DELTA AIRLINES

Delta Airlines has been one of the strongest airlines operating in the United States , in 2002 it was the third-largest passenger carrier in the world in terms of revenue and the second-largest in terms of passengers flown (Rivkin Therivel , 2005 p8 . At present , however its profitability and growth is threatened by the rise of low cost carriers like Southwest and Jetblue . The low cost carriers have gained significant inroads into Delta 's prized Florida market , coupled with this is that legacy carriers operating in hub and spoke have lowered fares , and regional

airlines were also competing with their midsized markets . Faced with these problems , the management team of Delta had met up with consultants to help them wade through this situation

The team had several options lined up for Delta to consider as a response to the threat of low-cost competition . This included the option of continuing with the present arrangement wherein mainline Delta , Delta Express and Delta 's fleet of regional jets against the existing low cost carriers , to modify Delta Express so that it would become a true low cost carrier or to integrate it with the mainline Delta . Another remedy would be to launch a new low cost subsidiary which in reality would be costly for Delta but can still be feasible , although it should be explained to shareholders and industry analysts

Considering the present situation in the airline industry and the track record for the failure of loc cost subsidiaries , it would seem that modifying or integrating Delta Express is a more viable option . Delta Express is already in operation and is up and running , if Delta would want to launch a new low cost subsidiary which would spell millions of investments , it would make sense to develop what presently exists . Or Delta could look into expanding its mainline fleet by integrating Delta Express , this would save them costs in leasing new aircrafts and establishing flight routes as well as being able to retain its market

References

Rivkin , J Therivel , L (2005 . Delta Air Lines : The low-cost carrier threat , Harvard Business

School . Boston HBS Publishing , pp1-15 ...