Introduction
The aviation industry has been one of the hardest hit by the coronavirus. This occurred because the flow of passengers has significantly decreased due to severe restrictions on movement (Hyman & Savage, 2021). In this regard, the aviation industry faced a critical situation and suffered significant losses.
In response to the unfolding crisis, companies had to take extraordinary measures to improve their financial situation. The key measures in this regard are cost reduction and savings that promote improved budget circulation (Amankwah-Amoah, 2021). Learning how Delta Air Lines has handled pandemic restrictions could impact its competitive edge.
Cost-Cutting and Savings Methods
Delta Air Lines is one of the largest airlines providing commercial flight services within the United States and internationally. COVID-19 has had a profound impact on the economic situation in the aviation market. International and domestic flights have been significantly reduced due to restrictions imposed in most countries (Fasanya et al., 2022). This led to a significant drop in income and necessitated urgent financial control measures.
Delta Air Lines has taken a holistic approach, characterized by cost reduction, to optimize resources (Anh et al., 2020). One of the forced methods was the reduction of employees and sending them on voluntary leave. The airline offered early retirement to eligible employees (Li, 2020). This allowed them to minimize labor costs and ease the financial burden in conditions of minimal profit.
In addition, Delta Air Lines took steps to mothball or sell obsolete aircraft that were the least economical. This helped lower maintenance costs and provided the company with additional financial support. With a decrease in demand for air travel, such a move allowed for the optimization of capacity and the aircraft fleet (Baxter, 2019).
An essential aspect during and after the pandemic was adjusting the route network. The change in the transportation network was due to a focus on close transportation, which proved to be more profitable (Lemon, 2023; Almansur et al., 2020). This rationalization had a positive impact, as the company did not spend resources on long-haul flights with empty sides.
Delta Air Lines had begun negotiations with suppliers during the pandemic to secure better deals and improve its financial position. This also concerns fuel suppliers, as well as specialized equipment necessary for flight provision (Kullar, 2020). Utilizing their market position and company size, they secured more lucrative contracts, which had a positive impact on the company’s financial stability. Providing fuel was also a priority for the organization, which led to several negotiations in this industry.
During the pandemic, the company also needed to implement new management and organizational principles to ensure the most profitable operation. For these purposes, Delta Air Lines initiated a digital transformation, which contributed to improved planning and load distribution within the flight system (Puckett, 2020). The improvement of the organization’s digital platforms has allowed the company to make the process of selecting flights for passengers more convenient and efficient. Internal organizational activities have also changed due to digitalization, as employees have begun to work on new equipment and utilize various software programs (Winchester & Hutchinson, 2020; Cai et al., 2022). This reduced the need for manual intervention, allowing for the acceleration of passenger order processing and various tasks associated with flight supervision.
During the pandemic, one way the organization addressed the financial challenge was by focusing on freight. Since the number of people traveling decreased significantly, the redistribution of responsibilities was a logical step that allowed Delta Air Lines to continue conducting financially profitable activities despite a substantial decline in passengers. The growth of e-commerce, combined with the need to deliver vaccines, medical supplies, and equipment, made it cost-effective to transport cargo across the United States and other countries. The versatility enabled the organization to allocate the maximum load to all aircraft, ensuring they would not be idle in the hangars.
The Impact of Cost-Cutting Methods
The use of urgent and relevant methods for confronting a crisis influenced how the company positions itself among its competitors. The benefits provided by the discussed Cost-Cutting Methods can be assessed using Porter’s Five Forces Model. The first category is the threat of new entrants to the market. The cost-cutting measures taken by the company have strengthened Delta Air Lines’ position in the market, creating additional difficulties for the emergence of new competitors (Pascual & Cain, 2022). They would have to cut prices substantially, which would make entering the industry too unprofitable and costly. In addition, the conclusion of more profitable partnership agreements with many providers led to the preservation of their cheaper services (Hyman & Savage, 2022). If companies have made concessions for Delta Air Lines, then there will be no such discounts and more profitable offers for new market participants, which will also create additional difficulties.
Regarding the supplier’s bargaining power, Delta made significant efforts to negotiate to achieve the best possible terms and conditions. This strategy has enabled the organization to minimize supplier exposure and operate independently. In addition, Delta has reduced power from specific suppliers by reducing its fleet and optimizing costs for certain parts (Maneenop & Kotcharin, 2020; Olaganathan, 2021). These measures enabled the company to manage its expenses and relationships with partners more effectively (Heiets & Yibing, 2021). The favorable conditions that the organization experienced during the pandemic continued to support its operations, which contributed to the company’s favorable position in the aviation market.
The bargaining power of buyers in this regard refers to passengers who use the company’s flight services. In this regard, Delta has prudently focused its efforts on digitalization, enhancing the customer experience. Thus, this increased the loyalty of customers who have been using the organization’s services for a long time (Mumbower, 2022).
Additionally, this method of working with customers enabled us to reduce the bargaining power of passengers by offering better amenities. At the same time, the position of clients in this regard was strengthened by the fact that the company reduced service costs (Dube et al., 2021). This has mitigated the effectiveness of adding digital technology, which could potentially strengthen clients’ bargaining power.
The threat of substitutes may not be relevant for Delta because the pandemic has impacted the company in a way that has contributed to the diversification of its transportation services. Much attention was paid to cargo transportation, which helped the organization to separate functions (Atems & Yimga, 2021). In this way, Delta was able to achieve better performance, which prevented the company’s services from being replaced by those of others. By utilizing the company’s existing aircraft to transport cargo instead of passengers, the company offered the market a unique solution during the pandemic, thereby increasing the convenience of individuals who required deliveries (Gualini et al., 2023). Ground transportation was slower and could not carry as much weight. Thus, substitutes for this type of activity exist only in the form of other companies that carry out air cargo deliveries.
Rivalry among existing competitors is characterized by the fact that the company operates in an international market where numerous organizations are also present. However, Delta has taken several measures to mitigate its potential impact on the market and enhance the sustainability of its position (Deb, 2023). This is primarily characterized by the optimization of the route network and the reduction of operating costs (Li, 2021).
During the pandemic, the company disposed of many of its aircraft and transitioned to a more fuel-efficient model. The company also resorted to staff reduction, which became a negative aspect in the future, as it influenced the fact that such employees could later move to competing organizations. However, Delta has maintained competitive prices that are low enough in the airline industry to attract a large number of customers (Fontanet-Pérez et al., 2022; Suk & Kim, 2021). It can be said that the strategies Delta implemented during the pandemic strengthened its competitive advantage and contributed to the company’s active recovery following the period of lockdowns.
Conclusion
The measures Delta Air Lines took during the coronavirus crisis were to continue to provide air travel services as efficiently as possible. Reducing costs and aircraft fleet made up a significant part of the decisions that the company made regarding maintaining operational capacity. In addition, this created the basis for further stable work, which was ensured by the diversification of work areas. Switching Delta Air Lines’ focus to cargo flights had the effect of maintaining competitiveness and allowing it to resume operations after the end of the lockdowns.
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