Airline Market Risks and Management Discussion and Analysis (MD&A): A Thematic Study

Abstract

This research endeavors to assess airline executive decision-making coping with critical crises during the pandemic by scrutinizing the Market Risks and Management Discussion and Analysis (MD&A) sections within the 10-K financial reports. This study delves into the quarterly financial reports (10-Q) of Delta Air Lines (DAL) spanning from the 1st quarter (Q1) of 2020 to the second quarter (Q2) of 2023 and discovered primary challenges and market risks that were of concern to top executives. To underscore the significance of top executives’ decision-making activities within a chosen airline, this research project explores significant discussions disclosed in the financial reports. The findings show “revenue”, “cost”, and “fleet” were three most discussed topics while “liquidity, asset, and payable accounts”, “failing cost-saving strategies and poor Return on Investment (ROI)”, “policy changes in ticket cancellation and frequent flyer program”, “failing new technology”, and “proprietary data security” emerged as the top five market risks during the COVID-19 pandemic. Executives responded to these challenges by implementing corresponding strategies aimed at ensuring sustainability, such as labor downsizing, reforms to retirement plans, flight frequency reduction, simplification of aging fleets, cancellation of aircraft orders, cost-reduction initiatives, and adjustments to routes and hubs, among other measures. Noticeably, frequent flyer loyalty program remained lucrative.