Delta Air Lines

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The differences in strategies and value chain activities between low-cost carriers and legacy airlines are the causes that made winners and losers in the same industry.

Why have legacy airlines not been able to imitate the success of their low-cost competitors? Even when legacy airlines like Delta launched low-cost subsidiaries like Delta Express, such strategies have failed. Why?

Personally, there are two primary reasons that made the imitating effort of legacy airline failed. The first one is these carriers did not have specific strategies for their low-cost subsidiaries. They did not discuss what segment of the market they want to serve. That was undoubtedly figured out by low-cost carriers like Southwest and JetBlue. The second one is that even legacy airlines try to imitate low-cost carriers, but they made some mistakes. They create new subsidiaries, but the subsidiaries did not operate independently. They still share the infrastructure, pilots, and flight attendants with the mainline. The decisions also made by the same person. Additionally, in cultural aspect, these subsidiaries did not have flexible work rules like low-cost firms and their unions are too strong. I think that each activity in low-cost carriers complements and enhances each other but that did not happen in the legacy airlines’ copy versions.

Mark Balloun’s team at Delta is considering four strategic options (these are listed in the case). Which option would be the most effective strategy for Delta? Justify your answer.

Mark Balloun’s team at Delta is considering four strategic options:

1. Continuation of the status quo.

2. Delta Express might be modified in some manners.

3. Delta Express might be reintegrated with the primary Delta brand.

4. Delta might also launch a new low-cost subsidiary.

I think that the best option is to modify Delta Express in some aspects because following reasons:

- If we keep Delta Express in the same way as it was, the fact is that it cannot compete with low-cost carriers like Southwest and JetBlue.

- If Delta Express is reintegrated with the primary Delta brand, it will make the company operation more complicated and also make customers more confused about the company’s brand.

- If Delta launches a new low-cost subsidiary, the company will have to invest intensively in the capital and build a brand new image in customers, which cost money and time.

Therefore, Delta should keep Delta Express and modify it in some manners. Delta Express should operate entirely independent from the Delta. Independent operation will support Delta Express more agile and flexible in their decisions and activities. Delta Express should also change their work rules to create its working environment more dynamic and creative. Also, it needs to modify the way to work with its unions to cut down its costs and boost support from these organizations. Finally, the most important thing for the company is to figure out which segment of the market it wants to serve and focuses on that portion.