Problems at Delta Airlines

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Case Details:

Case Code : BSTR135
Case Length : 18 Pages
Period : 2001 - 2004
Organization : Delta Airlines
Pub Date : 2004
Teaching Note : Available
Countries : U.S.A
Industry : Aviation

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Delta's Restructuring Plan Contd...

"If we cannot make substantial progress in the near term toward achieving a competitive cost structure that will permit us to access the capital markets on acceptable terms, we will need to seek to restructure our costs under Chapter 11 of the U.S. Bankruptcy Code," the airline said in its second-quarter report to the Securities and Exchange Commission.8


Delta's history can be traced back to 1924, when Huff Daland Dusters, an aerial crop dusting company, was set up in Georgia (USA) by B.R Coad (Coad) and C.E Woolman (Woolman), who were associated with the US Department of Agriculture. In 1928, Woolman bought out Coad's stake in the airline and renamed it Delta Air Service. In 1929, Delta diversified from crop dusting and made a foray into passenger airline services. The first passenger flight flew from Dallas (Texas) to Jackson (Mississippi) in the same year. In 1934, the airline's name was changed to Delta Air Lines and subsequently, in 1941, its headquarters were moved from Monroe in Louisiana to Atlanta in Georgia. In 1945, Delta was officially incorporated as Delta Air Lines Inc., with Woolman as the President and general manager, and the airline continued to expand through the late 1940s.

In 1953, Delta merged with Chicago and Southern Airlines, thus adding more routes, especially in the upper Midwest and Caribbean regions. Delta pioneered the hub-and-spoke flight system in 1955, where passengers were brought to a hub airport from various smaller places and then connected with other planes to their final destinations (Refer Exhibit I).

In the late-1950s, the airline adopted its logo of a red, white and blue triangle resembling the swept-wing appearance of a jet. Woolman died in 1966 and was succeeded by Charles Dolson (Dolson). Soon after Dolson took over, the crop dusting division of the company was shut down, and Delta began focusing on passenger services. In 1970, Delta entered the wide-body jet era with the purchase of Boeing 737 aircraft, which could carry more passengers farther, and at a cheaper overall cost. In 1971, W.T. Beebe became the Chairman and CEO of Delta. In the same year, the company started Delta Dash, a cargo service for small packages. In 1972, Delta purchased Northeast Airlines, which strengthened its presence in the northeastern parts of the US...

Excerpts >>

8] David Bond, "Nitty Gritty", Aviation Week and Space Technology, August 15, 2004.


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