Fast-forwarding to 2015, Delta has become an industry leader. In 2013 the company boasted the highest net profit in the history of the industry, and is currently the world\u2019s largest airline by passenger volume [ii.]<\/a> Delta achieved this success through its business and operating model alignment. Delta\u2019s business model focuses on attracting corporate travelers, a segment characterized by high margins and low price sensitivity. Delta also strives for a flexible business model that focuses on shifting their cost structure from fixed to variable costs as much as possible. Together, this model allows the company to scale up or down to meet demand, while maintaining higher margins than competitors.<\/p>\n Delta\u2019s operating model supports its business model through four key activities: purchasing used aircraft, vertical integration, low-unionization of labor, and industry-leading customer service. Airlines are known for their high fixed costs, with many airlines opting to purchase expensive new aircraft that come with low maintenance costs but high acquisition costs. Delta\u2019s strategy, however, has been to purchase used aircraft, which offer cheaper acquisition costs but higher maintenance costs. This model leaves Delta with lower fixed costs but higher variable (maintenance) costs, allowing them to quickly scale up or down to meet demand, while not being burdened by the same level of fixed costs of other airlines [iii.]<\/a> This creates sustained competitive advantage and reduced operational risk in the event of rapid increases or decreases in volume.<\/p>\n Delta\u2019s operating strategy also includes owning their own fuel refinery. Although fuel hedging and futures trading have become standard for airlines, Delta has taken this further by owning a source of low-cost fuel, protecting them from cost spikes [iv.]<\/a> Through vertical integration Delta reduced its per-gallon fuel prices by $.10 in the first quarter of 2014 [v.]<\/a> If fuel prices rise, Delta is positioned to respond to this pressure and maintain its competitive price advantage.<\/p>\n Delta\u2019s operating strategy also translates directly into its workforce. Airlines are known for high unionization rates, with approximately 50% of airline employees unionized. Delta\u2019s unionization rate is closer to 18%, allowing it to keep base wages lower [vi.]<\/a>\u00a0 Instead of offering high fixed wages, Delta instead offers industry-leading profit sharing plans. This allows Delta to shift a portion of their labor costs from fixed to variable, allowing the airline to remain competitive even in market downturns, and reducing the risk of an employee strike. In 2014, Delta\u2019s profit sharing program yielded nearly one month\u2019s salary to each employee [vii.]<\/a><\/p>\n Delta\u2019s business model also focuses on delivering high customer service to appeal to their core demographic, business travelers. Delta\u2019s commitment to customer service is evidenced by their recent multi-billion dollar investment in enhanced training programs for customer service agents, designed to improve the customer experience. Delta\u2019s commitment to customer service also led to their development of the first mobile bag tracking feature on smartphones [viii.]<\/a> Delta has even focused on creating a more lighthearted atmosphere in-flight, finding ways to bridge safety and fun in recent in-flight videos seen below. These new changes have been well received by business travelers, leading to Delta\u2019s #1 ranking by corporate clients four years in a row by Business Travel News [ix.]<\/a><\/p>\n![\"Delta-Airlines-Refine_Hugh\"](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Delta-Airlines-Refine_Hugh-300x200.jpg\")
<\/a>Delta’s Trainer Fuel Refinery<\/p>\n