Delta Air Lines, Inc.

Delta Air Lines, Inc.

Hartsfield International Airport
Atlanta, Georgia 30320
U.S.A.
(404) 765-2600
Fax: (404) 715-1400

Public Company
Incorporated: 1934 as Delta Air Corporation
Employees: 39,000
Sales: $9.171 billion
Stock Exchanges: New York

Delta Air Lines is one of the United States’ most successful air carriers. With the exception of 1983 and 1991, the company has not lost money since 1947. Originally founded as a crop dusting service in 1924, Delta was led for 40 years by an agricultural scientist and pilot named Collet Everman Woolman. Until his death in 1966 Woolman dominated the operations of Delta. In this sense he was similar to his three major competitors, Eddie Rickenbacker at Eastern, Juan Trippe at Pan Am, and Howard Hughes at TWA.

The company started in 1924 when Woolman and an associate joined a conversation with some Louisiana farmers who were concerned about the threat to their crops from boll weevils. Woolman knew that calcium arsenate would kill the insects, but the problem was how to effectively apply the chemical. Having learned to fly the boxy “flying Jennys” during World War I, Woolman considered dropping the chemical from an airplane. He engineered a “hopper” for the chemical and later perfected the system, and then began selling his services to farmers throughout the region. As a result, the world’s first crop dusting service, named Huff Daland Dusters, was born.

In 1925 Woolman left the agricultural extension service to take charge of the duster’s entomological work. In 1928 the crop dusting operation broke away from its parent company to become Delta Air Service. Woolman continued his crop dusting business across the South and expanded into Mexico and South America. The company began to diversify by securing air mail contracts, and in 1929 inaugurated passenger service between Dallas and Jackson, Mississippi. Later, routes to Atlanta and Charleston were added.

The airline began its climb to prominence when the U.S. government awarded it an airmail contract in 1930. The company remained in business during a temporary but costly suspension in the airmail contract system in 1934. The company, called Delta Air Corporation, was later awarded three more airmail contracts by 1941. During World War II Delta, under contract to the War Department, devoted itself to the allied war effort by transporting troops and supplies. Delta returned to civilian service in 1945, and entered an age of growth and competition never before seen in the airline industry.

On May 1, 1953 Delta merged with Chicago and Southern Airlines and continued to prosper as a major regional trunk carrier through the 1950s and 1960s. In June of 1967 Delta merged with Delaware Airlines and officially adopted the name Delta Air Lines.

Delta’s exposure to the Northeast increased with the acquisition of Northeast Airlines on August 1, 1972. In July of 1976 Delta purchased Storer Leasing, a move that added several jets to the existing fleet of about 200. Recognizing the value of high technology Delta formed two computerized marketing subsidiaries, Epsilon Trading Corporation in 1981 and Datas Incorporated in 1982, to coordinate and sell more passenger seats on all Delta flights.

Delta’s consistent growth can be partially attributed to its successful transition of leadership. In the early days of commercial air transport airlines were run by individual men who would be better described as aviation pioneers first and as businessmen second. At American, Eastern, Pan Am, TWA, and Delta, these men established what can be described as almost dictatorial operations, retaining their posts as long as possible. Many of these men were majority stockholders who categorically refused to share their power or prepare successors to operate the company after them. In many airline companies, when the chairman did eventually die, there was a difficult period of readjustment to the new management.

The departure of Delta’s Woolman, however, was not surrounded by difficulties. He suffered a heart attack in his late 60s and was forced to relinquish some of his duties to Delta’s board members. As Woolman’s health deteriorated the board members gradually assumed more of his duties until his death at age 76. Although Woolman’s absence was deeply felt at Delta, business continued as usual and the airline was able to make a smooth transition to a more modern, corporate style of collective management.

Delta is recognized for having one of the best planning and management teams in the airline industry. Specifically, Delta’s management is agile and responsive to problems which arise. A sound financial policy allows greater flexibility in decision-making even at the highest levels. And a consensus-style of management may be said to afford Delta cohesiveness and enduring stability.

Delta has the highest productivity in the “trunk,” or domestic airline business. The company is on very good terms with its employees who are generally nonunionized; actually, only the pilots and the dispatchers are organized. The machinists’ union, for example, reports that it is difficult to organize Delta employees because the company maintains pay and benefits above its unionized competition. As long as the company outperforms union contracts there is no incentive for the worker to unionize, and the willingness of employees to adjust to the needs of the company provides Delta with the unique ability to weather hardships in the airline industry.

Delta is known for treating all its employees as “family,” and has tried to avoid layoffs. During the 1973 oil crisis and the 1981 PATCO strike, for instance, the airline refused to release workers even though its profitability was compromised. In the absence of union rules and constraints, employees can be moved on a regular basis to other positions in order to fill temporary labor shortages. These measures are a major reason why the company remains competitive.

Although the company did not invent it, Delta was the first airline to widely employ the so-called “hub and spoke” system, in which a number of flights are scheduled to land at a hub airport within approximately 30 minutes enabling passengers to make connections for final destinations conveniently and quickly. The “big push,” as it is called, occurs about ten times a day at the Atlanta hub. Regarded by management as an effective marketing tool the “big push” is not, however, immune to problems caused by bad weather or maintenance delays. Delta also operates hubs at Dallas-Fort Worth, Boston, Memphis, and Cincinnati.

Delta has the most modern jetliner fleet in domestic service; however, they purchase new models only after they have been proven, often in a costly way, at other airlines. This “wait-and-see” policy saved the company a large amount of money when it refrained from purchasing Lockheed’s 1011. Only after competing airlines had used the L-1011 for a number of years did Delta purchase the plane. Although the decision was made in the early 1970s, Delta is just now replacing its fleet of Boeing 727s with the 757, 767, and MD-88, technologically advanced and fuel efficient planes that Delta plans to use for at least 20 years. It is typical of Delta that a 15-year strategy for flight equipment and support facility planning is used. According to vice chairman and chief financial officer Robert Oppenlander, “Success is based on the long term maintenance of a technical edge, which is cost efficiency.”

Delta is known for having the most conservative balance sheet in the industry. With a debt-equity ratio that is consistently below one to one (meaning that their debts are usually outweighed by their net worth), the company can afford to do most of its financing internally. Such a conservative character is aptly reflected in this statement by the late chairman W. T. Beebe: “We don’t squander our money on things like goofy advertising.”

Recently, Delta has taken on a more aggressive corporate personality. Its commitment to internal growth has been threatened by a general trend in the industry toward external growth. Delta is becoming relatively smaller as companies such as TWA, Texas Air, and Northwest expand through mergers. In 1986 Delta announced its intention to take over the Los Angeles-based Jet America; however, the $18.7 million deal has not materialized. Later that year Delta went ahead with the $680 million purchase of another air carrier based in Los Angeles, Western Air Lines. Delta’s chief executive officer, David Garrett, explained that “for a merger to be worthwhile, two plus two has to equal seven.” Enlarged by Western’s hubs in Los Angeles and Salt Lake City, Delta management was able to make that kind of math work; yet there have been problems with integrating Western’s unionized work force into Delta’s system. Nevertheless, as Garrett noted, when Delta merged with Northeast Airlines in 1972 Northeast’s unions dissolved.

In 1987 Ronald W. Allen, who rose through the ranks of Delta’s personnel administration department, was named the airline’s CEO. An aggressive and outgoing business person, Allen proved more willing to make large and unpredictable investments. Shortly after taking office, for example, he negotiated a $15 million dollar deal for Delta to become the official airline of Walt Disney World.

In the late 1980s and early 1990s, recession, rising fuel prices, and war in the Middle East all contributed to declining passenger traffic and inflated costs. Thanks in part to its financially solvent status, Delta weathered the industry troubles comparatively well; nonetheless, in 1991 the airline registered an operating loss of $450 million. Small, financially weak, and regional airlines were hardest hit by the trouble, however, and Delta was one of the prime beneficiaries of the failure in January of 1991 of Eastern Airlines, which like Delta had a significant portion of its routes in the southeastern U.S. After Eastern’s demise, Delta flew over 80% of traffic out of Atlanta.

In 1991 Delta made a major move toward becoming an international player by purchasing a $1.7 billion package of assets from Pan Am, outbidding chief rivals American and United. The package, which included the assumption of $668 million of liabilities, gave Delta a hub in Frankfurt, Germany, dozens of European routes, including flights from Miami and Detroit to London, a New York shuttle route, and 21 Airbus A310s. As with the purchase of Western, the deal was viewed by some in the industry as a departure from Delta’s traditionally conservative business stance, and possibly too costly a purchase. Delta management, however, termed it a necessary stop in a consolidating purchase-or-bepurchased airline market: “We think it is a very conservative move,” Allen told Fortune magazine. “To have missed this opportunity would have been the risky course.”

Delta appears to have adapted well to the expansion-oriented market. Whereas Delta fliers used to joke that, though you might not know whether you would go to heaven or hell when you died, you would definitely have to change planes in Atlanta, the airline’s customers can now fly to Europe via its Frankfurt hub, or to Latin America via Miami. At the same time that it adapts to the aggressive and expanding modern market, Delta appears not to have shifted from its policies of good labor relations and attention to service. Delta’s employees are still among the highest paid in the industry and, like founder C. E. Woolman, Allen sometimes rides on Delta flights to interact with passengers. Indeed, Forbes magazine queried in a 1988 headline: “Is Delta too nice for its own good?” Thus far, however, its emphasis on people seems not to have crippled Delta.

Principal Subsidiaries

Chicago and Southern Airlines, Inc.; Storer Leasing, Inc.; Northeast Airlines, Inc.; Epsilon Trading, Inc.; Datas, Inc.

Further Reading

Lewis, David W., and Wesley Philips Newton, Delta: The History of an Airline, Athens, University of Georgia Press, 1973; Lewis, David W., and Wesley Philips Newton, “The Delta-C & S Merger: A Case Study in Airline Consolidation and Federal Regulation,” Business History Review (Boston), 53, 1979; Banks, Howard, “Is Delta Too Nice for Its Own Good?,” Forbes, November 28, 1988; Laibich, Kenneth, “Delta Aims for a Higher Altitude,” Fortune, December 16, 1991.

—John Simley

updated by James Poniewozik