Bob's Gutsy Leadership Blog

Delta Airlines: A Great Turnaround Example

It is not much fun to be a part of an organization that is at best treading water with no clear roadmap to break out and get on an exciting path of progress.  That certainly was the case for employees of Delta Airlines when the company filed bankruptcy in 2005.

Once the bankruptcy process was completed in 2007, a very experienced leader was selected, who in a very short time launched the following simple but highly aggressive efforts to get Delta to a very strong position in the difficult airline industry:

1.) Treat the Employees as Full Partners – An employee profit sharing plan was put in place that was clearly unique in the industry.  Each year ten percent of earnings before taxes are paid out in bonuses.  Also, a stock ownership plan was implemented, also unique in the industry that gave pilots, flight attendants, ground crew members and support staff fifteen percent of the company’s equity.

2.) Rules of the Road – Delta management developed a document called “Rules of the Road” and provided a copy to each employee.  It is a basic set of principles that described the attributes expected of each employee; courteous behavior, open communications, financial discipline, and efficient operations.

3.) Gain Critical Mass via Acquisition and Partnerships – Delta carefully selected an acquisition candidate with a network and assets that was very complimentary and that had a great culture that fit well, acquiring Northwest Airlines.  Also, Delta deepened its foreign partnerships by taking minor stakes in three overseas carriers (AeroMexico, Brazil’s GOL, and Virgin Atlantic).

4.) A Plan for Winning – The new business model consisted of three components:  1) the most capital-efficient fleet of planes; 2) the lowest operating and maintenance costs; and 3) the most efficient network (selection of cities served and hubs).  Today Delta leads the industry in capital spending as a % of operating cash flow, and has the lowest maintenance costs.  The network was optimized, closing several inefficient hubs and developing a few new ones.

Delta’s results are impressive.  Today it is one of the most profitable airlines in the world, its stock price has gone from $8 range in 2008 to the $50 range today.  Also, employee surveys show that 90% of employees would recommend working at Delta to friends and family.

The fun of being a leader is stepping back and studying the situation, and then developing and executing an exciting plan that will clearly lead the organization to success.  Fortunately, too many leaders get bogged down with managing the status quo, leading to an employee base that is bored and uninspired.

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