Case Study Assignment with 3 Finding Of Fact: Delta

Case Study with 3 Finding Of Fact: Delta
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Case Study with 3 Finding Of Fact: Delta
Fact Finding 1: The unpredictability of the fuel prices that can either soar higher or plummet while posing significant impacts on the company’s operating cost.
Fuel prices have always been unpredictable and whenever there are changes companies are affected. Before 2005, the cost of crude oil was less than $60 per barrel. However, the fears of recession led to a steady increase, and by June 2008, the cost per barrel was $154.38. The above resulted in massive increases in the operating costs of Airlines and other companies that rely heavily on fuel. At Delta, for example, the total operating expense increased, and it was mainly driven by a $2.9 million surge in expenditures incurred on fuel.
Fuel has always had a significant influence on the operating costs as well as operating income of major Airlines. Whenever the world suffers from an increase in fuel prices, airlines often experience surges in operational costs, and this negatively impacts the profits. However, it is important to note that this is an industry wide problem and not unique to Delta. Conversely, by finding ways to limit or reduce the company’s expenditure on fuel, the management can help to grow the profits of the airline. Organizations often decide to cut cost by reducing their workforce, and while this could work, steady increases in the prices of fuel can render this approach futile.
The direct interpretation is that when oil prices go down, airlines will experience huge profits. However, airfares are also expected to be low, and this increases demand which means that capacity will have to be increased. Problems exist whether the oil prices are high or low. To help deal with the unpredictability of oil prices, the company can employ the following recommendations:
* Use oil futures. Oil futures are essentially contracts that are between trading parties where one party agrees to buy and sell a particular asset at a specified date but at a price that is agreed upon today. The unpredictability of oil prices is a big problem for the entire airline industry and can emanate from political strife, wars, and also weather. Essentially the danger here is that an organization could be staring at its closure or bankruptcy without knowing it. However, Delta can make use of oil futures to help secure its profits as well as maintain its operating cost to a certain percentage. This requires a competent team of financialists and analysts who can help with predictions and in making the final decision. While this might not be sure bet, it can aid the airline to avoid escalating costs of operation.
Fact Finding 2: The competitive nature of the airline business that often calls for restructuring or re-strategizing.
Delta is widely known both in the US and around the world. Reports suggest that in 2012, the company boasted of servicing 572 destinations and these were in 65 countries. The airline was credited with 5766 daily flights while operating 714 aircraft. These numbers are huge and cement its place as one of the leading airlines in the world. Additionally, the company has a workforce of over 80000 employees spread across in...