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How Delta Air Lines Mapped A Path To Success And Followed It

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The most important thing to know about Delta’s transition over the past decade is this: today, Delta gets a revenue premium of 107%. That is to say, in the first quarter, Delta’s revenue per available seat mile was seven points higher than the airline average because people choose to fly on Delta.

Before it sought bankruptcy protection in 2005, Delta had revenue per available seat mile that was 86% of the industry average. By the first quarter of 2007, Delta executives were pleased to proclaim that RASM was 96% of the industry average. The carrier emerged from bankruptcy protection on April 30, 2007.

While all of the major airline bankruptcies in the first decade and a half of the 21stcentury have been successful, enabling the carriers to profitably restructure, Delta’s was probably the most uniquely successful.

The bankruptcies all led to cost-cutting, primarily labor cost cutting, and enabled the final stages of post-deregulation consolidation to play out. Meanwhile, soaring oil prices led the industry to reduce capacity. And the idea of ancillary revenues caught on rapidly after United began to charge $25 for a second checked bag in 2008.

The American and US Airways bankruptcies both led to mergers enabling takeovers by an aggressive young management team from America West Airlines. United sat in bankruptcy for three years waiting for a merger. In 2010, four years after emerging, it finally enticed Continental . Today, given United’s problems, it is worth asking whether Continental management would make the same decision again.

As for Delta, it used bankruptcy to remake itself. Delta has one of U.S. airline industry’s best assets: the Atlanta hub, the biggest single airline hub in the world.

Before the bankruptcy, Atlanta was squandered, used largely to connect passengers between the Northeast and Florida – a leisure market with little potential to provide revenue premiums. Now Atlanta has 970 daily departures to 210 destinations including 62 international destinations. Overall, Delta serves 59 countries.

During an investor conference in 2007, Delta executives talked of their hopes. Executive Vice President Glen Hauenstein said he was seeking Heathrow slots. Not serving Heathrow, “is like fighting with one hand behind our back,” he said. In 2013, Delta acquired 49% of Virgin Atlantic, which brought enough slots to provide about two dozen daily round-trip Heathrow flights.

Also at the 2007 conference, President Ed Bastian talked of trying to secure a China route. “We fully expect to get China next year,” Bastian said. “Shame on us if we don’t.” In 2008, Delta merged with Northwest, acquiring a China presence.

Also in 2007, Delta CEO Jerry Grinstein, who had led the bankruptcy reorganization, said Los Angeles should provide another gateway to Asia. Okay, Delta went another direction there. Following Hauenstein’s vision, it is seeking to build its trans-Pacific hub in Seattle. This summer it will serve 10 international destinations from Seattle

Finally, Bastian said in 2007 that boosting its New York presence was Delta’s number one priority. Combining totals at LaGuardia and Kennedy airports, Delta has the most service, but “we’re not getting our share of the premium,” Bastian said.

Four days ago, on May 7, Bastian declared at an investor conference that Delta’s goal in 2014 “is to be profitable, for the first time in Delta history, in New York.”

This week, Delta announced it will boost its dividend 50% and buy back $2 billion worth of its shares. At the investor conference, Bastian said Delta is not stopping here. He said the carrier “should be able to continue to improve” on its 107% revenue premium.

The three global U.S. carriers “have very similar structures and networks,” Bastian said. “It’s really the quality of the service that matters (because) customers choose which airline they’re going to fly.”

670px-delta_world_hq_-_fly_delta_air_linEnglish: “Fly Delta Air Lines” marker (Photo credit: Wikipedia)


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Traduzindo: redução de custos com trabalhadores (salários e benefícios); aumento de receitas auxiliares (bagagem, lanche etc.) e concentração de voos em um Hub principal.

Muito "fácil" seguir essa trilha...

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