Delta Airlines

What Delta Airlines does

Delta Airlines (DAL) is among the largest airline companies in the world serving about 330 destinations in about 60 countries.  Its Ticker Symbol is DAL, which is traded in the New York Stock Exchange with 786,473,621.00 outstanding common shares.  It is located in Atlanta, GA United States in the Airlines Industry. Annually, the airline serves over 170 million passengers and operates more than 15,000 flights per day. Delta is a founding member of Sky Team marketing and code-sharing alliance with bases in Alitalia, KLM, and France.  DAL was established in 1924 and has grown to be the world’s largest major airlines with over 80,000 employees in 2014 (Reed & Reed, 2014).

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Overview and History

DAL is currently ranked number 266 in the global Fortune 500 companies. Its position dropped compared to the previous years because of the decline in profits following an increase in oil prices. However, the company is ahead of its competitors in terms of profitability and operating margins. Besides, in 2018, Fortune ranked DAL as one of the “Most Admired” for five consecutive years and “Best Companies to Work For” for two consecutive years. Besides, the company was ranked as one of the “Most Innovative Companies,” and sixth among travel companies for its RFID technology that tracks customer bags in real-time. Moreover, Ed Bastian rose to become “World’s 50 Greatest Leaders” following his leadership in DAL.

Delta Airlines has consistently set the pace in profitability among its major competitors American Airlines and United Continental. According to NYSE (2015), Delta airlines amassed a staggering pre-tax profit of $1.9 billion on revenue amounting $19.5 billion in the first half of 2014 translating to a 9.7% pre-tax margin. Although DAL’s closest competitor American Airlines also recorded $1.9 billion pre-tax profit over a similar duration, the company had invested a whole $21.4 billion representing a lower profit margin at 8.7%. The third competitor UCL trailed at $0.43 billion with a 2.3% margin (Fisher, 2015).

 Moreover, DAL still maintains a significant lead in cash flow well above its competitors. Despite a relatively smaller size, DAL spent $2.46 billion on capital investments (NYSE, 2015). According to Kirby and Drury (2009), a company’s free cash flow reflects its superior ability to reduce debt levels at a more expeditious rate while converting more capital to shares through share repurchase, thus making DAL a worthwhile investment opportunity.  

DAL boasts of one of the cheapest stocks in the market. Moreover, DAL’s stock enjoys high returns; in 2014, the company stock retailed at more than 11 times the expected Earnings per Share (EPS) of $3.23. Between 2013 and 2014, the company’s profitability grew from $1.6 billion to $2.7 billion (NYSE, 2015). These figures are significantly higher than its competitors AAL and UAL and considering how rapidly DAL income has been growing over the recent years, the company’s stock prices are set to grow even higher this year. 

For the last five years, DAL stocks have more than quadrupled raising the expectations of the investors in seeing a similar performance over the next two years (NYSE, 2015). However, while Delta’s stock isn’t undervalued as it was in 2012, it still seems quite cheap in light of the company’s recent earnings growth and adequate cash flow. With long term investment, the investors can sit tight and enjoy the benefits of DAL’s strong cash flow. The strength in cash flow would enable DAL to pay down the bulk of its debt, fund most of its pension liabilities and also maintain a 1% dividend yield in the next few years. By so doing, DAL will be in a position to devote more cash to shareholder-friendly uses. Long-term DAL’s shareholders thus have a lot to look forward to in the next five to ten years. 

These strong fundamentals will actually favor the company’s investment portfolios, as they are likely to generate more profits. Delta Airlines is a blue-chip company since it is one of the best-traded companies in the New York Stock Exchange. It is also the second largest airline, which implies that every year the company is likely to get increased revenue from its operations favoring investors of the Airlines. According to World Airline News, Delta Airlines expanded its territories in 2016, as it will launch seasonal services to Iceland’s Keflavik International Airport from its Twin Cities hub. This will greatly favor investors due to the expansion of its operations. The company product ranges from in-flight baggage to special services, to special catering meals, to check-in options and the like and it is expected that the company will give a dividend yield of 1.08 percent to its shareholders at the end of the year (Heizer, & Render, 2014). 

Rationale for Selection

The U.S publicly traded company that was selected is Delta Air Lines (DAL). The rationale for the selection was based on a wide range of financial and industrial strengths that the company portrays. One reason that an investor would be encouraged to invest in the company would be the fact that DAL’s passenger capacity has been on the rise. The company’s debt-to-equity ratio is lower than the industry at 1.11 implying that more money would be going to investors. The company has a strong cash flow, and besides that, the airline business is promising as evidenced by the falling oil prices and the increasing demand for air travel. Delta Air Lines (DAL) has been the global leader in the US stock market even as other companies plummeted over the great recession. Despite a slight slump in the stocks over the past few months, Delta airlines still remain the favorite spot for anyone who seeks to invest in a fast thriving business. Other than its profitability, the company has maintained a competitive edge in its stock prices up and above its two major competitors American Airlines (AAL) and United Continental (UAL) (New York Stock Exchange, 2015).

Vision and Mission of Delta Airlines

Mission Statement

We—Delta’s employees, customers, and community partners together form a force for positive local and global change, dedicated to bettering standards of living and the environment where we and our customers live and work.

Vision Statement

To be the World’s Most Trusted Airline.

Values

  1. Honesty: always tell the truth
  2. Integrity: always keep your deals
  3. Respect: don’t hurt anyone
  4. Perseverance: never give up
  5. Servant Leadership: care for everyone

From the mission statement, vision statement and values, it is evident that the three have been the guiding principle of the company throughout its success.

Leadership teams and their roles

In DAL, the CEO, Ed Bastian and his executive team are known to the employees and the public for their leadership and inclusivity in the study. Ed Bastian ranked among the top ten “Best CEOs for Women” and the only one from the Airline Industry. Ed Bastian leads a team of over 80,000 professional globally to build the world’s premier airline that is led by customer-focus culture, people driven, and spirit of innovation (Delta, 2019). The CEO has molded the company’s values of integrity, perseverance, respect, honesty, and servant leadership. 

On the other hand, Glen Hauenstein, the President, oversees a team responsible for Delta’s customer care, revenue management, network, customer engagement, reservation sales, and loyalty strategies. Gil West, S.E.V.P. and Chief Operating Officer lead the team responsible for reliable, safe operations globally. Furthermore, Delta’s global finance organization is led by Paul Jacobson who is the Executive Vice President and Chief Financial Officer. Likewise, Joanne Smith is Executive Vice President and Chief People Officer is responsible for preserving the airline’s unique culture of positive engagement and oversees recruitment, diversity and inclusion, talent management and development, HR service delivery, HR programs and policies (Delta, 2019).

Peter Carter is the Executive Vice President, Chief Legal Officer, and Corporate Secretary. Carter serves on the Leadership Committee of the company and his role is to oversee Delta’s legal, government, and compliance affairs groups globally. Besides, Rahul Samant is the Executive Vice President and Chief Information Officer in charge of the company’s data, information technology, and digital strategy, cybersecurity, and infrastructure which determine customer experience (Delta, 2019). Also, he oversees the development of innovative products in DAL that give customers options that meet their needs. 

Customer Satisfaction and Reward Strategies

Moreover, Reed, T., and Reed, D. (2014) add that the company still has objectives and strategies which are enhancing its competitive strategy. The first is the customer rewards and satisfaction strategy where its foundation is based on customer service in the entire travel experience, frequents flyers being rewarded, and premium in-flight offerings. From the efforts, DAL has received numerous rewards awards, accolades, and recognition from a different organization. For instance, J.D. Powers and Associates ranked as the second-best overall satisfaction of carriers. 

Conclusion

Delta’s future seems to be bright despite recent hurdles that it has faced compared to its competitors. The company has been innovative in a number of aspects and despite its bankruptcy, it has maintained its route structure, its strategy, and other business practices. While the labor cost and fuel prices are rising, the entire industry is affected, and thus Delta should continue with its differentiating strategies to maintaining its legacy through exemplary customer services at affordable rates. Also, the management vision is likely to lead the company to potential growth in the future and the anticipated acquisition of the Northwest seems to bring hope to the industry. Moreover, despite the fact that Delta was recently cleared to take off to black, investors should expect the worst since the move is likely to be challenging. Also, because Delta has stood out to prove that international opportunity is a more profitable venture, it should embrace this market. Likewise, Delta should get back to its initial Marketing promotion that was developed back in 1924. With customer satisfaction as its priority and strength, Delta should come up with a business class and develop a regular coach as a short term promotional investment. However, the processes need more of employee etiquette training which will ensure that customer expectations are in line with their travel experience.  

References

Bhaskar, R. (January 01, 2014). Data Analysis for Dynamic Pricing in Airline: The Role of Tactical Pricing. Journal of Cases on Information Technology (jcit), 16, 1, 14-22.

Fisher, J. G. (2015). Strategic reward and recognition: Improving employee performance through non-monetary incentives.

Heizer, J. H., & Render, B. (2014). Operations management: Sustainability and supply chain management. Boston: Prentice Hall.

Reed, T., & Reed, D. (2014). American Airlines, US Airways and the creation of the world’s largest airline.

Delta Leadership Committee | Delta News Hub. (2019). Retrieved from https://news.delta.com/tags/delta-leadership-committee

Reference

References 

Alexander Zorn, Michele Esteves, Ivo Baur, & Markus Lips. (January 01, 2018). Financial Ratios as Indicators of Economic Sustainability: A Quantitative Analysis for Swiss Dairy Farms. Sustainability, 10, 8.)

NASDAQ (2019). Retrieved from https://www.nasdaq.com/symbol/nke/financials?query=balance-sheetNYSE (2019). Retrieved from https://www.nyse.com/events/list/2019-07-05

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