Case Study: Delta Airlines and the Trainer Refinery

            Question 1

            In regard to the cost that is involved in airline operation, the costs are often very high.  This is because the airline industry necessitates huge overheads costs amount which is required in the form of labor.  This generally involves other materials that are pricey which include aircraft flee, jet fuel and maintenance of aircraft fleet.  Several highly skilled labor vacancies are needed in order to run an effective aircraft such as mechanics, pilots, flight attendants, customer representatives and others (Antoni, 2012).  Because of the associated cost, Delta received a revolutionary which was a controversial decision by buying the refinery which is located in Philadelphia (Antoni, 2012). Delta’s capability lies on low costs of operation.

            Question 2

            Delta is different from other corporations because over the previous few decades most airlines in the United States have been involved in hedging activities of fuel. These activities include purchasing jet fuel contracts for the future.  On the other hand, none has used the Delta’s example of purchasing a refinery (Carey, 2016).  Purchasing a refinery would help in permitting the airlines in participating in jet fuel pricing in America thus having greater control over the critical expenses of the airline business.  The United States airline economy is characterized by many competitors who mainly offer similar services in transportation. The price points of the competitors are additionally similar thus making it challenging to make a firm stand in reference to the airlines operators (Carey, 2016).

            However, several significant statistics enables Delta to be exceptional in regard to performance which outpaces the competitors within the airline economy in the United States. Over the recent years, Delta has continuously remained at the United States carrier’s top list.  For instance in the primary quarter of 2015, Delta was established to be on time as their flights held 84% of the general time (Carey, 2016). This was only challenged by Alaska and Hawaiian airlines. However, both airlines are significantly small corporations in comparison to Delta as they hold fewer flights and a reduced market segment than Delta. In 2015, the delta was additionally ranked second based on customer satisfaction alone.  The airline was beaten by Alaska airlines which took the first position having won by a reduced margin.  In general, the services provided by Delta airlines although were similar in various ways to those that were provided by the competitors within the economy of the airline are adequate significantly. This is because they are continuously providing their flights on a good time and also ensuring that their clients are fully satisfied by the services provided throughout their experience while traveling (Carey, 2016).

            Question 3

            When Delta airlines began viewing the trainer refinery, this would be termed as a straight die in regard to the economy. This is because the airline had shut down the majority of its operations as it was in the market with around a single airline price.  The major aim for Delta airlines in looking at the refinery trainer  was to fully  produce its  personalized  jet fuel  which would thus be  consumed  by Boston and NewYork  fleets (Carey, 2016). This was developed in order to reduce the operations costs of the airline which is associated with fuel consumption.  By producing personalized jet fuel Delta airlines hoped that it would be able to hedge itself against the future’s higher prices on jet fuel. This is because to the airline jet fuel cost was the highest ranked overhead expense that it was required to cater for.  This attempt was therefore designed in order to attempt to provide its individualized jet fuel to establish whether this would save the airline from high prices and volatility that comes inherently with jet fuel purchase for the whole aircraft fleet.  As the availability of fuel increased for Delta airlines the fuel cost began to decrease.  The capability of providing fleet fuel at decreased cost enabled Delta in achieving higher profits due to the decreased costs of operations (Carey, 2016).

            Question 4

            With Monroe refinery purchase Delta airlines have gained the capability of decreasing its costs which are based on fuel.  This is the single move that Delta has been involved in at this point.  The buying of the refinery has decreased the airline industry cost in general because fuel has been made available thus decreasing the process in the market.

            Question 5

            The merger amid virgin airlines and Delta has yielded a positive impact on the corporation in general.  Delta purchased 49% of virgin airlines for approximately 360 million dollars.   Delta required a huge share of flight routes which operated within London and network. Due to the passengers demand the company had to buy its way into the growing market (S&P Global plats, 2012).  The agreement involved 66 connections within 108 routes across North America and the United Kingdom.  Several other meager perks include clubhouse access sharing as well as sharing of loyalty reciprocal programs including boarding and handling of baggage.  The strategy was well developed in regard to investment on Delta’s part which helped the airline in gaining and retaining a greater market segment (S&P Global plats, 2012).

            Question 6

            The study is directly linked to the texts study such as joint venture, concentric diversification, and leadership based on low cost.  A delta airline was struggling with providing flight rates that are reasonable to its travelers based on increased jet fuel cost. In order to achieve leadership that is based on low cost of operation as well as reduce the rising prices of fuel Delta announced its buying of Monroe refinery to assist in fuel prices control. This was achieved through the utilization of concentric diversification approach when it purchased Monroe refinery.

 

 

 

 

 

            References

            Antoni, A. (2012). Delta airlines acquisition of trainer refinery. Retrieved from https://www.allfreepapers.com/Business/Delta-Airlines-Acquisition-of-Trainer-Refinery/22130.html

            Kathleen E. Carey. (2016). Delta air lines loses 428 million at Monroe energy refinery in trainer. Retrived from http://www.delcotimes.com/article/DC/20160416/NEWS/160419749

            S&P Global plats. (2012).US oil refining outlook: closures, acquisitions & delta’s surprise deal retrieved from Case Study: Delta Airlines and the Trainer Refinery