First Free Story (1 of 3)Join Skift Pro
Delta Air Lines chief executive officer Richard Anderson has announced that he will retire this May to take a new position as Executive Chairman of the airline he helped pull out of bankruptcy to record profitability. Anderson had been CEO since 2007.
There is no doubting his efficacy. Note the Delta income from our previous reporting.
“Under Richard’s leadership, Delta has become the most profitable and best run airline that consistently delivers excellent customer service. The entire Board of Directors extends a hearty thanks for his service, his leadership and his thoughtful succession planning process. This succession plan has been several years in the making and will keep Delta on top of the global industry,” said Dan Carp, Chairman of the Board in Delta’s announcement of Anderson’s retirement and succession.
But Anderson’s success was accompanied by a series of questionable positions on policies and public relations missteps.
It would be too easy to point to Anderson’s controversial statements on Gulf carriers and 9/11 terrorists live on CNN as part of the ongoing Open Skies debate.
Nor do we need to review the amusing war of words between Anderson and Qatar Airways CEO Al Baker. They were ideally matched and their sparring will be missed.
But in other matters affecting the future of the aviation industry Anderson’s statements and Delta’s positions raised eyebrows and sometimes did harm.
Delta’s Opposition to the Export-Import Bank
Anderson opposed reauthorisation of the U.S. Export-Import Bank, demanding changes to the bank’s financing of wide body aircraft sales. A failure to re-authorize the Ex-Im bank placed Boeing aircraft sales at risk and risked U.S. aviation industry jobs which reached beyond Boeing to all of its U.S.-based industry suppliers.
“Without meaningful reform we are opposed to reauthorisation,” Anderson said at the Aero Club in Washington on June 24, 2014, as Reuters reported.
“Ex-Im helped finance $37.4 billion worth of U.S. exports in 2013. Scrapping the bank would be a blow to Boeing, Caterpillar, General Electric and other U.S. companies that rely on Ex-Im financing to make sales in export markets where commercial lending is scarce,” wrote Mark Felsenthal of Reuters.
Delta’s opposition to the Ex-Im bank was long-standing and based on claims that Ex-Im loans unfairly favor foreign carriers, some of which already benefit from government subsidies.
Even so, Delta was comfortable with one of its customers getting an $84.4 million loan in 2012 which benefited the airline by guaranteeing a loan which would help said customer pay for airline mechanical maintenance.
While Anderson was effective at improving revenue and carefully monitoring costs, Delta spent millions fighting Boeing on the Ex-Im bank matter.
“Delta has spent nearly $10 million on lobbying since 2012, at least in part to kill the Ex-Im Bank or greatly diminish loan guarantees for Boeing customers abroad, according to lobby disclosure forms.”
In fairness, those $10 million were dwarfed by Boeing’s own spend of $69 million over the same period on the matter.
“We have been lobbying a lot on this because it’s a very important issue for us,” Tim Neale, Boeing’s government operations spokesman told the New York Times. “We know our business, and we know there are customers even in times of good credit availability that need a government loan guarantee.”
Cheap Planes Don’t Come Cheap
Anderson also did serious damage to Boeing by boasting of an ample market for cheap second-hand airplanes, and even hurt Airbus with talk of a bubble in the wide-body market, despite well-established industry growth projections which show that ultimately large aircraft will be essential to keep up with growing passenger demand.
Anderson first boasted that he could buy a used 777 aircraft for $10 million which hurt Boeing’s stock. Not content with that wound, Anderson added salt by boasting of his negotiating skills getting that $10 million down to $7.7 million
CEO: I was wrong when I said used 777s were on market for $10M. It was actually $7.7M. We just signed a letter of intent to buy one.
— Delta News Hub (@DeltaNewsHub) December 17, 2015
Other airlines could buy cheap wide-bodies, if they chose to do so, but many of Delta’s competitors are more concerned with meeting upcoming industry environmental targets and managing future fuel price shifts. These issues, and an improved passenger experience, are ideally addressed with the introduction of newer greener aircraft. Even if fuel remained cheap, the efficiencies and passenger experience improvements of newer are beneficial.
Accuracy of this pic.twitter.com/M3C57UgTdV
— Adam Khan (@Khanoisseur) January 24, 2015
Delta can afford to buy cheap used aircraft today, borrowing from tomorrow. The aircraft, supported by the airline’s strong maintenance corps, facilitate an extended service life of aircraft while the airline supports its higher fuel spend with its own private source of oil.
No doubt, the decision is profitable for Delta in the short term, but in the long term it may prove disadvantageous.
When Airlines for America Was Glad to See the Back of Delta
Some say you’ve only succeeded when you’ve made the right enemies. If so, the ignominious bye-bye Delta received from the leading trade association for U.S. airlines was a roaring success for Anderson.
“[The] Board of Directors voted unanimously to waive the notice period for Delta Air Lines to leave the association, effective immediately, shortening Delta’s announced intended departure date by six months. The Board members also voted to maintain the current budget and agreed to cover the dues Delta had been paying,” Airlines for America wrote.
In short: move along. Your money’s no good here.
It was clear that Anderson, the other CEOs, and A4A President and CEO Nick Calio were not getting along. ““A4A is a consensus-based organization, and we are pleased to be moving forward speaking in a unified voice on specific issue,” Brad Tilden, Chairman and CEO of Alaska Airlines and Vice Chairman of the A4A Board, wrote after the departure.
Can’t Handle the Pressure? Take on the Press
Any good leader will tell you that you can’t let the court of public opinion drive your decisions, nor be intimidated by press coverage, but Delta has gone out of its way to handle disputes with the press in a manner that is less than ideal
When the respected Editor of Air Transport World, Karen Walker, wrote a column questioning Delta’s reasons for cancelling service to Dubai, the airline responded in a way this writer, and perhaps others, would describe as teetering between bull-headed foolishness and poorly disguised misogyny.
While this was not a statement from Anderson, it was made under his watch by Delta’s Executive Vice President and Chief Legal Officer, Peter Carter. We can only assume that Anderson was aware of the letter “setting the record straight” which was posted on the airline’s Newshub for all the press to see.
“A column by Walker last week questioning our motives for canceling the Atlanta-Dubai service demonstrated a startling ignorance of how modern airline hubs operate,” Carter wrote, proceeding to educate Walker and the world on modern airline hub operations—at least as Delta claims they work.
There’s no harm in calling out the press on their opinions, but it shows poor judgment for any airline to target one of the few female reporters covering the industry in such a dismissive and belittling manner.
It opened Delta up to mockery from other corners, already leaning against the airline’s perceived whining about the Big 3 Gulf carriers.
Ben Schlapping of One Mile at a Time, never a big fan of Delta’s position on Open Skies, made a meal of it.
The letter had the opposite effect from what might have been intended. Walker was neither “schooled” or intimidated.
Instead, she questioned the choice by ATW’s sister publication of Anderson as person of the year for 2015, pointing out that the winner for 2014 was Putin.
Walker also made an interesting comparison between Anderson’s persuasion through bullying techniques to those of Donald Trump.
Delta could have made its argument without evidencing contempt and derision for someone who clearly knows her subject.
Instead, Delta fell back on legacy “good ol’ boy” tactics employed against women in aviation for decades. But you can’t bully a woman like Walker to shut up when she has a point to make.
Perhaps Delta wasn’t trying to belittle or intimidate Walker. Maybe the airline was only trying to make an example of her before her peers so they would fall in line. Also, no.
Speaking of peers …
The Rise of Rivals
While Delta has made progress, American has not been standing idly by. There is no love lost between airline CEOs, in fact it’s not uncommon for them to loathe each other. American Airlines Group CEO Doug Parker was certainly ready to duke it out with Anderson and this is unlikely to change with his successor. Delta has enjoyed a historic rise while American Airlines was weak, but American Airlines is readying itself for a bigger battle ahead.
Anderson Left on a Good Note
Besides his indisputable financial success, it must be said that one of Anderson’s most contrarian stances could be good news for the U.S. aviation industry, as some see it.
Shortly before announcing his retirement, Anderson spoke out against the privatization of U.S. Air Traffic Control (ATC).
“I want to be clear where Delta stands on this issue. We oppose privatizing U.S. air traffic control or any other attempt to remove air traffic control from the Federal Aviation Administration (FAA),” Delta CEO Richard Anderson wrote in a letter to leaders of the House Transportation Committee that was released by the company on Wednesday. “It is unnecessary and unwise. American air traffic control works because it works for the American people – and we should keep it that way,” he continued.
One could argue that this policy position is self-serving. ATC Privatization would hurt the Business Jet sector. Delta Private Jets would be affected.
Even so, the business jet industry in the U.S. goes beyond airline jet charter services and wealthy private jet owners. It also provides vital regional services, and emergency medical services, especially in remote areas which have no other access to air travel.
“Without Congress to ensure that our nation’s air traffic system safeguards the aviation needs of the entire public—including the people and companies that rely on general aviation in small and mid-sized towns—such a sweeping authority would instead be granted to a group of self-interested parties,” said Ed Bolen, President and CEO of the National Business Aviation Association (NBAA) last June. “These parties will be left to make decisions about where and when companies using business aviation can fly, how much it will cost to do so, and what type of payment—including user fees—will be demanded of operators.”
Ed Bastian, President of Delta, will be appointed CEO effective May 2, 2016 and Glen Hauenstein, Executive Vice President, will be appointed President of Delta, also effective May 2, 2016.
Anderson made his mark on aviation and will not soon be forgotten. The world will be watching how his successors handle these and future sticky issues while they manage Anderson’s legacy.
How will Delta's new CEO manage airline relations? Not just Gulf silliness, but China Eastern & Korean Air where relationships are critical
— Will Horton (@winglets747) February 3, 2016