Delta’s Flight from Bankruptcy
By all accounts, September 11, 2001, was the worst day in the history of the airline industry. But that didn’t stop Jim Whitehurst (MBA ’94), then a partner at The Boston Consulting Group in Atlanta, from joining Delta Airlines that day as the firm’s acting treasurer. “I literally started at noon on Tuesday and did not go home until Friday, September 14,” said Whitehurst, who is now Delta’s COO.
Invited to HBS in March by the Hospitality and Travel Industry Club, Whitehurst discussed lessons learned from what he sees as the biggest turnaround in airline history. Delta declared bankruptcy in September 2005 and was about a month away from its announced plan to emerge from Chapter 11 when Whitehurst visited the campus.
Observing that a key to any turnaround is identifying the problem correctly, Whitehurst explained that Delta had the lowest cost per available seat mile in the industry in the fall of 2005, but it also had the lowest revenue per available seat mile of the major airlines. The turnaround focused on three areas: the balance of nonstop versus connecting flights in the United States, the mix of domestic and international travel, and customer service. Delta has consolidated domestic flights and added service to seventy international destinations in the last fifteen months. Whitehurst said that the company’s future growth will center on Asia, Africa, and the Middle East.
“It’s easy to move the metal around and to work on the geography. The hardest part was to return service levels to the top of the industry,” said Whitehurst, noting that before the restructuring Delta’s once-loyal employees were disaffected and didn’t trust management. Whitehurst, who spends a great deal of his time selling the restructuring plan to Delta’s 45,000 employees, said that “especially in a service business, selling the plan is paramount to everything else.”
Specific actions of regaining employee trust included eliminating severance packages for management, updating an archaic scheduling system, and asking designer Richard Tyler to create new flight attendant uniforms.
“Our aspiration has been very clear: We will be the most profitable airline in the United States,” said Whitehurst, who media reports speculate is one of the senior Delta executives currently under consideration to be its next CEO.
