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Delta Hotels
 

Delta Hotels

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    Delta Hotels Delta Hotels Presentation Transcript

    • - Analysis - Leadership - Culture - Outlook - Business Model - Strategy - Customer Interface - Recommendations Pratt Institute | DM 672 | Business Strategy COMMERCIAL AVIATION IN U.S. Helps Drive - $1.142 trillion in economic activity - $346.4 billion in earnings - 10.2 million jobs Contributes - $692 billion/year to U.S. GDP - 5.2% of U.S. GDP Traffic - 40,000+ daily commercial departures - 2 million US passengers daily AGENDA
    • “Welcome Change. Welcome the new Delta.” KEY FACTS Since the founding of Delta Air Lines, our company has stood for safe and reliable air transportation, distinctive customer service, and hospitality from the heart. HQ in Atlanta, GA Founded 1928 52,386 Employees $22,697 Sales (in millions) $3.6 billion merger with NWA World’s largest airline (by traffic) COMPETITION Our vision is for Delta to build on its traditions and always to meet our customers' expectations while taking service to even higher levels of excellence. We are a leader in a business we know best - airline transportation. Pratt Institute | DM 672 | Business Strategy American United Continental US Airways Southwest America West Jet Blue ATA British Airways China Southern Air France AeroMexico Aeroflot Virgin Singapore Airlines SAS
    • - 9/11 COMMERCIAL AVIATION IN U.S. - Fuel Costs Helps Drive - Chapter 11 - Executive Management - Delta/NWA merger (Oct. 2008) - $1.142 trillion in economic activity - $346.4 billion in earnings - 10.2 million jobs Contributes - $692 billion/year to U.S. GDP - 5.2% of U.S. GDP - Capacity Cuts Source: FAA October 2008 Pratt Institute | DM 672 | Business Strategy PROFILE
    • Industry Airline Revenue Growth (adjusted for inflation) INDUSTRY FORCES Threat of New Entrants Power of Suppliers Power of Buyers Availability of Substitutes Competitive Rivalry OTHER FACTORS Labor Fuel Cost Weather Economy 9/11 Regulation Source: EIU/IATA Economic Briefing 2008 Pratt Institute | DM 672 | Business Strategy OVERVIEW
    • U.S. Airline Revenue Growth OUT OF BUSINESS (2008) MAXJet Big Sky Aloha ATA Skybus Eos Champion Air Midwest Vintage Props & Jets Gemini Air Cargo ExpressJet Chapter 11 Source: ATA Industry Review 2009 Frontier Sun Country Primaris Source: ATA Industry Review 2009 Pratt Institute | DM 672 | Business Strategy OVERVIEW
    • Income Statement (in millions) 2007 2008 12,758 4,170 482 1,744 15,137 4,446 686 2,428 Revenue Passenger Mainline Passenger Regional affiliates Cargo Other Total Revenue $ 19,154 $ 22,697 Top Expenses 2008 1. Fuel (23.7%) 2. Impairment of intangible assets 3. Salaries Expenses 4,189 4,686 1,164 996 3,152 725 983 933 0 0 15 Salaries Fuel Depreciation Contract Service Contract Carrier Arrangements Landing Fees Aircract Mantenance Passenger Commission Impairment of intangible assets Restructuring Charge Other operating 4,802 7,346 1,266 1,153 3,616 839 1,169 1,030 7,296 1,131 1,363 4. Carrier Arrangements 5. Depreciation 6. Aircraft Maintenance NET Income Comparison for 2008 Net Income $ $ 16,843 1,612 Pratt Institute | DM 672 | Business Strategy $ $ 31,011 (8,922) $ (585 million) American $ (2 billion) US Airways $ (2.2 billion) Delta Operating Expense Continental $ (8.9 billion) Source: WSJ DAL Financial Reports FINANCIALS
    • Balance Sheet (in millions) 2006 Cash/Investments Accounts Receivable Maintenance Flight Equipment Goodwill Leasehold Rights Other Total Assets $ Liabilities Accounts Payable Air Traffic Liabilities Taxes Payable Accrued Salaries Debt Pension & retirement Deferred Revenue Other 2007 2,784 936 192 18,115 227 279 2,911 Assets 3,168 1,092 273 10,127 12,104 2,953 2,706 19,622 $ 936 1,797 500 405 8,012 0 709 20,856 Total Liabilities $ 33,215 Total Equity $ (13,593) Pratt Institute | DM 672 | Business Strategy 32,423 1,045 1,982 320 734 9,000 3,867 3,632 1,730 $ 10,113 - 530% increase in Goodwill? - Did Chapter 11 absolve pension? - $20 billion “liabilities subject to compromise”? ...This amount represents the debtors' estimate of known or potential prepetition claims to be resolved in connection with the Chapter 11 cases. 22,310 $ OBSERVATIONS Source: WSJ DAL Financial Reports FINANCIALS
    • STRENGTHS - World’s largest mega carrier “Although airlines will seek to recover - Innovative business strategies (Song, Delta re-branding) the higher cost through...fare hikes and - Acquisition of Northwest Airlines higher fees, this will prove increasingly - SkyTeam alliance difficult in a weak U.S. economy.” - Industry-leading airport model (lobby re-design, self-service kiosks) WEAKNESSES - Capacity cuts (20% capacity reduction) - Employee cuts (2,000 job cuts) - Low on-time rating - S&P, May 22, 2008 “Airlines have no choice but to pass on the cost of fuel...and when passengers - Air transportation safety do begin to push back in significant - Operational costs numbers the airlines have no choice - Susceptibility to labor-related disruptions (employee strikes) but to slash capacity.” - Technology dependence for operations - No clear mission & vision - Differentiation Pratt Institute | DM 672 | Business Strategy - Rick Seaney, WSJ 2008 S.W.O.T.
    • OPPORTUNITIES - Invest in new technologies INDUSTRY FORCES - New Presidential Administration Threat of New Entrants - Fuel alternatives Power of Suppliers - Reduce operational costs Power of Buyers - New sources of operating revenue - Enhance the customer experience - Renegotiate lease agreements (2012-Atlanta HQ HUB) THREATS Availability of Substitutes Competitive Rivalry OTHER FACTORS - Video Conferencing Technology Labor - Fluctuating Fuel Costs & Supply Chain risks Fuel Cost - Unionized Labor Strikes (17% of workforce is unionized) Weather - Disruptions/interruptions of service at hub airports Economy - Profit losses and adverse publicity from any aircraft accident incidents - Government Regulation CO2 Emissions - Global Economic Recession - Customer reaction to new policies (baggage & food) Pratt Institute | DM 672 | Business Strategy 9/11 Regulation S.W.O.T.
    • INDUSTRY FORCES Threat of New Entrants Power of Suppliers Power of Buyers Now what!? Availability of Substitutes Competitive Rivalry OTHER FACTORS Labor Fuel Cost Weather Economy 9/11 Regulation Pratt Institute | DM 672 | Business Strategy HORIZON
    • U.S. Airline Revenue Growth - Chapter 11 - NWA Merger - Fuel Hedging - Personnel Costs - Poor Economy - Cutting Capacity & Jobs - New Revenue Streams Source: ATA Industry Review 2009 Industry Airline Revenue Growth (adjusted for inflation) Source: EIU/IATA Economic Briefing 2008 Pratt Institute | DM 672 | Business Strategy REVIEW
    • Income Statement (in millions) 2007 2008 12,758 4,170 482 1,744 15,137 4,446 686 2,428 Revenue Passenger Mainline Passenger Regional affiliates Cargo Other Total Revenue $ 19,154 $ 22,697 Expenses 4,189 4,686 1,164 996 3,152 725 983 933 0 0 15 Salaries Fuel Depreciation Contract Service Contract Carrier Arrangements Landing Fees Aircract Mantenance Passenger Commission Impairment of intangible assets Restructuring Charge Other operating 4,802 7,346 1,266 1,153 3,616 839 1,169 1,030 7,296 1,131 1,363 Operating Expense $ 16,843 $ $ 1,612 $ (8,922) 1. Fuel (23.7%) 2. Impaired intangible assets (23.5%) 3. Salaries (15%) 4. Carrier Arrangements (11.7%) 5. Depreciation (4%) 6. Aircraft Maintenance (3.8%) NET Income Comparison for 2008 Continental $ (585 million) American $ (2 billion) US Airways $ (2.2 billion) Delta $ (8.9 billion) 31,011 Net Income Top Expenses 2008 Pratt Institute | DM 672 | Business Strategy Source: WSJ DAL Financial Reports REVIEW
    • STRENGTHS WEAKNESSES - Acquisition of Northwest Airlines - World’s largest mega carrier & flight network - Low on-time rating - Operating costs - Pacific & Atlantic Ocean flight routes - Employees - SkyTeam & SkyMiles alliance - Airport model - Brand & History - Susceptibility to service disruptions - Technology dependence for operations - Differentiation - Merger consolidation OPPORTUNITIES - Reduce operational costs & capacity - Streamline operations & supply chain - New value-for-money strategies - Enhance the customer experience - Customer retention initiatives - Invest in new technologies - Renegotiate lease & labor agreements Pratt Institute | DM 672 | Business Strategy THREATS - Alternatives - Competition - Increased regulation - Market environment - Economy - Fuel costs - Crashes/Terrorism S.W.O.T.
    • The Huff Daland Dusters founded (pre-Delta) Begins operating as Delta Air Lines Chicago and Southern Air Lines merger W.T. Beebe becomes Chairman and CEO 1924 1934 1953 1971 1928 1945 1966 1978 Merger: Huff Daland Dusters + Delta Airlines. Renamed Delta Air Service Official corporate name becomes Delta Air Lines, Inc. Delta founder C.E. Woolman dies. Charles H. Dolson named CEO The Airline Deregulation Act passes Source: Delta website - Delta Through the Decades Pratt Institute | DM 672 | Business Strategy LEADERSHIP
    • Delta celebrates its 50th year of service Western Airlines merges-becomes 4th largest US carrier Leo F. Mullin is named President and CEO Delta declares Bankruptcy. Richard H. Anderson becomes CEO 1979 1987 1997 2006 1981 1991 2001 2008 Delta launches Frequent Flyer Program Pan Am Merger U.S. airspace closed for two days after terrorist attacks on Sept. 11th Merger with NWA Source: Delta website - Delta Through the Decades Pratt Institute | DM 672 | Business Strategy LEADERSHIP
    • The Work Environment - Delta has always been family oriented but changed with the times - Committed to maintaining corporate culture, committed to employee and customers satisfaction. Anderson demonstrates this through: 1. Employees: Profit sharing & Stock Options 2. Emphasis on customer service 3. Providing compensation packages - Employees believe culture changed, but Anderson understands both cultures of Delta and NW - Delta is non-union, NW is unionized (pilots) Pratt Institute | DM 672 | Business Strategy CULTURE
    • Facts & Updates Industry Airline Revenue Growth (PROJECTIONS) - Profitability in 2009 due to: 1. Lower fuel costs 2. Capacity Discipline 3. Merger synergies Text - Reduction of Domestic Capacity - Delta and NW Traffic updates Change in % of Consumer Spending for Airline Industry 10 8 6 4 2 0 2008 2009 2010 2011 2012 2013 -2 -4 -6 -8 -10 YEAR "They're definitely taking capacity down probably more than what people thought they would be doing," Helane Becker, airline analyst at Jesup & Lamont Securities Pratt Institute | DM 672 | Business Strategy OUTLOOK
    • Industry Airline Revenue Growth (PROJECTIONS) Change in % of Consumer Spending for Airline Industry 10 8 6 4 2 0 2008 2009 2010 2011 -2 -4 Text2013 2012 US Personal Consumption expenditures for US airlines are expected to grow at an annual compounded rate of 5.9% between 2008 and 2013. -6 -8 -10 YEAR Pratt Institute | DM 672 | Business Strategy Consumer Spending on airline travel Growth Slows and Flattens. OUTLOOK
    • INVESTMENT OUTLOOK CONTINENTAL 22 AMERICAN US Personal Consumption US AIRWAYS expenditures for US airlines NUMBER OF IRPs 20 are expected to grow at an 18 TAM 16 DELTA Text UNITED annual compounded rate of 5.9% between 2008 and 2013. 14 12 CHINA SOUTHERN Consumer Spending on airline CHINA EASTERN travel Growth Slows and 4.0 SELL 3.5 2.5 3.0 HOLD 2.0 BUY Flattens. Source: WSJ DAL Financial Reports FEB. 2009 Pratt Institute | DM 672 | Business Strategy OUTLOOK
    • FUEL CUSTOMER NEEDS TECHNOLOGICAL CHANGE ECONOMY LABOR REGULATION COMPETITION ENVIRONMENT Pratt Institute | DM 672 | Business Strategy MARKET FORCES
    • LABOR COMPETITION ENVIRONMENT REGULATION ECONOMY TECHNOLOGICAL CHANGE FUEL CUSTOMER NEEDS Turbulent Market Forces Suppliers Procurement Inbound Logistics Operations Excess Capacity & Supply Pratt Institute | DM 672 | Business Strategy Developement Outbound Logistics Marketing & Sales Service Customers Lower Demand & Spending VALUE CHAIN
    • Network & Operations Market & Customers (Behind the scenes) (Perception) PARTNER NETWORK CUSTOMER RELATIONS Producers, Suppliers, Partners, Employees Service (CSR), Employees, Sales, PR CHANNELS CUSTOMERS RESOURCES ACTIVITIES VALUE PROPSITION Fuel Logistics Air Transportation Distribution Operations Cargo Delta.com Labor Development Entertainment Internet Airports Brand Management (Vacation, Transfer, Business, Elite) Food Phone Content Sales & Marketing Travel Agents SkyMiles Terminal Support Strategy e-commerce Training & Consulting Partner Airline Maintenance IT Advertisers Advertising In-flight Service Planes Service Content Passengers Costs Margin Revenue (HR, R&D, Finance, Development, Purchasing, HUBS, etc.) (Revenue - Costs) (Passengers, Baggage, Entertainment, Food, Advertising) $31 billion Creating Value $22.7 billion -$8.9 billion Capturing Value Model created by Alexander Osterwalder, Arvetica Pratt Institute | DM 672 | Business Strategy BUSINESS MODEL
    • Network & Operations Market & Customers (Behind the scenes) (Perception) PARTNER NETWORK CUSTOMER RELATIONS PARTNER NETWORK Producers, Suppliers, Partners, Employees Producers, Suppliers, Partners, Employees RESOURCES Service (CSR), Employees, Sales, PR ACTIVITIES Logistics RESOURCES Fuel VALUE PROPSITION Air Transportation ACTIVITIES CHANNELS VALUE PROPSITION Operations Cargo Development Distribution Fuel Entertainment Air Transportation Internet Food Phone Cargo SkyMiles Terminal Logistics Labor Operations Brand Management Airports Distribution Sales & Marketing Content Development Strategy Labor Support Training & Consulting IT Advertising Brand Management Maintenance Airports Service Planes Content Delta.com Passengers (Vacation, Transfer, Business, Elite) Travel Agents e-commerce Entertainment Partner Airline Advertisers In-flight Service Food Sales & Marketing Support Maintenance SkyMiles Strategy Content Training & Consulting IT Costs Service (HR, R&D, Finance, Development, Purchasing, HUBS, etc.) Planes CUSTOMERS Margin (Revenue - Costs) $31 billion Creating Value Advertising Revenue (Passengers, Baggage, Entertainment, Food, Advertising) Content $22.7 billion -$8.9 billion Capturing Value Model created by Alexander Osterwalder, Arvetica Pratt Institute | DM 672 | Business Strategy BUSINESS MODEL
    • Network & Operations Market & Customers (Behind the scenes) (Perception) CUSTOMER RELATIONS CUSTOMER RELATIONS PARTNER NETWORK Service (CSR),(CSR), Employees, Sales, PR PR Employees, Sales, Service Producers, Suppliers, Partners, Employees RESOURCES Fuel ACTIVITIES VALUELogistics PROPSITION Operations Distribution Air Transportation Development Labor Brand Cargo Management Airports Sales & Marketing Content Support Entertainment Strategy Maintenance IT Food Service Planes SkyMiles VALUE PROPSITION Air Transportation Advertising (HR, R&D, Finance, Development, Purchasing, HUBS, etc.) Content Entertainment CUSTOMERS Delta.com Internet Passengers (Vacation, Transfer, Business, Elite) Phone Delta.com Food SkyMiles Travel Agents Passengers e-commerce Terminal Training & Consulting Internet Airline Partner (Vacation, Transfer, Business, Elite) Advertisers In-flight Service Phone Advertising Content Travel Agents e-commerce Partner Airline Margin Terminal Advertisers In-flight Service (Revenue - Costs) $31 billion Creating Value CUSTOMERS CHANNELS Cargo Training & Consulting Costs CHANNELS Revenue (Passengers, Baggage, Entertainment, Food, Advertising) $22.7 billion -$8.9 billion Capturing Value Model created by Alexander Osterwalder, Arvetica Pratt Institute | DM 672 | Business Strategy BUSINESS MODEL
    • Delta Air Lines Overview HUBS Marketing - Inconsistent Message - Does not speak to the customer experience “Welcome Change, Welcome the new Delta” Approach - Multiple agencies do work for them over the years - The Merger is a new opportunity Pratt Institute | DM 672 | Business Strategy - Cincinnati - Atlanta - JFK - Salt Lake City - *Minneapolis Customer Retention - SkyMiles - SkyTeam - Crown Room Club Subsidiaries - Comair - Compass Airlines - Delta Shuttle - Delta AirElite - Mesaba Airlines - Northwest Airlines (3 business’) Destinations - 461 destinations in 96 countries - More than any other U.S. airline - Delta has 1,534 flights per day - Delta Connection: 2,533 daily - Delta + Alliance: 6,795 daily STRATEGY
    • Delta Awareness planning reservation trip airport arrival check-in security boarding check-in service de-boarding baggage airport follow-up claim departure & memory Delta Awareness Continues customer experience mapping Pratt Institute | DM 672 | Business Strategy CUSTOMERS
    • US Airways Virgin Atlantic British Airways Delta Continental American Southwest United JetBlue Pratt Institute | DM 672 | Business Strategy CUSTOMERS
    • Creating Value - Reduce costs, capacity, and increase efficiency - Focus on domestic vs. international - Evaluate and streamline suppliers - Renegotiate contracts - Evaluate and divest noncore business units & programs - Monitor competition and borrow ideas from international market Capturing Value - Transparent & effective MarComm - Maintain & revitalize marketing & customer retention initiatives - New & enhanced value proposition opportunities - Charge for EVERYTHING Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Ideas... - Enhance the customer experience - Technology (RFID & ICT) - Sell more Advertising (Captive audience who you know all about) - Trade content for passenger feedback, information, & marketing - Monitor passenger content interaction & improve offerings - Sales training for Flight-Attendants (the new sales force in the sky) - Investigate alternative food, beverage, & service models - Recycling and waste reduction Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Maximize value by Charging for a better Customer Experience Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Technology Content, Access, & Information Games, Movies, Messaging, & WiFi.... Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Advertising Connect Advertisers to Customers John Smith age 40 race white geography NYC status Married children 2 Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Service Your sales force in the sky... ...can I interest you in a glass of wine? Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Technology RFID baggage tracking Industry could save $650 million to $1 billion annually Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • WASTE more than 2 million plastic cups daily Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Experience Simulation & Visualization Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Experience Visualization Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • Experience Visualization Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • RE-Imagine your Business Model ...Charge for EVERYTHING Pratt Institute | DM 672 | Business Strategy RECOMMENDATIONS
    • RE-Imagine your Business Model ...Skydiving anyone? Pratt Institute | DM 672 | Business Strategy Q&A