Delta Airlines Political Environment Essay

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Delta Airlines is headquartered in the United States. The airline industry is heavily-regulated, in particular where public safety is concerned. The airline industry was also transformed in the late 1970s by deregulation, a process which has opened up competition and created the conditions for the industry consolidation that is still ongoing today (The Economist, 2013). Most of the legal/political environment for Delta is the FAA, or Federal Aviation Administration. This is the body that governs the airline industry, and sets the standards by which airlines must operate. There is no discrimination between airlines by the FDA. The Department of Justice is also a factor, because that department governs the mergers between airlines in order to ensure a competitive market. Thus far, airline mergers have been permitted, and there are still protections from the FAA with respect to foreign carriers and their ability (or lack thereof) to operate on domestic U.S. routes.

Thus, in general, the political environment is neutral. The restrictions placed on the industry increase costs -- and safety -- and airlines have been able to merge, but competition in the industry has made it difficult for many airlines to operate profitably with any sort of consistency. There are just enough regulations to keep industry costs high -- though arguably this offsets potential lawsuits that would surely occur if there was cost-cutting by a company like Delta. Non-aviation operations are much less stringently-regulated than the aviation regulations, so in that sense Delta does have some flexibility with respect to how it wants to run its non-aviation operations.

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There are other aspects to the legal environment for Delta. The company was able to declare bankruptcy in order to restructure its pension obligations, something that has helped the company to remain in business this long (Foust, 2009). Its merger with Northwest was also critical, and this was allowed, so the strongish Delta today exists because of a favorable political environment ten years ago. The legal environment also governs such issues as labor laws -- rules regarding hiring, firing, unions and other variables. Taxation policy affects airlines, in particular how they structure their asset bases. Further, the legal environment is important where things like communications are concerned as well -- fortunately for major airlines they are allowed to offer things like Wifi on their flights. Government is heavily involved in health and safety, through OSHA, something that is quite important to airlines in particular, as a heavy machinery industry.

Globally, the political/legal environment is generally unfavorable for airlines. In basically every country, domestic flights are run by domestic airlines. The airline business is typically viewed by governments as a national security issue, and they all protect their domestic markets from foreign competition. So a foreign airline can fly from a foreign country into the U.S., but cannot fly between two U.S. cities. The same holds true outside of the U.S. This limits Delta's operations to the domestic U.S. routes, and to routes between the U.S. and….....

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