Delta Airlines: Navigating an Uncertain Environment

Case 27- Delta Air Lines (2012): Navigating an Uncertain Environment

FOF #1: Differentiation

In order to compete in a price-sensitive industry, Delta Air Lines needs to focus on differentiating itself from competitors. By doing this, Delta is creating sustainability through customer retention and loyalty. To set itself apart from competitors like United Airlines and American Airlines, Delta needs to implement a program to improve customer service.

Because of Delta’s poor service reputation, I believe that the company needs to primarily concentrate on offering superior customer service as a way to gain a competitive advantage. After Delta’s merger with Northwest, customer complaints increased significantly. In 2009 Delta’s customer complaints doubled the industry average, and only two years later accounted for a third of all complaints. Additionally, results from a survey done in 2011 showed that Delta had the lowest customer satisfaction rating out of Southwest, Continental, American, US Airways, and United Airways at a staggering 56%. A rating as low as that is alarming, and can easily persuade consumers to ultimately choose competing airlines. In an attempt to counter diminishing brand loyalty and reputation, Delta needs to focus on the following three issues:

1. Improving comfort- This includes designing seats that accommodate passengers of all sizes for trips of all durations. Legroom should be expanded. Additionally, the airline should offer a better selection of meals, snacks, and beverages, as well as focus on providing all-around better service from flight attendants. Also, more and better entertainment for long flights should also be provided. Even by offering on-board free wireless internet access, Delta would become the preferred airline for many consumers. 1% of revenue would fund efforts to increase passenger comfort. A research and development program would be developed in order to design better, more comfortable aircraft interiors and seating. The budget will also be used to provide extensive customer service training programs for all airline employees, not limited to flight attendants. To evaluate and measure results, management would use customer satisfaction surveys and blogs.

2. Improve punctuality- Nothing generates customer loyalty like punctuality and reliability. Excellent on-time-arrival performance is a major competitive differentiator. To begin improving Delta’s punctuality, potential delay causes need to be identified. Next, efforts should be made to decrease and eliminate, when possible, any of these issues. Simple solutions might be to increase the amount of time allotted for passengers to exit the plane and the time between connecting flights. Lastly, on-time performance goals need to be established and measured quarterly.

3. Decreasing/eliminating baggage fees- While baggage fees help to offset operating costs, consumers tend to be disgruntled and unhappy with the excessive fees. It may be unrealistic to eliminate them completely, but even if the fees were decreased I believe that consumer preference among competitors can be established. If Delta offered a value-added baggage service, rather than the industry standard, the fees might not be so unfavorable for customers.

In an industry in which customers are likely to choose a product based solely on price, Delta needs to increase competitive differentiation by offering superior customer service that will initiate consumer preference. Despite being a large investment, increasing this aspect of business is also a long-term investment; One that can significantly increase revenue as customers return and brand loyalty is achieved.

FOF #2: Directional Strategy

Delta’s top management needs to determine the best directional strategy to ensure good future health of the company. The three directions in which to consider are:

1) continue its current activities and make no changes

2) retrench by reducing the number of brands

3) focus on expansion though continued acquisitions

If Delta continues its current activities and makes no changes, then it will have chosen a stability strategy. As this strategy is most popular with corporations in a stable environment and small business owners who are happy with the success and size of the company, I do not see it as a reasonable solution for Delta Air Lines. Additionally, stability strategies tend to only be beneficial in the short run, so choosing to continue making no changes is not a temporary solution for Delta.

On the other hand, a retrenchment strategy attempts to eliminate the weaknesses in a company in order to improve overall performance. Delta has implemented these strategies in the past. For example,