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.
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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 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:
Q: Spirit, Allegiant, and Frontier are charging to put a bag in the overhead bin. Is that something that you could imagine for Delta?
A: 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 10 years ago.
Q: Delta didn’t always have that reputation in recent years. What has happened at Delta to make that work?
A: 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.
Q: Is there an example you can share?
A: 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.
Q: Does the Transportation Security Administration need to make changes to get your travelers to their gates quicker?
A: We’re the third biggest industry in the U.S., after agriculture and oil. So if we want economic development and economic growth, and we want this city full of people traveling here, we need to let people know that you’re never going to have more than a 15-minute wait in security. One of the key ways to get there is with PreCheck (the government’s pre-screening system). Our ultimate goal needs to be 75 to 80 percent PreCheck.
It’s going to be a matter of using the data. It’s amazing how much information is out there. If you go to a normal consumer-data company like Axiom or Nexis or Equifax, they have massive databases with scoring technologies. And so I think it’s a matter of taking the kind of technology that we have in the financial world and bringing that to bear at the security checkpoint.
Q: In the next five years, what do you expect would be two or three changes the flying public could see?
A: We were really the first to pioneer a ubiquitous Wi-Fi product, so we have Wi-Fi across our system. And the next piece of what we’re going to do there is stored content; so the ability to provide entertainment on all of our airplanes through stored content to your own device, on the internal Wi-Fi of the airplane.
Q: For a fee?
A: We’re talking about that. We actually think there would be a piece that we would probably offer to all the passengers on the airplane. And then if you wanted, you could buy other things.
Q: How about allowing voice communications?
A: No. Our customer-survey data tell us that consumers do not want that on the airplane.
Q: Whose idea was it to buy an oil refinery?
A: Well, we actually first started looking at buying an oil company. We didn’t have one picked out. You’ve got to take control over every aspect of your business. You can’t let any of your suppliers dictate the way the refiners were dictating to us. Our business model has to capture the full cost of fuel, but when it’s $12 billion, you’ve got to invest and figure out how you’re going to keep that cost under your control. We talked about oil companies, we talked about refineries. It took us a couple of years, but then this one came on the market for the price of a 787.
Q: What have you learned about managing from all those jobs you held before becoming Delta’s CEO?
A: It’s probably just a mishmash of a lot of little rules, right? You know, always return your phone calls promptly, always be on time for your meetings. Always be the person that people look forward to go into a meeting with. Don’t ask people to do things you wouldn’t do. Be kind to people. I don’t know — it’s probably how you were raised or something. I was raised in a very big Catholic family, so you know, you were taught to be polite.
I never took a business course in school. I didn’t take an accounting class in school. I thought I was going to practice law, but I got married and had children. My mother and father died from cancer, my dad, when I was 20, my mom when I was 21, after long illnesses. I just didn’t have any money.
So I went to night law school. You get out and you go, “Well I’m just going to practice law.” Then you get married and have a child and you’ve still got student loans. Sue said, “When are we going to ever pay off these student loans?” So, you know, I think life is serendipitous in that regard.
Q: Did you get those student loans paid off?
A: I did, finally, but I was the vice president at Northwest Airlines. It took a while.
Q: Well, if your interest rate is low enough, then maybe it’s prudent debt?
A: No. As you learn at airlines, there’s no such thing as prudent debt. That’s the lesson, we’ve learned it.