Delta CEO credits management 'pack' with airline's turnaround; pursues faster security lines

  • Article by: JOSHUA FREED , AP Airlines Writer
  • Updated: June 26, 2013 - 5:17 PM

NEW YORK — Delta Air Lines is on track for its fourth straight annual profit, its best stretch since the six years ended in 2000. Its passengers file fewer complaints about lost bags and late flights than those flying its chief rivals. Delta's merger with Northwest is considered a blueprint for combining airlines.

That performance has come under the guidance of CEO Richard Anderson, who started as CEO in 2007, just after Delta exited bankruptcy protection, and just before fuel prices jumped and the Great Recession began.

But Anderson says he isn't the only one with the answers. "The senior management team hunts as a pack," he says.

The hunt has led to opportunities in some key markets. In the New York area, Delta has raised its passenger count by 10 percent in the past three years and is challenging United as the dominant airline there. Delta's partnership with Virgin Atlantic will give it a bigger share of the New York-London route, the world's busiest.

The pack also ventured into uncharted territory for an airline. Management took the unusual step of buying an oil refinery, in an effort to exert some control over the price of jet fuel. At $12 billion, fuel is Delta's biggest annual expense. Delta also added in-flight Internet access faster than other airlines.

In an interview at The Associated Press headquarters in New York, Anderson and Delta President Ed Bastian talked about how Delta initially considered buying an oil company before settling on the refinery, how it restored its reputation and how passengers may eventually see security wait times of no more than 15 minutes.

Below are excerpts, edited for length and clarity:

AP: Spirit, Allegiant, and Frontier are charging to put a bag in the overhead bin. Is that something that you could imagine for Delta?

ANDERSON: That's not in our plans. (We see) more carry-ons going in the belly. Those carriers have a different business model, right? There's no first class, there's no Economy Comfort, there's no assigned seating. No leg room. At Delta, we're really focused on providing a really premium product, for all travelers.

Our operating performance is stellar. If you don't have a tornado in Oklahoma City, a typical day for us is 95 percent of our flights arriving under DOT rules, on time, and no cancellations. That level of operating capability was really unheard of in this business ten years ago.

AP: Delta didn't always have that reputation in recent years. What has happened at Delta to make that work?

ANDERSON: Well, you know, Delta has great employees, and we went through that tough period after 9/11 and really restructured. All we did was pull the Delta values out again, where you value the people, you value the customer, and give the employees the tools and the direction that they needed. And they've just done a phenomenal job.

Now we put a lot of research and industrial engineering know-how into the operation. Our customer complaint numbers, in the first quarter of this year, were lower than any time since the DOT has been collecting the data, since 1997. And we just continue to drive improvement in the operation.

AP: Is there an example you can share?

ANDERSON: We put a flat tire rule in place, for someone that misses their flight. (The rule allows customer service workers to waive a change fee and get passengers on the next flight if they were delayed by something unforeseen, like a flat tire.) We put a lot more discretion in our front-line employees. We brought back redcoats. Delta was always famous for the redcoats, who were the senior airport customer service agents who were there to solve problems on the spot.

AP: Have you made enough progress over the last decade to eliminate, or at least ease, the boom and bust cycle in airlines?

BASTIAN: I think we've made tremendous progress in that regard. 2012 was the third straight solidly profitable year for Delta, and we're off to a good start in 2013. Our return on invested capital was over 10 percent for the last several years. We'll probably do a little better than that (this year), a low double-digit return, which is something that has never been seen from one company, much less the industry. Consolidation has had a lot to do with that. We think consolidation is still in the relatively early stages, with more to come that will provide more stability.

One of the things that's allowed for that stability is higher fuel prices. Candidly, while we hate where fuel prices have gone, it's become our new normal, we've had to plan for it. It requires us to be disciplined about the supply we put out, about the offerings we provide. It requires us to be as productive as we can. It also means the new entrants that historically have disrupted the industry have a difficult time financially.

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