Air Transport World

Delta is awesome; the Atlanta giant had a scare in 1983, but it hardly caused a stutter in its march to technological supremacy in the airline industry.

Delta is awesome

As airlines adjusted to deregulation in the United States there were many surprises. But the one that almost no one predicted was that Delta Air Lines would lose money. It happened, but not to worry. When you are a Delta you can adjust, and the folks that run the world's fourth or fifth biggest airline, depending upon how you count these things, have made changes. Delta is again producing record earnings, and has positioned itself nicely for further conflicts in the second half of the 1980s.

When the financial returns for Delta's fiscal year, ended June 30, 1983, were released they showed an $86.7 million net loss, the first net loss for Delta in 36 years. Delta reports its progress generally in fiscal years, but it also had a loss for calendar 1982 and another for calendar 1983, also the first in over 30 years and the first consecutive loss years in longer than anybody can remember.

The problems were attributable to many factors, the same ills that plagued most of the other airlines in the world. The general economic recession resulting from the 1979 oil crisis was a major factor. But, people at Delta will tell you that another major cause of the economic slump was the airline's difficulty adjusting to deregulation.

Delta has long had a technical base among the finest in the world. Operationally you could say it invented the hub and spoke system that has become the vogue of the deregulated airline industry. The biggest challenge came in the marketing department.

W. Whitley Hawkins, Delta's recently promoted VP for marketing, says "Phasing out of regulation caused some confusion. We found ourselves in a retail environment, and we were not used to it.' He says at first Delta's tendency was to match the numerous cheap fares that were coming into the marketplace. He says Delta's problem was a lack of ability to control inventory. Simply too many seats were being offered at a discount. By June of 1982 over 90% of Delta's passengers were flying on a discount fare. By the first quarter of 1983 yields had dropped to 11.41^ per mile. Breakeven load factor for fiscal 1983 (12 months ended June 30, 1983) climbed to 57.84%. Actual load factor fell more than three points below that. For the first time in recent history Delta suffered a decline in operating revenue in fiscal 1983 compared with 1982, at a time when its RPMs increased 7.5%.

Computer application

To correct this slide Delta did something not too surprising for Delta when you think about it. It applied new technology to the problem. Delta was very early in buying computers, but according to Hawkins it was slow in properly applying them to marketing. He says at first Delta looked for a "group approach' while American Airlines and United Airlines went their own way. He says, "They got a jump on us with outside uses, especially with travel agents.' Delta now attributes 67% of its ticket sales to travel agents. Ten years ago, according to Hawkins, only 37-38% of Delta's tickets were sold by agents.

Another area where Delta was late in computer application was its discount seat inventory control. …

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