Capitalizing On Route Structure Essay, Research Paper

Introduction:

The airline industry has grown at an incredible rate in the past, and is expected to increase at an even faster rate in the next twenty years. Delta Airlines has capitalized on this by being one of the leaders in air transportation, transporting more passengers worldwide than any other airline. In 1997, Delta became the first airline to carry 103 million passengers in one year.

Delta has its headquarters located in Atlanta, Georgia where it can maintain control over all of its major hubs, which include Atlanta, Salt Lake City, Cincinnati, and Dallas/Ft. Worth. The company employs over 74,000 employees throughout its network, who have the challenge of getting 2,687 flights completed daily. These flights are completed with the help of Delta?s aircraft fleet of 584 aircraft, consisting mostly of Boeing produced aircraft. Delta?s vision is to build on its traditions and become the best airline in the industry. It is focused on providing excellent customer service and reliability to its customers while always looking at ways to improve. (www.Delta.com)

Throughout the rest of this report, ten of Delta Airline?s routes will be analyzed based on the following areas: Market Rank, Competition, Non-Stop Mileage, Type Of Aircraft, Number of Passengers, Total Revenue, % Of Market Share, Average Yield, And Average Haul. Each route will help show how Delta has organized their flights compared to their major competition, and determine how it is doing over all.

Market Rank:

The ten routes that were selected for this report were chosen based on their rank, which was sorted according to Yield standing. Yield is defined as (total cents/ cost per mile), which gives the shorter routes an advantage due to the amount of time spent in the air. The top five routes were used, followed by a random selection of five routes to cover both closely related routes and routes that may differ from the rest.

All routes originate from Delta?s major hub in Atlanta and are based on one-way travel. The routes according to their rank, are as followed:

RankDestinationMkt. RankYield Cents

1. Birmingham, Al 2291 128.91

2. Madison, Al 2246 127.13

3. Greenville/Spt, SC 3229 105.28

4. Columbia Met., SC 1710 104.46

5. Nashville, TN 639 103.51

16. Cincinnati, OH 530 55.36

28. Daytona Beach, Fl 1709 33.54

51. Fort Wayne Int. 2157 23.66

70. Portland, ME. 1718 17.50

76.Colorado Springs, CO 1244 16.21

Route #1: Birmingham, AL

Birmingham is considered a short haul flight from Delta?s Hub in Atlanta, with a non-stop mileage of 134. The average time in travel usually averages around 52 minutes, with no enroute stops. At this times Delta airlines has only one competitor flying the route from Atlanta to Birmingham, which is a small commuter airline. This competitor only holds .302% of the market share, while Delta holds 99.698% of the market share. With this in mind Delta should still be cautious of new competition that might try this market out, because Birmingham is an expanding city.

Delta Airlines flies an average of nine flights a day to Birmingham, starting around 0800 and ending around 2330 that evening.(www.oag.com) The most popular aircraft that is used on the Birmingham route is the Boeing 757, which is configured to hold an average of 182 passengers. It might seem unusual to have such an aircraft on a short haul route, but Delta Airlines is able to transport about 33,000 passengers every quarter, with the 757. Delta charges an average fare of 172.39 dollars on the route, which brings in 5,395,500 dollars of revenue very quarter.

Birmingham is considered a City of the Deep South, which is still high on Southern traditions. Birmingham is a relatively young city, which was founded in 1871 and has grown ever since. New major attractions, including a full-blown theme park and one of the country?s best science museums, have opened recently. Birmingham is also well known is the medical community, with its worldwide contributions to health care and healing. (www.bcvb.org)

Route #2: Madison County, AL

Delta Airlines route from Atlanta, GA to Madison County, AL is another short haul flight with a non-stop mileage of 151. The average flight usually runs around 55 minutes, which is why it is a non-stop flight. Delta utilizes the Boeing 737-347 on this route with an average of about 128 seats available for each flight. The 737 is a two engine aircraft with an average fleet age of 13.6 years, which makes it a good choice for this route due to the average haul being only 151. Delta flies an average of 9 flights per a day to Madison County; with frequency throughout the day.(www.oag.com) An average of 32,300 passengers fly on this route each quarter, producing $6,182,200 in revenues. Delta charges an average fare of 191 dollars, which is slightly higher than the Birmingham route. This Higher fare might be due to Delta Airlines owning 100% of the market share on this route. Without competition Delta is able to charge a slightly higher rate, and passengers will still flies due to the convenience.

Route #3: Greenville/Sptbrg. SC

As with the first two routes, Delta Airlines third route is also a short haul route. The Atlanta, GA to Greenville/Sptbrg. SC route has an average haul of 214 miles, with an average flight time around 58 minutes. This is a non-stop flight, on which Delta Airlines takes advantage of a few different aircraft to fulfill their customer needs. These aircraft include the Boeing 737, McDonnell Douglas MD-88, and the ATR-72. The Boeing 737 and MD-88 both fly the same amount of flights to Greenville each day. They are both two-engine aircraft, with an average seating load from 128 to 142 passengers. Delta?s average fleet life on the MD-88 is slightly lower than the 737?s, which make them a more logical choice when the passenger load is higher.(www.Delta.com) Delta Airlines flies around nine flights a day into Greenville, starting at 0600 and ending around 2230. Delta owns 94.565% of the market share on this route, with the rest going to Atlantic Southeast Airlines. Because ASA is a Delta Connection carrier, one carrier dominates the Greenville route. Delta flies approximately 17,400 passengers on this route each quarter, bringing in $2,775,300 in revenues. The Greenville area has a medium sized population that supports cooperate and small privately owned businesses.

Route #4: Columbia Metro, SC

The Columbia Metro route from Atlanta, GA operates a lot like the previous routes, with the idea that it is a short haul route. The Average Haul of this route is 191 miles, with an average time spent in the air of one hour. Columbia, SC has a diverse and stable economy, which is healthy for an airline. It is the site of the Fort Jackson military base, and a central manufacturing and distribution center. Money magazine listed Columbia as the eighth-largest U.S. community as far as economic growth during the 1980?s. (Cities of the United States, 383)

Delta Airlines understands the potential for this city and flies a total of eight flights to Columbia Metro everyday. On these routes it predominately utilizes the MD-88 as the aircraft of choice. As mentioned before this aircraft is a good choice for this type on route because of its configuration and fleet age. Delta Airlines owns 98.978% of the market share for this route, with US Airways picking up the rest. Because of the potential of this route Delta must maintain an understanding that new competition could decide to open routes to this city. Delta Airlines carries 48,400 passengers on this route each quarter, with revenue earnings of $9,273,400. The average fare for this route is 192 for Delta and 124 for US Airways. With this it can be seen that there is potential for a new carrier to come in at a lower price.

Route #5: Nashville, TN

Route #5 from Atlanta, GA to Nashville, TN is the busiest of all the previous short haul routes already mentioned. The non-stop mileage is 213, with an average flight time around 59 minutes. Because Nashville, TN is both a cooperate and a tourist area, the potential for air travel into the area is great. Delta owns 85.210% percent of the market share of this route, with Corporate Airlines owning 14.448% and Northwest picking up the rest. Delta uses the MD-88 and Boeing 757 on this route compared to Corporate Airlines in which they use the J31 a much smaller aircraft. The 757 is a relatively has a relatively young fleet age, which an average of 9.6 years, making it a good short haul carrier for the amount of traffic the Delta moves into the area. Delta Airlines carries around 149,000 passengers into Nashville each quarter compared to Corporate Airlines? 25,400 passengers. These passengers produce $33,060,900 in revenues each quarter, with the average fare costing the passenger 221 dollars. This is almost double Corporate Airlines? price of 109 dollars. Delta can do this because of the type of aircraft that they fly there and the name backing the airline; however, this might change in the future causing Delta to lower its prices.

Route #6: Cincinnati, KY

Cincinnati is a short ? medium haul route out of Atlanta, GA, with an Average Haul of 390 miles. This route is usually non-stop, however it is possible for it to have one stop on the way to Cincinnati. Delta Airlines offers twelve flights out of Atlanta to Cincinnati on a day-to-day base. Medium to large size aircraft are used on this route by Delta to accommodate the number of passengers that travel on this route. The Boeing 767, 727, and the McDonnell Douglas MD-88 are all utilized on this route. Delta owns 99.346% of the Market Share for this route, with Continental Express, Trans World Airlines, and United Airlines sharing the rest. Delta carries 197,500 passengers on this route each quarter, with total revenue of $42,502,000. Delta?s competition at this time only flies a couple of flights into Cincinnati each quarter, and has little effect on its business. The Cincinnati Airport is centrally located around the city, with easy access in and out. The Airport itself has three terminals and three concourses that provide easy loading and unloading of aircraft. A well designed airport is always a consideration when deciding what routes to fly. (www.CincinnatiInt.com)

Route #7: Daytona Beach, FL

The route out of Atlanta, GA to Daytona Beach, FL, is another short to medium haul route for Delta Airlines. This route has an Average non-stop haul distance of 367 miles, with an average time of 1 hour and 15 mins. The Daytona Beach area has a small population, with most of the air travel coming from tourist and college students traveling back and forth. Tourism is best during the spring months, with the Daytona 500 and Bike Week happening during this time. The McDonnell Douglas MD-88 is the preferred aircraft on this route for Delta Airlines, with a load carrying capacity of 142 passengers. (www.oag.com) This is a good choice of aircraft for this route because of the length of flight, however the Boeing 737, might be another alternative. Delta Airlines owns 67.146% of the Market share for this route; However, ASA controls the other 32.854%, which is a Delta Connection carrier. This provides Delta Airlines 100% control on this route, which gives them flexibility. 32,700 passengers are carried each quarter on this route producing $3,907,700 in revenues during this time. ASA carries 16,000 passengers into the area each quarter, producing $2,360,000 in revenues. Delta charges an average fare of $123.01 per seat, which is a reasonable amount for the location.

Route #8: Fort Wayne Int. Fort Wayne

Fort Wayne Int. is a medium haul route from Delta?s Atlanta based Hub, with a non-stop Average Haul distance of 763 miles. This route is control by Atlantic Southeast Airlines, which is a Delta connection carrier. Delta has 100% of the market share on this route when counting ASA, which they have control of. Delta flies its CRJ aircraft on the Fort Wayne route, which completes the distance in 1 hour 30 mins with no stops. This is a good choice of aircraft, because Delta?s fleet of CRJs are only 2.6 years old on an average. This allows for extremely good reliability and efficiency. Three flights are completed each day, with 26,100 passengers carried each quarter, producing $5,423,600 in revenues during this time.

Route #9: Portland, ME

Portland, ME is considered a medium haul route out of ATL, GA with a non-stop Average Haul distance of 1053 miles. This route has an average airtime around 2 hours 35 mins, which is double the time compared to the routes already discussed. Delta Airlines only offers two flights a day out of Atlanta to Portland, one at 1:50pm and one that departs at 8:05pm. Even with only two flights a day Delta still holds 93.671% of the Market share on the route. The rest is divided between Northwest Airlines (1.013%), United Airlines (.759%), and US Airways with (4.557%) of the Market Share. Although, Delta Airlines still holds a large percentage compared to its competition, this is the first route where Delta has to compete with other Major carriers. Delta Airlines flies 37,000 passengers on this route every quarter, bringing in $6,608,200 in revenues. Delta charges an Average fare of $184.35 on this route, which is still slightly higher then the competition but comparable. Delta Airlines plane of choice on this route is the McDonnell Douglas MD-88, which seats 142 passengers. As mentioned before this aircraft is fairly young in Delta?s fleet, which is why this aircraft is a good choice for this medium haul route. The comparable Boeing 737 has an older average fleet age and therefore making it less efficient, and should only be used when necessary on this route.

Market #10: Peterson Field, Colorado Springs, CO

Route #10 is from Atlanta, GA to Peterson Field, CO, which is another medium haul route with an Average Haul distance of 1219 miles. This route is comparable to the last route, with only two flights departing each day. The first flight departs at 11:50am, followed by the second at 7:40pm. These flights have an average flight time of 3 hours 15 mins, making scheduling important. Delta Airlines holds 68.453% of the Market Share on this route, followed by United Airlines with 16.386%. The rest is divided between Trans World Airlines, Northwest Airlines, and America west Airlines. Possessing 68% of the Market Share Delta Airlines carries 44,700 passengers, which produce $8,707,600 in revenues each quarter. Delta carries it passengers to Colorado on the Boeing 727 which can transport 157 individuals. Most of the business to Colorado is due to tourism, and the near by Air force Academy. During the winter months Colorado Springs is a haven for skiers, while the summer months cater to the outdoor enthusiasts.

Conclusion:

This report outlined some of the most important factors in determining how a route is doing. When gathering an overview of the ten routes that were studied in this report, it was noticed that Delta Airlines dominated the routes that flew out of its major hub in Atlanta. It was seen in this report that with an increase in distance, also came an increase in major carrier competition. Delta Airlines utilizes their aircraft very well, by providing good frequency on its routes, however, it needs to be watchful that a new competitor doesn?t come in with a lower price to the passenger. The Birmingham route might be one of these routes that Delta Airlines will have to watch in the near future.

?Birmingham Background? Birmingham Visitors? Bureau Homepage. 2000 Online.

Internet. Available http://www.bcvd.org 10 Nov. 2000

?Cincinnati Int. Airport? Cincinnati Int. Airport Homepage. 2000. Online. Internet.

Available http://www.CincinnatiInt.com 8 Nov. 2000

?Commercial Aircraft? Boeing Homepage. 2000 Online. Internet. Available

http://www.boeing.com 10 Nov. 2000

Gale Research Inc. ?Columbia.? Cities of the United States 1987: 383. Second Ed.

Detroit, Mich: Gale Research Inc, 1998

?Investor Relations.? Delta Airlines Homepage. 2000 Online. Internet. Available

http://www.delta.com 28 Oct. 2000

?Flight Information.? Oag Homepage. 2000 Online. Internet. Available

http://www.oag.com 8 Nov. 2000