Delta Airlines Research Paper Example | Topics and Well Written Essays - 1750 words

Delta Airlines - Research Paper Example Generally a fluctuating exchange rate exists between dollar and euro which implies that one euro is not always equals to one dollar. Hence Delta Air Lines in order to finance its day to day operations has to exchange the euro for the dollars. The airline can be at a disadvantageous or in an advantageous position depending upon the current market situation. This leads to distortion in the earnings of the airlines as the currency exchange affects the revenue of the company. If euro is high as compared to dollars then while Delta Airline is converting its earning, which is from euro to dollar then the company will be able to benefit from this situation. Like for instance if 1 Euro = $ 1.20, then for every euro the company will get more dollar than what it had got if the situation is just reverse. Therefore, cost incurred in monetary terms by the company is of less or more value than company’s income recognized in monetary terms depending on the market condition. The airline compa ny engages in currency hedging in order to mitigate currency risk. Currency hedging signifies protecting against the fluctuations in the exchange rates by locking in a particular exchange rate or a series of exchange rates (Vasigh, Fleming & Mackay, 2010; Papaioannou, 2006)). Delta Air Line participates actively in the Fuel hedging program in order to manage the fuel price risk. This program helps in reducing financial impact that occurs due to change in the price of jet fuel. Different commodity and contract types are used in this fuel hedging program. The economic efficiency of the hedge portfolio is evaluated on a regular basis with the financial targets of the company. According to the prevailing market condition the hedge portfolios are rebalanced,... This paper stresses that there are a number of facilities that are provided by the airport where the airline operates. The airport looks for increasing their total income from commercial sources that creates both concession fees and rents. The rental income arises primarily by renting and leasing the space either directly or indirectly to the airport users like the handling agents, freight forwarders and airlines. On the other hand, concession fees are payment made by the service providers to the airport authority. Delta Air Lines that is operating in various countries also pays rent to the airport authority for using their space. The rent that the airline pays depends upon the area occupied by the company and the number of facilities operating in the airport. This essay makes a conclusion that the international operations of the company are subjected to competition from both foreign and domestic carriers. In such a scenario, the airline in order to operate profitably has entered into alliance with foreign carriers in which they have implemented code sharing and marketing agreement that in turn will increase the ability to sell international transportation and go beyond the traditional gateway cities like Asia and Europe. At the same time the other airlines that have entered into alliance has also benefitted from the alliance by entering into US market. Apart from this, the company is also heavily dependent upon technology for their day to day operations.