MEMOTO:Isin GulerFROM:[name deleted]DATE:September 24, 2008RE:‘Delta Airlines’ Case Write-UpLow Rates of Return on Investment in Airline IndustryThe airline industry, in the 1990s, was influenced heavily by high forces from rivals, buyers, substitutes, and suppliers. Because the product offered by Delta and other airlines is very homogenous (other than food, entertainment, and service), most of the competition occurs through price differentiation. Rivals have consisted mostly of low cost carriers (LCC), such as Southwest and JetBlue, that have been able to cut costs through strategic routing, scheduling, technology innovations, and customer appeal. Buyers have high power because the airlines compete to put as many individuals on flights as possible to raise revenues. Thus, the flyer has the ability to choose low-cost options and force higher-charging airlines to lower prices. Substitutes include driving, taking buses, or taking trains.
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