Why Delta’s Free Wi-Fi Could Backfire for the Airline Industry
Amer Alnajafi
Head of Finance | Driving Growth & Profitability in PE-Backed Companies | UCLA Anderson MBA
Delta Airlines recently announced that it will offer fast, free Wi-Fi to all SkyMiles members on most of its domestic flights, starting from Feb. 1, 2024.? I rejoiced at this news along with my fellow Delta loyalists.? But the airline industry is one of the most fiercely competitive, and there is no doubt that this offering will not offer Delta a competitive advantage for long.
Delta is trying to differentiate themselves from their competitors with this offering, but what seems like a differentiation strategy is really a cost strategy.? Delta is lowering the cost of WiFi (to nothing) and therefore offering more value for each ticket price.? This is great for the consumer, but bad for Delta and the Airline industry as a whole.
According to Michael Porter, a renowned economist and business strategist, competing on cost will never create a sustainable competitive advantage, as it can be easily copied.? If Delta’s free WiFi campaign is successful in recruiting more customers away from competitors you can be sure that those competitors will offer free WiFi as well, and then others will follow suit.? In a year or so it’s easy to see how free WiFi will be a given on most flights, great for us, but a lost source of revenue for the airline industry.? But hey, I’m not complaining!
Payments / Fintech Entrepreneur, CEO @ Pacific Processing, Co-founder @ KLEAR Technologies, SecurPair, & LK LiquidKlear
1 年What about the LTV from a new customer that is onboarded to and then become loyal to Delta during and before other airlines follow suit? How likely are they to switch back over just a feature once they’ve started accumulating miles and become part of the new platform? Accruing benefits and mounting losses occur for newly onboarded customers regardless of the competitor now also offering free Wi-Fi. Therefore, I think the LTV/CAC ratio is very high for Delta and think this is a smart move.
Award Winning In-House Counsel | Founder of Contract Nerds ?? ?? | Author of Contract Redlining Etiquette | Keynote Speaker
1 年Interesting! What's an example of a competitive advantage that Delta could've offered that's not based on pricing?