Delta Airlines 2014 Annual Report Download - page 22

Risk Factors Relating to the Airline Industry
The global 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. Consolidation in the domestic airline industry, the rise of well-funded government
sponsored international carriers, changes in international alliances and the creation of immunized joint ventures 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 competitive cost structures.
Our domestic operations are subject to competition from traditional network carriers, including American Airlines and United Airlines, national
point-to-
point carriers, including Alaska Airlines, JetBlue Airways and Southwest Airlines, and discount carriers, some of which may have lower costs
than we do and provide service at low fares to destinations served by us. Point-to-point, discount and ultra low-cost carriers, including Spirit Airlines
and Allegiant Air, place significant competitive pressure on network carriers in the domestic market. In particular, we face significant competition at
our domestic hub and gateway airports either directly at those airports or at the hubs of other airlines that are located in close proximity to our hubs and
gateways. We also face competition in smaller to medium-sized markets from regional jet operations of other carriers. Our ability to compete in the
domestic market 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 foreign and domestic carriers. Competition is increasing from well-funded
carriers in the Gulf region, including Emirates, Etihad Airways and Qatar Airways. 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.
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 addition, several joint ventures among U.S. and foreign carriers, including our transatlantic and transpacific joint ventures, have received grants
of antitrust immunity allowing the participating carriers to coordinate schedules, pricing, sales and inventory. Other joint ventures that have received
antitrust immunity include a transatlantic alliance among United Airlines, Air Canada and Lufthansa German Airlines, a transpacific joint venture
between United Airlines 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.
Increased competition in both the domestic and international markets may have a material adverse effect on our business, financial condition and
operating results.
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. The industry is heavily taxed. For example, the Aviation and Transportation Security Act mandates the federalization of
certain airport security procedures and imposes security requirements on airports and airlines, most of which are funded by a per ticket tax on
passengers and a tax on airlines. The federal government adopted a significant increase in the per ticket tax effective in July 2014 and has proposed
additional fees. Additional taxes and fees, if implemented, could negatively impact our results of operations.
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