Case Analysis Of Delta Airlines

Submitted By RichAntV
Words: 1095
Pages: 5

Business Law 1
Week 8

Delta airlines, Inc. is a major United States airline whose headquarters are located in Atlanta, Georgia. The airline operates an extensive domestic and international network serving all continents except Antarctica. Delta airlines and its subsidiaries operate over 5,000 flights every day with approximately 80,000 employees (Delta.com). The airline's hub at Hartsfield-Jackson Atlanta International Airport is the world's busiest airport by passenger traffic and number of landings and takeoffs. Delta is the sixth-oldest operating airline by foundation date, and the oldest airline still operating in the United States.

Delta's corporate headquarters is housed in a corporate campus on the northern boundary of Hartsfield-Jackson Atlanta International Airport, within the city limits of Atlanta. This location has served as Delta's headquarters since 1941, when the company relocated its corporate offices from Monroe, Louisiana to Atlanta. In addition to housing Delta's corporate headquarters, Hartsfield-Jackson is also the site of Delta's Technical Operations Center, the airline's primary fleet maintenance, repair, and overhaul facility.

In the past year Delta has reported a $168 million loss including nonrecurring items that included a $561 million adjustment related to fuel-price hedging. Without this loses Delta would have made a $586 million profit, a $220 million improvement over a year earlier. In an effort to trim some fat Delta is going to initiate a fleet realignment plan that could affect the future of Memphis-based Pinnacle Airlines Corp (One of Delta’s subsidiaries). By reducing 50-seat jets from about 320 to 125 and replacing some with Boeing 717s and two-class regional jets. Officials are counting on fleet realignment to produce part of $1 billion in anticipated cost savings over the next couple years.

The fortunes of Pinnacle and Memphis International Airport are closely tied to Delta's push to ground 50-seat regional jets, which are considered inefficient to operate and due for major maintenance overhauls in the next few years. Pinnacle operates about 140 50-seaters for Delta out of Memphis and other airports. Delta reached agreement with its pilot union in June to make a significant reduction in 50-seaters and expand two-class, 76-seat regional jets by 70 aircraft (Pinnacle Airlines Inc., 2012). The agreement forced Pinnacle officials to go back to the drawing board to figure out how best to keep the company afloat coming out of a Chapter 11 bankruptcy filed April 1. Pinnacle had previously filed a plan to move forward post-bankruptcy as a Delta-only carrier utilizing 181 jets, including 140 50-seaters. But Pinnacle officials said Delta's pilot agreement signals that Pinnacle needs to lower costs to successfully compete for future Delta contracts.

Due to the fact that Delta has a long term contract with Pinnacle I could potentially see a breach of contract suit being brought against them for making this move. Pinnacle is already in a situation where they are bleeding money and are currently going through a bankruptcy. By Delta going through with this initiative Pinnacle will be forced to cut the size of their fleet down to nearly half. Pinnacle could take Delta to court for consequential damages for lose that could come from this action. They could also sue for reliance damages due to the reasoning that Pinnacle was making future plans based on the assumption that their contract with Delta was not going to change and was going to help them come out from under their current financial issues. Also under the UCC (Uniform Commercial Code) statue of frauds all quantities must be in writing which means that Delta is in breach of contract by downsizing the amount of plans they use ("Uniform commercial code," 2003).

There are several ways that Delta could go about ensuring that they are not found in breach of contract. The…