Delta Hotels

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  • 1. - Analysis - Leadership - Culture - Outlook - Business Model - Strategy - Customer Interface - RecommendationsPratt Institute | DM 672 | Business StrategyCOMMERCIAL AVIATION IN U.S. Helps Drive - $1.142 trillion in economic activity - $346.4 billion in earnings - 10.2 million jobs Contributes - $692 billion/year to U.S. GDP - 5.2% of U.S. GDP Trafc - 40,000+ daily commercial departures - 2 million US passengers dailyAGENDA

2. Welcome Change. Welcome the new Delta. KEY FACTSSince the founding of Delta Air Lines, our company has stood for safe and reliable air transportation, distinctive customer service, and hospitality from the heart.HQ in Atlanta, GA Founded 1928 52,386 Employees $22,697 Sales (in millions) $3.6 billion merger with NWA Worlds largest airline (by trafc) COMPETITIONOur vision is for Delta to build on its traditions and always to meet our customers' expectations while taking service to even higher levels of excellence. We are a leader in a business we know best - airline transportation.Pratt Institute | DM 672 | Business StrategyAmerican United Continental US Airways Southwest America West Jet Blue ATABritish Airways China Southern Air France AeroMexico Aeroot Virgin Singapore Airlines SAS 3. - 9/11COMMERCIAL AVIATION IN U.S.- Fuel CostsHelps Drive- Chapter 11 - Executive Management - Delta/NWA merger (Oct. 2008)- $1.142 trillion in economic activity - $346.4 billion in earnings - 10.2 million jobs Contributes - $692 billion/year to U.S. GDP - 5.2% of U.S. GDP- Capacity Cuts Source: FAA October 2008Pratt Institute | DM 672 | Business StrategyPROFILE 4. Industry Airline Revenue Growth (adjusted for ination)INDUSTRY FORCES Threat of New Entrants Power of Suppliers Power of Buyers Availability of Substitutes Competitive Rivalry OTHER FACTORS Labor Fuel Cost Weather Economy 9/11 RegulationSource: EIU/IATA Economic Brieng 2008Pratt Institute | DM 672 | Business StrategyOVERVIEW 5. U.S. Airline Revenue Growth OUT OF BUSINESS (2008) MAXJet Big Sky Aloha ATA Skybus Eos Champion Air Midwest Vintage Props & Jets Gemini Air Cargo ExpressJet Chapter 11 Source: ATA Industry Review 2009Frontier Sun Country Primaris Source: ATA Industry Review 2009Pratt Institute | DM 672 | Business StrategyOVERVIEW 6. Income Statement (in millions)2007200812,758 4,170 482 1,74415,137 4,446 686 2,428Revenue Passenger Mainline Passenger Regional afliates Cargo OtherTotal Revenue$19,154$22,697Top Expenses 2008 1. Fuel (23.7%) 2. Impairment of intangible assets 3. SalariesExpenses 4,189 4,686 1,164 996 3,152 725 983 933 0 0 15Salaries Fuel Depreciation Contract Service Contract Carrier Arrangements Landing Fees Aircract Mantenance Passenger Commission Impairment of intangible assets Restructuring Charge Other operating4,802 7,346 1,266 1,153 3,616 839 1,169 1,030 7,296 1,131 1,3634. Carrier Arrangements 5. Depreciation 6. Aircraft Maintenance NET Income Comparison for 2008Net Income$ $16,843 1,612Pratt Institute | DM 672 | Business Strategy$ $31,011 (8,922)$ (585 million)American$ (2 billion)US Airways$ (2.2 billion)DeltaOperating ExpenseContinental$ (8.9 billion)Source: WSJ DAL Financial ReportsFINANCIALS 7. Balance Sheet (in millions)2006Cash/Investments Accounts Receivable Maintenance Flight Equipment Goodwill Leasehold Rights OtherTotal Assets$Liabilities Accounts Payable Air Trafc Liabilities Taxes Payable Accrued Salaries Debt Pension & retirement Deferred Revenue Other20072,784 936 192 18,115 227 279 2,911Assets3,168 1,092 273 10,127 12,104 2,953 2,70619,622$936 1,797 500 405 8,012 0 709 20,856Total Liabilities$33,215Total Equity$ (13,593)Pratt Institute | DM 672 | Business Strategy32,4231,045 1,982 320 734 9,000 3,867 3,632 1,730$10,113- 530% increase in Goodwill? - Did Chapter 11 absolve pension? - $20 billion liabilities subject to compromise? ...This amount represents the debtors' estimate of known or potential prepetition claims to be resolved in connection with the Chapter 11 cases.22,310$OBSERVATIONSSource: WSJ DAL Financial ReportsFINANCIALS 8. STRENGTHS - Worlds largest mega carrierAlthough airlines will seek to recover- Innovative business strategies (Song, Delta re-branding)the higher cost through...fare hikes and- Acquisition of Northwest Airlineshigher fees, this will prove increasingly- SkyTeam alliancedifcult in a weak U.S. economy.- Industry-leading airport model (lobby re-design, self-service kiosks)WEAKNESSES - Capacity cuts (20% capacity reduction) - Employee cuts (2,000 job cuts) - Low on-time rating- S&P, May 22, 2008 Airlines have no choice but to pass on the cost of fuel...and when passengers- Air transportation safetydo begin to push back in signicant- Operational costsnumbers the airlines have no choice- Susceptibility to labor-related disruptions (employee strikes)but to slash capacity.- Technology dependence for operations - No clear mission & vision - Differentiation Pratt Institute | DM 672 | Business Strategy- Rick Seaney, WSJ 2008S.W.O.T. 9. OPPORTUNITIES - Invest in new technologiesINDUSTRY FORCES- New Presidential AdministrationThreat of New Entrants- Fuel alternativesPower of Suppliers- Reduce operational costsPower of Buyers- New sources of operating revenue - Enhance the customer experience - Renegotiate lease agreements (2012-Atlanta HQ HUB)THREATSAvailability of Substitutes Competitive Rivalry OTHER FACTORS- Video Conferencing TechnologyLabor- Fluctuating Fuel Costs & Supply Chain risksFuel Cost- Unionized Labor Strikes (17% of workforce is unionized)Weather- Disruptions/interruptions of service at hub airportsEconomy- Prot losses and adverse publicity from any aircraft accident incidents - Government Regulation CO2 Emissions - Global Economic Recession - Customer reaction to new policies (baggage & food) Pratt Institute | DM 672 | Business Strategy9/11 RegulationS.W.O.T. 10. INDUSTRY FORCES Threat of New Entrants Power of Suppliers Power of BuyersNow what!?Availability of Substitutes Competitive Rivalry OTHER FACTORS Labor Fuel Cost Weather Economy 9/11 RegulationPratt Institute | DM 672 | Business StrategyHORIZON 11. U.S. Airline Revenue Growth- Chapter 11 - NWA Merger - Fuel Hedging - Personnel Costs - Poor Economy - Cutting Capacity & Jobs - New Revenue StreamsSource: ATA Industry Review 2009Industry Airline Revenue Growth (adjusted for ination)Source: EIU/IATA Economic Brieng 2008Pratt Institute | DM 672 | Business StrategyREVIEW 12. Income Statement (in millions)2007200812,758 4,170 482 1,74415,137 4,446 686 2,428Revenue Passenger Mainline Passenger Regional afliates Cargo OtherTotal Revenue$19,154$22,697Expenses 4,189 4,686 1,164 996 3,152 725 983 933 0 0 15Salaries Fuel Depreciation Contract Service Contract Carrier Arrangements Landing Fees Aircract Mantenance Passenger Commission Impairment of intangible assets Restructuring Charge Other operating4,802 7,346 1,266 1,153 3,616 839 1,169 1,030 7,296 1,131 1,363Operating Expense$16,843$$1,612$(8,922)1. Fuel (23.7%) 2. Impaired intangible assets (23.5%) 3. Salaries (15%) 4. Carrier Arrangements (11.7%) 5. Depreciation (4%) 6. Aircraft Maintenance (3.8%) NET Income Comparison for 2008 Continental $ (585 million) American $ (2 billion) US Airways $ (2.2 billion) Delta $ (8.9 billion)31,011Net IncomeTop Expenses 2008Pratt Institute | DM 672 | Business StrategySource: WSJ DAL Financial ReportsREVIEW 13. STRENGTHSWEAKNESSES- Acquisition of Northwest Airlines - Worlds largest mega carrier & ight network- Low on-time rating - Operating costs- Pacic & Atlantic Ocean ight routes - Employees - SkyTeam & SkyMiles alliance - Airport model - Brand & History- Susceptibility to service disruptions - Technology dependence for operations - Differentiation - Merger consolidationOPPORTUNITIES - Reduce operational costs & capacity - Streamline operations & supply chain - New value-for-money strategies - Enhance the customer experience - Customer retention initiatives - Invest in new technologies - Renegotiate lease & labor agreementsPratt Institute | DM 672 | Business StrategyTHREATS - Alternatives - Competition - Increased regulation - Market environment - Economy - Fuel costs - Crashes/TerrorismS.W.O.T. 14. The Huff Daland Dusters founded (pre-Delta)Begins operating as Delta Air LinesChicago and Southern Air Lines mergerW.T. Beebe becomes Chairman and CEO19241934195319711928194519661978Merger: Huff Daland Dusters + Delta Airlines. Renamed Delta Air ServiceOfficial corporate name becomes Delta Air Lines, Inc.Delta founder C.E. Woolman dies. Charles H. Dolson named CEOThe Airline Deregulation Act passesSource: Delta website - Delta Through the DecadesPratt Institute | DM 672 | Business StrategyLEADERSHIP 15. Delta celebrates its 50th year of serviceWestern Airlines merges-becomes 4th largest US carrierLeo F. Mullin is named President and CEODelta declares Bankruptcy. Richard H. Anderson becomes CEO19791987199720061981199120012008Delta launches Frequent Flyer ProgramPan Am MergerU.S. airspace closed for two days after terrorist attacks on Sept. 11thMerger with NWASource: Delta website - Delta Through the DecadesPratt Institute | DM 672 | Business StrategyLEADERSHIP 16. The Work Environment - Delta has always been family oriented but changed with the times - Committed to maintaining corporate culture, committed to employee and customers satisfaction. Anderson demonstrates this through: 1. Employees: Prot sharing & Stock Options 2. Emphasis on customer service 3. Providing compensation packages - Employees believe culture changed, but Anderson understands both cultures of Delta and NW - Delta is non-union, NW is unionized (pilots)Pratt Institute | DM 672 | Business StrategyCULTURE 17. Facts & UpdatesIndustry Airline Revenue Growth (PROJECTIONS)- Protability in 2009 due to: 1. Lower fuel costs 2. Capacity Discipline 3. Merger synergiesText- Reduction of Domestic Capacity - Delta and NW Trafc updatesChange in % of Consumer Spending f