Lessons from the Rise and Fall of Delta Airlines

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On June 17, 1929, Delta Airlines began passenger service. The airline had been founded as a crop-dusting service in Monroe, Louisiana in 1924, taking its name from the Mississippi delta.

By 1989, Delta was the premier US airline for business travel. Today, two decades later, when Delta is just another airline, it’s hard to remember how good they were then.

When I travelled for business I often changed my itinerary to fly Delta. I wasn’t the only one. Business travelers loved Delta because of the way we were treated.

It sounds corny to talk about “Southern hospitality,” the way the media often did. But the hospitality was real. Business travelers swapped stories about great service from Delta’s flight attendants and counter agents.

The service we got was a direct result of the feeling inside the company. Chairman Tom Beebe referred to it as a “family feeling.” You might not be able to quantify that, but think about this. In 1989, Delta had not had a strike since 1942. There hadn’t been a union vote in over thirty years.

Want more proof? How many times have you heard of airline employees buying their company a plane?

In 1983, led by three flight attendants, Delta employees presented the airline with its first Boeing 767. They did it to show their appreciation for solid management and strong leadership, especially during the period following deregulation in 1978.

In 1989, Delta was at the top of its game. It was one of the most profitable airlines and seemed to be weathering deregulation better than the competition. It was easily the preferred airline of business travelers. And it was a place where people loved to work.

Ten years later, Delta was just another airline, with the same problems and gripes and labor issues. The reason for the dramatic transformation had a name: Ron Allen. Allen became Delta’s CEO in 1987.

There were financial missteps, starting with Pan Am. Delta snapped up Pan Am’s European routes at a cost of $600 million. That did not include the carrying cost of the facilities. To make matters worse, Delta purchased Pan Am’s least profitable routes and passed on the more lucrative South American routes.

That seems to be where conflict started between Allen and Delta’s CFO, Tom Roeck. Roeck was an accomplished CFO and a straightforward truth teller. But not all CEOs value truth-tellers.

According to James Mathews, Delta’s treasurer at the time: “Tom was the first one to routinely be in the situation of bringing Ron Allen bad news, and Ron Allen didn’t like bad news.” So when Allen formed an executive committee in 1995 to “to oversee the company’s day- to-day operations and to refine Delta’s long- term strategies for profitability and growth,” he left the CFO off the committee.

Just about everything seemed ham-handed and clumsy. A cost-cutting program failed to achieve even half its goal. But the cuts reduced staffing and amenities and affected business travelers’ perception of the value of flying Delta.

To get an idea of how bad it all was, consider that Plane Business magazine awards its Ron Allen Airline Management Award to the individual who did the most financial harm to their airline in the preceding year. But Delta might have come back from the financial problems. The dismantling of the culture was something else.

Remember that Delta was a company that prided itself on a family feeling. It had a no layoff policy for decades. In 1994, Ron Allen cut 10,000 jobs.

Those jobs were cut all over the company. But, as one retired Delta flight attendant told me, “Ron seemed to really have it in for the pilots.” The story of the jump seat is a good illustration.

Every other airline allowed their pilots and those from other airlines to ride in the cockpit jump seat if there were no seats available in the main cabin. During the 1996 contract negotiations, the pilot’s union made several concessions to management and asked, in return to be able to use the jump seat as other airlines did.

This was a concession that would have cost Delta nothing. It’s something that many pilots think actually improves safety, since you have an extra set of trained eyes and ears in the cockpit.

But Ron Allen wouldn’t grant the concession. He went further. He told the pilots they would get it, “over my dead body.”

His body wasn’t dead, but it was gone from the CEO chair when the board forced Allen out in 1997. But by then the damage was done. Delta Airlines, once the premier US carrier for business travel had turned into just another airline.

Boss’s Bottom Lines

Business is a game where it’s new every day. No matter how well you’ve done before, it’s still possible to wreck the boat.

If you get the people parts right, it’s easy to get the rest.

Culture is a powerful, but fragile thing. If you burn down the culture tree, it takes a long time to grow another one.

You can hide from the truth, but it will find you. When it does, it will be angry.

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