Angela Schulist, Caitlin Vickowski,

Caitlyn McBride, Daniel Cellucci,

Wenqi Chen
Leveraging Business Segment Leadership for New Growth
Situation
- Delta is known for excellent customer service, especially in the business realm
- The introduction of low cost carriers has become a serious threat for Delta, as
leisure travelers are flocking to the low-cost carriers
- Trying to compete on cost, Delta has already integrated backward to control costs

Problem
- Need to regain competitiveness in leisure segment to secure market share

Recommendation
- Pursue forward integration by furthering its MLT Vacation business to increase its
differentiated value proposition, build brand loyalty, and introduce a new revenue
stream
From the Clouds: Introduction to Airlines and Delta
- US airline industry is a $1.5 trillion industry
- Two main strategies within the industry
- Differentiators: Provide customers with exceptional service or amenities; hub and spoke model
- Low Cost: Provide customers with the lowest price and fewer amenities, point to point
- Delta entered into passenger air travel in 1930 and has grown to one of the worlds largest airlines
- Second largest US Airline with 17% market share
- Operates as a differentiator with a hub and spoke model
- More than 15,000 daily flights to 337 locations in 62 countries

Core Competency
Creating an exceptional customer experience throughout the entire travel process
Value Chain

Aircraft Reservation & Vacation

Fuel Supplier Air Carrier
Components Ticketing Service Services
Operational Excellence Drives Customer Satisfaction
Corporate Strategy
- Dominate Business Firm
- 87% of revenue is derived from passenger jet services
- Other sources: cargo, maintenance, global solutions, vacations, and private jets
- Geographic Diversification
- Both domestic and international flights
Global Strategy
- International Strategy
- Same offerings (pricing structure) in both domestic and international flights
Business Strategy
- Integration
- Combining cost leadership and differentiation
- Introduction of low-cost basic fare as a response to market pressure
- Controlling costs through vertical integration
 Travel Industry: Millennials Demand Experiences
Normalizing relations with Cuba creates new destination opportunity
Political/Legal Price collusion investigation by DOJ and major consolidation discourages market share growth

79% of domestic airline trips are leisure, twice as much spent on leisure travel than business
Economic Ancillary fees a growing revenue source as airlines shift towards debundling services

Millennials show highest travel spending and frequency

Travellers are shifting to booking their own travel on websites
Sociocultural Cultural shift towards seeking experiences
Terrorist attacks and high profile accidents have pressured the travel industry

High speed trains and more efficient cars affecting regional travel options
Technological Price aggregators and comparison sites pressuring fares across carriers

Ecological EPA regulation of emissions and shifting focus toward sustainable biofuels for aircraft
 High Buyer Power
Many buyers
Most have little brand loyalty
Face little to no switching costs

High Supplier Power High Threat of

Few suppliers
Supplier industry more
concentrated than airline industry
No substitutes
Suppliers offer differentiated
products
High Rivalry Among
Competitors
Oligarchic tendencies threatened
by low cost competitors
Competing on value and cost
Substitutes
Many airlines to choose from
Alternative modes of
transportation: cars, trains, buses

Low Threat of Entry

High barriers to entry
Significant capital requirements for
hub and spoke model
Higher threat for small, local
airlines
 Future Options for Recapturing Market Share
Strengths
Brand name and excellent reputation
as a business carrier
Highest operational efficiency
Delta TechOps, the largest full service
aviation maintenance organization
Strategic alliances that allow Delta to
expand their destinations
Monroe Energy, Deltas refinery
Opportunities
Economic growth allows for more
disposable spending
Increased Millennial travel spending
Faster growing leisure segment
Weaknesses
Cost structure
Aging fleet
No explicit mission or vision
Under utilized vacation services
Threats
High threat of substitutes
High supplier and buyer power
Subscription-based startups
Low-cost point-to-point providers
Fluctuation of fuel costs
Strategic Options for Delta
1. Further integrate into Vacations
B: Higher margin opportunity
R: Inability to differentiate
2. Subscription-based business class
B: First-mover advantage
R: Potential loss of revenue
3. Marketing campaigns to Millennials
B: Convert lifelong customers
R: No strategic shift
4. Upgrade aging fleet
B: Decreased fuel and maintenance
R: Large up front cost
Attracting the Leisure Market: Experience Packages
- Bring back all vacation services in-house
- Introduce experience-based travel packages
- Integrate vacation booking services prominently into web-site
- Establish partnerships with experience-based companies (I.E. Live Nation, Six Flags,
Peek, NFL)
Vision
Helping people explore the world

Mission
Provide a complete travel experience through operational efficiency, strategic
partnerships, and continuous innovation

Strategic alliance with
SkyTeam member, Air France,
KLM, Alitalia, Virgin Atlantic
Airports
Shareholders
Suppliers
Transporting passengers
and cargo to over 337
destinations
Maintaining, renovating, and
overhauling aircrafts
Refining oil into jet fuel
Offering vacation packages
Offering exceptional In-flight experience Main passenger segment:
customer service throughout Business travellers
the entire travel experience Awarded Overall Best
Business Airline for 5 Leisure travellers
Offering the most consecutive years
destinations of any US air Other air carriers
carrier
Leading the industry in
maintenance, renovation,
and overhaul of commercial
air crafts

Fleet 180 US Locations

Delta TechOps
Monroe Energy SkyMiles Program
MLT Vacations
Brand and reputation MLT Vacations
Relationships with airports
Strategic Alliances

Salaries Passenger travel

Passenger service
Fuel TechOps, Global Services, MLT Vacations, Private Jets
Profit sharing
Regional Carrier expense Cargo transportation
Contracted services
Maintenance and repairs
Selling expense
Landing fees
Aircraft rent

Strategic alliance with
SkyTeam member, Air France,
KLM, Alitalia, Virgin Atlantic
Airports
Shareholders
Suppliers
Strategic Partners (Live
Nation, Six Flags, Peek, NFL)
Transporting passengers
and cargo to over 337
destinations
Maintaining, renovating, and
overhauling aircrafts
Refining oil into jet fuel
Offering complete vacation
packages
Fleet
Delta TechOps
Monroe Energy
MLT Vacations
Brand and reputation
Relationships with airports
Strategic Alliances
Offering exceptional
customer service throughout
the entire travel experience
Offering the most
destinations of any US air
carrier
Leading the industry in
maintenance, renovation,
and overhaul of commercial
air crafts
Offering complete travel
experiences
In-flight experience Main passenger segment:
Business travellers
Awarded Overall Best
Business Airline for 5 Leisure travellers
consecutive years
Other air carriers
Brand affinity for
experiential travel Adventure Seekers
Millennials
180 US Locations
SkyMiles Program
MLT Vacations

Salaries Passenger travel

Passenger service
Fuel TechOps, Global Services, MLT Vacations, Private Jets
Profit sharing
Regional Carrier expense Cargo transportation
Contracted services
Maintenance and repairs
Selling expense
Landing fees
Aircraft rent
Identifying Potential Impacts
Total Concert Goers per day C 100,000
If Then % using Delta's Services 3%
A
# of Customers Using Delta 3,000
-A Cannot differentiate vacation experience threat of Price of Ticket $120
substitute Total Delta Ticket Sales 360,000
% Commission for Delta 10%
-A Lack of adoption potential loss of $14M in revenue
Ticket Revenue for Delta $36,000
-B Not securing key partnerships loss of events and Hotel Rate $343
mismatch with target Millennial customer Total Delta Hotel Sales $1,029,000
% Commission for Delta 20%
-C Recession Less spending on vacations
Hotel Revenue for Delta $205,800
- Fail to balance core business and new venture decrease TOTAL REVENUE FOR DELTA $241,800
in business travel x 3 Days for Festival $725,400
x 30 Festivals per Year B $21,762,000
Strategic Implementation
Year 1

- End wholesale business, focus on direct to customer

- Forge strategic partnerships with Live Nation, Six Flags, Peek, and NFL
- Redesign website to further integrate the vacation service, making it a main pillar of
business

Years 2 & 3

- Run domestically beginning with festivals and expanding into other events
- Implement marketing and co-branding campaigns to raise awareness for
experience-based millennials
Questions?