Last updated: 01:10 AM ET, Wed February 17 2016

How Delta's Outgoing CEO Changed the Air Travel Industry

Airlines & Airports | Delta Air Lines | Josh Lew | February 16, 2016

How Delta's Outgoing CEO Changed the Air Travel Industry

Delta’s Richard Anderson will soon be stepping down from the helm of America’s second largest airline. Actually, when you count the large shares that Delta has in some of the world’s other major carriers (Virgin Atlantic and Aeromexico) and smaller shares in airlines like China Eastern and Brazil’s Gol, it is the largest player in the industry. Even when it has a small share of another airline, Delta’s execs are active in the boardrooms, getting these carriers to adopt their profit-making strategies. 

Delta changed the way airlines operate

The airline industry has changed a lot since Anderson joined Delta. He began as a board member but was tagged as the CEO just a few months later. He oversaw the merger with Northwest Airlines, the carrier that he headed before moving to Delta. Delta-Northwest was the first of three major mergers by U.S. legacy carriers and the first of a long list of “firsts” that occurred during Anderson’s reign.  

Anderson was sometimes seen as a controversial figure, but he is credited by virtually everyone for being the driving force in a dramatic turn-around by his airline and, to a lesser extent, by the industry as a whole.

A dramatic turnaround

In 2007, Delta was struggling with poor employee relations. There had been talk of bankruptcy and the airline's public image was among the worst of all major carriers. 

After the Northwest merger, Anderson set about changing Delta’s core philosophy and revising its strategies for competing with other airlines. Major carriers used to focus on getting a larger share of the market. The driving idea was that, when times were good, having a bigger presence would lead to more profits. Anderson put the focus directly on making profits (above all else). 

READ MORE: Delta Air Lines Planning to Cut Jobs

Profits come first

To achieve the all-important profits, Anderson closed down some of Delta’s slowest, most unprofitable hubs. This drew complaints from the people in places like Memphis who thought that the airline was abandoning them. However, it helped to shore up the budget. This trend continues today, with legacy carriers dropping all but the most profitable routes in smaller markets.  

Delta also saved money with savvy airplane purchasing strategies as well. Rather than opting to order new aircraft, Delta supplemented its fleet with used aircraft that were cheaper, but sufficient for running most routes. 

A leader with lots of high profile followers

There were a number of times when Anderson's decisions were mimicked by the rest of the industry. When Delta’s Skymiles loyalty program switched from figuring rewards based on miles to rewards based on amount of money spent, other legacy carriers quickly followed suit. This move was very unpopular with frequent flyers, but it made sense for the airline from a dollars and cents standpoint. 

And when Delta started dividing its cabins and classes to include premium economy seats and ultra-budget, no-change, middle-seat fares, other airlines saw the wisdom of upselling (and downselling) and started to discuss implementing the same kind of strategy. 

Even with its revamped loyalty program and ultra-low fares, Delta under Anderson was not entirely unfriendly to customers. It was the only airline to keep snacks on domestic flights when other legacy carriers dropped them from the menu (only to recently return the complimentary peanuts with much fanfare).

READ MORE: Why Delta Is Against Privatizing Air Traffic Control in the US

A lasting legacy 

Southwest, Spirit and their low cost peers are known for a la carte pricing and low operational costs. Under Anderson, Delta took this philosophy and applied it globally, finding the sweet spot that allowed them to grow their passenger numbers and fix their reputation while also upping their profits and streamlining their operating expenses. 

This approach seems to have given U.S. legacy carriers a renewed sense of vigor and an ability to compete again with both international airlines and with their budget competitors. A lot has happened, but there is no doubt that Anderson and his Delta execs made a number of moves that changes the way that U.S. legacy carriers do business.    

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