead if they unbundle business class fares.

As certain as tomorrow’s sunrise.

I’m in DL J across the Atlantic each Summer and this does not sound good to me.

@ Tim — Airlines generally do not “give away free upgrades”. They attract revenue by promising elite upgrades as an EARNED benefit. Intending to never provide those benefits is fraud, but that behavior is straight out of Delta’s playbook. Customers aren’t as stupid as you and Delta think. They see through fraud and are taking their money elsewhere. The statement that Delta “earns” the highest profit is a backward-looking one. Delta won’t necessarily do so as customers catch on. You act like Delta is somehow owed a higher profit margin and that customers like myself are being selfish by doing what is in their best interest. Delta is the one being greedy and selfish.

Shows delta doesn’t even think there is value in their business class. With a good product you don’t mind spending $$$ on

Gene And resetting expectations is exactly what multiple airlines have done. No rational company gives away more than it has to. As long as Delta keeps leading the industry in profits, it can choose how and when it gives away its rewards better than its peers

@ Tim Dunn — Fraud.

@Tim Dunn – “As long as Delta keeps leading the industry in profits, it can choose how and when it gives away its rewards better than its peers”

Delta announced its profits and its stock sank. Delta also announced they expect lower profits than anticipated in the coming quarter. The market was sure unimpressed, and it doesn’t matter that other airlines are worse. Meanwhile Delta is generating a lot of revenue from a well-negotiated American Express deal, but SkyMiles is lower margin than AAdvantage and lower margin than MileagePlus!

The airline has a lot going for it but your framing as ‘gives away’ is mistaken. Airlines offer future rewards in exchange for current business, and the one area where Delta lags peers is loyalty. They lucked out with a legacy American Express deal that positioned them incredibly well when Costco pulled the plug, but the mere fact that deal has higher top-line revenue than peers doesn’t mean they’re executing as well as they could or even reasonably should be.

And yet Gary SkyMiles results in more money for Delta than any other loyalty program. I get how it works as do you. My comment was to Gene who incessantly dishes on Delta but somehow pretends other loyalty programs haven’t done the same thing.

As for the stock,Delta is still up more than any other large jet US airline. And investors will cringe far more when other airlines report. Delta simply is the canary in the coal mine. They will be the most valuable airline by market just as they are now. Industry stock growth is taking a break.

Unbundled business class is awesome for people who have elite status. You don’t pay for the benefits that your elite status has already entitled you like lounge access and free checked bag.

I like where this is going.

@Will you’d think so, right? However, it’s likely that the basic business fares will be priced around the current rates, not at a steep discount (based on some trends from other airlines who’ve done it). Essentially, you’re paying the same for fewer benefits. Do note that you likely won’t access the new D1 lounges with elite status.

I can only speak for myself: I think this sucks. I am a DL 2 Million Miler, which now makes me a lifetime Platinum. That’s the only recent change at DL that has done me any good (2 million lifetime miles was only good for lifetime Gold status before). As noted, DL’s treatment of its elite flyers hasn’t exactly showered its most loyal customers with benefits. If DL goes through with this change, I don’t see myself as willing to pay for an “upgrade.”. Furthermore, what will it do to global upgrade certificates? One must already be in Premium Select to use them to get into DeltaOne. Will the certificate now be valid only for a seat and nothing else? The value of DeltaOne currently is as much about the extra perks ad it is the seat. No thanks.

@Will–I think your logic about FF benefits with an unbundled business class seat might be flawed. For instance, with an unbundled seat, will you get–

1. Access to special airport entrances, e.g, the Virgin Atlantic Upper Class entrance at LHR?

2. Access to DeltaOne lounges and other business class-only lounges?

You get the idea–if there is something they can withhold or for which they can change separately, they likely will. It’s a bad trend, even for elites.

@Tim Dunn “And yet Gary SkyMiles results in more money for Delta than any other loyalty program.” ignoring the substance of my comment and conflating revenue and profit

I usually fly business class for long haul flights specifically for the privacy and the lie flat seat. I never check a bag, so the included checked bags are useless to me, and I rarely make use of my lounge access, because most often there is better food and/or coffee to be had in other areas of the airport. I would not want to give up my carry-on bag and I would prefer to be able to change the ticket for free or a small fee (although, this usually equates to a steep difference in fare price and isn’t always a valuable benefit). And, while it wasn’t mentioned, I would happily forgo the business class meals, as I rarely enjoy what an airline provides in terms of food, even in business class– especially on Delta and other U.S. carriers– and I don’t drink alcohol. So, depending on the way the airline structures an unbundled business class ticket, it could be inticing for my use.

@Luke – I see your point, for sure, it could be like Basic Economy that they are going to keep the current cheapest fare and rebrand it as BE and perform a hidden price hike over the non-BE. Assuming that’s the case, then it’s bad for all since we’re not paying anything less for reduced benefits.

@Steve – Yeah, especially with SkyTeam Elite/EP, their reciprocal is the worst among three. Delta One lounge cannot even be access with non-Delta Venture partner SkyTeam flights. And with Delta, you even need to fly Premium Economy in order to get complimentary SkyClub access. For people who cares about Delta One lounge access, unbundled Business class can be bad. And now when I think about it, for some company paying their employees travel for work only buying unbundled business class for them, not only causing employees losing benefits they were entitled to, it will also drain the business class seats inventory thus further drives up the unbundled business class fare.

and, Gary, your calculations of profitability from loyalty programs make circuitous assumptions ON YOUR PART that are disconnected from what shows on each airline’s income statement.

@Tim Dunn – they’re not ‘my calculations’ they’re the margins each airline has self-reported :rolleyes:

and yet all that means is that the value of a subsidiary or business unit doesn’t translate into the bottom line.

It really isn’t any different than the refinery calculations that you claim to understand but clearly don’t.

Delta translates its earnings from Skymiles/Amex better into a benefit for the overall airline than any other airline including AA and UA.

You accurately state that AA has tried to grow NYC because of the value to the loyalty program – and yet they can’t make the flights there work while DL has the same reason to grow in competitive coastal markets and translates their coastal hub presence into higher corporate and loyalty/card program revenues.

I am on the same boat with Al. I fly D1 internationally. Do not fly UA or AA since I live in ATL. I am DL360 so Skyclub Is free. I don’t drink. Never like DL onboard food. I don’t check bags even 2 weeks work travel overseas. To me as long as I have flat bed and carry on bags, I am golden. So depending on how DL unbundles biz class, that could benefit me, especially my leisure travel if I can pay less for J class.

First, Gary thanks. I used to listen to a local DJ who would rant about unbundling cable TV, imagining his $150 for 50 channels deal would see him pay 1/2 or even 1/3 as much for the 15 he watched.

On contemplation, I see a use for this. Offer J seats with lesser perks strategically/dynamically and lock people in with a price they can’t get refunded, but that is a better price for the airline than selling late upgrades.

I’ve read that in the early laser printer days, HP used to produce three otherwise identical units. The two slower ones just had software modifications. Thus, each cost HP the same. Obviously, there were significant price differences. One can price discriminate in this way.

Delta has the “happiest airline employees” in the sky – bottom line!

Comments are closed.

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Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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