Just as a delta is a symbol for change in math, Delta Air Lines symbolizes the changing mathematics of the airline industry. Delta became one of the world's largest airlines by traffic after its $2.8 billion acquisition of Northwest Airlines in 2008. Through its regional carriers (including subsidiary Comair), the company serves about 350 destinations in more than 60 countries, and it operates a mainline fleet of 700-plus aircraft, as well as maintenance, repair, and overhaul (MRO) and cargo operations. Delta is a founding member of the SkyTeam marketing and code-sharing alliance (airlines extend their networks by selling tickets on one another's flights), which includes carriers Air France, KLM, and Alitalia.
Delta operates from domestic hubs in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York, and Salt Lake City. Delta has international hubs in Amsterdam, Paris, and Tokyo.
In addition to passenger and cargo transportation, Delta offers private jet service. Looking to capitalize more effectively on name recognition, Delta renamed its private jet subsidiary from Delta Air Elite to Delta Private Jets in late 2010. The airline, which is the only US-based carrier with commercial and private jet service, doubled the size of its private jet fleet in early 2010 with the acquisition of Segrave Aviation. Other Delta businesses include Delta TechOps, which provides maintenance and engineering services for the Delta fleet as well as more than 150 other aviation customers, and Delta Global Services, which provides staffing for about 150 clients. Another unit, MLT Vacations, wholesales vacation packages.
Delta earned profits of $850 million in 2011 and around $590 million for 2010 -- a vast improvement from the $1.2 billion loss it reported in 2009. Year-over-year total operating revenue rose 11% in 2011. By segment mainline passenger also headed up 11%. In that segment domestic passenger revenue similarly rose 11% with an improvement in passenger revenue per available seat mile (PRASM). International passenger revenue climbed 13% as PRASM improved with more business and leisure travel and higher fares. Regional carrier revenue went up 9% as a result in part of fare increases that offset higher fuel costs. Cargo increased 21% with an improvement in yield and an uptick in volume.
Like its counterparts in the airline industry, Delta has been struggling with rising fuel costs. Such expenses rose as a percentage of total operating expense from 30% in 2010 to 36% in 2011. The company attempts to cushion itself against rising prices with a hedging program.
Delta invested about $1.5 billion in 2011 for such improvements as flat-bed seats for BusinessElite flights and in-seat audio/video systems. That compares to $2 billion invested in 2010 and $1 billion in 2009 for improvements in the company's flight operations.
The airline industry is fueled by strategic alliances that allow individual carriers to extend their service without physically flying into new territory. In mid-2011 the airline created its Trans-Pacific Alliance with Virgin Australia Airlines, for travel between the US and Australia. Earlier in the year Delta created an alliance with WestJet Airlines, a popular Canadian airline.
While the interline agreement with WestJet is important, it's Delta's alliance with SkyTeam that allows the airline's reach to extend to more than 900 destinations in 170-plus countries around the globe. Looking to become the preferred carrier in New York City, Delta is creating a hub at LaGuardia Airport to provide flights to almost all top domestic destinations. The company is also redeveloping its facility at JFK International with a focus on more transcontinental and international service. The company gets a boost in global coverage with airlines around the world coming aboard the SkyTeam alliance. By 2014 Aerolineas Argentinas, PT Garuda Indonesia, Middle East Airlines, Saudi Arabian Airlines, and Xiamen Airlines plan to join the alliance.
Besides the SkyTeam alliance, Delta offers more international service through a joint venture with Air France-KLM and Alitalia. The airlines share revenue and split the cost of trans-Atlantic flights between North America and Europe, Africa, the Middle East, India, and Latin America.
Combining with Northwest represented a milestone in Delta's efforts to regain its financial footing since its emergence from bankruptcy in 2007. Delta finished integrating Northwest's infrastructure, flight network, reservation systems, and brands with its own operations in 2010. With its mainline operations bolstered, Delta shed two regional carriers that had been part of the Northwest deal, Mesaba Airlines and Compass Airlines. It sold Mesaba to Pinnacle Airlines; to fuel the transaction, Delta loaned $62 million to Pinnacle. Delta sold Compass to Trans States for $20.5 million. – less