Delta Strategy to Have a Discounted Airline

Global Competitive Strategy

Executive Brief: Delta Airlines

Executive Summary:

After years of instability, decreasing profit margins, and volatile costs, the airline industry is experiencing stabilization and profitability. Though low-cost carriers, such as Southwest and Jetblue, were able to succeed during rough economic times, Delta should not launch a new stand-alone discount airline to directly compete within this market. As shown in Exhibit 1, despite recent changes in the industry - including consolidation, bankruptcy filings, and a forecasted positive economic outlook - intense competition and supplier power remain extremely high for the industry. Based on the following analysis, Delta is in direct competition with other legacy airlines such as United/Continental and American Airlines for the higher end market juxtaposed to its less direct competition with low-cost carriers, e.g. Southwest, which fall into a separate strategic group targeting a different market and consumer. As a result of Delta’s entrenched strategy of providing many routes and amenities for higher ticket prices, the company’s core competencies, resources, and activities do not align with the discount airline market and, therefore, the company should not launch a new low-cost carrier airline.

Company and Competitor Analysis:

Delta’s core competencies are to provide multiple domestic and international routes to travelers, customer service and luxury, technological innovation, and access to popular destinations. These competencies are enforced by their extensive resources of aircrafts, its hub-and-spoke model, airport space at major domestic and international destinations, investments in amenities, technological innovation within the industry and the intellectual property of these internally developed initiatives. These resources are further leveraged by other strategic moves by Delta to increase barriers for competition attempting to encroach on their competencies....