Delta Airline

HOW WE DID IT… DELTA’S CEO ON USING INNOVATIVE THINKING TO REVIVE A BANKRUPT AIRLINE

by Richard H. Anderson

HBR.ORG

The Idea

AKIO KON/GETTY IMAGES

Unconventional moves— from employee profitsharing to the purchase of an oil refinery—have made the U.S. carrier an industry leader again.

December 2014 Harvard Business Review 43

HOW WE DID IT

A

t Delta we understand the perils of the traditional airline business model. The

we would need to change our pricing model. We did all those things. But we also realized that conventional moves would not be enough. To come back on top, Delta would have to further strengthen its culture and pursue more-innovative strategies. We started, just after our twoyear restructuring, with an employee profit-sharing program that continues to differentiate us from our peers. Each year 10% of earnings before taxes and management compensation is paid out in bonuses. A year after our 2008 merger with Northwest Airlines, we added a stock ownership plan— also unique in the industry—that gave our pilots, flight attendants, ground crew members, and support staff 15% of the company’s equity. We have reclaimed our reservations system, becoming the only U.S. airline to own and control this key operations data. We have deepened our foreign partnerships by buying

a minority stake in three overseas carriers—Aeroméxico, Brazil’s GOL, and the UK’s Virgin Atlantic—and strengthening our existing alliance with Air France–KLM. We have also moved toward vertical integration (and better management of fuel costs) by acquiring an oil refinery—a decision that shocked both aviation and oil industry observers. Thanks to these new ways of thinking about our organizational structure and operations and our determination to get employees invested—both literally and figuratively—in running a topnotch airline, Delta is now one of the healthiest, most profitable airlines in the world, with some of the best performance rankings (including on-time...