Business model of Delta Air Lines

Customer Segments

Delta Air Lines serves a range of customers, including both general consumers and commercial entities. The majority of the Company’s customers are general passengers, comprising individual travellers, groups and families. While Delta Air Lines offer competitively priced air fares, it is not a low-cost airline and as such does not market itself to customers seeking the cheapest prices.

The Company also provides corporate travel management services to professionals, and provides a specialist program for small and medium-sized enterprises to ensure that they receive a good return on their investment in air travel. Commercial and general consumer customers are also provided cargo and shipping services, targeted largely at customers wishing to transport pets, pharmaceuticals, perishables, and high-value items.

Delta Air Lines derives the majority of its revenue from its domestic market of the US. It also serves a number of international customers divided into geographic segments named Atlantic, Pacific and Latin America.

Value Propositions

Delta Air Lines provides value to clients in the following ways:

• Its broad network of domestic and international destinations, with the Company providing flights across all major US hubs, as well as international services across the Atlantic, Pacific and Latin America;
• Its industry standing and reputation as a reliable carrier, with the Company being an established name in the industry associated with quality and being one the largest, most popular airlines in the US;
• Its frequent-flyer reward scheme, through which customers are able to earn rewards, discounts and gain access to deals from a range of commercial partners;
• Its network of airline partnerships, including domestic and international operators that improve the Company’s access to foreign markets and provide greater connectivity to passengers; and
• Its in-flight services and customer care, with the Company providing on-board entertainment services, Wi-Fi connectivity, and food and drinks.

Channels

Delta Air Lines operates a website at www.delta.com, which provides information on the Company’s services, schedule, destinations and regulations. The Delta Air Lines website also hosts a booking portal, through which customers are able to book flights and hotels. An increasing number of sales are being through the Company’s online sales, as well as through its mobile app and mobile website. Additionally, Delta Air Lines operates an online store at www.deltashop.com, where customers can purchase Delta Air Lines-branded merchandise and travel accessories.

The company also operates a direct sales team, which can arrange bookings over the phone. Delta Air Lines’s own sales channels are supplemented by a network of partners, including physical travel agencies and ticketing offices across Africa, Asia, Europe, Australia, the Middle East, and the Americas, as well as numerous online travel agencies and global distribution systems. Delta Air Lines additionally operates its own kiosks across numerous airports worldwide, through which customers are able to access assistance.

Customer Relationships

Customers are able to browse flight schedules, make flight reservations, book hotels and transportation, check in for flights and manage user accounts on a self-service basis through both the Delta Air Lines website and mobile apps. This requires no direct interaction with members of the Company’s sales team.

Customers are also able to contact Delta Air Lines directly over the phone to make bookings, receiving a more personalised experience. The Company’s personal care extends to its in-airport services, where members of the Company’s staff are available to assist customers in-person throughout the check-in flight process.

Delta Air Lines provides support to customers after bookings have been made, handling enquiries and complaints over the phone and via email, facilitating cancellations, refunds, and booking adjustments. Customers are also able to interact directly with Delta Air Lines through its social media accounts with Twitter and Facebook.

Key Activities

Delta Air Lines provides scheduled air transportation and cargo services for general passengers, professionals and commercial customers both domestically in the US and internationally across Europe, Europe, Asia Pacific, the Americas, the Middle East, and Africa.

The Company operates via two separate but related business segments: the Airline segment and the Refinery segment. The Airline segment is managed as a single business unit that covers the Company’s global passenger travel and freight services, as well as cargo services, aircraft maintenance, repair and overhaul services, staffing services for third parties, vacation wholesale operations and private jet operations. The Company’s Refinery segment is concerned with the production of gasoline, diesel and jet fuel. Delta Air Lines operates through a number of subsidiary companies, notably Monroe Energy and MIPC, which jointly operate the Trainer Refinery near Philadelphia.

Key Partners

Delta Air Lines collaborates with various companies in order to provide its customers with a comprehensive and quality service. This includes a number of partnerships with other airlines and air travel providers. These partnerships are divided as follows:

• Codesharing Partners, comprising domestic and international air carriers through which the Company is able to extend its own services, selling connecting flights for airlines such as Alaska Airlines and WestJet through its own sales channels;
• Joint Venture Partners, with which the Company provides joint services, such as its deals with Air France-KLM-Alitalia, and Virgin Atlantic; and
• Alliance Partners, with which the Company integrates its flight network and offers reciprocal frequent flyer benefits.

Delta Air Lines has alliance partnerships with Aeromexico, China Eastern and GOL, and participates in the SkyTeam and SkyMiles program.

Delta Air Lines also has a number of partnerships as part of its rewards scheme, with participating companies including Hertz, Europcar, Vinesse Wine Clubs, Nicor Solutions, Biscoff Store, and Alamo.

Key Resources

Delta Air Lines’s key resources are its fleet of aircraft, its physical infrastructure and ground facilities, its oil refinery assets, its sales channels – notably its online channel, its IT infrastructure, its partnerships and alliances, and its personnel. Delta Air Lines controls a fleet of more than 900 aircraft of varying sizes, including aircraft operated by regional carrier partners on the Company’s behalf.

Cost Structure

Delta Air Lines incurs costs in relation to the acquisition and maintenance of its aircraft, the purchase and supply of consumables – in particular jet fuel, the operation and maintenance of its oil refining assets, its implementation of sales and marketing programs, the maintenance of its physical infrastructure and ground support facilities, the management of its partnerships and alliances, the maintenance of its IT infrastructure, and the retention of its personnel.

Delta Air Lines’s most significant costs relate to the payment of salaries and benefits to its workforce of approximately 83,000 full-time or equivalent staff, amounting in 2015 to $8.78

Revenue Streams

Delta Air Lines generates its revenue through the provision of air travel services to consumers and commercial entities. Its revenue is reported in the following categories:

• Passenger, comprising revenue derived from passenger air fares and ancillary services provided through the Company’s mainline operations and its network of regional partner carriers;
• Cargo, comprising revenue derived from the provision of freight and shipping services on both domestically and internationally through the use of cargo space on regularly scheduled passenger aircraft; and
• Other, comprising operations such as aircraft maintenance, repair and overhaul, staffing services, vacation wholesale operations, and private jet operations.

In 2015 Delta Air Lines generated $40.70 billion in total operating revenue, up slightly on the $40.36 billion recorded by the Company the previous year. More than 70% of this revenue is attributed to the Company’s mainline passenger air services, which generated $28.90 billion in revenue for the year. Regionally operated air services generated $5.90 billion.