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Delta Air Lines Case Study Prospectus

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The Airline industry is dominated by a few big Airlines. But ... Southwest s business travel website lets business travelers book their flights online and has ... – PowerPoint PPT presentation

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Title: Delta Air Lines Case Study Prospectus


1
Delta Air Lines Case Study Prospectus
  • Ayodele Locke
  • Jonathan Long
  • Markos Taddesse
  • Robert Buonocore

2
Delta Air Lines Case Study
  • Introduction to the Industry
  • Robert Buonocore
  • Up-to-date scan of Delta
  • Jonathan Long
  • Responses to Industry Questions
  • Markos Taddesse
  • Responses to specific Delta questions
  • Markos Taddesse
  • Suggestions related to the IT issues
  • Ayodele Locke
  • Final Conclusions
  • Jonathan Long, Robert Buonocore

3
Introduction to the Industry
  • Since 1978 airlines were permitted to select
    their own routes and establish fares.
  • Varying prices has helped balance the costs and
    ensure that airlines are not flying with empty
    seats. Today it is likely that almost every
    passenger on a flight has paid a different price
    (McCartney 2003)

4
Introduction to the Industry (Continued)
  • JetBlue
  • offering DirectTV to its passengers.
  • New planes
  • Lower maintenance costs
  • Lower insurance costs
  • September 11th Effects
  • Caused more safety regulations
  • Fear of flying less passengers.

5
Introduction to the Industry (Continued)
  • Airline Costs According to the Air Transport
    Association (ATA) (McCartney 2002)
  • Labor Costs make up the greatest percent. (38.4)
  • Administrative overhead (23.7)
  • Fuel Costs (11.6)
  • Cost of the Plane/interest (13.2)
  • Maintenance (2.5)
  • Food Programs (2.2)
  • Travel Agent Commissions (2.2)
  • Airport Fees (2.1)
  • Insurance (1.5)
  • Communications (1.5)
  • Advertising (1.0)

6
Introduction to the Industry (Continued)
  • Future
  • Re-negotiating union contracts
  • Small planes could create a business air taxi
    service that would be outpriced for most
    consumers but ideal for businesses.

7
Up to date scan of Delta Airlines
  • September 2005
  • Delta files for bankruptcy
  • Pilots gave deep concessions after lengthy
    negotiations
  • Closed Dallas hub
  • Cut jobs
  • August 2006
  • Delta receives permission to outsource IT to IBM
  • 200 employees effected
  • Delta turns first profit under restructuring

8
Up to date scan of Delta Airlines
  • November 2006
  • U.S. Airways attempts hostile takeover
  • December 2006
  • Delta announces new SOA for DNS
  • January 2007
  • U.S. Airways drops takeover bid
  • April 2007
  • Delta emerges from bankruptcy

9
Responses to Industry Questions
  • What information technologies have helped this
    industry?
  • Reservation Systems
  • Customer and corporate data tracking
  • Telemetry data acquisition
  • Did the technologies provide a competitive
    advantage or were they quickly adopted by rivals?
  • Yes they do but they are quickly adopted by the
    industry.
  • Smaller airlines are more adept at incorporating
    new innovations

10
Responses to Industry Questions
  • Which technologies could this industry use that
    were developed in other sectors?
  • RFID
  • Is the level of competition increasing or
    decreasing in this industry? Is it dominated by a
    few firms, or are they fairly balanced?
  • The Airline industry is dominated by a few big
    Airlines.
  • But Competition is increasing (Southwest, Jet
    Blue, Airtran)
  • What problems have been created from the use of
    information technology and how did the firms
    solve the problems?
  • Defective systems
  • Disparate databases

11
Responses to specific Delta questions
  • Why do people fly on discount airlines?
  • Price, speed of service (in terms of turn around)
  • What do they not like about discount airlines?
  • Bare minimum services
  • Inconvenient, not all cities are directly served
  • Can Delta combine these answers with IT to regain
    market shares and profit?
  • Yes, but not fully realized at this time.

12
Responses to specific Delta questions
  • How does Delta use technology to reduce costs? Is
    it enough to make a difference?
  • In house IT work
  • Delta Nervous System (DNS)
  • CRM software
  • Self check in kiosk
  • Yes it is making a difference

13
Responses to specific Delta questions
  • Can Delta use IT to become more like Southwest?
    Is that the best strategy?
  • Yes, cut certain services, re-negotiate wages,
    implement systems that track companywide data for
    travel managers , improve budgeting software for
    more accurate forecasts, adopt own booking system
    that compete with the likes of Sabre, and
    Southwest own online booking system.

14
Suggestions Related to the IT Issues
  • Although Delta has implemented several large
    technology systems in recent years, including
    DNS Operation Clockwork to help them
    improve productivity and their bottom line,
    lowering costs to compete with low cost airlines
    still remains a major hurdle.
  • The following section will summarize some of
    Deltas IT challenges and suggested
    recommendations on how to address them.

15
Suggestions Related to the IT Issues
  • Issue 1 Inefficient baggage bar code system.
  • Issue 2 Outdated radio communication systems.
  • Issue 3 Lack of web presence targeted to
    business customers.
  • Issue 4 Inefficient passenger boarding process.

16
Suggestions Related to the IT Issues
  • Issue 1 Inefficient baggage bar code system
  • Delta airlines currently processes millions of
    pieces of baggage per year. Delta utilizes a bar
    code scanning system to keep track of bags that
    are tagged to specific flights. A tag is placed
    on each piece of luggage which is then scanned
    and then sent to the appropriate flight.
  • This technology however is inefficient and leads
    of some baggage being lost and lost revenue in
    airline staff takes to locate or redirect the
    baggage. As many as 15 to 20 percent of bags are
    not scanned properly.

17
Suggestions Related to the IT Issues
  • Suggestion 1 RFID Technology
  • RFID Technology systems are a significant
    improvement over bar code scanning systems. RFID
    tags attach to customers luggage in the same way
    as bar code tags and each RFID tag is encoded
    with the owners information as well as their
    travel itineraries. ,
  • RFID readers are able to locate baggage an
    average of 95 or greater compared with a scan
    rate of 70 to 80 with the current bar code
    scanning systems.

18
Suggestions Related to the IT Issues
  • RFID Technology contd
  • In 2004, Delta began testing this new technology
    and planned to implement it in 2007. Plans were
    put on hold indefinitely due to budget issues.
    The projected implementation costs for a RFID
    system was 15 to 20 million, a significant
    expenditure for an airline such as Delta that is
    facing financial woes.
  • Delta however spends an estimated 100 million a
    year addressing lost luggage issues. In light of
    these figures, Delta should reconsider RFID
    technology because they would be able to quickly
    recoup their investment as well as gain greater
    customer satisfaction.

19
Suggestions Related to the IT Issues
  • Issue 2 Outdated communication systems
  • Delta and other airlines have radio systems that
    are decades old.
  • Dispatchers and airplane captains communicate
    information such as flight patterns or weather
    info with each other via voice radio equipment.
  • Voice radio equipment is prone to static,
    interference and poor voice quality.

20
Suggestions Related to the IT Issues
  • Suggestion 2 VDLM2 Technology
  • VDLM2 technology systems can transfer text data
    at fifteen times the rate of traditional radio
    systems in airlines.
  • More efficient communications between dispatchers
    and airline captains helps to increase staff
    efficiency and cut down turnover rates, an
    important goal for all airlines.
  • Competitor SouthWest airlines has already
    invested in this technology and Delta should
    follow suit.

21
Suggestions Related to the IT Issues
  • Issue 3 No website targeted to business
    customers
  • Southwest Airlines is one of the few profitable
    airlines today and one of the reasons is that
    they address the concerns of their customer base.
  • Southwests business travel website lets business
    travelers book their flights online and has a
    backend system for keeping track of company
    travel data.
  • Delta Airlines currently has one website and
    reservation system for all its customers with no
    such features for business travelers.

22
Suggestions Related to the IT Issues
  • Suggestion 3 Business Travel website
  • A Delta business travel specific website would
    help them have a better relationship with
    corporate travel departments.
  • In addition to the key features offered by
    Southwests swabiz.com, Deltas business website
    should also offer travel discounts, travel news
    and customer satisfaction surveys and feedback
    forms.
  • Traditionally business class tickets cost more
    than economy tickets so paying attention to the
    needs to this customer base could be a profitable
    endeavor for Delta.

23
Suggestions Related to the IT Issues
  • Issue 4 Inefficient passenger boarding process
  • Delta Airlines currently uses a passenger
    boarding system that does not help them to
    improve their turnaround times.
  • The passenger boarding system using a standard
    back-to-front method does not address boarding
    delay due to passengers with aisle seats
    obstructing those with window or middle seats.

24
Suggestions Related to the IT Issues
  • Suggestion 4 Reverse pyramid boarding system
  • The Wilma reverse pyramid boarding system
    implemented by United Airlines calls for boarding
    rear window and middle seats first, followed by
    front window and middle seats then those in the
    rear and front aisles and finally seats in the
    front of the plane would be boarded last.
    Business and first class passengers would be
    boarded before everyone else.
  • Even a few minutes saved per flight translates
    into measurable savings for an airline. The
    quicker a plane boards and takes off, the more
    flights the airline can have in a day.

25
Delta Air Lines Case Study
  • Conclusions
  • Delta will benefit from adding interoperability
    to the Delta Nervous System with their Service
    Oriented Architecture.
  • As Delta emerges from bankruptcy and posts
    profits, IT will continue to be an integral part
    of their success.
  • In order to have future success, Delta will need
    to address certain issues
  • Inefficient baggage bar code system.
  • Outdated radio communication systems.
  • Lack of web presence targeted to business
    customers.
  • Inefficient passenger boarding process.

26
Delta Air Lines Case Study
  • Resources used
  • Associated Press. Delta Airlines still
    considering an acquisition. CNNMoney.com.
    Retrieved November 11, 2007 from
    http//money.cnn.com/2007/11/07/news/companies/del
    ta_acquisition.ap/?postversion2007110718
  • Associated Press. Delta seeks to outsource 200 IT
    jobs to IBM. Mcpmag.com. Retrieved November 11,
    2007 from http//mcpmag.com/news/article.asp?Edito
    rialsID1014
  • Broache, Anne. Can technology solve air travel
    woes? New York Times. September 27, 2007.
  • Foust, D., Bachman, J. (2007). A surprising new
    pilot for Delta. Business Week, 4048, 44
  • Greenemeir, Larry. IT Pros Plus Marketing
    Experts Equal Better Service. Information Week.
    March 18, 2002.

27
Delta Air Lines Case Study
  • Resources used
  • Havenstein, H. (2006). Delta Set to Launch
    Three-Year SOA Project. Computerworld, 40(50), 8.
  • McCartney, Scott. Which costs Airlines More
    Fuel, Labor or (Ugh) Meals? The Wall Street
    Journal. November 6, 2002.
  • McDougall, Paul. Techie Exodus At Bankrupt Delta
    Caused Flight Delays, Broader Chaos. Information
    Week. December 19, 2006.
  • Overby, S. (2003, February 15). Delta Aims for
    Infrastructure Overhaul. CIO. Retrieved November
    11, 2007 from http//www.cio.com/article/31708/
  • Post, Anderson (2006). Management Information
    Systems Solving Business Problems with
    Information Technology. New York McGraw-Hill.
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