Delta Air Lines, Inc.

views updated May 29 2018

Delta Air Lines, Inc.

Hartsfield International Airport
Atlanta, Georgia 30320
U.S.A.
Telephone: (404) 715-2600
Fax: (404) 715-1400
Web site: http://www.delta.com

Public Company
Incorporated: 1934 as Delta Air Corporation
Employees: 81,000
Sales: $15.89 billion (2000)
Stock Exchanges: New York
Ticker Symbol: DAL
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481219 Other Nonscheduled Air Transportation

Delta Air Lines, Inc. is one of the largest and most successful air carriers in the United States. Originally founded as a crop dusting service in 1924, Delta was led for 40 years by an agricultural scientist and pilot named Collet Everman Woolman. Until his death in 1966 Woolman dominated the operations of Delta. In this sense he was similar to his three major competitors, Eddie Rickenbacker at Eastern, Juan Trippe at Pan Am, and Howard Hughes at TWA. Expansion through acquisition characterized the era that followed. Then, in the 1990s Delta adopted an aggressive business strategy in order to retain market share in an increasingly competitive airline industry. The new strategy was an enormous success, and in 2000 Delta enjoyed a net income of more than $1 billion and carried a record 117 million passengers. Entering the new century the airline had extended its route network to serve 221 cities in 48 states, and an additional 118 cities in 47 foreign countries.

From Crop Dusting to Passenger Transport

The history of Delta may be traced to 1924, when Collet Everman Woolman and an associate joined a conversation with some Louisiana farmers who were concerned about the threat to their crops from boll weevils. Woolman knew that calcium arsenate would kill the insects, but the problem was how to effectively apply the chemical. Having learned to fly the boxy “flying jennys” during World War I, Woolman considered dropping the chemical from an airplane. He engineered a “hopper” for the chemical and later perfected the system, and then began selling his services to farmers throughout the region. As a result, the world’s first crop dusting service, named Huff Daland Dusters, was born.

In 1925 Woolman left the agricultural extension service to take charge of the duster’s entomological work. In 1928 the crop dusting operation broke away from its parent company to become Delta Air Service. Woolman continued his crop dusting business across the South and expanded into Mexico and South America. The company began to diversify by securing air mail contracts, and in 1929 inaugurated passenger service between Dallas and Jackson, Mississippi. Later, routes to Atlanta and Charleston were added.

Delta began its climb to prominence when the U.S. government awarded it an airmail contract in 1930, remaining in business even during a temporary but costly suspension in the airmail contract system in 1934. By 1941, the company, now called Delta Air Corporation, would be awarded three more airmail contracts. During World War II, Delta, under contract to the War Department, devoted itself to the allied war effort by transporting troops and supplies. Delta returned to civilian service in 1945 and entered an age of growth and competition never before seen in the airline industry.

The Growth of Air Travel After World War II

On May 1, 1953 Delta merged with Chicago and Southern Airlines and continued to prosper as a major regional trunk carrier through the 1950s and 1960s. In June 1967 Delta merged with Delaware Airlines and officially adopted the name Delta Air Lines.

Delta’s exposure to the northeast part of the country increased with the acquisition of Northeast Airlines on August 1, 1972. In July 1976 Delta purchased Storer Leasing, a move that added several jets to the existing fleet of about 200. Recognizing the value of high technology, Delta formed two computerized marketing subsidiaries, Epsilon Trading Corporation in 1981 and Datas Incorporated in 1982, to coordinate and sell more passenger seats on all Delta flights.

Delta’s consistent growth could be partially attributed to its successful transition of leadership. In the early days of commercial air transport airlines were run by individuals who would be better described as aviation pioneers first and as businessmen second. At American, Eastern, Pan Am, TWA, and Delta, these men established what could be described as almost dictatorial operations, retaining their posts as long as possible. Many of these leaders were majority stockholders who categorically refused to share their power or prepare successors to operate the company after them. For many airline companies, when the chairman did eventually die, there was a difficult period of readjustment to the new management.

The departure of Delta’s Woolman, however, was not surrounded by difficulties. He suffered a heart attack in his late 60s and was forced to relinquish some of his duties to Delta’s board members. As Woolman’s health deteriorated the board members gradually assumed more of his duties until his death at age 76. Although Woolman’s absence was deeply felt at Delta, business continued as usual, and the airline was able to make a smooth transition to a more modern, corporate style of collective management. Under the new consensus-style management, Delta quickly became recognized for having one of the best planning and management teams in the airline industry. The company also earned a reputation for being on very good terms with its employees, treating its workers as family. By maintaining pay and benefits above the unionized competition, Delta was able to keep the majority of its employees non-unionized.

Although the company did not invent it, Delta was the first airline to widely employ the so-called “hub and spoke” system, in which a number of flights are scheduled to land at a hub airport within approximately 30 minutes, enabling passengers to make connections for final destinations conveniently and quickly. By the early 1990s the “big push,” as it was called, was occurring about ten times a day at the Atlanta hub. Delta was also operating hubs at Dallas-Fort Worth, Boston, Memphis, and Cincinnati.

On the whole, Delta’s management style remained conservative throughout the 1970s. While it boasted one of the most modern jetliner fleets in domestic service, the company developed a reputation for purchasing new planes only after they had been proven, often in a costly way, at other airlines. This “wait-and-see” policy saved the company a large amount of money. Only after competing airlines had used the Lockheed 1011 for several years did Delta purchase the plane, and Delta began replacing its fleet of Boeing 727s with the 757, 767, and MD-88 in the late 1980s, later than most, with the intention of using these technologically advanced and fuel efficient planes for at least 20 years. This 15-year strategy for flight equipment and support facility planning was typical of Delta. According to the vice-chairman and chief financial officer at the time, Robert Oppenlander, “Success is based on the long term maintenance of a technical edge, which is cost efficiency.”

Delta also became known for having the most conservative balance sheet in the industry. With a debt-equity ratio that was consistently below one to one (meaning that their debts were usually outweighed by their net worth), the company was able to do most of its financing internally. This conservative approach was aptly summed up in a statement by the late chairman W.T. Beebe: “We don’t squander our money on things like goofy advertising.”

A New Business Strategy for the 1980s

In the 1980s, however, Delta assumed a more aggressive corporate personality, as its commitment to internal growth became increasingly threatened by a general trend in the industry toward external growth. Throughout the 1980s, Delta became relatively smaller, as companies such as TWA, Texas Air, and Northwest expanded through mergers. In order to remain competitive, in 1986 Delta announced its intention to take over the Los Angeles-based Jet America; however, the $18.7 million deal never materialized. Later that year Delta went ahead with the $680 million purchase of another air carrier based in Los Angeles: Western Air Lines. As Delta’s chief executive officer, David Garrett, explained, “For a merger to be worthwhile, two plus two has to equal seven.” Enlarged by Western’s hubs in Los Angeles and Salt Lake City, Delta management was able to make that kind of math work, in spite of initial difficulties integrating Western’s unionized work force into Delta’s system.

In 1987 Ronald W. Allen, who rose through the ranks of Delta’s personnel administration department, was named the airline’s CEO. An aggressive and outgoing business person, Allen proved willing to make larger and riskier investments. Shortly after taking office, for example, he negotiated a $15 million dollar deal for Delta to become the official airline of Walt Disney World.

Company Perspectives:

Since Delta was founded, our company has stood for safe and reliable air transportation, distinctive customer service and hospitality from the heart. Our vision is for Delta to build on its traditions of superior customer service and always to meet our customers’ expectations while taking service to even higher levels of excellence. Delta is a great company, and we are a leader in the business we know best—airline transportation and related services. We intend to be an even greater company and will focus our time, attention, and investment on building that leadership. We are dedicated to being the best airline in the eyes of our customers. We will provide value and distinctive products to our customers, a superior return for investors and challenging and rewarding work for Delta people in an environment that respects and values their contributions.

In the late 1980s and early 1990s, recession, rising fuel prices, and war in the Middle East all contributed to declining passenger traffic and inflated costs. Thanks in part to its financially solvent status, Delta weathered the industry troubles comparatively well, despite a 1991 operating loss of $450 million. Small, financially weak, and regional airlines were hardest hit by the trouble; Delta was one of the prime beneficiaries of the failure in January 1991 of Eastern Airlines, which like Delta had a significant portion of its routes in the southeastern United States. After Eastern’s demise, Delta flew over 80 percent of traffic out of Atlanta.

In 1991 Delta made a major move toward becoming an international player by purchasing a $1.7 billion package of assets from Pan Am, outbidding chief rivals American and United. The package, which included the assumption of $668 million of liabilities, gave Delta a hub in Frankfurt, Germany, dozens of European routes, including flights from Miami and Detroit to London, a New York shuttle route, and 21 Airbus A310s. As with the purchase of Western, the deal was viewed by some in the industry as a departure from Delta’s traditionally conservative business stance, and possibly too costly a purchase. Delta management, however, termed it a necessary stop in a consolidating purchase-or-be-purchased airline market: “We think it is a very conservative move,” Allen told Fortune magazine, adding, “To have missed this opportunity would have been the risky course.”

Delta appeared to have adapted well to the expansion-oriented market. Whereas Delta fliers used to joke that, though you might not know whether you would go to heaven or hell when you died, you would definitely have to change planes in Atlanta, the airline’s customers could now fly to Europe via its Frankfurt hub, or to Latin America via Miami. As it adapted to the aggressive and expanding modern market, Delta strove to maintain its policies of good labor relations and attention to service. Delta’s employees were still among the highest paid in the industry and, like founder C.E. Woolman, Allen sometimes rode on Delta flights to interact with passengers. Indeed, Forbes magazine queried in a 1988 headline: “Is Delta too nice for its own good?” At the time, however, its emphasis on people seemed not to have crippled Delta.

Record Profits, New Problems: Heading into the Twenty-First Century

By 1992 it became clear that the financing agreement with Pan Am had come at a bad time for Delta. The general economic recession and continued high fuel prices, combined with the weight of Pan Am’s heavy debt, resulted in net losses of $506 million for fiscal year 1991. In an effort to lower costs, Delta was forced to reduce its work force by five percent, in addition to implementing wage freezes and salary cuts. At the same time, the company was eager to integrate Pan Am’s extensive European routes into its system, hoping to restore itself to profitability by improving its position as an international carrier. However, the lingering effects of the recession, as well as the recent Gulf War, had precipitated an overall decline in commercial air travel. To counteract this trend, Delta announced reductions of 45 percent on transatlantic fares at the onset of the summer 1992 season, resulting in record traffic of 8,511,966 passengers in August. In April 1993, in an effort to increase its share of transpacific air traffic, Delta launched new non-stop flights between Los Angeles and Hong Kong.

Initially, the stronger emphasis on overseas routes paid off for the company, leading to profits of $60.4 million in the first quarter of fiscal 1993, compared to a net loss of $125.2 million for the first quarter of the previous year. Inspired by this success, Delta strove to further expand its international presence by entering into code-sharing agreements with a number of foreign carriers in 1994, including Virgin Atlantic, Vietnam Airlines, and Aeromexico. Code sharing allowed an airline to purchase tickets from its rivals and resell them to its own customers, providing greater scheduling flexibility and control over prices. While some considered the practice deceptive, by the mid-1990s it had become prevalent throughout the airline industry, with the number of code-sharing partnerships reaching 389 by 1996. For its part, Delta established 14 such contracts with other airlines between 1992 and 1996.

Another wave of heavy losses in the first three months of 1994 forced the company to undertake a more drastic cost cutting scheme, and in April Delta launched its Leadership 7.5 program, a restructuring initiative designed to streamline operations. The goal was implied in the program’s name; Delta hoped to reduce the cost of flying to 7.5 cents per mile, per seat, with an overall aim to cut operating expenses by $2 billion over a three year span. The reorganization called for a reduction of 20 percent of the company’s work force, a realignment of its domestic route system, and a discontinuation of some of its less profitable European routes. These drastic measures brought quick results, and the company was able to claim a net profit of $251 million for the fourth quarter of fiscal 1995.

Key Dates:

1924:: Huff Daland Dusters, a crop dusting operation, is founded.
1929:: Delta inaugurates passenger flights between Dallas and Jackson, Mississippi.
1953:: Delta merges with Chicago and Southern Airlines.
1967:: Delta merges with Delaware Airlines, becomes Delta Air Lines.
1972:: Delta acquires Northeast Airlines.
1986:: Delta acquires Western Air Lines.
1994:: Delta’s Leadership 7.5 program is launched, seeking to dramatically restructure and streamline operations.
2000:: Total number of passengers carried during the year reaches an all-time high of 120 million.

Delta’s impressive financial comeback was not without costs to its reputation as a “family” corporation. The reduction of the company’s customer service team resulted in a significant increase in passenger complaints, and by 1997 Delta dropped to last place in on-time rankings among the ten leading U.S. airlines. The decline in customer service was hardly unique to Delta. Overall, the annual number of airline passengers in the U.S. jumped to 640 million in 1999, compared to 453 million in 1991, with the ratio of seats filled reaching an all-time high of 71.3 percent. Overcrowding, frequent delays, and poor service resulted in a substantial increase in the numbers of complaints lodged with the Department of Transportation in 1999, prompting Congress to consider legislation that would impose stricter regulations on the airlines’ business practices.

The airline industry also faced a number of labor disputes at the beginning of the new century. The expiration of the Delta pilots’ contract in May 2000 was followed by several months of unproductive negotiations. When the impasse dragged into December, the pilots retaliated by refusing voluntary overtime during one of the airline’s busiest seasons, forcing Delta to cancel 3,500 flights over the course of the month. The new year brought little relief, and another 1,700 cancellations followed in the first ten days of January 2001. While the company enjoyed net profits of $897 million in 2000, and saw its total number of passengers reach an all-time high of 120 million, it was clear Delta still faced several unresolved issues, both with customer service and labor, as it continued on its quest to become the nation’s leading airline.

Principal Subsidiaries

ASA Holdings, Inc.; Atlantic Southeast Airlines; Delta Technology, Inc.; Comair Holdings, Inc.; WORLDSPAN, L.P. (40%)

Principal Competitors

AMR Corporation; Southwest Airlines Co.; UAL Corporation.

Delta Air Lines, Inc.

views updated May 18 2018

Delta Air Lines, Inc.

Hartsfield International Airport
Atlanta, Georgia 30320
U.S.A.
(404) 765-2600
Fax: (404) 715-1400

Public Company
Incorporated: 1934 as Delta Air Corporation
Employees: 39,000
Sales: $9.171 billion
Stock Exchanges: New York

Delta Air Lines is one of the United States’ most successful air carriers. With the exception of 1983 and 1991, the company has not lost money since 1947. Originally founded as a crop dusting service in 1924, Delta was led for 40 years by an agricultural scientist and pilot named Collet Everman Woolman. Until his death in 1966 Woolman dominated the operations of Delta. In this sense he was similar to his three major competitors, Eddie Rickenbacker at Eastern, Juan Trippe at Pan Am, and Howard Hughes at TWA.

The company started in 1924 when Woolman and an associate joined a conversation with some Louisiana farmers who were concerned about the threat to their crops from boll weevils. Woolman knew that calcium arsenate would kill the insects, but the problem was how to effectively apply the chemical. Having learned to fly the boxy “flying Jennys” during World War I, Woolman considered dropping the chemical from an airplane. He engineered a “hopper” for the chemical and later perfected the system, and then began selling his services to farmers throughout the region. As a result, the world’s first crop dusting service, named Huff Daland Dusters, was born.

In 1925 Woolman left the agricultural extension service to take charge of the duster’s entomological work. In 1928 the crop dusting operation broke away from its parent company to become Delta Air Service. Woolman continued his crop dusting business across the South and expanded into Mexico and South America. The company began to diversify by securing air mail contracts, and in 1929 inaugurated passenger service between Dallas and Jackson, Mississippi. Later, routes to Atlanta and Charleston were added.

The airline began its climb to prominence when the U.S. government awarded it an airmail contract in 1930. The company remained in business during a temporary but costly suspension in the airmail contract system in 1934. The company, called Delta Air Corporation, was later awarded three more airmail contracts by 1941. During World War II Delta, under contract to the War Department, devoted itself to the allied war effort by transporting troops and supplies. Delta returned to civilian service in 1945, and entered an age of growth and competition never before seen in the airline industry.

On May 1, 1953 Delta merged with Chicago and Southern Airlines and continued to prosper as a major regional trunk carrier through the 1950s and 1960s. In June of 1967 Delta merged with Delaware Airlines and officially adopted the name Delta Air Lines.

Delta’s exposure to the Northeast increased with the acquisition of Northeast Airlines on August 1, 1972. In July of 1976 Delta purchased Storer Leasing, a move that added several jets to the existing fleet of about 200. Recognizing the value of high technology Delta formed two computerized marketing subsidiaries, Epsilon Trading Corporation in 1981 and Datas Incorporated in 1982, to coordinate and sell more passenger seats on all Delta flights.

Delta’s consistent growth can be partially attributed to its successful transition of leadership. In the early days of commercial air transport airlines were run by individual men who would be better described as aviation pioneers first and as businessmen second. At American, Eastern, Pan Am, TWA, and Delta, these men established what can be described as almost dictatorial operations, retaining their posts as long as possible. Many of these men were majority stockholders who categorically refused to share their power or prepare successors to operate the company after them. In many airline companies, when the chairman did eventually die, there was a difficult period of readjustment to the new management.

The departure of Delta’s Woolman, however, was not surrounded by difficulties. He suffered a heart attack in his late 60s and was forced to relinquish some of his duties to Delta’s board members. As Woolman’s health deteriorated the board members gradually assumed more of his duties until his death at age 76. Although Woolman’s absence was deeply felt at Delta, business continued as usual and the airline was able to make a smooth transition to a more modern, corporate style of collective management.

Delta is recognized for having one of the best planning and management teams in the airline industry. Specifically, Delta’s management is agile and responsive to problems which arise. A sound financial policy allows greater flexibility in decision-making even at the highest levels. And a consensus-style of management may be said to afford Delta cohesiveness and enduring stability.

Delta has the highest productivity in the “trunk,” or domestic airline business. The company is on very good terms with its employees who are generally nonunionized; actually, only the pilots and the dispatchers are organized. The machinists’ union, for example, reports that it is difficult to organize Delta employees because the company maintains pay and benefits above its unionized competition. As long as the company outperforms union contracts there is no incentive for the worker to unionize, and the willingness of employees to adjust to the needs of the company provides Delta with the unique ability to weather hardships in the airline industry.

Delta is known for treating all its employees as “family,” and has tried to avoid layoffs. During the 1973 oil crisis and the 1981 PATCO strike, for instance, the airline refused to release workers even though its profitability was compromised. In the absence of union rules and constraints, employees can be moved on a regular basis to other positions in order to fill temporary labor shortages. These measures are a major reason why the company remains competitive.

Although the company did not invent it, Delta was the first airline to widely employ the so-called “hub and spoke” system, in which a number of flights are scheduled to land at a hub airport within approximately 30 minutes enabling passengers to make connections for final destinations conveniently and quickly. The “big push,” as it is called, occurs about ten times a day at the Atlanta hub. Regarded by management as an effective marketing tool the “big push” is not, however, immune to problems caused by bad weather or maintenance delays. Delta also operates hubs at Dallas-Fort Worth, Boston, Memphis, and Cincinnati.

Delta has the most modern jetliner fleet in domestic service; however, they purchase new models only after they have been proven, often in a costly way, at other airlines. This “wait-and-see” policy saved the company a large amount of money when it refrained from purchasing Lockheed’s 1011. Only after competing airlines had used the L-1011 for a number of years did Delta purchase the plane. Although the decision was made in the early 1970s, Delta is just now replacing its fleet of Boeing 727s with the 757, 767, and MD-88, technologically advanced and fuel efficient planes that Delta plans to use for at least 20 years. It is typical of Delta that a 15-year strategy for flight equipment and support facility planning is used. According to vice chairman and chief financial officer Robert Oppenlander, “Success is based on the long term maintenance of a technical edge, which is cost efficiency.”

Delta is known for having the most conservative balance sheet in the industry. With a debt-equity ratio that is consistently below one to one (meaning that their debts are usually outweighed by their net worth), the company can afford to do most of its financing internally. Such a conservative character is aptly reflected in this statement by the late chairman W. T. Beebe: “We don’t squander our money on things like goofy advertising.”

Recently, Delta has taken on a more aggressive corporate personality. Its commitment to internal growth has been threatened by a general trend in the industry toward external growth. Delta is becoming relatively smaller as companies such as TWA, Texas Air, and Northwest expand through mergers. In 1986 Delta announced its intention to take over the Los Angeles-based Jet America; however, the $18.7 million deal has not materialized. Later that year Delta went ahead with the $680 million purchase of another air carrier based in Los Angeles, Western Air Lines. Delta’s chief executive officer, David Garrett, explained that “for a merger to be worthwhile, two plus two has to equal seven.” Enlarged by Western’s hubs in Los Angeles and Salt Lake City, Delta management was able to make that kind of math work; yet there have been problems with integrating Western’s unionized work force into Delta’s system. Nevertheless, as Garrett noted, when Delta merged with Northeast Airlines in 1972 Northeast’s unions dissolved.

In 1987 Ronald W. Allen, who rose through the ranks of Delta’s personnel administration department, was named the airline’s CEO. An aggressive and outgoing business person, Allen proved more willing to make large and unpredictable investments. Shortly after taking office, for example, he negotiated a $15 million dollar deal for Delta to become the official airline of Walt Disney World.

In the late 1980s and early 1990s, recession, rising fuel prices, and war in the Middle East all contributed to declining passenger traffic and inflated costs. Thanks in part to its financially solvent status, Delta weathered the industry troubles comparatively well; nonetheless, in 1991 the airline registered an operating loss of $450 million. Small, financially weak, and regional airlines were hardest hit by the trouble, however, and Delta was one of the prime beneficiaries of the failure in January of 1991 of Eastern Airlines, which like Delta had a significant portion of its routes in the southeastern U.S. After Eastern’s demise, Delta flew over 80% of traffic out of Atlanta.

In 1991 Delta made a major move toward becoming an international player by purchasing a $1.7 billion package of assets from Pan Am, outbidding chief rivals American and United. The package, which included the assumption of $668 million of liabilities, gave Delta a hub in Frankfurt, Germany, dozens of European routes, including flights from Miami and Detroit to London, a New York shuttle route, and 21 Airbus A310s. As with the purchase of Western, the deal was viewed by some in the industry as a departure from Delta’s traditionally conservative business stance, and possibly too costly a purchase. Delta management, however, termed it a necessary stop in a consolidating purchase-or-bepurchased airline market: “We think it is a very conservative move,” Allen told Fortune magazine. “To have missed this opportunity would have been the risky course.”

Delta appears to have adapted well to the expansion-oriented market. Whereas Delta fliers used to joke that, though you might not know whether you would go to heaven or hell when you died, you would definitely have to change planes in Atlanta, the airline’s customers can now fly to Europe via its Frankfurt hub, or to Latin America via Miami. At the same time that it adapts to the aggressive and expanding modern market, Delta appears not to have shifted from its policies of good labor relations and attention to service. Delta’s employees are still among the highest paid in the industry and, like founder C. E. Woolman, Allen sometimes rides on Delta flights to interact with passengers. Indeed, Forbes magazine queried in a 1988 headline: “Is Delta too nice for its own good?” Thus far, however, its emphasis on people seems not to have crippled Delta.

Principal Subsidiaries

Chicago and Southern Airlines, Inc.; Storer Leasing, Inc.; Northeast Airlines, Inc.; Epsilon Trading, Inc.; Datas, Inc.

Delta Air Lines, Inc.

views updated May 09 2018

Delta Air Lines, Inc.

LET YOURSELF FLY CAMPAIGN
ON TOP OF THE WORLD CAMPAIGN
THE PASSENGER'S AIRLINE CAMPAIGN

1030 Delta Boulevard
Atlanta, Georgia 30320-6001
USA
Telephone: (404) 715-2600
Fax: (404) 715-5042
Web site: www.delta.com

LET YOURSELF FLY CAMPAIGN

OVERVIEW

Although Delta Air Lines, Inc., was the number three air-passenger carrier in the early 1990s, by 1996 it was feeling the pressures of low-cost carriers such as Southwest Airlines. Budget-conscious air travelers were embracing cheap tickets and willingly giving up first-class seating, onboard meals, and other frills offered by older carriers such as Delta, United Airlines, and American Airlines. When Southwest expanded service into the lucrative Florida leisure-traveler market in 1996, Delta realized that its customers were abandoning it for that airline. To compete with Southwest, in 1996 Delta unveiled a low-cost carrier called Delta Express. Although Delta Express was initially a success, discount fare wars and consumers' brand confusion, among other problems, caused the carrier to falter. In 2002 Delta announced plans to close Delta Express and introduce a new low-cost carrier, Song Airlines, in its place.

To assure that Song's launch was a success and to send the message that low cost did not have to mean low quality, Delta planned a major branding campaign with a budget estimated at $10 to $12 million. Working with its advertising agency, Kirshenbaum Bond + Partners, as well as the agency's units Media Kitchen (media strategy) and Lime (public relations), Delta developed a unique marketing strategy that included print ads, television spots, and outdoor efforts. Also part of the creative team were Andy Spade, who had served as creative director of various ad agencies, and Spade's wife, fashion designer Kate Spade, who was responsible for creating new uniforms for Song's customer-service staff and flight attendants.

Song's branding strategy was a resounding success. The company reported that, within five months of the "Let Yourself Fly" campaign's launch, brand awareness had jumped from zero to as much as 44 percent in key target markets. In early 2005 the original campaign was replaced with a new one, "Fly Your Own Song," created by Shepardson Stern & Kaminsky, New York. Later that year Song, along with its parent, Delta Air Lines, filed for bankruptcy. Delta reported that Song Airlines would be discontinued in 2006.

HISTORICAL CONTEXT

After starting as a crop-duster service in 1924, Delta Air Lines' first passenger-carrying flight took off in 1929. The fledgling airline served customers traveling between Dallas, Texas, and Shreveport, Louisiana. Within one year Atlanta was among the destinations, along with Monroe, Louisiana, and Jackson, Mississippi. Through a series of mergers with other airlines—Northwest in 1972, Western in 1987, and Pan Am in 1991—Delta grew and expanded its routes to become a global carrier. By the mid-1990s Delta was the number three air-passenger carrier, ranking behind number one American Airlines and number two United Airlines.

By the mid-1990s customers were abandoning the carrier for discounters such as Southwest Airlines, especially in the popular Florida leisure-travel market. To try and win back passengers, in 1996 Delta launched its own no-frills, low-cost airline, Delta Express. It was initially successful, but as other low-cost airlines—including JetBlue Airways—started up, Delta Express's business began slipping. In 2002 Delta announced plans to disband Delta Express and launch a new low-cost airline, Song. The new airline was planned to compete directly against other low-cost airlines that continued to win Delta's customers. Song's first target markets were those dominated by JetBlue's service: Orlando and Fort Lauderdale, Florida, and cities in the Northeast, including Boston and New York.

TARGET MARKET

According to the Travel Industry Association of America, in 2003 the core customers of most airlines were business travelers, although they accounted for just 28 percent of all air travel. The rest of air travel was leisure (59 percent) and combined business/leisure travel (13 percent). As Delta Air Lines prepared for the launch of its low-cost subsidiary, Song, the company had its eyes on a non-traditional target market: women. Tim Mapes, the new air carrier's managing director of marketing, told Adweek that, while most airlines targeted male business travelers, Song was the only airline "targeting female leisure and business travelers." The women that Song was trying to reach were described as sophisticated people with discerning taste who loved bargains and hated typical airline food. More specifically, Song's target market was any frequent traveler in the airline's primary markets, New York and Boston. Also targeted were those leisure travelers in Florida who had used Song's key competitor, JetBlue Airways.

COMPETITION

JetBlue Airways Corporation, based at John F. Kennedy International Airport in New York, was launched in February 2000 and set the standard for a new breed of low-cost air-passenger carriers. The airline offered only coach service, but it included first-class amenities such as additional legroom and wider leather seats, free snacks during flights, and video entertainment, including DirecTV, in every seat. More importantly, JetBlue's focus was on customer service. It offered the convenience of e-ticketing, toys in airport terminals to occupy children waiting for flights, and blue-corn tortilla chips onboard. The strategy seemed to work; the airline reported boarding its 500,000th passenger within eight months of its first flight. To promote its services and build brand identity, in September 2000 JetBlue released its first marketing campaign. Created by the Boston office of Arnold Communications, the $1 million campaign's initial advertisements were billboards that emphasized the frustration that air travelers felt as a result of high prices and poor service. Television spots followed in October. By 2003 JetBlue was serving customers, especially those traveling for leisure, in 20 cities in Florida, in the Northeast, and on the West Coast. Also in 2003 JetBlue introduced flights between Long Beach, California, and Atlanta, home of Delta Air Lines. The flights between Atlanta and Long Beach seemed to be a direct response to Delta's plans to introduce its low-cost carrier, Song, with flights between New York and Florida, JetBlue's primary market.

United Airlines took on JetBlue and Delta's Song in November 2003 with the introduction of its own low-cost carrier, Ted. It made its first flight in February 2004. Described as an airline-within-an-airline, Ted—its name was derived from the last three letters of "United"—was based in Chicago and operated within the United brand. It offered passengers opportunities not typically provided by discount carriers, such as the ability to earn United's Mileage Plus miles and to upgrade from economy to economy plus (with more legroom at each seat). Ted also targeted leisure travelers, who accounted for 59 percent of all air travel, rather that the smaller business-traveler market. Once Ted was established, United planned to drop United service from its Denver hub to cities likely to be visited by leisure travelers—such as Las Vegas; New Orleans; Phoenix, Arizona; and Orlando, Florida—leaving those destinations to be covered by Ted. Passengers on Ted were served snacks (pretzels and biscotti) on morning flights and could buy more substantial snacks or light meals on longer flights. To support the launch of its new airline, United worked with agencies Fallon Worldwide, Minneapolis; Frankel, Chicago; and Pentagram, New York, to create a branding program, which Adweek said was "lighthearted" and "comfortable." But Ted's purpose was twofold. It took the place of United's original discount carrier, Shuttle by United, which operated for seven years until it was disbanded in 2001; and it was hoped the new low-cost carrier would attract customers, build business, and help the struggling United emerge from bankruptcy, for which it filed in 2002.

MARKETING STRATEGY

To guarantee that its spin-off airline, Song, would stand out from the crowd of discount airlines, Delta embarked on a major branding campaign for the new carrier that was intended to convince consumers it was offering more than just low-cost tickets. The effort involved every aspect of the new airline, from the uniforms of the customer-service agents and flight attendants to the food and entertainment provided on board. Marketing for the new airline supported the message that Song was unique and would provide customers an experience equal to air travel in the 1960s, when flying was an adventure in glamour and sophistication rather than simply a way to arrive at destination B from point A. In addition to the work of Delta's advertising agency, New York-based Kirshenbaum Bond + Partners, work on the project was provided by Andy Spade, former creative director at ad agency TBWA\Chiat\Day and husband of fashion designer Kate Spade, who developed Song's new uniforms. Kirshenbaum Bond + Partners divisions Media Kitchen and Lime worked on Song's media and public relations/promotions accounts.

SONG AND NYC MEATPACKING DISTRICT ALLIANCE ANNOUNCED

In a unique effort to separate itself from the crowd of low-cost air carriers, Song Airlines, a subsidiary of Delta Air Lines, Inc., formed an alliance in late 2003 with the fashionable New York City neighborhood the Meatpacking District. According to the alliance, the Meatpacking District Initiative, an organization composed of businesses located in the neighborhood, would receive financial support from Song to increase awareness of the area's retail shops and restaurants. Song would benefit from the alliance by increasing its opportunities to reach the upscale customers who lived in the Meatpacking District or frequented the shops and restaurants there. Although Song officials planned no traditional signage or advertising in the neighborhood, the airline's logo appeared on a map of the area that was widely distributed to travel agents and New York City hotels.

Kirshenbaum Bond + Partners and Andy Spade partnered on Song's marketing campaign, with the agency handling outdoor advertising and Spade creating print ads. Television spots were also a part of the campaign. Print ads, which ran in publications such as InStyle, Travel & Leisure, Food & Wine, and the New York Times Magazine, were two- or three-page spreads, each depicting a Song customer who matched the specific publication's readers. The InStyle spread portrayed a 20-something woman dressed in jeans and a striped shirt, her red hair flying out behind her as she held onto a tree. The copy read: "Kate isn't afraid of flying, she's afraid of conformity." A spread that appeared in the New York Times Magazine featured an older woman with coiffed white hair. She was posed in front of rosebushes with her hands on her hips, and the copy read: "Magdalena could fly in first, but she'd rather save $600 and not meet another CEO." The ads visually alluded to flying; for instance, the redhead's hair was flying behind her, and the older woman's arms on her hips hinted at the shape of wings. Ads also included the slogan, "Founded by optimists, built by believers," the tagline "Let Yourself Fly," and a list of Song's variety of product offerings.

Television spots for the campaign followed a format similar to the print ads, using imagery that evoked flight. The spots also used the theme and tagline of the campaign, "Let Yourself Fly." During an interview on PBS television's Frontline, Spade described the spots as "kind of a morph between a music video and a commercial." One commercial featured a small group of people laughing and running across a meadow while flying a kite in a crystal-blue sky. Text on the screen stated, "Now boarding happy people," followed by a list of Song's benefits (such as organic food and low fares) and the tagline "Song. Let yourself fly."

In addition to print ads and television spots, Song's marketing strategy included outdoor work by Kirshenbaum Bond + Partners' media-strategy division, Media Kitchen. One of the projects entailed hiring skywriters to fly over beaches on the East Coast, such as those on the Jersey shore, Martha's Vineyard, and Florida, writing in the sky the message "Wish you were here. Fly Song.com." The outdoor effort also featured signage that read, "Fifth Avenue style at Lower East Side prices," and that was placed in fashionable locations in New York City, such as the corner of Broadway and Houston Street. The agency's public-relations unit, Lime, opened a Song retail store in New York's SoHo neighborhood. The shop gave consumers an opportunity to try out Song's leather seats, sample its food, view the onboard entertainment options, and book a flight.

OUTCOME

With its initial "Let Yourself Fly" campaign, which created a brand identity for Song that established it as a stylish and fun way to travel and set it apart from other low-cost air carriers, Song emerged as one of the fastest-growing travel brands. In an interview with Adweek, Tim Mapes, the airline's managing director of marketing, noted that, five months after its launch, Song had established a brand awareness of 44 percent among consumers in target markets such as New York and Boston.

After a three-year run, in May 2005 Song replaced its "Let Yourself Fly" campaign with a new campaign titled "Fly Your Own Song." The effort was created by New York agency Shepardson Stern & Kaminsky and featured a series of print ads supported by outdoor and online advertising. The ads focused on Song's options that allowed passengers to personalize their travel experience. The campaign was released in select markets, including New York, Boston, and Los Angeles, before being expanded to other areas served by the airline.

Despite the success of its multimillion-dollar branding effort and of the follow-up campaign, in September 2005 Song Airlines filed for bankruptcy protection along with its parent Delta Air Lines. At the time Delta reported that Song would continue operation until 2006 and then would be absorbed back into its parent, Delta Air Lines. Gerald Grinstein, Delta's chief executive officer, told the Los Angeles Times that many of the best aspects of Song, such as additional legroom for passengers and high-tech entertainment options, would be incorporated into Delta as the airline continued to evolve as a more passenger-oriented carrier.

ON TOP OF THE WORLD CAMPAIGN

OVERVIEW

"Millions of reasons to fly today; only one that matters to you" was the central message of the "On Top of the World" campaign for Delta Air Lines, Inc. The campaign acknowledged that customers had individual reasons for flying, and it assured them that the airline would strive to meet their needs. To the accompaniment of ethereal music, some of the television commercials focused on individual passengers dreaming that they were being pampered by airline employees and then awakening to discover that the reality of a Delta flight was almost as pleasant as the dream. One woman was gently fanned by attendants as she slept on a bed of feathers. In another spot a man danced while an orchestra played just for him. Later spots showed people writing down their reasons for flying on Delta, attaching the pieces of paper to balloons, and watching them float into the air. Delta employees gathered the papers and placed them on airplane seats to indicate that they had assumed responsibility for ensuring that each customer's needs were met. The fantasy advertisements were intended to change the company's image and to portray the comfortable conditions in Delta's new transatlantic business-class seats. The "On Top of the World" campaign, which was created by Saatchi & Saatchi Advertising, began in May 1997 and was scheduled to run through the fall of 1999 in various media.

HISTORICAL CONTEXT

Delta Air Lines was founded in 1924 as Huff Daland Dusters, the first business to offer aerial crop dusting. C.E. Woolman, B.R. Coad, and George Post were instrumental in the formation of the enterprise. A division of Huff Daland Manufacturing, a New York firm that made airplanes, the dusting company began operations in Macon, Georgia, and then moved to Monroe, Louisiana. In 1928 the enterprise was sold to a group of Louisiana businessmen, and its name was changed to Delta Air Service in honor of the Mississippi delta region where it operated. During the 1940s the company moved its headquarters to Atlanta, and its name was changed to Delta Air Lines, Inc. The company offered crop-dusting services in the United States until 1966. Meanwhile, the firm began transporting passengers and mail among cities throughout the South. Mergers with Chicago and Southern Air Lines (C&S) in 1953, Northeast Airlines in 1972, and Western Air Lines in 1987 expanded Delta's operations nationwide. By 1998 the airline was making more than 5,000 daily flights to 318 destinations in 41 countries.

Over the years Delta's advertising slogans included "Trunkline to sunshine," introduced in 1945; "Delta is ready when you are," used from 1968 to 1984; "We love to fly and it shows," introduced in 1987; and "You'll love the way we fly," introduced in 1994. The airline often emphasized passenger comfort and personal service in its marketing efforts. "We take the time and effort to make you feel comfortable and relaxed on each Delta flight. Because we care," said an advertisement in Sunset magazine in 1986. In 1996 the $20 million "Delta Marathon" campaign during the Olympic Games showed the worldwide travels of British actor Nigel Havers, who had appeared in the film "Chariots of Fire." The commercials were intended to enhance Delta's status as an international carrier by appealing to the general public but also to frequent business travelers, who were becoming increasingly important to airlines.

Before 1978, when the U.S. airline industry was deregulated, advertising campaigns for Delta and other carriers were typically designed to promote a brand image. During the chaotic competition of the 1980s and 1990s the emphasis shifted to affordable prices as airlines launched fare wars and incentives such as frequent-flier programs to build customer loyalty. The industry lost enormous amounts of money, and many new carriers went out of business. After surviving economic difficulties during the early 1990s, Delta embarked on a dramatic cost-cutting program called Leadership 7.5, which streamlined its operations and increased passenger traffic but lowered employee morale and customer service. By 1997 the company was moving away from Leadership 7.5 and adopting a bold new marketing strategy that would change the airline's image and strengthen the Delta brand.

TARGET MARKET

The "On Top of the World" campaign was aimed primarily at business travelers flying on expense accounts. Because corporate travelers tended to fly frequently, they valued comfort and service during their trips. Since their fares were being charged to a business, these passengers tended to be less concerned about price. Nevertheless, they often traveled in the moderately priced business-class section because their employers were not willing to pay for the more costly first class. Some customers paid for less expensive seats and then used their frequent-flier credits to move into first class, reducing the airline's profits from the first-class section. During 1997 Delta's business-class market increased four times as fast as its first-class market, and the airline adjusted to the changing times by introducing a new transatlantic business class. (International operations, particularly transatlantic flights, accounted for about 20 percent of the company's revenues.) In 1998 Delta reconfigured its first-class and business-class sections into one group of luxury seats known as BusinessElite, which offered passengers greater legroom and space to recline. One newspaper advertisement in the "On Top of the World" campaign called attention to the more spacious seating arrangement by stating, "Delta presents the last news today's hardened business executives would expect to hear from a company. 'We're upsizing.'" The campaign also emphasized the sincere, courteous service for which Delta had always been noted.

COMPETITION

In 1998 Delta transported 105 million passengers, more than any other airline in the world. According to Aviation Week & Space Technology, United Airlines, Inc., was in first place in the United States, with American Airlines second, Delta third, Continental Airlines, Inc., fourth, Northwest Airlines Corporation, fifth, and US Airways Group, Inc., sixth. During 1998 Delta considered a marketing and code-sharing alliance with United Airlines, since the two carriers served more than 200 destinations but competed in only 34 of them. The virtual merger, which would have given the two firms nearly 39 percent of all U.S. traffic, was opposed by government officials on antitrust grounds, and it was abandoned when Delta's pilots withdrew their support. In the same year Northwest and Continental began planning a similar alliance, which would control about 16 percent of U.S. traffic, but the partnership was delayed as the two companies awaited antitrust clearance from the U.S. Department of Justice. Meanwhile, American and US Airways considered a cooperative arrangement, which would control 25 percent of the market, but they ultimately converted the proposal into little more than a reciprocal frequent-flier plan. Because the three alliances would have created three gigantic airline blocs controlling 82 percent of the market, they were opposed by government regulators, consumer groups, and smaller airlines.

Like Delta, other airlines were using new advertising slogans in 1998. United, a subsidiary of UAL Corp., had abandoned its familiar "Come fly our friendly skies" tag line and in 1997 launched a candid campaign called "Rising," which admitted that air travel was not always pleasant. The campaign promised that United would rise to the challenge and improve its performance. One magazine advertisement said, "We figure by the time you reach the gate agent, you've had enough red tape." The text explained that the company had given its gate agents the power to resolve problems for customers without consulting a supervisor or asking the customer to wait. In one television commercial the narrator promised, "Air travel needs to be easier, more professional, especially for people who do it most. Now it will be, because, compared to the rest of the industry, United Airlines is headed in a different direction."

Continental Airlines, a subsidiary of Continental Air Holdings, also had a new marketing slogan, "Work hard. Fly right." Like Delta, Continental advertised a business-class fare (known as BusinessFirst) that offered first-class perks to attract international fliers. The 1990s were a time of flux for Continental, which operated at a loss early in the decade and filed for bankruptcy protection, from which it emerged in 1993. By 1997 Continental was generating $7.2 billion in annual revenues and was growing faster than any other major U.S. carrier, but because one of its primary investors was attempting to withdraw from the company, Continental was viewed as a possible takeover target. Delta considered merging with Continental during 1997, and in January 1998 Continental received takeover proposals from both Delta and Northwest, but no agreement was reached during the year.

LIVING BILLBOARD

While competing for the Delta Air Lines, Inc., account, Saatchi & Saatchi Advertising submitted an idea for a "living billboard" that would feature a 44-foot-long section of a Delta jet and actual people playing the roles of passengers and flight attendants. The billboard would showcase the appetizing food, individual movie screens, and comfortable conditions on the airline's new business-class flights to Europe. Saatchi & Saatchi expected Delta to commend the creative effort and then request a less unusual approach. Instead, Delta executives were so enthusiastic about the idea that they asked the agency to have the display completed within two months. The billboard was erected near the Port Authority Bus Terminal in Manhattan, where it was seen by an estimated 1.5 million people each day. Adweek estimated that Delta received more than $2 million worth of publicity, thanks in part to testimonials from the billboard's passengers and widespread coverage by print and broadcast media. The promotion, which lasted six days and cost $250,000, won a 1998 Mediaweek Plan of the Year Award.

Northwest lost $224 million during the third quarter of 1998 because of a pilot strike that lasted from June to September. The company had revenues of $10.2 billion in 1997, and in 1998 it reported a profit of $71 million during the first quarter and $49 million during the second quarter. Northwest's marketing efforts in 1998 included a notable advertising campaign for the company's E-Ticket service, which allowed customers to purchase tickets electronically via the Internet. Northwest was also known for its popular "What in the World" advertisements in USA Today, which was based on interesting facts, for example, the number of glasses of milk a cow produced in its lifetime tied to the line "Milk your vacation for all it's worth."

Another top competitor, American Airlines, emphasized the familiarity of its brand during 1998. In its advertisements international travelers felt as if they were almost home when they saw the company's red, white, and blue emblem. American, a subsidiary of AMR Corporation, had led the U.S. airline industry in 1992, with a market share of 20.3 percent, compared to 19.3 percent for United and 16.8 percent for Delta. By the late 1990s American held the second largest market share in the United States but was generating more revenue than any other carrier in the world.

MARKETING STRATEGY

By 1997 Delta was ready to move away from the straightforward themes and simple melodies of its earlier advertisements and to try a daring new strategy to change its image. It hired a new agency, Saatchi & Saatchi Advertising, to design a consistent, multimedia ad campaign that would build the Delta brand. The campaign revolved around the message that Delta was a global carrier that treated customers as individuals and made them feel as if they were "on top of the world." Gayle Bock, vice president for consumer marketing at Delta, explained, "We all know the rational reasons for choosing an airline: schedule, convenience, frequent flier miles, and cost. However, to connect an airline brand with its customers, it is essential that we also understand their emotional needs. In this regard, Delta already has a long history of commitment to personal customer service. No courtesy is too small to extend to any customer, anywhere in the world. The new branding campaign demonstrates that Delta professionals recognize customers individually. It is who we are, and it is our competitive advantage."

The surreal quality of the "On Top of the World" campaign was underscored by its chantlike theme music, a New Age song called "Adiemus." The first five television commercials in the U.S. campaign, launched in the spring of 1997, looked a great deal alike and had the same overall tone. They showed passengers dreaming that airline chefs, flight attendants, and other personnel were catering to them as if there were no other travelers on the plane. When the passengers awoke, they discovered that Delta's transatlantic business class was almost as pleasant as their dreams. A second series of television commercials began airing in the fall of 1997 and ran through 1998. Like the first spots in the campaign, they featured the song "Adiemus" and voice-over narration by actress Christine Lahti, star of the television series Chicago Hope. In the spots that aired during 1998 Lahti said, "There are millions of reasons to fly today. Only one that matters to you. At Delta Air Lines, it is our pleasure to get you to the place you want to be." The fantasy television commercials depicted a wide range of passengers who wrote their reasons for flying on Delta Air Lines (using words such as "success," "fun," "home," "the deal," and "the thrill") on pieces of paper, attached them to balloons, and watched as the messages floated into the sky. Delta employees collected the pieces of paper and assumed responsibility for meeting the customer needs written on them.

The "On Top of the World" campaign was a global promotion initially launched in the United States and Europe. It included print and billboard advertisements, radio spots, and network television commercials aired during programs such as ER, Good Morning America, 20/20, and sportscasts. The campaign received a large percentage of Delta's estimated $100 million annual advertising budget. According to Competitive Media Reporting, Delta spent $30.8 million on all advertising during the first half of 1997, compared to $31.9 million for United Airlines and $28.6 million for American Airlines. In the previous year Delta had spent $70.2 million for advertising, United $71.2 million, and American $61.3 million.

POP MUSIC

"Adiemus," the unusual theme song in the "On Top of the World" campaign, had been used in European advertising for Delta Air Lines since 1994. The music was so successful that the London Philharmonic Orchestra recorded a longer version, which climbed the popular music charts to reach number 13 across Europe and number 8 in Italy. Consumers purchased more than 100,000 copies of a compact disc that featured the song.

OUTCOME

The "On Top of the World" campaign was acclaimed for its style and creativity. One of the television commercials in the European campaign, "Synchronized Flying," which starred dolphins swimming together as if in a water ballet, won a Golden Kompass Award in 1995, and the public frequently called to learn when it would air so that they could tape it. "Adiemus" won a gold Clio in 1998 for original music.

Delta's research indicated that most consumers understood the central message of the promotion, but some people were mystified by the surreal advertisements. A new multimedia campaign promoting the airline's intercontinental BusinessElite service was launched in April 1999 with the tag line "Delta BusinessElite, outclassing business class."

In January 1999 Air Transport World named Delta the global airline of the year. In May 1999 Aviation Week & Space Technology named Delta the industry's best-managed major airline, citing the company's organizational strength and ability to compete in the global marketplace.

THE PASSENGER'S AIRLINE CAMPAIGN

OVERVIEW

Delta Air Lines was the number three air-passenger carrier in 1999, behind number one American Airlines and number two United Airlines. Delta's goal was to move up in the rankings to number one, at least in the eyes of its customers. But as consumer dissatisfaction with the airline industry overall continued to increase, Delta's main challenge was to convince people that air travel did not have to be a negative experience.

To reverse the negative perception consumers had of air travel, and to win over customers, Delta in 1999 replaced its longtime ad agency BBDO with the Leo Burnett Company. Leo Burnett created a branding and advertising campaign for Delta that began in March 2000. Titled "The Passenger's Airline," the campaign was unique in that it had no specific tagline, theme song, or celebrity spokesperson. Rather, the television spots, radio spots, and print ads focused on passengers, their needs, and how Delta was working to meet those needs.

The campaign reached its target audience, and in 2001 it received a Silver EFFIE Award for achieving its goal of mending the damaged relationship between Delta and its customers, particularly frequent business fliers. Following the September 11, 2001, terrorist attacks in the United States that included the hijacking and crashing of four commercial airliners, consumers fled from air travel. Because Delta's "The Passenger's Airline" campaign had resonated so well with the airline's customers, the Leo Burnett Company's team revamped it for the circumstances. With the title "Person to Person," the modified campaign remained passenger-focused and was designed to show how Delta could help bring people together.

HISTORICAL CONTEXT

In 1924 Huff Daland Dusters was founded as the world's first aerial crop-dusting company. The company quickly evolved to offer passenger service under the name Delta Air Service. Delta's first passenger flights began in 1929, carrying passengers from Dallas, Texas, to Shreveport, Louisiana, and from Monroe, Louisiana, to Jackson, Mississippi. In 1930 service was expanded to include Atlanta, Georgia, followed in 1934 with a name change to Delta Air Lines. In 1946 Delta's millionth passenger climbed on board. Delta Air Lines merged with Northwest Airlines in 1972, becoming a key carrier in the New York/Boston market. Delta continued to grow, merging with Western Airlines in 1987 and purchasing Pan Am's transatlantic routes in 1991 to become a global carrier. Air Transport World magazine named Delta the global airline of 1998.

To promote its flights between Chicago and Miami, Delta in 1945 hired the Montclair, New Jersey-based advertising agency Burke Dowling Adams (BDA) to create a marketing campaign. The $150,000 campaign had the tagline "Trunkline to Sunshine." BDA merged with another agency, BBDO of Atlanta, in 1964. In 1968 BBDO launched the campaign "Delta Is Ready When You Are," which was used by Delta for 16 years. The "We Love to Fly and It Shows" campaign followed in 1987. In 1994 BBDO repositioned Delta's marketing to focus on the airline's customer service and introduced the slogan "You'll love the way we fly." But in 1997, after 51 years of serving as Delta's creative agency, BBDO resigned the airline's account when Delta opened the door to other ad agencies. According to a report in the Atlanta Journal-Constitution, Delta's decision to pursue other agencies was based on the failure of BBDO's 1996 campaign, "Delta Marathon," which was designed to promote the Atlanta Olympics. At the time BBDO stated that it preferred not to compete with the three other agencies vying for Delta's account: Ogilvy & Mather, Ammirati Puris, and Saatchi & Saatchi. BBDO stated further that during the review process it came to believe that Delta had already removed the agency from consideration.

When the dust settled, Saatchi & Saatchi, an agency based in New York, was selected to handle Delta's $100 million advertising account. In September 1997 "You'll love the way we fly" was pulled, and Saatchi's new campaign for Delta, "On Top of the World," was launched. The agency's relationship with Delta did not have the staying power that BBDO's did, however. In 1999, amidst management upheaval at the airlines and complaints that the theme "On Top of the World" was obtuse and unsuccessful, Delta again looked for a new agency to handle its account. Besides Saatchi & Saatchi, in the running were the Leo Burnett Company, TBWA Worldwide, and Grey Advertising. Leo Burnett won the $100 million account and in March 2000 launched Delta's global campaign, "The Passenger's Airline."

TARGET MARKET

In 1999 Delta conducted a study of its customers, and the results revealed that, although the airline typically reported high ratings for customer satisfaction, it was experiencing the effects of a negative perception of the airline industry. Many business travelers had become distrustful of airlines and their broken promises of better service, shorter check-in and boarding lines, on-time departures and arrivals, and no lost luggage. Delta considered such travelers to be one of its key market demographics. According to a report submitted for consideration by the EFFIE Awards, the airline's primary target audience was "Road Warriors," that is, 25- to 54-year-old men who flew on more than six trips annually. Steve Crawford, executive vice president of client services at Leo Burnett, told Adweek that the "Passenger's Airline" campaign was designed to address a split between the airline and its customers. "There's a relationship between the business traveler and the airlines that's really important," Crawford said. Recognizing the importance of that relationship, Lisa Bennett, executive creative director at Leo Burnett, added that the two-phase campaign would focus on the passenger's experience of flying Delta Air Lines and on addressing customer concerns.

COMPETITION

As the skies became more crowded and passenger numbers inched up, reaching more than 700 million travelers boarding 9 million flights in 2000, complaints about airline service were also on the rise. A report by the National Institute for Aviation Research at Wichita State University found that, despite promises by airlines to improve their services in 2000, overall they had not. The U.S. Transportation Department reported that from 1999 to 2000 the number of complaints had risen 20 percent, to nearly 3 complaints for every 100,000 passengers. The number one airline, American Airlines, a subsidiary of AMR Corp., and low-fare upstart Southwest Airlines Company, were among the companies reviewing methods to attract passengers and to respond to complaints of everything from long lines in the terminals to cramped quarters on the planes.

AIRLINE ALLIANCE ADS PROMOTE CUSTOMER SERVICE

In 2000 SkyTeam, an alliance between Delta Air Lines and its partners Air France, AeroMexico, and Korean Air, introduced a new marketing campaign designed to promote the customer service and benefits the separate airlines offered consumers. Themed "Putting You Back in the Picture," the campaign included television spots and print ads. Delta and its partners formed the alliance in late 1999 to develop code-share agreements, which enabled the partners to sell seats on each other's planes. According to Delta, one year after forming a code-share agreement with Air France in 1998, it had generated some $400 million in extra sales. To benefit consumers the SkyTeam Alliance connected more than 6,000 flights daily and carried approximately 174 million passengers to 98 countries each year. Other such alliances and their partners included Star Alliance, led by United Airlines and Lufthansa, and Oneworld Alliance, led by American Airlines and British Airways.

American Airlines focused on making passengers more comfortable once they were on board. In 2000 American expanded the free space inside its planes by removing two rows of coach seats in each of its 700 jets. The project cost an estimated $70 million. To support the effort American launched what it described as an amusing advertising campaign themed "More Room throughout Coach." Developed by ad agency TLP-Dallas, it was specifically aimed at business travelers, those who fly most. The campaign was twofold: it promoted the additional legroom on the planes, and it responded to the question of what had happened to all the seats that had been removed. The "Great American Seat Take-Off" portion of the campaign gave people a chance to win two of the removed seats and two round-trip coach tickets to any American Airlines destination. Ads for the promotion ran in major daily newspapers across the United States. "More Roomobile," part two of the campaign, was a traveling trailer set up like the inside of a remodeled American jet. It toured to 27 cities and gave people along the route the opportunity to play games and win prizes such as American Airlines golf tees, baggage tags, and T-shirts.

Southwest Airlines targeted business travelers, typically men between 25- and 54-years-old. In 2000 the airline signed a four-year sponsorship deal with the National Hockey League that was designed to reach hockey fans who also fell into Southwest's target demographic. The agreement included a deal with ABC television that included broadcast commercials, sponsorship during hockey-game intermissions, and showing Southwest's logo on goal replays. Also in 2000 Southwest worked with its Austin, Texas-based agency GSD&M to launch a marketing campaign to promote its website. The campaign's tagline, "A symbol of e-free-dom," was a variation on Southwest's familiar "A symbol of freedom" slogan. TV spots portrayed people in unpleasant daily situations adjacent to images of them enjoying pleasant vacations. The message was: "When the going gets tough, get going to southwest.com to book a quick getaway."

MARKETING STRATEGY

The Leo Burnett Company, which had created the successful "Fly the Friendly Skies" theme for United Airlines, was hired by Delta Air Lines in 1999 to develop a new global branding and advertising campaign for the air carrier. A report in the Cincinnati Post stated that, prior to developing the campaign, Leo Burnett's team interviewed thousands of the airline's passengers and employees. The interviews considered every aspect of a traveler's experience with the airline, from making phone reservations to gate announcements in the terminals and employee uniforms. Based on the information it gathered, Leo Burnett created Delta's "The Passenger's Airline" campaign.

The $100 million worldwide campaign did not sing Delta's praises with catchy taglines or songs, and there was not a celebrity spokesperson in sight. Rather, the campaign focused on strengthening Delta's business relationship with its passengers by promoting what Delta had to offer from the perspective of passengers. Included was a redesigned delta.com website, more casual uniforms for employees, and advertising with television and radio spots and print ads. Lisa Bennett, executive creative director for Leo Burnett, told Adweek, "We didn't want this campaign to come across as corporate in nature. Rather than Delta saying, 'This is who we are,' we wanted to sign off with the passenger point of view."

Kick-off television spots aired on CBS during the 2000 NCAA basketball tournament. The commercials featured a variety of air travelers, from backpackers looking for a bargain to a businessman dressed in a suit. In each spot a text bubble appeared over the passenger's head with thoughts such as "Wants a window seat" and "Nap" followed by a voice-over asking, "How do you want to fly?" Other spots entailed airport vignettes that focused on passengers' needs. One portrayed a passenger stopping in an airport terminal ice-cream shop and lingering over a cone. The message was that the passenger had time to enjoy the ice cream because he had used Delta's E-ticketing and avoided long lines at the airline's terminal counter. It concluded with the statement, "Check in at the curb and go straight to the plane." Some spots closed with shots of personalized luggage tags on which passengers wrote their desires. In one spot a group of passengers were shown waiting at a baggage carousel, and the tag read, "Fly … understood." Print ads, which appeared in major magazines, were similar to the TV spots. In one promoting Delta's BusinessElite international service, the baggage tag read "Fly … like an '80s bond trader."

OUTCOME

Despite the lack of a catchy tagline or theme song to resonate with consumers, "The Passenger's Airline" campaign achieved it goals. The campaign was presented a Silver EFFIE Award in 2001 for its success in reconnecting the airline with business travelers, for joining the company's complete roster of product offerings under one umbrella, and for increasing brand regard at a time when consumers had a deep distrust of airlines. But by the end of the year Delta was embroiled in disputes with its employee unions. In November 2000 the airline was forced to cancel 375 flights because of a pilot shortage, affecting thousands of its customers. Under threats of delayed or canceled flights, Delta was struggling to maintain the consumer confidence the campaign had helped build.

The terrorist attacks on September 11, 2001—in which four commercial airliners were hijacked and crashed into the twin towers of the World Trade Center in New York, the Pentagon, and a field in Pennsylvania—further eroded consumer confidence in air travel and in airlines as a whole. Delta was forced to take another look at its successful marketing campaign. Rather than abandon the campaign, however, the Leo Burnett agency modified it for the circumstances. Maintaining the same focus on customers that "The Passenger's Airline" had used, the revamped campaign introduced a new series of advertisements, themed "Person to Person," designed to reinforce the importance of people being together in person.

Delta Air Lines, Inc.

views updated May 09 2018

Delta Air Lines, Inc.

founded: 1924

Contact Information:

headquarters: hartsfield atlanta international airport
atlanta, ga 30320-6001 phone: (404)715-2600 fax: (404)765-2233 url: http://www.delta-air.com

OVERVIEW

Suffering from four years of financial loss, Delta Air Lines, Inc. rallied and became profitable in 1996. Cutting costs is among the priorities at Delta in an effort to remain competitive with the low-budget airlines, whose popularity is rising. Delta Air Lines, Inc. flies to 153 cities in the United States and 51 cities in 31 countries abroad. In an effort to boost air traffic to Europe, the company has increased service out of JFK International Airport.

COMPANY FINANCES

Delta states that for the quarter ending March 31, 1998, unaudited operating income of $336 million and net income of $195 million were recorded. For the quarter ending March 31, 1997, unaudited operating income of $336 million and net income of $195 million were recorded. The company also stated that its operating margin (operating income divided by operating revenue) was 9.9 percent for the quarter ending March 31, 1998 compared to 10.1 percent for the quarter ending March 31, 1997. Further, with Delta's 1998 alliance with United Airlines, Inc., an estimated $600 million in annual gross revenue benefits was expected.

ANALYSTS' OPINIONS

Many analysts agree that Delta Air Lines, Inc.'s restructuring plans were a necessity. Once known for its lavish in-flight services, Delta had become a high-priced airline when faced with competition from airlines offering lower fares. Although Delta's profits rose in the fourth quarter of 1996 by $55 million compared to the fourth quarter in 1995, several analysts said the company's operational costs remained high. Compared to the $2.78-billion operational costs of 1995, analysts remained watchful as Delta's operational costs rose to $2.97 billion in 1996. Delta cited the 1996 Olympics as the source for increased operational expenses, since Delta's hub is located in Atlanta, where the event took place that year.

Analysts have been impressed by former CEO Ronald Allen's efforts to reduce expenses while bringing the company back to profitable margins. Many critics were skeptical of his goal of 7.5 cents per airplane seat per mile of flight by June 1997, yet Allen had gone on to show an 8.4-cents per mile expense by the end of 1995—two years away from the target date. By early 1997 that cost was 8.69 cents per mile.

HISTORY

Founded in Macon, Georgia, in 1924, Huff-Daland Dusters (renamed Delta Air Service in 1928) was established as a crop-dusting service to treat boll weevils that were overrunning cotton fields. The company began offering passenger flights in 1929 from Dallas to Jackson, Mississippi. Delta contracted with the United States Postal Service in 1934 to fly from Fort Worth to Charleston, South Carolina, using Atlanta as a hub. The company relocated to Atlanta in 1941.

Over the years, Delta Air Lines, Inc. added flight destinations to include Cincinnati, New Orleans, Chicago, and Miami. When the company bought Southern Airlines in 1952, other destinations included cities in the South, the Midwest, Texas, and the Caribbean. Almost instantaneously the company has become the fifth largest airline in the United States. International service increased when the company bought Northeast Airlines in 1972 and offered service to New England, Canada, and London.

In 1983 the company reported its first financial loss due to a poor economy. Having become profitable once again by 1985, Delta purchased Western Air Lines the following year, and also used its profits to begin flights to Asia in 1987. International flights accounted for 11 percent of Delta's passenger revenues by 1989, and during this time the company made deals with Swissair and Singapore Airlines. Delta also conducted a joint venture with TWA and Northwest to create WORLDSPAN, a computer service that managed reservations.

Delta witnessed a financial setback in 1990 as a result of fuel and labor increases coupled with reduced fare rates. Delta followed this disappointment with the purchase of gates, planes, and three Canadian routes from Eastern. The company also purchased Pan Am's New York-Boston shuttle, European routes, and a Frankfurt hub. These purchases made the company the largest airline in the world based on the cities it served and its fruitfulness.

Once again the company began to see financial difficulties due to price wars and a weak economy, and by 1992, Delta was forced to evaluate cost-cutting possibilities. The company reduced planes and short-distance routes. In 1995 the company decided to cease its flights to Bangkok, Hong Kong, and Taipei, since they had not been financially rewarding. ValuJet's disastrous flight crash and grounding in 1995 was expected to increase Delta's passengers. Delta aimed to boost passenger volume by offering Delta Express, an inexpensive service flying to 15 cities in the eastern United States.

STRATEGY

Since Ronald Allen's cost-cutting plans went into effect in 1994 the company has remained focused on profitability. Delta's interests have included forming creative partnerships and overhauling everything from baggage handling to maintenance. Allen's goal was to reduce spending to the point that only 7.5 cents per airplane seat per mile of flight would be spent by June of 1997—a plan he called "Leadership 7.5." In other words, the company was seeking to cut costs by $2 billion. Cost-cutting goals were established for specific categories: $400 million from marketing, $300 million from layoffs, and $310 million from in-flight services.

INFLUENCES

Changes in the industry began in the early 1990s. The rising popularity of low-cost, low-fare airlines forced Delta to make continual cutbacks yielding less profits. In fact, by the end of 1995, 60 percent of Delta's domestic flights were in competition with other low-cost carriers' flights. Customers had begun looking at cost as the top consideration when purchasing a ticket versus luxury or in-flight service.

Delta's Leadership 7.5 plan was implemented in 1994 as a result of a changing industry. Even changes in European markets demanded Delta to make revisions. In 1995 improved economies in the United States and parts of Europe accounted for Delta's increased European market share. A new European advertising campaign was partly responsible for a five-percent increase in European air traffic as well.

European markets received increased attention as competing airlines added new flight times and non-stop services. Delta had begun looking to other companies for code sharing agreements as a means of increasing profitability, flight availability, and competitiveness. Code sharing simply means airline companies agree to purchase regular flights on each others' planes, which allows them to establish or increase their presence in strategic international markets. By 1995 Delta was able to provide service to Brussels from Chicago and Boston, to many German destinations, to London, to Vienna from New York, and to Geneva from Washington, D.C.

The 1996 Summer Olympics held in Atlanta proved beneficial for Delta Air Lines, Inc., since its largest hub is based in Atlanta. The company had filled an average of almost 75 percent of its seats. Since off-peak flights generally carry a small group of people, this figure indicated Delta's flights were full a majority of the time during the Olympics.

CURRENT TRENDS

Due to new strategies being developed by the competition to better service European-bound customers, Delta Air Lines, Inc. devised new plans for its transatlantic flights. First on the agenda have been plans to add non-stop flights from Kennedy International Airport to Istanbul, Madrid, and Manchester. Expansion plans have included year-round service to Athens and an additional daily flight to Rome. Other added flights have included Stuttgart and Zurich, both cities being reached via Atlanta.

As well as adding flights, Delta has also implemented plans for discontinuations. Among those have been the doing away with non-stop flights from Los Angeles to Frankfurt and Frankfurt to Athens, Bucharest, Istanbul, Warsaw, Moscow, and St. Petersburg.

The European service changes revolve around Delta's goal of cutting costs by $62 million per year. Following the purchase of Pan Am's European operations in 1991, Delta's financial losses mounted, causing a need for a change. Although the company made a profit on transatlantic flights in 1996, the competition from United Air Lines and Lufthansa had been fierce. Delta has chosen to take a one-time restructuring fee of $60 million in order to increase its European service.

The company reports that in 1998 a marketing alliance was formed with United Air Lines, Inc. The two airlines plan to code-share (subject to both airlines' pilots' unions) and reciprocate with frequent flyer programs and other areas of marketing.

New purchases are also a part of Delta's strategic direction. In March 1997 the company announced plans to purchase jets from Boeing Company totaling up to $12 billion. In hopes of replacing its 55 L-1011s by the end of the 1900s, Delta has agreed to buy 24 Boeing 767s, 777s, and newer 737s as its first purchase.

The airline industry, many analysts agree, is a mature one in the United States and abroad. The European market has been one of increasing demand, especially since competing airlines have begun service improvements. Delta's efforts to improve its European operations have included code-sharing, which subject to government approval, could allow Delta enormous European expansion.

One code-sharing agreement has produced increased exposure in China for Delta Air Lines, Inc. Under the signed agreement with China Southern Airlines, Delta would be able to provide service between Los Angeles and Guangzhou. China, in turn, would purchase seats on Delta's flights to include cities like Atlanta, Boston, Cincinnati, Detroit, Las Vegas, New York, Orlando, Philadelphia, Phoenix, Portland, Salt Lake City, San Francisco, and Washington D.C.

CORPORATE CITIZENSHIP

Delta Air Lines, Inc.'s community involvement has revolved primarily around two organizations: United Way of America and the Crested Butte Ski Weekend, an event held for at-risk inner-city teens. In conjunction with United Way of America, Delta has agreed to offer round trip travel tickets to people suffering from life-threatening illnesses in order to allow them access to the best treatment available. A new program called SkyWish permits travelers to donate their frequent flyer miles to United Way of America, helping those in need of medical treatment.

FAST FACTS: About Delta Air Lines, Inc.

Ownership: Delta Air Lines, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: DAL

Officers: Maurice W. Worth, COO, 57, $539,076; Harold C. Alger, Exec. VP Operations, 59, $539,076; Gerald Grinstein, Chmn., 65; Leo F. Mullin, Pres. & CEO, 54

Employees: 63,441 (1997)

Principal Subsidiary Companies: Delta Air Lines, Inc.'s chief subsidiaries include: Delta Express, the Delta Shuttle, the Delta Connection, and Delta's Worldwide Partners.

Chief Competitors: Competition among airlines is strong. Delta states that it competes with many major airlines on its principal routes as well as with regional, national, and all-cargo carriers. Some primary competitors include: Continental Airlines; Alaska Air; and British Airways.

Delta was also the leading sponsor of the Crested Butte Ski Weekend where inner-city teenagers are brought together to meet successful, inspirational role models like Hank Aaron. A Winter Weekend auction has been held there, where various vacation packages and donated items are auctioned off. The proceeds go to FutureForce, an Atlanta Project program where at-risk teens between the ages of 12 and 19 are taught how to set and achieve goals through personal development. Delta's contributions have included air transportation, auction items, and volunteers.

In regard to environmental issues, Delta reports that it has a program in place to investigate and remedy, if necessary, any air pollution, soil, and/or ground water contamination issues.

GLOBAL PRESENCE

Delta states that as part of its plans to expand in Latin America, it recently set up service between Atlanta and Caracas, Guatemala City, Panama City, San Jose, and San Salvador. In addition, the company purchased a 35-percent equity interest in Aeroperu.

EMPLOYMENT

The company states that the outcome of its collective bargaining agreement it entered with its 8,600 airline pilots in 1996 could not be determined in 1998. The bargaining agreement covers issues of pay rate, rules and working conditions, and obligation to fly to new equipment.

Delta feels that its executives' salaries are below their peers' at other airlines, so they have developed an Incentive Compensation plan (pay for performance) aligned that with the company's strategic objectives. In addition, safety, customer satisfaction, and on-time performance are continually stressed.

CHRONOLOGY: Key Dates for Delta Air Lines, Inc.

1924:: Huff-Deland Dusters is established as a crop dusting service
1928:: Renames company to Delta Air Service
1929:: Begins offering passenger flights from Dallas, Texas, to Jackson, Mississippi
1941:: Delta relocates to Atlanta, Georgia
1953:: Merges with Chicago and Southern Airlines
1967:: Delta Air Lines becomes the company name after a merger with Delaware Airlines
1972:: Northeast Airlines is purchased
1982:: Delta forms two computerized marketing subsidiaries to coordinate and sell tickets on Delta flights
1991:: Purchases a package of assets from Pan Am giving Delta a hub in Frankfurt, Germany, as well as dozens of European routes
1998:: United Air Lines and Delta forms a marketing alliance

SOURCES OF INFORMATION

Bibliography

"Air France Joins Delta's SkyMiles Program." PR Newswire, 2 April 1997.

"Airlines End Talks." Cable News Network, 16 December 1996.

"Delta Air Lines and China Southern Announce Code-Sharing Agreement." PR Newswire, 2 April 1997.

"Delta Air Lines Helps Carter Center Bring High Hopes to Inner-City Teens." Delta News, 6 February 1997.

"Delta Air Lines, Inc." Hoover's Online, 11 April 1997. Available at http://www.hoovers.com.

Delta Air Lines, Inc. Home Page, 21 April 1997. Available at http://www.delta-air.com.

"Delta Earnings Better Than Expected; Operating Costs Still High." Fox News, 23 January 1997. Available at http://foxnews.com.

"Delta Shuffles Flights in Europe." United Press International, 7 April 1997.

"Delta Talks Merger with Continental." Associated Press, 4 December 1996.

"Delta to Move Cincinnati/Paris Flight to Charles de Gaulle Airport." PR Newswire, 2 April 1997.

"Delta Will Revamp European Service." Cincinnati Enquirer, 8 January 1997.

Edgar Database Web Site, 6 June 1998. Available at http://www.edgar-online.com.

"FAA Developing Checks in Response to Delta Problem." Reuters, 30 March 1997.

Greising, David. "It Hurts So Good at Delta." Business Week, 11 December 1995.

Greising, David, and Wendy Zellner. "Delta Express or 'Delta Distress?'" Business Week, 26 August 1996.

——. "No Wind Beneath Its Wings." Business Week, 16 December 1995.

"Official: Delta to Agree to Long-Term Commitment to Boeing." Fox News, 20 March 1997.

Reed, Dan. "Delta Reports Sixth Straight Quarter of Record Profits." Arlington Online, 24 October 1996. Available at http://www.arlington.net.

Stern, Willy. "WARNING!—Bogus Parts Have Turned Up in Commercial Jets. Where's the FAA?" Business Week, 10 June 1996.

"United Way of America and Delta Air Lines Announce Sky-Wish," 21 April 1997. Available at http://www.Invalley.org.

Walker, Karen. "Delta's History," 21 April 1997. Available at http://www.airapps.com.

For an annual report:

on the Internet at: http://www.edgar-online.com

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Delta's primary SIC is:

4512 Air Transportation Scheduled

Company Profiles for Students

Delta Air Lines, Inc.

views updated May 14 2018

Delta Air Lines, Inc.

founded: 1924

Contact Information:

headquarters: hartsfield atlanta international airport, po box 20706
atlanta, ga 30320-6001 phone: (404)715-1400 fax: (404)715-2600 url: http://www.delta-air.com

OVERVIEW

Suffering from financial loss in 2001 and much of 2002, executives of Delta Air Lines, Inc. rallied the company to again become profitable as it had been from 1996 through 2000. Cutting costs is among the priorities at Delta in an effort to remain competitive with the low-budget airlines, whose popularity is rising, and in 2002, encouraging customers to purchase tickets at the Delta.com Web site, Delta drastically cut commissions to travel agencies. Delta Air Lines, Inc. has operations in 201 U.S. cities in 45 states and in 50 cities in 32 international countries.

COMPANY FINANCES

Delta stated that for the first quarter of 2002, the airline operated with a loss of $ 397 million. For the 2001 full year, the company posted a serious loss of $1 billion, although the company's executives assured shareholders they saw a way back to profitability by the end of 2002 or sometime in 2003, barring unforeseen problems similar to the September 11, 2001, terrorist attacks using aircraft as instruments of attack.

ANALYSTS' OPINIONS

Many analysts agree that Delta Air Lines, Inc.'s assurances that it plans to return to profitability in the early 2000s are largely merited. In the mid-1990s, the company faced a similar financial period of uncertainly as it aggressively jettisoned its lavish in-flight services. In 2002, the company aggressively marketed its business travel to that lucrative market sector and also offered lower fares and special deals on its Delta.com Web site to lasso profits heretofore going to travel agencies. "He's effectively been able to position Delta as the lowest cost of the three majors," said Bill Mastoris, managing director of research at BNY Capital Markets Inc., in a Bloomberg News interview. "He is going to more conservatively manage the balance sheet, and that means something to investors." John Buckingham, a fund manager at Al Frank Asset Management Inc. told Bloomberg News he concurred with that analysis. "Delta is in far better shape" than some of its competitors, said Buckingham, adding that DAL is "a survivor if we do get a big shakeout in the industry."

HISTORY

Founded in Macon, Georgia, in 1924, Huff-Daland Dusters (renamed Delta Air Service in 1928) was established as a crop-dusting service to treat boll weevils that were overrunning cotton fields. The company began offering passenger flights in 1929 from Dallas to Jackson, Mississippi. Delta contracted with the United States Postal Service in 1934 to fly from Fort Worth to Charleston, South Carolina, using Atlanta as a hub. The company relocated to Atlanta in 1941.

Over the years, Delta Air Lines, Inc. added flight destinations to include Cincinnati, New Orleans, Chicago, and Miami. When the company bought Southern Airlines in 1952, other destinations included cities in the South, the Midwest, Texas, and the Caribbean. Almost instantaneously the company has become the fifth largest airline in the United States. International service increased when the company bought Northeast Airlines in 1972 and offered service to New England, Canada, and London.

In 1983 the company reported its first financial loss due to a poor economy. Having become profitable once again by 1985, Delta purchased Western Air Lines, and also used its profits to begin flights to Asia in 1987. International flights accounted for 11 percent of Delta's passenger revenues by 1989, and during this time the company made deals with Swissair and Singapore Airlines. Delta also conducted a joint venture with TWA (replaced by American Airlines) and Northwest to create WORLDSPAN, a computer service that managed reservations. Delta owned a 40 percent share of WORLDSPAN in 2002.

Delta witnessed a financial setback in 1990 as a result of fuel and labor increases coupled with reduced fare rates. Delta followed this disappointment with the purchase of gates, planes, and three Canadian routes from Eastern. The company also purchased Pan Am's New York-Boston shuttle, European routes, and a Frankfurt hub. These purchases made the company the largest airline in the world based on the cities it served and its fruitfulness.

FAST FACTS: About Delta Air Lines, Inc.

Ownership: Delta Air Lines, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: DAL

Officers: Frederick W. Reid, Pres. and COO, 51, $1.4 million; M. Michele Burns, EVP and CFO, 44, $735,000; Leo F. Mullin, Chmn. and CEO, 59, $2.2 million

Employees: 76,273

Principal Subsidiary Companies: Delta Air Lines, Inc.'s chief subsidiaries include Delta Express, the Delta Shuttle, the Delta Connection, and Delta's Worldwide Partners.

Chief Competitors: Competition among airlines is strong. Delta competes with many major airlines on its principal routes as well as with regional, national, and all-cargo carriers. Some primary competitors include Continental Airlines, USAir, United, Alaska Air, and British Airways.

Once again the company began to see financial difficulties due to price wars and a weak economy, and by 1992, Delta was forced to evaluate cost-cutting possibilities. The company reduced planes and short-distance routes. In 1995 the company decided to cease its flights to Bangkok, Hong Kong, and Taipei, since they had not been financially rewarding. In the mid to late 1990s, DAL hoped to take away some of the strategic advantage of no-frills carriers by cutting back on its more expensive customer perks such as lavish in-flight meal service. Delta's advantage in the marketplace in the 2000s as it strives for a return to profitability is that it has avoided the catastrophic battles with union workers that have assailed such air carriers as United and USAir. Delta, largely nonunion save for the pilots' union, pays wages that are competitive for the most part with air carriers that are union workers, but it has been able to deny costly wage increases to flight attendants and airport workers in 2002 at a time of crisis for the airline, thus holding down costs.

STRATEGY

CEO Leo F. Mullin in 2002 stressed to the trade publication Aviation Week & Space Technology that the company anticipated continued success in international, vacationer and leisure and regional Delta markets, but that the company was vigorously courting the lucrative corporate travel market that shrunk disastrously after the September 11, 2001 terrorist attacks using aircraft. M. Michele Burns, EVP and CFO, told Aviation Week & Space Technology that Delta's strategy was to pay strict attention to "capacity discipline, cost containment and cash preservation."

INFLUENCES

Changes in the industry begun in the early 1990s have escalated in the 2000s and eventually will see legislative debate in the U.S, Congress over the issue of mandatory arbitration for workers in spite of union objections. Although many of Delta's rank and file workers are non-union, a battle with the Air Line Pilots' Association in 2001 nearly shut down the airline and helped make the airline unprofitable for the year. The rising popularity of low-cost, low-fare airlines has continued to force Delta to make continual cutbacks in order to stay competitive. Customers clearly tend to choose lower costs over amenities as the top consideration when purchasing a ticket.

The airline industry, most analysts agree, is a mature one in the United States and abroad. The European market has been one of increasing demand, especially since competing airlines have begun service improvements. Also a major strength for Delta has been its Delta Connection strength as a server of regional markets. Beginning in 2002, Chautauqua Airlines starts service as the fifth such regional carrier in the DAL system.

CORPORATE CITIZENSHIP

Delta Air Lines, Inc.'s community involvement has revolved primarily around youth, investment in minority education, and cultural affairs. The company supports numerous charities targeting childhood diseases. Its four main charities include the American Red Cross, CARE, Children's Miracle Network and the Juvenile Diabetes Foundation. At the community level, Delta has become a major supporter of Habitat for Humanity. Delta also allows frequent traveler mile contributions to be used to aid the Make-A-Wish-Foundation and Make-A-Wish Foundation International.

GLOBAL PRESENCE

In 2002 Delta Air Lines announced that it now serves more passengers worldwide than any competitor, through its large worldwide route system. In 2001, some104 million passengers chose Delta, more than any other competitor. Delta and its partners boast that they operate 6,400 daily flights to more than 450 cities in 98 countries.

CHRONOLOGY: Key Dates for Delta Air Lines, Inc.

1924:: Huff-Deland Dusters is established as a crop dusting service
1928:: Renames company to Delta Air Service
1929:: Begins offering passenger flights from Dallas, Texas, to Jackson, Mississippi
1941:: Delta relocates to Atlanta, Georgia
1953:: Merges with Chicago and Southern Airlines
1967:: Delta Air Lines becomes the company name after a merger with Delaware Airlines
1972:: Northeast Airlines is purchased
1982:: Delta forms two computerized marketing subsidiaries to coordinate and sell tickets on Delta flights
1991:: Purchases a package of assets from Pan Am, giving Delta a hub in Frankfurt, Germany, as well as dozens of European routes
2000:: Announced creation of SkyTeam, a global alliance, partnering Delta with AeroMexico, Air France and Korean Air
2001:: Delta posts first loss in six years
2002:: Chautauqua Airlines and Delta form a partnership

EMPLOYMENT

The company has a successful contract in place with its union airline pilots in 2002, but it has vigorously resisted attempts by its flight attendants, ground crews, and other personnel to unionize. Delta maintains that its executives' salaries are below their peers' at other airlines, so they have developed an Incentive Compensation plan (pay for performance) aligned that with the company's strategic objectives. In addition, safety, customer satisfaction, and on-time performance are continually stressed. Although it has not endured quite the paralyzing labor situation that competitors United and USAir have struggled with in the 2000s, Delta nonetheless has announced it favors some sort of mandatory arbitration to reduce the specter of strikes that invariably cause travelers to book with alternate airlines.

SOURCES OF INFORMATION

Bibliography

"airlines paving way for 'binding arbitration' law." airline financial news, 29 april 2002.

"delta air lines, inc." hoover's online, 15 june 2002. available at http://www.hoovers.com.

delta air lines, inc. home page, 17 june 2002. available at http://www.delta-air.com.

marek, lynne. "delta's mullin cuts costs and copes with low fares." bloomberg news, 17 april 2002.

"phillips, edward h. from big losses to a small profit, airlines report rocky quarter." aviation week & space technology, 22 april 2002.

For an annual report:

on the internet at: http://www.delta.com/inside/investors/annual_reports/2001_annual/pages/financials/note11.html

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. delta's primary sic is:

4512 air transportation scheduled

also investigate companies by their north american industry classification system codes, also known as naics codes. delta's primary naics code is:

481110 scheduled air transportation

Company Profiles for Students

Delta Air Lines, Inc.

Delta Air Lines, Inc.

From Crop Dusting to Passenger Transport

The Growth of Air Travel After World War II

A New Business Strategy for the 1980s

Company Perspectives:

Record Profits, New Problems: Heading into the Twenty-First Century

Key Dates:

Principal Subsidiaries

Principal Competitors

Further Reading

Delta Air Lines, Inc.

Delta Air Lines, Inc.

Principal Subsidiaries

Further Reading

Delta Air Lines, Inc.

Delta Air Lines, Inc.

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HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

MARKETING STRATEGY

SONG AND NYC MEATPACKING DISTRICT ALLIANCE ANNOUNCED

OUTCOME

FURTHER READING

ON TOP OF THE WORLD CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

LIVING BILLBOARD

MARKETING STRATEGY

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OUTCOME

FURTHER READING

THE PASSENGER'S AIRLINE CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

AIRLINE ALLIANCE ADS PROMOTE CUSTOMER SERVICE

MARKETING STRATEGY

OUTCOME

FURTHER READING

Delta Air Lines, Inc.

Delta Air Lines, Inc.

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

STRATEGY

INFLUENCES

CURRENT TRENDS

CORPORATE CITIZENSHIP

FAST FACTS: About Delta Air Lines, Inc.

GLOBAL PRESENCE

EMPLOYMENT

CHRONOLOGY: Key Dates for Delta Air Lines, Inc.

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

Delta Air Lines, Inc.

Delta Air Lines, Inc.

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

FAST FACTS: About Delta Air Lines, Inc.

STRATEGY

INFLUENCES

CORPORATE CITIZENSHIP

GLOBAL PRESENCE

CHRONOLOGY: Key Dates for Delta Air Lines, Inc.

EMPLOYMENT

SOURCES OF INFORMATION

Bibliography