Delta – Minh Quang Duong

A few days ago, I wrote a short piece on how Delta strives to deliver an exceptional customer experience. This follow-up entry focuses on the airline’s worldwide partnerships to stay competitive internationally.

One airline alone can’t possibly handle all the routes by themselves, especially international routes and when they don’t want to blow up their financials with unsustainable expenses. Strategic partnerships allow carriers to make possible routes that are far away and not on the carriers’ map. Through joint ventures and investments, Delta has established a great network of partners that enable the carrier to service international routes. Some of the notable partnerships or investments include the stakes in Virgin Airlines, KLM, GOL and AeroMexico in Latin America, China Eastern Airlines and Korean Air in Asia.

The partnership with Korean Air is highly important to Delta Airlines’ desire to expand in Asia. Delta’s revenue between 2012 and 2017 fell significantly. The carrier’s main hub has been Narita, Japan for the past 30 years, but the Japanese government decided to upgrade Haneda, an airport closer to Tokyo, to an international hub. The move drew passengers away from Narita, especially those who ended their trips in Japan; which made Narita less financially sound. Delta’s rivals, American and United, had partners to help them service routes to both Haneda and Narita. Delta didn’t have that option.

As a consequence, Delta started to address the weakness amidst the rise in demand for flights between the US and Asia. In addition to getting approval to fly non-stop to American cities from Haneda, Delta added more flights between China or Korea and America. The carrier first signed a joint venture deal with Korean Air and then bought a 4.3% stake in the parent company of its Asian partner. The collaboration with Korean Air gives Delta access to Incheon, one of the new major airport hubs in the world and Asia, as well as access to more Asian cities. Furthermore, Delta stopped its own services to Hong Kong and Singapore while adding routes to destinations such as Manila. To service Delta passengers to Singapore, it relied on Korean Air.

Elsewhere, Delta announced in October 2019 its acquisition of 20% stake in LATAM. The investment hands the carrier access to the lucrative flights between the US and South America while stripping its rival American of a strategic partner in the region.

In 2018, international passenger revenue made up 29% of the airline’s total passenger revenue.

Disclosure: I own Delta’s stocks in my personal portfolio

As I am fascinated by successful turnaround stories in business, below is my research on how Delta delivered a great flying experience to customers as part of their effort to turn the company around.

Tim Mapes, the current Chief Marketing and Communications of Delta, said the following in 2017: “[The Northwest merger] was our opportunity to emerge from the pack of U.S. airlines, the legacy carriers, and differentiate Delta, not as a commodity, where a seat is a seat, but as a different experience, with levels of service that are different from our competitors,”

Since emerging from its bankruptcy, Delta has been relentlessly focused on delivering superior customer experience, willing to sacrifice short-term profits in exchange for better customer experience.

In 2018, Delta announced renovation for its 777 fleet, reducing the number of abreast seats from the industry standard of 10 to 9 in order to give its customer seat more room. For premium section, the carrier added “sliding-door accesses to a private cove filled with entertainment options, a personal table, and a 24-inch-wide reclining seat”. The reduction of seats meant a short term drop in revenue. The investment in premium section came with an increase in expenses. It showed how far Delta was willing to go to deliver a great customer experience.

In terms of in-flight entertainment, in 2016, Delta became the first US airline to offer all in-flight entertainment for free. Since then, it has added wireless back-seat screens and free messaging in flight for passengers, the latter of which allowed passengers to stay connected with others on the ground.

Additionally, Delta looked for other ways to make the whole flying experience from start to finish as pleasant as possible. In 2016, Delta spend $50 million in a technology called Radio Frequency Identification (RFID) for baggage tracking. RFID not only allows accurate handling to be more efficient, but also lets passengers know where their luggage is at any time via Delta mobile application. In 2018, the carrier started to let fliers file a baggage claim via its mobile application at the final destination instead of having to physically visit a Delta office. Confident in its ability to handle baggage, Delta is now committed to a 20-minute policy for luggage on domestic flights. Under the policy, if luggage doesn’t arrive on a carousel within 20 minutes of arrival of a domestic flight, passengers will be entitled to 2,500 bonus miles.

Late 2018, Delta rolled out the first biometric terminal for direct international flights from Terminal F at its Atlanta hub. The new technology allows passengers to check in without presenting papers. If you are annoyed by having to take out electronic devices for carry-on and personal items, you won’t have to with the new technology from Delta, making the boarding experience smoother and more pleasant.

Clear and effective communication is key to customer satisfaction. Delta was the first US airline that offered customer support on Twitter. Since then, the airline has used social media extensively to offer customer support to passengers. In 2019, when a flight was delayed due to uncontrollable weather, Delta sent personalized emails to explain the situation and apologize to customers, along with 10,000 bonus points in their account.

All the investments in and focus on improving customer satisfaction seem to pay off majorly for Delta. In 2019, it won the TripAdvisor Travelers’ Choice Awards for the Major Airline in North America category. Revenue from Premium products made up 31% of Delta’s total revenue in 2018, up from 18% in 2011. According to Delta;s CEO, passengers purchased 65-70% of premium seats on international and domestic routes, compared to only 13% of domestic premium seats sold in 2011. Loyalty Program’s revenue share rose to 9% of the carrier’s total revenue, up from 5% in 2011. Customer loyalty is also shown through the use of Delta branded credit card. In 2018, the carrier received $3.4 billion in revenue from American Express for the purchase of miles and merchant credit card fees. The margin from American Express payment was estimated to be higher than that of Delta’s core operations and grow at an 11% annual clip.

Disclosure: I own Delta stocks in my personal portfolio

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Delta’s worldwide partnerships

Delta Airlines’ efforts to deliver a great customer experience