Delta Airlines Environmental Factors

Delta Airlines Environmental Factors

        The airline industry has broken barriers and further globalized the world’s economy. They allow individuals, companies, and industries to connect without the difficulty of distance or time. Influences of the seven external environment factors will provide an insight on the industry while specifically observing Delta Airlines.

Demographic Factors: As an industry    whole, an average of over eight million people fly every year, roughly 44% of the world’s population. Airlines host near four billion passengers yearly. The industry is geared towards people aged 25-54 years old and employ persons 25-45 years old. Flight travels are a global service and are distributed all around the world, and because of this, the industry has a strong ethnic mix. As far as income distribution, the industry provides services for any income level, service mainly middle to high income families, and the average income level for airline employees is $34,000 for flight attendants, $72,000 for airline pilots, and $70,000 for headquarter positions. This past year Delta transported more than 170 million passengers in the Atlanta based airport alone. Currently the company focuses on the millennial generation populous including 16-34 year olds and are expecting their business travel to increase by 50% in the next five years. Delta reaches revenues from 87.2% passenger segment, 2.5% cargo segment and 10.3% from airline amenities. The company services 65.8% towards domestic regions, 17.1% towards Atlantic regions, and 6.3% from Latin America regions.  The company thrives itself on being diverse and having a large ethnic mix; this includes but is not limited to Caucasian, African American, Latino, Women, and Men. Delta provided an 18% pay increase in 2016. On average, flight Delta pay scale includes $40,000 for flight attendants, $200,000 for pilots, and $140,000 average for headquarter positions.

Economic Segment: As an industry whole, economic trends are the foundation for performance. Since the inflation rates and interest rates are subject to income levels and the supply and demand of each currency, the industry is subject to continual change in inflation and interest rates. The country deficit has not affect the airline industry considering sales the past year have increased by 12% and generated roughly $700 billion in revenues in 2016. The industry itself become a low-cost carrier service to increase their sales to passengers. In doing so, the industry saw revenue per passenger decrease by 50% but increase in number of passengers by 80%. The industry attributes $2.7 trillion in the world’s GDP. With President Trump in office, he has plans to lower corporate taxes by up to 15% which could result in lower costs and higher revenues for the industry as a whole. Delta specifically earned $10.2 billion in 2016, a 32% increase from the previous year. In contrast to the industry, Delta is not specialized in low-cost, but they are rather focused on high-quality service. They do provide their customers with a rewards points program that earns free flights and upgrade amenities. They have increased their rewards program by 1.5 million new customers in 2016. Delta is responsible for one-third of the industry’s GDP.

Political/Legal Segment: As an industry whole, industry trade, tax policies, and competition regulations define their political and legal segmentation. According to the U.S. Department of Transportation, the airline industry is watched closely to keep from creating a monopoly and protecting customers. Previous factors such as 9/11 hindered the airlines by a 6% decline, a $13 billion total loss, and took five years for recovery. Today, the largest political factor is the transition of a new President. For international trade, various places have not been explored due to government restrictions such as having no trade agreement with certain countries such as Russia.  Tax policy is subject to each country; some offer incentives to the airline industry and others result in higher cost versus revenue. Terrorism is the biggest threat to airline companies today. People are hesitant to travel into countries due to the repetitive attacks by ISIS, not to mention the random shooting inside airport baggage claim. Lastly is competition. In result of the Deregulation Act of 1978, limitations on airfares and routes, several commercial airline companies entered the industry, which in turn plunged airfare tickets lower than before. Specifically considering Delta Airline, the executive order has not affected the company’s travels. They currently do not travel to the 7 countries listed in the executive order. They do however have the potential to be affected when Trump expands these orders. At the same time, it will help Americans to feel safer when flying and thus will be encouraged to travel. Delta also recently went through a technical glitch that slowed and even stopped some traveling passengers. This could create a negative connotation for the company, and Delta will need to prove themselves.

Sociocultural segments: As an industry whole, the sociocultural segment is one of its best qualities. The industry is known for being diverse and a positive work environment. Delta specifically has worked hard to pride themselves in diversity. They service more countries than any other global airline and look to hire every type of person. This includes cultures, languages, ethnicity, gender, race, age, disability, education, and religion to name a few. Women have been the majority in this industry, however Delta is working to change this standard and has increased the number of male employees to almost half in comparison to the whole. Delta also has created a higher value in their employees. While other companies such as Southwest and JetBlue have not increased their employee pay, Delta is consistently increasing salaries in comparison to their revenues.

Technological segment: As an industry whole, technology is key for operational efficiency. With an increase in the role of technology, airlines have reduced costs specifically related to engine technology. Delta has been a leading factor in the industry when it comes to technology. They reduced fuel cost to $2.93 per gallon in 2016 in comparison to Southwest paying $3.02 and American Airlines paying $3.03 per gallon. Delta also uses technology for better communication with its customers. They created an app for easy access to flight information. It is allows passengers to keep track of their airline rewards points, travel information, boarding passes, and trip extras. It also gives all customer support contact number for easier and quicker services. As mentioned previously, Delta underwent a technical failure that caused thousands of passengers a delay in their flights. They gave their passengers a refund on their flights and will need to prove their company has updated their technology with regards to on time flights.