Delta Airlines 2008 Annual Report Download - page 24

Table of Contents
Index to Financial Statements
Risk Factors Relating to the Airline Industry
The airline industry is highly competitive and, if we cannot successfully compete in the marketplace, our business, financial condition and operating
results will be materially adversely affected.
We face significant competition with respect to routes, services and fares. Our domestic routes are subject to competition from both new and
established carriers, some of which have lower costs than we do and provide service at low fares to destinations served by us. In particular, we face significant
competition at our hub airports in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York-JFK, Salt Lake City, Amsterdam and Tokyo-Narita
either directly at those airports or at the hubs of other airlines that are located in close proximity to our hubs. We also face competition in smaller to medium-
sized markets from regional jet operators.
Low-cost carriers, including Southwest, AirTran and JetBlue, in the U.S. have placed significant competitive pressure on us and other network carriers
in the domestic market. In addition, other network carriers have also significantly reduced their costs over the last several years. Our ability to compete
effectively depends, in part, on our ability to maintain a competitive cost structure. If we cannot maintain our costs at a competitive level, then our business,
financial condition and operating results could be materially adversely affected. In light of increased jet fuel costs and other issues in recent years, we expect
consolidation to occur in the airline industry. As a result of consolidation, we may face significant competition from larger carriers that may be able to
generate higher amounts of revenue and compete more efficiently.
In addition, we compete with foreign carriers, both on interior U.S. routes, due to marketing and codesharing arrangements, and in international
markets. International marketing alliances formed by domestic and foreign carriers, including the Star Alliance (among United Airlines, Lufthansa German
Airlines and others and which Continental has announced its intention to join in October 2009) and the oneworld Alliance (among American Airlines, British
Airways and others) have significantly increased competition in international markets. The adoption of liberalized Open Skies Aviation Agreements with an
increasing number of countries around the world, including in particular the Open Skies agreement with the Member States of the European Union, has
accelerated this trend. Through marketing and codesharing arrangements with U.S. carriers, foreign carriers have obtained access to interior U.S. passenger
traffic. Similarly, U.S. carriers have increased their ability to sell international transportation, such as transatlantic services to and beyond European cities,
through alliances with international carriers.
Terrorist attacks or international hostilities may adversely affect our business, financial condition and operating results.
The terrorist attacks of September 11, 2001 caused fundamental and permanent changes in the airline industry, including substantial revenue declines
and cost increases, which resulted in industry-wide liquidity issues. Additional terrorist attacks or fear of such attacks, even if not made directly on the airline
industry, would negatively affect us and the airline industry. The potential negative effects include increased security, insurance and other costs and lost
revenue from increased ticket refunds and decreased ticket sales. Our financial resources might not be sufficient to absorb the adverse effects of any further
terrorist attacks or other international hostilities involving the U.S.
The airline industry is subject to extensive government regulation, and new regulations may increase our operating costs.
Airlines are subject to extensive regulatory and legal compliance requirements that result in significant costs. For instance, the FAA from time to time
issues directives and other regulations relating to the maintenance and operation of aircraft that necessitate significant expenditures. We expect to continue
incurring expenses to comply with the FAA's regulations.
Other laws, regulations, taxes and airport rates and charges have also been imposed from time to time that significantly increase the cost of airline
operations or reduce revenues. For example, the Aviation and
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