Five Forces analysis of Delta Airlines
Delta Airlines which is known best for its industry leading global network serves more than 180 million passengers every year. The airlines brand is present in six continents and serves 323 destinations across 59 countries. It owns a mainline fleet that consists of 800 aircrafts. The brand has invested billions in facilities and products and services globally. The brand offers more than 150 daily flights connecting important hubs across the world through its alliance. More than 80,000 are employed by delta. The brand is continuously investing in making customer experience both on the land and in the air better. This is a Porter’s five forces analysis of Delta airlines. These forces are in every market and industry and affect the competitiveness and attractiveness of the industry. This analysis discusses how and to what extent these forces affect the competitive position of Delta Airlines.
Bargaining power of suppliers: Moderate
The bargaining power of suppliers for Delta airlines is Moderate. It is because the main suppliers are the aircraft makers which are few in number. The brand has to invest in up to date aircraft models for passenger convenience and to maintain high level of popularity and loyalty. The main suppliers for airlines industry are the aircraft makers like Bombardier, Boeing and Airbus. They are large companies with both financial and technological clout. This is the main reason that their bargaining power is moderately high. Moreover, the airlines companies are in a race to remain technologically ahead of their competitors and so demand for state of art aircrafts remains high. There are other smaller suppliers too that provide related services but their bargaining power is significantly lower. The overall bargaining power of the suppliers is low to moderate because of Delta Airlines being a major buyer.
Bargaining power of customers: Moderate
The bargaining power of the customers in the 21st century has grown which is because of several factors. Apart from economic and technological factors, increased competition is also an important factor that has led to increased bargaining power of the customers. The customers are well informed and have too many options. In order to lure customers, the airlines companies have kept dropping prices and increasing customer convenience.
To build customer loyalty is not easy and it is easy for customers to switch from one to the other brand. While the switching costs are low, brands are doing everything to increase customer convenience and use loyalty programs and discount offers for promotion and customer loyalty. So, these are the several factors due to which the bargaining power of customers is high. However, it gets moderated by the speed and convenience offered by an airline service and its brand image. Delta has a strong brand image which acts in its favour and the reliability of its services acts to moderate the customers’ bargaining power.
Threat of substitute products : Moderate
The threat of substitute products for Delta Airlines is moderate. To some extent, trains and cars act as a substitute for domestic flights whereas in the case of long distance flights, there are no other substitutes but the competing airlines. Several domestic and international brands are competing in the airlines industry for market share. This raises the threat from the substitute products. However, the threat to some extent gets moderated by the string brand image and position of Delta Airlines in the industry. The overall threat from substitute products remains moderated.
Threat of new entrants: Low
The threat of new entrants in the airlines industry is low. It is because of the large financial investment in starting a new brand. Apart from infrastructure and staff, there are other investments also required to build a brand. The barriers to entry are high and that to exit are low. This is why the threat of new entrants for Delta Airlines is very low.
Intensity of Competitive rivalry: High
The intensity of competitive rivalry in the airlines industry is very high. It is because there are several American brands competing for market share. Most of these are influential names that own several aircrafts and have a significant presence around the globe across several continents. Apart from that several domestic airlines are also competing with Delta in the American airlines industry. American Airlines, Southwest Airlines and Jet Blue are some of the major names competing with Delta Airlines. The overall competitive rivalry in the Airlines industry is very high.