Delta’s ambitions soar again
When Delta Air Lines Inc. went into a financial tailspin a few years ago, its longtime slogan “We love to fly, and it shows” became the butt of jokes as passengers encountered grungy cabins, gaping flight delays and grumpy attendants.
Rather than loving to fly, “the employees seemed stressed and frustrated,” said David Urode, a Delta frequent flier. “I was constantly asking ... if there was another airline I could fly.”
Emerging from 19 months of bankruptcy protection, Delta is inching back up, leaner and more focused, with airplanes that have been scrubbed clean and a re-energized workforce that is roping back customers like Urode.
Emboldened with a restructured balance sheet and a new look, Delta is about to expand again and has set its sights mainly on Los Angeles International Airport, where it once was the largest carrier but had slipped to fourth in recent years.
This week Delta is expected to announce that it will increase the number of flights out of LAX by 50% from 62 departures a day to 99, making the airport one of the busiest for the Atlanta-based carrier.
That’s good news for travelers in Southern California because the move would intensify competition at LAX and could keep the lid on airfares, analysts say. UAL Corp.'s United Air Lines, AMR Corp.'s American Airlines and Southwest Airlines Co. are now the largest carriers at LAX.
“There’s no doubt Delta is going to affect fares there,” said Ray Neidl, airline analyst at New York-based Calyon Securities Inc.
United Airlines, the largest carrier at LAX, acknowledged last month that fares were likely to be held down in California because of the competition.
While Delta heats up the competition for domestic passengers, its expansion plans could have the biggest effect on international travel.
At LAX, 90% of the international flights are operated by foreign carriers that have been raising fares as demand has surged.
Delta is planning a significant increase at LAX, particularly to destinations in Latin America and Asia. In all, Delta sees international flights accounting for 40% of its flights, up from 30% today and 20% two years ago.
“We’ve decided to make L.A. our second Latin America gateway,” said James Whitehurst, Delta’s chief operating officer and one of the top internal candidates for the airline’s chief executive post.
Delta is also eyeing the Asia market, Whitehurst said, adding that the carrier has “almost nothing in the Pacific.”
“That’s a major hole in our network, so we see a lot of opportunities there,” he said.
Passengers will notice the difference inside the planes as well, said Joanne Smith, Delta senior vice president for in-flight services. “We are to create a better on-board experience,” she said. The airline will equip all long-haul planes with in-seat TVs, bring back meal service and install lie-flat seats in first class.
The heady talk is in sharp contrast to just two years ago, when grim-faced executives announced that Delta could no longer pay back its loans and declared bankruptcy, joining the likes of United and Northwest in seeking protection from creditors in court.
The Sept. 11, 2001, terrorist attacks had grounded air travel and pushed the so-called legacy airlines, already ailing from overcapacity and increased competition from new low-cost carriers, over the financial precipice.
Delta slashed 6,000 jobs and cut billions of dollars in wages and benefits. At the same time, it eliminated unprofitable routes and reshuffled its fleet, flying larger wide-body planes on longer international routes and smaller, single-aisle aircraft on shorter domestic flights.
Though cuts caused an angry backlash from rank and file at other airlines, Delta has weathered the restructuring unfettered by labor strife. Tensions are escalating at American, for instance, but Delta’s relations with employees are fairly smooth.
Last week, at the airline’s LAX terminal, hundreds of Delta flight attendants, ground-crew members and ticketing agents cheered and threw confetti as Delta executives got off an airplane that had been dedicated to the airline’s retiring chairman, Gerald Grinstein.
LAX was the last stop in a “barnstorming” trip by Delta executives to celebrate the airline’s coming out of Chapter 11. Brian Cohen, a Delta frequent flier and moderator of an Internet chat room dedicated to complaints about the airline, said that for the Delta employees the painful pay cuts were somewhat mitigated by executives’ also taking a huge hit.
For instance, Grinstein cut his salary in half during the carrier’s bankruptcy proceedings, to $338,000 a year, making it among the lowest for any major U.S. corporation.
Moreover, the employees became “galvanized” by the unsuccessful hostile takeover bid by US Airways Group Inc. last fall. “They fell in line when they realized that things could be worse if US Air took over,” Cohen said.
Thomas Campion, a customer service agent for Delta at LAX, said he lost about $40,000 in wages and benefits because of the bankruptcy. But still he said employee morale was high.
Company executives “shared the pain, and that helps,” he said.
Neidl put it another way: “You’re just glad to have a job after going through the ringer of bankruptcy.”
Paid sick leave is down 11% and the airline’s on-time arrival and departure record has jumped from being the worst among the top 10 U.S. airlines in 2004 to third in 2006. In February, Delta posted the best on-time performance.
Urode, a marketing manager for an energy drink maker who commutes from his home in Atlanta to work in Santa Monica, said “more of the flights are on time and cabins seem more full.”
Moreover, he said, the flight attendants “seem more pleasant and friendly, and I think that does make a difference.”