As a semi-frequent flyer, I have been watching with some concern the consolidation talks floating around various airlines. The latest development in US Airways’ effort to takeover Delta is a plan submitted to the federal bankruptcy court by Delta’s management. The plan rejects US Airways $8.5 billion takeover offer in favor of keeping Delta independent by engaging in a five-year restructuring campaign that purports to generate profits by the beginning of the year and provide better value than a merged company. Because they have to approve any reorganization plan, ultimately Delta’s creditors will judge of the kind of entity that provides the best value.
What I find especially interesting in the Delta-US Airways saga is the efforts by employees to rebuff the takeover attempts. Delta employees have created buttons with the slogan “Keep Delta My Delta” to express their opposition to a merger with US Airways. And apparently there is a high demand for the buttons among both employees and customers. What is “My Delta?” Apparently not just a Delta that is independent, but Delta is also a company that employees believe responds to their concerns. Indeed, one of the primary reasons why employees object to the US Airways takeover is that they feel it would jeopardize Delta’s corporate culture. Not surprisingly, Delta has expressed its support for employees’ Keep Delta My Delta campaign. What is surprising is that employee’s favorable impression of Delta’s culture has survived even through its bankruptcy. And employees may be willing to preserve that culture even at the cost of foregoing better wages. Indeed, the CEO of US Airways not only claims that his merger plan will cut $1.65 billion in costs without cutting jobs, but that he intends to raise salaries of employees. Perhaps employees do not believe such a claim. And perhaps employees believe that Delta’s management can improve their wages in the long run. Employees campaign certainly reflects a strong belief in the strength and importance of their company’s culture.
Ultimately, however, employees concerns about culture may be pitted against creditors desire for better value. Of course there is debate regarding whether a standalone Delta is more valuable than one that merges with US Airways. Indeed, Delta’s unions appear to support management’s belief that an alliance with US Airways would not produce good value. One union representative noted that the union’s opposition to the merger meant that they were in the “unusual” position of being on common ground with Delta’s management. However, if such a merger does prove valuable, then Delta employee’s campaign spotlights an interesting issue regarding whether a company seeking to emerge from bankruptcy can oppose a deal that may provide some value to its creditors in order to preserve its corporate culture.
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1. Posted by Kate Litvak on December 19, 2006 @ 22:03 | Permalink
What exactly is Delta's corporate culture and how is it different, for low-level employees' purposes, from US Airways' corporate culture? What is it about Delta's corporate culture that is so valuable to low-level employees that they would be willing to forego pay raises and job stability promised by US Airways? Do they give out cookies on Tuesdays? Do they require pilots to remember stewardesses' names? Do they have more minorities among top management? Unless I hear something coherent and very specific on this subject, I will be forced to conclude that, once again, managers are cynically using gullible employees to fight off a takeover and keep their own fat salaries...
2. Posted by Larry on December 20, 2006 @ 10:00 | Permalink
"Culture" at airlines is usually roughly translated into "seniority" and other such things. As in, if we merge with another airline, it is possible that I would lose my seniority.
3. Posted by Beth Young on December 20, 2006 @ 19:19 | Permalink
I've worked with employee groups at both airlines. US Airways is wall-to-wall union, so it is likely that some employee groups, most notably flight attendants, would enjoy higher compensation in a merged company, though thorny seniority issues would have to be worked out. Its company culture, such as it is, reflects the fact that the company was built by agglomerating various small carriers--Piedmont, Allegheny, etc.--which is why US Airways has had so many hubs historically.
At Delta, only the pilots are unionized. Unionization drives have been defeated at Delta in the past based on the company culture argument. So although I wouldn't put it past Delta's management to use corporate culture cynically, it's not like this is the first time management has used this strategy. Delta has been headquartered in Atlanta for a long time--its relative union-free status is reflective, I think, of the "right to work" environment typical of the "New South"--and although it has occasionally bought regional carriers it has been a cohesive whole for many decades, unlike US Airways. I have attended four Delta annual shareholder meetings, and there is always good employee/retiree turnout, regardless of where the meeting is held. (It's rotated around the US but always in a city with solid Delta service.)
4. Posted by Kate Litvak on December 20, 2006 @ 20:42 | Permalink
Beth: so, "my Delta" campaign is all about the anti-union sentiment among rank-and-file Delta employees? Interesting, and surely not what the "corporate culture" types wanted to hear.
5. Posted by Beth Young on December 21, 2006 @ 16:11 | Permalink
I think there's always a fear of the unknown, and airline mergers are famously contentious. But the "union-free" campaign over the years has had the benefit, from the perspective of the current Delta management, of fostering a sense of difference and specialness within the employee base--of course, by no means do all employees buy it, but enough did to defeat the last flight attendant unionization effort--a sense that comes in handy in a situation like the one Delta is now facing.
6. Posted by Christopher Muise on January 4, 2007 @ 5:28 | Permalink
Kate, you are way off base. And your self-assuredeness is virtually laughable. Keep Delta My Delta is not a company propaganda tool. I know. I came up with it on a flight from Atlanta to Boston the day the hostile takeover was announced. From that day on, I and my group, an employee advocacy and representation group for our overwhelmingly non-organized workforce, began a grass roots campaign completely independent of management influence. And although I am a middle manager at Delta, one would be a fool to call me a member of "management." Indeed, the other 4 members of my 10-year-old group are all as Kate would call them "low-level employees." The US Airways offer came as a shock not because we weren't aware that other airlines wanted to leverage our progress and our brand, but because Delta people identify themselves in just that way: Delta people. I continue to be amazed by the cynical talking heads who simply cannot understand how any corporate employee could possibly have any affection for his company. The belief from day one that you are hired at Delta is that you've struck gold. You do not come to Delta to get rich, you come to a company that values the greater good. As a culture we actively resist the "what's in it for me?" mentality pervasive in today's society. As but one example of the Delta difference, our company was recognized by the state of Georgia for how humanely it handled its workforce cuts after 9/11 by offering very expensive early retirement programs to soften the blow on its employees. Ask the employees at NW how they were treated...specifically, ask the former mechanics in Atlanta who showed up to a SWAT team guarding a padlocked hangar closed with no notice. Nope, Delta's not perfect. And, please, give us credit for knowing that. It does, like anything, have its warts. An abiding credo to treat 45,000 employees fairly comes with its challenges. But it is ours and we intend to keep it that way. To Kate, keep up the cynicism. It just makes us Delta people chuckle when we encounter someone like you who just doesn't get it and it makes us that much mor appreciative of what we have. That you cannot relate to or understand the Delta culture is exactly what makes it unique. Unless you've been here.... Keep Delta My Delta.
7. Posted by Jerome Alexander on January 11, 2007 @ 18:37 | Permalink
Several years ago I wrote a book on the subject of workplace culture and employee morale. It is as relevant today as it was then. Employee morale is directly linked to the interaction of employees with line managers who are charged with executing the policies and strategies of companies. Unfortunately, many of these managers subvert the good intentions of the organization to meet their own personal goals and agendas at the expense of their peers and subordinates. This management subculture is a direct result of a corporate culture of ignorance, indifference and excuse. Better corporate level leadership is the key. Read more in "160 Degrees of Deviation: The Case for the Corporate Cynic."
8. Posted by Regular Traveler on January 24, 2007 @ 20:26 | Permalink
I don't know what's funnier -- the idea that a Delta propaganda web site hosted by Delta on a Delta server with a Delta HQ address is a "grass roots" campaign and not propaganda. . . or the idea that US Airways is seeking to "leverage their progress and their brand."
Delta, ironically, is using the old US Air strategy from the 1980s. Southwest drove US out of California, then out of the midwest, and US decided its future was in fortress hubs in Philadelphia and Pittsburgh. That decision almost killed them -- until they became a low cost carrier and merged with AWA.
Now Delta, unable to compete on domestic routes against low cost carriers, has taken a bunch of domestic jets and thrown them across the Atlantic -- figuring they'll retreat to where there's no low cost competition. Just like US Air in the 1980s, they bet that nobody would ever compete in the last space they could go without competition.
They, like US was, are wrong. Low cost transatlantic flights are on their way (including huge bumps up in capacity by US Airways, ironically enough) and Delta's last bastion will be overrun. At that point, the game will be over, as DL remains weak and heavily indebted -- with an aging fleet.
As for the "Delta is so different" stuff, it's just nonsense. I know lots of people in the aviation industry, and it's generally agreed that Delta's employees ummm. . . think highly of themselves. One reason why Delta is bristling at the idea of a US Airways takeover is because US Airways has been its largest rival in the east for decades, and successfully drove them out of Washington (and have also overshadowed them and forced them to pull down service in Boston, too). Still, they always said "US Air sucks compared to our great carrier" and the idea that the little mongrel carrier from Pennsylvania (and now Phoenix) could be ending their bloated management structure and calling the shots is just apalling to them.
Unfortunately, all the propaganda is just that -- propaganda. A coach seat is a coach seat, coach is the bread-and-butter of the domestic market, and US Airways is determined to maintain the economies of scale needed to remain a major player in the domestic market -- while continuing to grow in the foreign market. There's no "advantage" or even difference in the levels of service between the two carriers on most routes, and apart from those with irrational brand attachments, nobody will notice a difference (well, except an end to Delta's sky-high fares and a competitive pricing structure).
9. Posted by Just a Voice on February 21, 2007 @ 19:53 | Permalink
Regular Traveler you say much that appears wise. But, you speak in dogmatic terms. I won't deconstruct your argument. I'll just invoke the statement of Robert Shaw in Jaws (I paraphrase and convert to a question): will you at least have the education enough to admit when you're wrong? Somehow I doubt it. Delta's debt load will shortly be a fraction of what it was 18 months ago. And its transformation to a heavier mix of international travel puts it marginally on par with other majors in terms of domestic/international mix. But, I'm certain you already knew that. I'll check back in a year to see if you've apologized or pulled a Clinton.