Delta Air Lines Case Study

Prospectus
Ayodele Locke
Jonathan Long
Markos Taddesse
Robert Buonocore

Delta Air Lines Case Study

Introduction to the Industry

Up-to-date scan of Delta

Markos Taddesse

Suggestions related to the IT issues

Markos Taddesse

Responses to specific Delta questions

Jonathan Long

Responses to Industry Questions

Robert Buonocore

Ayodele Locke

Final Conclusions

Jonathan Long, Robert Buonocore

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)

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.

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%)

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.

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

Up to date scan of Delta Airlines

November 2006

December 2006

Delta announces new SOA for DNS

January 2007

U.S. Airways attempts hostile takeover

U.S. Airways drops takeover bid

April 2007

Delta emerges from bankruptcy

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

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

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.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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/delta_acquisition.ap/?
postversion=2007110718
Associated Press. Delta seeks to outsource 200 IT jobs to IBM. Mcpmag.com.
Retrieved November 11, 2007 from http://mcpmag.com/news/article.asp?
EditorialsID=1014
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.

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.