Question

Analyze Delta Airline 10K Annual Report for the fiscal year ended December 31, 2019 in terms of external, internal and value chain?

Answer 1

General

Delta Airline is the leading U.S. global airline serving 200 million customers every year. They connect customers across our expansive global network to more than 300 destinations in over 50 countries. They are the world’s largest airline by total revenues and the most profitable with five consecutive years of $5 billion or more in pre-tax income. They are committed to industry-leading safety and reliability and are consistently among the industry’s best performers. Their employees provide world-class travel experiences for their customers and give back to the communities where they live, work and serve. Their people and service are their strongest competitive advantage creating significant customer satisfaction improvements. Other key competitive advantages include operational reliability, global network, customer loyalty and their investment grade balance sheet.

Globel Network

They offer more than 5,000 daily departures and as many as 15,000 affiliated departures including the premier SkyTeam alliance, of which Delta is a founding member. They generate over 70% of our passenger revenue from our domestic network, centered around high-margin core hubs in Atlanta, Minneapolis-St. Paul, Detroit and Salt Lake City. These core hub positions complement strong coastal hub positions in Boston, Los Angeles, New York-LaGuardia, New York-JFK and Seattle. They have agreements with domestic regional carriers that operate as Delta Connection to feed traffic to our domestic hubs.

They serve the Transatlantic, Transpacific and Latin America markets directly on Delta and through joint ventures with global airline partners. Internationally, They have significant hubs and market presence in Amsterdam, London-Heathrow, Mexico City, Paris-Charles de Gaulle and Seoul-Incheon. They will become the largest U.S. carrier to Tokyo-Haneda in 2020 as we consolidate operations in Tokyo, the preferred airport for the local and corporate markets.

Products and Services

Over the last decade we have fundamentally transformed our business. They have invested in their people, product and reliability to alter the commoditylike nature of air travel. They have a retail oriented, merchandised approach to distribution with well-defined and differentiated products for their customers. Through improved product segmentation, They offer distinct travel experiences with clear value propositions that enable customer choice. In 2019, approximately one-third of thir passenger revenues were from premium products, which include Delta One, Delta Premium Select, First Class and Delta Comfort. Main Cabin products, including Basic Economy, represented approximately half of our revenue in 2019 and provide varying levels of pre-travel flexibility as well as their exceptional service onboard the aircraft. Their tickets are sold through various distribution channels, with 52% of tickets sold through direct channels. These include digital channels, such as delta.com and the Fly Delta app, and reservations specialists where they deliver more direct, personalized interactions with their customers at reduced distribution costs. Indirect distribution channels include online travel agencies and traditional "brick and mortar" agencies. They make fare and product information widely available across those channels, ensuring customers always receive the best information and service options.

Joint Ventures, Equity Investments and Alliances

They have implemented four separate joint venture arrangements with foreign carriers, each of which has been granted antitrust immunity from the U.S. Department of Transportation ("DOT"). They have reinforced a number of the agreements through equity investments in those carriers. Each of there joint venture arrangements provides for joint commercial cooperation with the relevant partner within the geographic scope of the arrangement, including the sharing of revenues and/or profits and losses generated by the parties on the joint venture routes, as well as joint marketing and sales, coordinated pricing and revenue management, network and schedule planning and other coordinated activities with respect to the parties' operations on joint venture routes. Their implemented commercial joint ventures consist of the following: • A combined joint venture with Air France, KLM and Virgin Atlantic with respect to transatlantic traffic flows. In addition to the joint venture, we own a non-controlling 49% equity stake in Virgin Atlantic Limited, the parent company of Virgin Atlantic Airways and a non-controlling 9% ownership stake in the parent company of Air France and KLM. • A joint venture with Aeroméxico with respect to trans-border traffic flows between the U.S. and Mexico. In addition to the joint venture, They own a noncontrolling 51% equity stake in Grupo Aeroméxico, S.A.B. de C.V., the parent company of Aeroméxico. In addition, They and Aeroméxico have established a joint venture relating to an airframe MRO operation located in Queretaro, Mexico. • A joint venture with Korean Air with respect to traffic flows between the United States and certain countries in Asia. In addition to the joint venture, we own a 10% equity stake in Hanjin-KAL, the largest shareholder of Korean Air. • A joint venture with Virgin Australia and its affiliated carriers with respect to traffic flows between North America and Australia/New Zealand.