Delta CEO Richard Anderson has helmed his current post since 2007, steering his company through nothing short of a sea change in the commercial air travel industry. Aviation journalist Kathryn Creedy recently discussed Anderson’s impact on Delta and the airline industry with Airways News’
“Anderson is a polarizing figure, but it’s unfair to say that you either love him or hate him. He’s created a new philosophy of running an airline for profitability, not market share. We now have a group of managers that adhere to this new philosophy and that has never happened before.”
Thanks to Anderson’s management, Delta was recently crowned the second largest airline in the world, but the carrier is actually the biggest when you look at the forest instead of the individual trees — Delta runs five global airlines. However, some critics believe that while the present is bright for Delta, a dark future may be on the horizon. It’s hard to say how Anderson will be remembered when all is said and done, but here’s how the CEO has laid a new path for Delta and the rest of the airline industry:
“We’re following the leader, the leader, the leader…” It’s difficult to think of any other CEO in the industry that commands such imitation by his peers. When Delta transitioned its longstanding Skymiles loyalty program from a miles-based system to a revenue-based program, much to the chagrin of most of its loyal customers, the biggest players in the industry giddily followed suit.
A blueprint for the 21st century airline. Southwest and Spirit may spring to mind when you think of operating a low-cost airline, and Alaska certainly earns its reputation for efficiency and service, but Delta is the airline that put these aspirational qualities into effect on the global scale.
Head of the new class(es). For decades, airlines have structured their cabins around roughly the same three or four classes of passenger. First, business and coach seats make up the majority of seats aboard most commercial flights. Anderson flipped this rubric on its head, squeezing in new seat classes like the nonrefundable less-than-coach Basic Economy that doesn’t allow passengers to choose their own seat when purchasing, or the roomier Delta Comfort Plus, which offers fliers additional legroom at additional cost.
Once again, a wave of imitation swept through the industry, with competitors offering up additional classes of their own, and reconfiguring cabins in order to provide all of that profitable extra leg room in economy plus seats.
Skymiles? More like Skypennies, Skypesos or Skyinches. Delta’s transition to dynamic miles redemption may have proven to be good for the short-term bottom line, but the new system’s opacity has elicited more criticism than compliments from angry Delta lifers. The elimination of a redemption chart, and the fluctuating miles valuation tied to — well, nobody knows what, exactly — have earned Skymiles the new moniker Skypesos, first coined by Gary Leff. The nickname is hardly unfair. Delta has literally pegged their miles’ value at one cent a piece, when redeeming for products like in-flight cocktails. Travel industry analyst Henry Harteveldt tells Airways News:
“The execution hasn’t been entirely perfect, however. Delta now focuses on revenue at the expense of customer loyalty, and this is about to bite them on the behind. Proprietary research we do for a financial services client shows that Delta has lost an alarming amount of customer loyalty, especially among its top-tier 360, Diamond and Platinum members, [while] Gold and Silver members already feel ignored.”
Squabbles with Delta’s peers. Anderson is often accused of looking out for Delta’s best interests at the expense of the greater aviation industry. Like in the case of, ohhh I don’t know, Delta withdrawing from the trade group Airlines for America, invading Alaska Airlines’ home turf in Seattle, the sudden devaluation of Korean Airlines’ Medallion Qualifying Miles with Delta, or biggest of all, going to war with Boeing (yes, again) over the U.S. Export-Import Bank. Some would argue that Anderson doesn’t always win when he gambles with his company. But then again, some would argue that he doesn’t always have to win.
Ledger books of black gold. While travelers might not love many of Anderson’s decisions, he’s had quite an impressive career. In addition to relatively seamlessly merging with Northwest after holding the reins at the former airline for 14 years, he’s also won big on some other impressive gambles. For example, dismayed by the $12 Billion a year that Delta was paying to refineries that prepared its jet fuel, Anderson did what up until that point no airline had ever done before; he dove directly into the oil industry. Delta purchased an aging refinery outside of Philadelphia in 2012, and proceeded to refine its own product, much to the consternation of financial analysts. The deal, Forbes argued, made no sense whatsoever. Yes, Delta’s oil costs were down, but only because the cost of oil had plummeted. But by 2015, the airline had earned back its initial investment in the facility, and was saving upwards of $300 Million a year on refining.
Devaluation of the Boeing 777. Anderson may have brought his own low estimates of a used 777’s worth into reality when he candidly questioned why Delta would purchase new 777-200ER jets for upwards of $277 Million when used Boeing 777 jets were worth less than $10 Million. Professional estimates had up until that point pegged the used planes’ worth at closer to $70 Million. Boeing’s stock took a tumble as suspicion arose that major airlines would slow down their purchases of new aircraft. And sure enough, a vindicated Anderson eventually found himself a used 777 for $7.7 Million, though it should be noted that the plane was purchased for parts and never meant to fly.