Delta Airlines

4516 words 19 pages
EXECUTIVE SUMMARY

This report provides an examinaion of the current structure, performance, stragergy and management of Delta Airlines, along with an industry analysis of the airline industry. The report uses current and past financial and statistical data for the company along with other up to date material to determine Delta's current market position and future potential.

The report finds that Delta Airlines has successfully emerged from its bankruptcy in 2005 to report successful returns in both 2007 and 2008. With its 2008 acquisition of Northwest Airlines Delta became the world's largest airline, further improving its position in the airline industry. Despite this current positive position report also finds potential adversities
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Mergers

Market conduct, of which market power results, can also be viewed as a way in which the firms behave in order to increase market share. Three different types of mergers can be identified namely, horizontal mergers, vertical mergers and conglomerate mergers. Horizontal mergers occur when firms in the same industry combine. Vertical mergers occur when firms combine at different stages of the production process. The merger between Delta and Northwest Airlines in 2008 resulted in a horizontal merger, allowing Delta to increase their market share (Journal of Commerce Online, 2008).

Financial Summary

Delta’s financial summary illustrated in Figure 1, indicates that the company has had a positive revenue growth increase by eight percent in 2007 and fifteen percent in 2008. However, their continual increase in operating expenses is eroding any possibility of a positive operating income. Although these loses are not acceptable, there is a several contributing factors which have reduced their operating income. Firstly, due to their restructuring plan in 2006, initiated by filing for bankruptcy in 2005, they incurred costs of $6.2 billion. This did have a flow on effect into 2007 in which they saw a gain of $1.2billion. Similarly in 2008, Delta suffered a fuel price increase of 30%, which increased their overall operating expenses by seven percent from the previous

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