Delta Airlines 2012 Annual Report Download - page 23

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.
The airline industry is highly competitive, marked by significant competition with respect to routes, fares, schedules (both timing and frequency),
services, products, customer service and frequent flyer programs. Our domestic operations are subject to competition from both traditional network
and discount carriers, some of which may 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 domestic hub airports in Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-
LaGuardia, New
York-JFK and Salt Lake City 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.
Discount carriers, including Southwest, AirTran (now owned by Southwest), JetBlue, Spirit and Allegiant have placed significant competitive
pressure on us in the United States and on other network carriers in the domestic market. In addition, other network carriers have also significantly
reduced their costs over the last several years through restructuring and bankruptcy reorganization. American Airlines has recently filed for
bankruptcy protection, which may enable it to substantially reduce its costs. 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.
Our international operations are subject to competition from both domestic and foreign carriers. Through alliance and other marketing and
codesharing agreements with foreign carriers, U.S. carriers have increased their ability to sell international transportation, such as services to and
beyond traditional European and Asian gateway cities. Similarly, foreign carriers have obtained increased access to interior U.S. passenger traffic
beyond traditional U.S. gateway cities through these relationships. In particular, alliances formed by domestic and foreign carriers, including
SkyTeam, the Star Alliance (among United, Lufthansa German Airlines, Air Canada and others) and the oneworld alliance (among American
Airlines, British Airways, Qantas and others) have significantly increased competition in international markets.
Increased competition has also emerged from well-funded carriers in the Gulf region, including Emirates, Etihad and Qatar. These carriers have
large numbers of international widebody aircraft on order and are increasing service to the United States from their hubs in the Middle East. Several
of these carriers, along with carriers from China, India and Latin America, are government supported or funded, which has allowed them to grow
quickly, reinvest in their product and expand their global presence at the expense of U.S. airlines. In addition, the adoption of liberalized Open Skies
Aviation Agreements with an increasing number of countries around the world, including in particular the Open Skies Treaties that the U.S. has with
the Member States of the European Union and Japan, could significantly increase competition among carriers serving those markets.
Several joint ventures among U.S. and foreign carriers, including our transatlantic joint venture with Air France-KLM and Alitalia, have received
grants of antitrust immunity allowing the participating carriers to coordinate schedules, pricing, sales and inventory. Other joint ventures that have
received anti-trust immunity include a transatlantic alliance among United, Air Canada and Lufthansa, a transpacific joint venture among United and
All Nippon Airways, a transatlantic joint venture among American Airlines, British Airways and Iberia and a transpacific joint venture between
American Airlines and Japan Air Lines.
Consolidation in the domestic airline industry and changes in international alliances have altered and will continue to alter the competitive
landscape in the industry by resulting in the formation of airlines and alliances with increased financial resources, more extensive global networks
and altered cost structures.
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.
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