From Atlanta Journal Constitution
Delta crafts new plan to compete
Nancy Fonti - Staff
Thursday, July 25, 2002
Facing mounting pressure from discounters, Delta Air Lines will present today at its regularly scheduled board meeting a far-reaching strategy for competing against low-fare airlines.
Delta representatives on Wednesday would not discuss details of the plan, which was prepared with consulting firm McKinsey & Co. But industry reports said the new strategy addresses fares, marketing and aircraft fleet adjustments.
In the past two years, Delta has faced growing competition from AirTran Airways, an Orlando-based discounter operating its Atlanta hub alongside Delta.
Delta has responded to AirTran by matching low prices on some routes and last year eliminated restrictions, such as Saturday night stays.
"AirTran has done a great job at growing into a vacuum that Delta has allowed to exist. It's costing (Delta) a lot of money," said New York airline consultant Bob Mann. "It amazes me that you would have to pay a consultant to learn how to compete."
Mann said typical suggestions from consulting firms often amount to marketing advice, which won't help Delta in this situation. "It's a question of how to compete," he said. "Waving the brand around won't work this time."
McKinsey is a long-term Delta consultant and has worked on many airline projects.
Industry reports said Delta and McKinsey officials have bought tickets on discount carriers to evaluate their service and operations in recent months.
Responding to low-cost competition can have negative consequences for large airlines. Some major airlines have been accused of predatory pricing --- defined as cutting prices so low that revenue doesn't cover costs --- when competing with smaller, low-fare carriers.
AirTran, when it was known as ValuJet, accused Delta of predatory pricing. American Airlines came under scrutiny by officials of the U.S. Department of Justice in 1999 for allegedly competing unfairly against smaller competitors, but a federal court dismissed the case. Northwest Airlines faced similar complaints.
Delta operates its own low-cost unit called Delta Express from Orlando, but Delta has dramatically scaled back express operations after Sept. 11.
Low-cost carriers like Southwest, JetBlue and AirTran are outperforming than their bigger rivals in the new economic climate of diminished airline capacity and lower fares. AirTran announced this week that it posted a $5 million profit in the second quarter --- its first profitable quarter since Sept. 11.
AirTran continues to expand, serving 38 cities and has plans to add 20 percent more seats this year.
Delta lost $186 million in the second quarter and said revenue is recovering more slowly than expected.
Delta crafts new plan to compete
Nancy Fonti - Staff
Thursday, July 25, 2002
Facing mounting pressure from discounters, Delta Air Lines will present today at its regularly scheduled board meeting a far-reaching strategy for competing against low-fare airlines.
Delta representatives on Wednesday would not discuss details of the plan, which was prepared with consulting firm McKinsey & Co. But industry reports said the new strategy addresses fares, marketing and aircraft fleet adjustments.
In the past two years, Delta has faced growing competition from AirTran Airways, an Orlando-based discounter operating its Atlanta hub alongside Delta.
Delta has responded to AirTran by matching low prices on some routes and last year eliminated restrictions, such as Saturday night stays.
"AirTran has done a great job at growing into a vacuum that Delta has allowed to exist. It's costing (Delta) a lot of money," said New York airline consultant Bob Mann. "It amazes me that you would have to pay a consultant to learn how to compete."
Mann said typical suggestions from consulting firms often amount to marketing advice, which won't help Delta in this situation. "It's a question of how to compete," he said. "Waving the brand around won't work this time."
McKinsey is a long-term Delta consultant and has worked on many airline projects.
Industry reports said Delta and McKinsey officials have bought tickets on discount carriers to evaluate their service and operations in recent months.
Responding to low-cost competition can have negative consequences for large airlines. Some major airlines have been accused of predatory pricing --- defined as cutting prices so low that revenue doesn't cover costs --- when competing with smaller, low-fare carriers.
AirTran, when it was known as ValuJet, accused Delta of predatory pricing. American Airlines came under scrutiny by officials of the U.S. Department of Justice in 1999 for allegedly competing unfairly against smaller competitors, but a federal court dismissed the case. Northwest Airlines faced similar complaints.
Delta operates its own low-cost unit called Delta Express from Orlando, but Delta has dramatically scaled back express operations after Sept. 11.
Low-cost carriers like Southwest, JetBlue and AirTran are outperforming than their bigger rivals in the new economic climate of diminished airline capacity and lower fares. AirTran announced this week that it posted a $5 million profit in the second quarter --- its first profitable quarter since Sept. 11.
AirTran continues to expand, serving 38 cities and has plans to add 20 percent more seats this year.
Delta lost $186 million in the second quarter and said revenue is recovering more slowly than expected.
