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Book: How Utah played a role in Delta’s big turnaround

First Published      Last Updated Feb 17 2016 04:58 pm


Airline » Authors describe how company went from ‘‘despair to dominance’’ in past decade.

Utah played minor but key roles in the story of how Delta Air Lines pulled off a major turnaround over the past decade, according to authors of a new book.

The strong performance of Delta's Salt Lake City hub — aided by Utah's quicker-than-elsewhere economic recovery and a destination that draws skiers and sightseers — helped lift the airline.

The other Utah turnaround connection ironically is David Neeleman, who created low-fare airline JetBlue and spawned other low-cost carriers patterned after it. Those upstarts became "the greatest competitive threat to Delta" with lower fares and better amenities. It forced Delta somehow to make flying fun and cheap again.




That's according to "Glory Lost and Found — How Delta Climbed From Despair to Dominance in the Post 9/11 Era," a book being released Monday, by Seth Kaplan and Jay Shabat, respectively the managing partner and publisher of Airline Weekly.

Kaplan said in an interview that when Delta filed for bankruptcy in 2005, "even among bankrupt airlines, it was in terrible shape. And now in the last several years, by some measures it has been the most profitable airline in the world."

He adds, "It's hard to think of a more improbable turnaround story." And, he says, Delta "generally managed to do it in a way that is good for its employees and customers. ... You have happy shareholders, happy employees and happy customers. That's an interesting story."

Major steps included merging with Northwest Airlines, cutting costs, slashing debt, globalizing its network, aggressively charging for extra baggage and in-flight food, expanding its New York presence, adding seats to aircraft and even buying its own oil refinery to help fight high fuel costs.

One of the most profitable changes for Delta, eventually copied by most of the industry, is how it refined scheduling.

"It used to be that an airline schedule looked the same every day of the week, and all year long," Kaplan said. Airlines took for granted that during slow seasons or slow days of the week, they would need to drop fares or fly with more empty seats.

"Delta really began varying its schedules very dynamically by season and even by day of week," he said. "They said if not as many people want to fly on Tuesday as Monday, let's fly less on Tuesday. They matched their supply of seats to the demand."

That's why, for example, Delta has nonstop flights from Salt Lake City to Amsterdam during the summer — when demand is high to and from Europe — but not in other seasons.

Among smaller factors in Delta's turnaround, the book says, was a strong performance by its Salt Lake City hub. It notes, "Delta added markets from Salt Lake City, whose economy was faring relatively well during the recession."

Kaplan said Salt Lake City's "geography is very good" as a connecting point for anywhere in the West.

"The economy is good. And it is a destination. It's a place where people like to visit. That helps because a hub needs a certain amount of local demand where people are not connecting, where people will pay a little more for the convenient nonstop."

He said, "The one thing it does not have going for it is a large local population relative to other hub cities."

But, he adds, Salt Lake City "made the cut" in competition with other Delta hubs. "Memphis did not. Cincinnati is still considered a hub, but it has been downsized very dramatically. Salt Lake City seems to have found a sweet spot where they can operate a reasonably sized hub profitably."

The book also said Neeleman and his creation of JetBlue were the greatest competitive threat to Delta at its low point because it cut into Delta's New York City market, offering low fares and better amenities.

"Delta did become better" because of JetBlue's competition, Kaplan said. "JetBlue was really the first low-cost carrier where people preferred its product so much that they would even pay more to fly it."

That included televisions at every seat, extra legroom and unlimited snacks. "Delta's first big response was Song [a low-cost airline of its own], which was not a financial success. But they learned a lot about product," Kaplan said. "Now if you talk to people who travel a lot, they say, 'Yes, Delta is a pretty nice airline. They learned a lot of that by competing against that airline [JetBlue]."

Delta now offers lie-flat premium seats for long-haul flights, Wi-Fi, extra-legroom economy seats for loyal customers (and others willing to pay more), new airport terminals in New York and Atlanta, renovated lounges, first-class cabins on regional jets, customer service via mobile and social-media channels and an upgraded website and airport kiosks.

 

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