Restructuring / Turnaround Strategies Case Study

Delta Air Lines: Grinstein's Restructuring Challenge

Abstract:
During 2001-2003, Delta Air Lines (Delta) had cumulatively lost $3.3 billion, in sync with industry losses of $21 billion. Delta had laid off 16,000 employees and had cut capacity by 16%. To improve revenues, Delta had strengthened its alliances with its regional Delta Connection partners and international partners through 'SkyTeam'. The airline had also leveraged technology through its Delta Nervous System (DNS) to cut costs and improve productivity. In addition, to compete with the Low Cost Carriers (LCC), the company had launched Song, a low cost subsidiary in select markets. In spite of these initiatives, it posted losses of $383 million in the first quarter of 2004 due to high labour costs as its pilots were the highest paid in the airline industry. Having failed to get the required concessions from the pilots, Leo Mullin, the CEO of Delta, resigned and Gerald Grinstein took over in January 2004. After taking over, Grinstein announced a complete strategic assessment of the airline.

Pedagogical Objectives:

• To discuss the various problems faced by the company and the choices it needs to make a return to profitability
• To discuss the strategies adopted by Delta to lower its costs and the advantage it derives from DNS
• To discuss the challenges Delta faces due to its high labour costs and increasing debt
• To discuss the challenges posed by the rapid growth of LCC and the strategic importance of Song in the long run
• To discuss the merits and demerits of the regional and international alliances for Delta
• To discuss the ways in which Delta mainline can optimise and streamline its operations
• To discuss the possible outcomes of the strategic assessment and the pros and cons associated with them.

Keywords : Network carriers in the US; Business segments of Delta Airlines; History of Delta Airlines; Leo Mullin's revival plan for Delta Airlines; Restructuring / Turnaround Strategies Case Study; Employee involvement programme at Delta; Delta Airlines' business alliances; Cost management at Delta Airlines; Productivity enhancements at Delta Airlines; Delta Nervous System (DNS); Song; Delta expansion initiative