Delta air lines cost and productivity analysis
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Delta Air Lines Cost and Productivity Analysis. Ujaval Patel. Airline Information. Delta is considered a legacy carrier. It has: A heterogeneous fleet mix Fleet hubs (Dom: ATL, DTW, MSP, LGA, SLC, JFK, CVG, MEM; Int : CDG, NRT, AMS) Small percentage of unionized workers

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Airline information
Airline Information

  • Delta is considered a legacy carrier.

  • It has:

    • A heterogeneous fleet mix

    • Fleet hubs (Dom: ATL, DTW, MSP, LGA, SLC, JFK, CVG, MEM; Int: CDG, NRT, AMS)

    • Small percentage of unionized workers

    • Categorized seating classes

    • Seat assignments

    • Frequent flyer program

    • GDS


Definitions
Definitions

  • RPM –Revenue Passenger Mile – One revenue paying passenger transported one mile. ∑ i = 1 to All Flights (# of revenue passengers * # of miles traveled)

  • ASMs – Available Seat Miles – One available seat flown 1 mile. ∑ i = 1 to All Flights (# of seats on flight * # of miles flown)

  • RASM – Revenue Per Average Seat Mile –Revenue made from each seat mile offered = Operating Revenue/ASMs

  • CASM – Cost Per Average Seat Mile -Cost to operate each seat per mile offered = Operating costs /ASMs

  • Yield – measure of the average fare paid by all passengers per mile flown. = Total Operating Revenue/ # Revenue Passenger Miles = Load Factor * Yield

  • PRASM - passenger revenue per ASM. = Total passenger revenue/ASM

  • Fuel Consumed – Total volume of fuel used

  • Fuel Costs per ASM = Fuel Cost / ASM

  • Non-Fuel Costs per ASM = (Operating Expenses – Fuel Costs)/ASM


Rsm asm and load factor comparison
RSM, ASM, and Load Factor Comparison

  • The trends shown represent the rise in 3rd Quarter RPMs and ASMs.

  • 2010 showed a great increase in both RPMs and ASMs, though the trend seems to be tapering off a little, due to the merger with Northwest.

  • The load factor has gradually increased from ~80% to ~90% in 6 years.


Operating revenue operating expenses and income before taxes
Operating Revenue, Operating Expenses, and Income Before Taxes

  • The 3rd quarter is prime summer traveling season and sees the most RPMs and ASMs.

  • 2008 and 2009 signal the high cost to keep up profits up even during the summer.

  • The merger in 2010 saw expenses and revenues dramatically rise, and this has led to higher Q3 profits.


Rasm casm yield prasm
RASM, CASM, Yield, PRASM Taxes

  • By 2009 the yeild was dropping and CASM was seeing a rise. This was cutting into profits.

  • With the merger in 2010, the yeild was climbing again and CASM was dropping . Though, currently CASM is back at 2009 levels.


Fuel opex non fuel opex fuel consumption
Fuel OPEX, Non-Fuel OPEX, Fuel Consumption Taxes

  • The summer months tend to have higher than average fuel prices.

  • 2008 saw a price spike in fuel prices and thus there was a spike in Fuel OPEX.

  • With the merger Fuel OPEX has increased steadily, while Non-Fuel OPEX and fuel consumption has remained relatively steady.


Opex asms and fuel cost
OPEX ASMs and Fuel Cost Taxes

  • The price of fuel saw a spike in 2008 and the price dropped back down in 2009, but it has steadily creeped up over the past 3 years.

  • As expected Fuel OPEX per ASM closely follows the trend of fuel cost. Where as Non-Fuel OPEX has remained fairly stable.


Final thoughts
Final Thoughts Taxes

  • Fuel prices and dropping profits in Q3 were probably an indicator of two years of lost profits at Delta in 2008 and 2009.

  • With the merger in 2010 with Northwest fuel expenses did rise as the fleet size increased.

  • Additionally, airline expenses rose to handle the larger company that was formed.

  • With an increased market share and a drop in CASM after the merger profits rose, and have steadily risen since.