Why Delta Decided to Stop Being the Mean Airline
The cruelty of U.S. airlines has lately become a sore point for travelers—use strong-arm tactics on customers today, and an airline risks a swift explosion of online outrage. Within the industry, however, Delta Air Lines has spent the past year trying to shake a less- visible reputation as a bruising antagonist that fought with other airlines and bureaucrats alike.
As Delta’s Ed Bastian reaches his first anniversary as chief executive officer this month, aviation experts and former regulators say they see signs that the Atlanta-based airline is stepping away from an in-your-face posture that sometimes rankled competitors and annoyed bureaucrats under former boss Richard Anderson. The change in attitude can be traced to the personalities of the CEOs. “Richard was a litigator,” said Mo Garfinkle, a longtime aviation consultant who now works with American Airlines Group Inc. on international matters. Anderson was a Texas prosecutor before resurrecting Delta following its bankruptcy in 2007. “That litigious, strong, ‘I’m right’ approach of Richard is not the same approach that Ed has.”
Take, for example, the time in 2014 when Atlanta business leaders were considering a state tax increase for roads and Anderson goaded them not to be “chicken” about supporting it. Or the February 2015 CNN interview in which Anderson brought up the Sept. 11 terror attacks while discussing U.S. carriers’ long-standing policy disputes with Persian Gulf airlines, which prompted a public apology from Delta.
And there was a parting shot during Anderson’s final days as CEO last May. Delta withdrew future corporate funding for Atlanta’s historic Fox Theatre because the venue hosted a party featuring a performance by Jennifer Lopez at which archrival Qatar Airways celebrated a new route. Delta proclaimed itself surprised and disappointed by the event. The theater, a local columnist wrote, had been “found in a car trunk, bound and gagged, a single shot to the back of the head.”
The spats ran the gamut—with the government about alliances and landing slots, with lobbyists about whether its interests were being served, even with its own allies in the airline industry. A once-close relationship with Alaska Air Group began unraveling in 2012 as Delta moved to build a hub in the smaller carrier’s Seattle hometown. The partnership between Delta and Alaska was set to end May 1.
Delta in recent years “viewed every issue as a bet-the-company kind of case, and they fought it tooth and nail,” said Kathryn Thomson, a former general counsel at the U.S. Department of Transportation. She senses now, a year into Bastian’s tenure as boss, that Delta may be becoming more like other airlines that tend to “pick and choose which issues are most important to them and fight for them.’’
Bastian, 59, a CPA who earlier in his career worked with food companies, has been repairing a strained relationship with fellow SkyTeam alliance member Korean Air Lines. When the U.S. government insisted that Delta give up some flights to Mexico City to win approval for an alliance with Aeromexico, Bastian complied instead of taking the DOT to court, as Anderson did in a 2015 dispute. And when rival United Airlines inflamed the public’s anger against the industry in April by dragging a passenger off a plane, Bastian raised the amount Delta may offer bumped fliers to almost $10,000—about two weeks before United took similar action.
Delta’s willingness to duke it out over every issue “did damage their credibility, because we’d say, ‘Here goes Delta again,’” said Thomson, who now works at a technology company. The agency never let its frustration with the airline influence its decisions, she said. Under Bastian, she said, “I do think that they have taken that to heart.”
Many regulators saw Delta as the “smartest guys on the block” who ran the best airline, said Paul Gretch, a former head of the Transportation Department’s Office of International Aviation. Yet that success exposed some “pretty sharp edges,” he said, that could feel personal for officials working on Delta cases.
According to Delta, which didn’t make Bastian or Anderson available for an interview, its persistence has paid off. “Delta is a tenacious competitor—it is part of our DNA,” said spokeswoman Elizabeth Wolf. “As a result, we’ve established Delta as the industry leader among customers, investors, and labor relations.” The carrier’s 18 percent operating-profit margin—earnings before interest and taxes in this case—last year topped those of American, at 13 percent, and United Continental Holdings Inc., at 12 percent. Its shares, which closed as low as $3.93 in 2009, have risen to about $48, and it enjoys more labor peace than most big rivals.
Under both CEOs, Delta has found itself the odd one out on some significant government and industry decisions. Industry insiders debate whether the airline’s hardball style has contributed to the disappointments.
When Delta couldn’t get the chief lobbying group for U.S. carriers, Airlines for America, to see its way on certain issues, it pulled its membership and $5 million in annual dues. When Anderson retired, Delta lost a seat on the board of the International Air Transport Association, as the selection committee passed over Bastian for a leader from Hawaiian Airlines—with just 6 percent of Delta’s annual revenue. Delta didn’t directly respond to a reporter’s question about its loss of the board seat.
The U.S. Transportation Department granted Delta the right to collaborate with Grupo Aeromexico SAB on routes and fares without violating antitrust rules—but only after initially demanding that the duo give up so many rights to take off and land in Mexico City that Delta considered ditching the deal. Regardless, Delta said, the result was the largest transborder alliance between the U.S. and Mexico.
Early last year, Delta lost a fight to keep the U.S. and Japan from expanding certain flights at Tokyo’s Haneda Airport, which is closer to downtown than Delta’s major hub at Narita International. While Delta has since cut several flights from Narita, the company points out that it ended up getting rights to fly two routes to Haneda, while other airlines picked up a single route.
Delta considers both the Aeromexico and Tokyo situations examples of its “significant successes” in Washington, rather than setbacks. “Delta values our longstanding relationships with representatives at all levels of government as we advocate for policies that are in the best interest of our people and the communities where we live and work,” the company said in a statement.
Under Bastian, Delta has been reestablishing links with Korean Air, with which it had a longtime rift and little collaboration. The airlines just agreed to cooperate on routes across the Pacific, in a deal that would give Delta a much needed partner in Asia.
“We've had our challenges over the years with Korean,” Bastian told investors in December. “But I'm optimistic in 2017, we're going to continue to have breakthroughs in that relationship.”
Paula Reynolds observed Bastian’s ascent while she served on the airline’s board for a decade. She’s been struck by his willingness to show humility in the year since he became CEO. She admired his tone in flight-safety videos talking about the honor he feels to be among Delta’s 80,000 workers, as well as his public apologies after Delta canceled thousands of flights following Atlanta storms in April and an IT meltdown last summer. “He’s got a graciousness about him—he’s humble,” said Reynolds, who left the board in 2015.
As for consultant Garfinkle, he credits Delta for giving up some flights to Mexico City in the Aeromexico case rather than taking the DOT to court, as the company did in a 2015 dispute over a Seattle-to-Tokyo route.
“The old Delta would have stiffened their backs and gone to court and fought the DOT,” Garfinkle said. “The new Delta, while it didn’t like the decision, accepted it and moved on, putting the practical over the principle.”