Delta Air Lines is an airline carrier based in Atlanta, USA. Delta’s hopes of survival rest on a series of initiatives: a new pilot contract; the simplification of its fares; and ‘Operation Clockwork’, an attempt to reduce the costs of running a ‘hub and spoke’ operation to get close to the economies of low-cost carriers. Hubs have been central to the business of traditional airlines, in collecting customers from small cities that are too uneconomic to serve with direct air services.

Hub schedules used to be organised around maximising revenues from marginal passengers – those willing to pay high fares for efficient connections. The director of operations strategy and planning said ‘Historically we had to trade off the inefficiencies of the traditional hub for high fares from connecting passengers. Today, people pay low fares.’ The overall aim of Operation Clockwork is to improve productivity: there will be a 22% reduction in the time aircraft spend on the ground as a result of increasing the number of departures per day from nine to 10.5. Employees will handle six to seven flights per day, up from four to five, incentivised by performance bonuses of up to $100 per month. Turnaround times will be reduced by asking passengers to board while the plane is being cleaned, closing the doors earlier and not waiting for late connecting flights, asking more staff to stay with the aircraft throughout the day, and reduce the number of gate changes, previously used to make customer connections more convenient.

Discussion points
1 How will the company improve the contribution from selling flights to passengers?
2 What are the business risks the company faces in its plans to cut costs?