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Delta - (with fewer flight attendants per passenger Airline...

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BUSI698   Strategic Management Delta Airlines (A):  The Low-Cost Carrier Threat
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Delta Updates - I 2003: Delta launched Song, a subsidiary “with a distinctive product and a lower cost” Target market: “Discount Diva” – 45-years old, female, over $75,000 household income, interested in fashion, health and design Leather seats, all-coach cabin, TV service, gourmet food (for sale), flight attendant attire designed by Kate Spade Pilots from mainline Delta, separate flight attendants and ground personnel Florida – NY: 757s with high loads on 900-miles Separate check-in desks, signage, shared check-in
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Delta Updates - II Delta declared bankruptcy on September 14, 2005 Song folded back into mainline Delta on October 28, 2005 It was “very expensive to support two brands” Delta reduced fleet, and needed the 757s back Senior flight attendants threatened to unionize if Delta reduced its own fleet while devoting more planes to Song
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Unformatted text preview: (with fewer flight attendants per passenger) Airline Industry Updates Delta 2007: $19 billion sales, 6% operating margin Proposed merger with Northwest Airlines Southwest 2007: $9.8 billion sales, 8% operating margin JetBlue 2007: $2.8 billion sales, 6% operating margin Key Takeaways Southwest and JetBlue have been successful in an industry with an unfavorable structure by identifying unique markets and creating distinctive positions (market segmentation) It is very difficult for a legacy carrier to pursue two targets at the same time Perception problems – target markets may not look attractive Motivation problems –Self-cannibalization threatens managers, runs against managerial incentives and instincts Coordination problems – serving different segments requires movement of all functions in concert...
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