WEBVTT - Delta Pulls Out of a Dive 0:00:04.480 --> 0:00:08.520 Greetings, ladies and gentlemen, and welcome aboard today's episode. Delta 0:00:08.680 --> 0:00:11.840 is currently the second largest airline in revenue and second 0:00:11.920 --> 0:00:15.160 in passengers carried. From its humble beginnings as a crop 0:00:15.240 --> 0:00:19.599 dusting operation, and despite the occasional turbulence, this airline would 0:00:19.600 --> 0:00:24.400 soar too massive high. But in two thousand five, Delta 0:00:24.560 --> 0:00:28.800 filed for bankruptcy, and they weren't the only ones losing altitude. 0:00:29.280 --> 0:00:32.879 This seemed to be a pretty big decade for airline failure. 0:00:33.080 --> 0:00:37.040 But while other airlines were permanently grounded, Delta once again 0:00:37.280 --> 0:00:40.040 took wing. And how did they do that? We'll buckle 0:00:40.120 --> 0:00:42.279 in and return your trade tables and seats to their 0:00:42.360 --> 0:00:45.760 upright positions as we take off for Delta on the brink. 0:00:55.920 --> 0:00:58.880 Hey there, everybody. I am Jonathan Strickland and I'm Aerial 0:00:58.960 --> 0:01:03.680 cast and Ariel I. I have to take my metaphorical 0:01:03.880 --> 0:01:06.920 hat off to you for writing that intro because there 0:01:06.920 --> 0:01:12.080 were so many puns it was. It was a beautiful thing. 0:01:12.280 --> 0:01:17.240 I love puns. And as we have alluded to, we 0:01:17.319 --> 0:01:21.160 will be talking about Delta Airlines and uh, for interest 0:01:21.160 --> 0:01:24.119 of full disclosure, before we even get started in this, 0:01:25.080 --> 0:01:30.520 my wife works for Delta, so I but you know, 0:01:30.600 --> 0:01:34.600 she has no saying what I do here, just as 0:01:34.640 --> 0:01:36.959 I have no say in what she does at Delta. Well, 0:01:36.959 --> 0:01:39.200 my husband does not work for Delta, but he sometimes 0:01:39.360 --> 0:01:43.000 rides it. Yeah, we've both both flown a few times. 0:01:43.040 --> 0:01:45.399 You a bit, quite a bit, But as as a 0:01:45.480 --> 0:01:47.720 spouse of someone who works for Delta, I have flown 0:01:48.640 --> 0:01:52.360 quite a bit. And Delta has a really fascinating history. 0:01:53.000 --> 0:01:56.640 Delta is one of those companies where it's not super 0:01:56.760 --> 0:02:00.240 easy to point at a company timeline and say here 0:02:00.320 --> 0:02:02.840 is where it all began, because it actually there were 0:02:02.840 --> 0:02:07.040 a lot of things that led into the creation of 0:02:07.120 --> 0:02:10.240 Delta as a as a company, and as our series 0:02:10.280 --> 0:02:12.320 title suggests, a lot of things that led into the 0:02:12.360 --> 0:02:15.720 brink as well. It wasn't just one instance and bam, 0:02:15.760 --> 0:02:20.320 there there. Yeah, there was actually decades of policy that 0:02:20.480 --> 0:02:23.639 got overturned in the nineteen seventies. Spoiler alert will get 0:02:23.639 --> 0:02:27.400 there and and we'll talk about how that really was 0:02:27.480 --> 0:02:30.160 both a good thing and a bad thing and had 0:02:30.240 --> 0:02:33.480 unintended consequences. But to start with, just to get an 0:02:33.480 --> 0:02:37.400 overview of where Delta came from. In back in nineteen twenty, 0:02:38.200 --> 0:02:42.079 some guys named Thomas Huff and Elliott de Land created 0:02:42.280 --> 0:02:47.640 the Ogdensburg Errowway Corporation in New York, and in nineteen 0:02:47.639 --> 0:02:51.480 twenty five they renamed it the Huff de Land Aero Company, 0:02:51.560 --> 0:02:56.160 and they relocated out of Bristol, Pennsylvania. And at that 0:02:56.200 --> 0:02:59.919 point they weren't an airline. They weren't taking people or 0:03:00.440 --> 0:03:04.959 even stuff anywhere. They were building airplanes mostly for the military, 0:03:05.080 --> 0:03:08.960 and their next step was also not necessarily moving people around. 0:03:09.160 --> 0:03:13.800 They then started huff Dalon Dusters as a subsidiary company 0:03:13.840 --> 0:03:16.280 of huff daland Arrow, and it was the first commercial 0:03:16.360 --> 0:03:19.600 agricultural fine company. So they did crop dusting. Yeah, and 0:03:19.639 --> 0:03:22.480 this was out of a place that we're both familiar with, 0:03:22.720 --> 0:03:27.760 Macon Georgia oh Man Makon Bacon and uh yeah. They 0:03:28.720 --> 0:03:31.880 started off building out a small fleet, although it was 0:03:31.919 --> 0:03:34.600 the largest privately owned fleet at the time, but it's 0:03:34.639 --> 0:03:37.880 still small, eighteen whole planes. Yeah, yeah, And they also 0:03:37.920 --> 0:03:41.920 moved into doing some mail carrying, and you know, shortly 0:03:41.960 --> 0:03:47.000 after crop dusting people carrying I hope not simultaneously. Yeah. 0:03:47.240 --> 0:03:51.080 Then in the late nineteen twenties, Ce Woolman comes in 0:03:51.240 --> 0:03:54.560 buys the company and decides that he doesn't care for 0:03:54.600 --> 0:03:57.600 the huff Dalon Arrow company name, so he renames it 0:03:57.840 --> 0:04:02.800 and he calls it Delta Air Service. Now why Delta, Well, 0:04:02.920 --> 0:04:06.840 that would be because they served at the Mississippi Delta region. Yep. 0:04:06.920 --> 0:04:10.600 So in the late twins they also incorporated and they 0:04:10.640 --> 0:04:14.400 began their first passenger flights. So let's say I want 0:04:14.440 --> 0:04:17.080 to get from point A to point B and I 0:04:17.120 --> 0:04:19.720 want to fly Delta. Where are point A end point B, 0:04:20.080 --> 0:04:23.880 Texas and Mississippi, And you have to be one of 0:04:23.920 --> 0:04:28.520 the lucky five total passengers on their planes at that time. Yeah, 0:04:28.600 --> 0:04:31.440 five passengers one pilot, which, if you if you ask me, 0:04:31.600 --> 0:04:36.080 not a bad ratio. But you know, having recently been 0:04:36.080 --> 0:04:39.520 on a puddle hopper, tiny, little, cramped a little plane, yeah, 0:04:39.680 --> 0:04:43.839 I rarely fly on planes that small, and my wife 0:04:44.400 --> 0:04:47.920 never will. I cannot convince her to get on those. 0:04:48.160 --> 0:04:50.480 She's she says, if the plane is to the size 0:04:50.480 --> 0:04:52.640 where she could reach her arms out to either side 0:04:52.640 --> 0:04:55.520 and touch walls, she doesn't. She wants some bigger plane. 0:04:56.120 --> 0:04:59.080 Uh So, nineteen thirties they start service to the city 0:04:59.120 --> 0:05:01.880 that you have to go through. Now, if you're on Delta, 0:05:02.040 --> 0:05:05.240 at least, that's the joke. Which is Atlanta, our hometown. 0:05:06.000 --> 0:05:09.000 So this episode is also a big shout out to 0:05:09.520 --> 0:05:14.680 a major power player in our city. And they decided 0:05:14.720 --> 0:05:17.880 that they weren't going to continue passenger services for a 0:05:17.880 --> 0:05:22.919 couple of years because they got another gig, yeah, flying 0:05:23.160 --> 0:05:27.400 mail routes for the postal service. So I guess the 0:05:27.480 --> 0:05:30.240 letters were more important than the people trying to get 0:05:30.279 --> 0:05:33.640 from Atlanta to Texas to Mississippi. People still have buses. 0:05:35.200 --> 0:05:36.919 It's hard for a letter to board a bus and 0:05:36.960 --> 0:05:39.480 get off at the right location. Gosh darn it, they're 0:05:39.640 --> 0:05:42.880 perishable goods in this in this box. They're really really 0:05:42.880 --> 0:05:48.479 bad at directions. Um yeah. So uh. Then they eventually 0:05:48.520 --> 0:05:52.360 start flying under the name Delta Airlines, and they began 0:05:52.440 --> 0:05:57.880 to offer night service flights in nine yes, with two pilots, wow, 0:05:58.160 --> 0:06:03.440 and eight passengers. Now at this point, Delta, while it 0:06:03.600 --> 0:06:08.400 is flying passengers, was not one of the big major 0:06:08.480 --> 0:06:10.840 airlines in the United States. No, the big four were 0:06:10.880 --> 0:06:15.480 Eastern t W A United An American. And then we had, 0:06:15.600 --> 0:06:21.360 uh this bit of legislation that would take take take 0:06:21.360 --> 0:06:26.040 control for the next four decades, which was the Civil 0:06:26.040 --> 0:06:30.520 Aeronautics Act of nineteen thirty eight. Yes, and This allowed 0:06:30.560 --> 0:06:34.680 Delta to jump into the market of the Big four 0:06:34.760 --> 0:06:37.400 and kind of be a competitor. Yeah, it allowed for 0:06:37.440 --> 0:06:40.400 better market growth. What's important to remember here, and we'll 0:06:40.440 --> 0:06:43.839 talk more about it in just a second, but this 0:06:44.120 --> 0:06:48.159 was an era where in the United States, if you 0:06:48.360 --> 0:06:53.800 had an airline that flew flights between states, so you 0:06:53.839 --> 0:06:57.480 went beyond one state into another, then you fell under 0:06:57.800 --> 0:07:01.840 the purview of an agency, and you were you had 0:07:01.920 --> 0:07:05.520 to agree to certain rules on a federal level, and 0:07:05.520 --> 0:07:09.400 that included things like the federal government setting the rates 0:07:09.920 --> 0:07:13.800 for airfare and what your schedule was and what routes 0:07:13.840 --> 0:07:18.000 you could fly. And in these early days, what that 0:07:18.080 --> 0:07:22.520 helped to do is establish an industry. But as we'll 0:07:22.520 --> 0:07:26.080 see as we go along, the longer that policy stayed 0:07:26.120 --> 0:07:33.120 in place, the more constrained everybody was. Moving on with 0:07:33.200 --> 0:07:36.960 Delta's history. Yes, in the nineties, they added flight attendants, 0:07:37.440 --> 0:07:40.440 which were called stewardesses at the time. Yes, we are 0:07:40.840 --> 0:07:44.120 more elevated in our thinking these days, we are. And 0:07:44.160 --> 0:07:46.440 they also moved their headquarters to Atlanta, so they had 0:07:46.480 --> 0:07:49.160 service to Atlanta, but now they're going to be based 0:07:49.160 --> 0:07:51.640 out of Atlanta. And then they also started modifying their 0:07:51.680 --> 0:07:55.600 airplanes to contribute to World War two efforts because that 0:07:55.680 --> 0:07:58.320 was happening. And then they were training military pilots and 0:07:58.360 --> 0:08:00.320 mechanics for their planes if you listen to our episode 0:08:00.360 --> 0:08:03.040 on Harley Davidson, similar to what Harley was doing with 0:08:03.080 --> 0:08:06.480 their bikes and training people to service their bike right, 0:08:06.480 --> 0:08:09.440 and that this would end up serving the company well 0:08:09.600 --> 0:08:14.760 post war because they would have a larger infrastructure in place. 0:08:15.280 --> 0:08:20.520 They also underwent another name change. Yes, they became Delta Airlines, Incorporated. 0:08:20.960 --> 0:08:26.360 And they hit one million passengers flown on Delta Airlines, 0:08:26.400 --> 0:08:29.000 which you know is a lot when you consider they're 0:08:29.000 --> 0:08:31.679 flying him like five or eight of the time, maybe 0:08:31.760 --> 0:08:35.400 maybe a few more by that time. And also they 0:08:35.679 --> 0:08:39.640 had traveled half a billion passenger miles with no fatalities. 0:08:40.000 --> 0:08:43.960 They're recognized by the National Safety Council for that ten 0:08:44.040 --> 0:08:49.800 years of no fatality success. And they introduced a special 0:08:49.880 --> 0:08:54.120 class of flying for those who were on a budget 0:08:54.440 --> 0:08:59.480 like me. No, they introduced coach service from Chicago to Miami. 0:09:00.080 --> 0:09:02.839 So I guess if you're going to the windy City 0:09:02.880 --> 0:09:05.280 to Miami, I would say if if you're going from 0:09:05.320 --> 0:09:08.600 the greatest city to the sunniest city, I don't know 0:09:08.600 --> 0:09:14.000 that Chicago's right lovely. So nineteen fifties that's when they 0:09:14.120 --> 0:09:18.680 begin to incorporate a hub system. And this is something 0:09:18.720 --> 0:09:22.079 that became common in the airline industry for the big 0:09:22.120 --> 0:09:25.600 airlines in the United States. The idea that you create 0:09:25.679 --> 0:09:28.880 a base of operations in a major city and you 0:09:29.400 --> 0:09:32.720 have a lot of flights out from that area. You 0:09:32.720 --> 0:09:35.559 don't necessarily do a lot of direct flights city to 0:09:35.640 --> 0:09:38.600 city across the States. So if you want to get 0:09:39.080 --> 0:09:41.240 from point A to point B, you've got to fly 0:09:41.280 --> 0:09:45.240 through Atlanta first. Yes, that was the joke. Is it 0:09:45.360 --> 0:09:46.920 still is? You know? I was trying to get back 0:09:46.920 --> 0:09:48.760 from New Hampshire to Atlanta and I had to fly 0:09:48.800 --> 0:09:51.200 through Philadelphia, which seemed a little off course for me. 0:09:51.400 --> 0:09:54.720 I once had to fly home from Philadelphia to Atlanta, 0:09:54.840 --> 0:09:57.600 but because of the way the flights had filled up, 0:09:57.640 --> 0:10:00.599 I had to go Philadelphia Cincinnati. Since at E D C, 0:10:00.920 --> 0:10:04.920 d C Atlanta. That sounds like an adventure. It was 0:10:04.960 --> 0:10:09.320 a long day. Yes, Delta had several hubs. Atlanta remains 0:10:09.440 --> 0:10:12.599 Delta's hub, but for a while it also had Cincinnati, 0:10:12.800 --> 0:10:16.520 and I believe it still has Salt Lake City, So 0:10:16.600 --> 0:10:19.080 those would be the major hubs for Delta, but different 0:10:19.080 --> 0:10:22.120 airlines have different cities as their hub. Yes. Also in 0:10:22.160 --> 0:10:24.920 the nineteen fifties, Delta installed radars in the noses of 0:10:24.960 --> 0:10:28.040 their aircraft and they also got their first logo. Wow, 0:10:28.360 --> 0:10:30.840 it's amazing that they had been around for decades and 0:10:30.840 --> 0:10:33.480 they get their first logo in nineteen fifties in the 0:10:33.600 --> 0:10:37.199 In nineteen sixty six, the c woman who had purchased 0:10:37.240 --> 0:10:42.559 Delta from the original creators back uh several decades earlier, 0:10:42.640 --> 0:10:47.600 passes away. Yes, they gave a huff dollond duster to 0:10:47.679 --> 0:10:50.200 the Smithsonian a remembrance of him, which is kind of cool. 0:10:50.400 --> 0:10:53.520 That's kind of cool. Uh. They hit fifty years old 0:10:53.559 --> 0:10:56.800 once they get into the nineteen seventies, and at this 0:10:56.920 --> 0:11:00.959 point they had moved away from airplanes entirely. The entire 0:11:01.040 --> 0:11:05.720 fleet was now jet aircraft, no longer prop planes necessarily, 0:11:06.240 --> 0:11:11.520 and they end up hitting their first hitting a major 0:11:11.559 --> 0:11:16.480 financial loss by night. This is a point where they 0:11:16.559 --> 0:11:21.120 actually were in some pretty dire straits financially, so they 0:11:21.160 --> 0:11:25.000 turned to their employees as one of the ways that 0:11:25.080 --> 0:11:28.360 they could recover. Yeah, they raised about thirty million dollars 0:11:28.480 --> 0:11:32.480 from payroll deductions. Yikes. Never a fun thing. Yes, and 0:11:32.600 --> 0:11:35.400 they took up money and purchased their first Boeing seven 0:11:35.480 --> 0:11:39.280 sixties seven. Yes, they call it the Spirit of Delta, which, 0:11:39.320 --> 0:11:41.720 by the way, there there is always at least one 0:11:41.800 --> 0:11:44.600 Spirit of Delta. If you pay attention when you get 0:11:44.679 --> 0:11:47.520 on the plane, you might notice if you're on the 0:11:47.559 --> 0:11:50.720 Spirit of Delta. I have not flown on the Spirit 0:11:50.720 --> 0:11:54.360 of Delta. Despite the fact that I've flown Delta many 0:11:54.480 --> 0:11:57.079 many times, I'm going to assume that I haven't. By 0:11:57.080 --> 0:11:59.240 this time in the eighties, Delta is the fourth largest 0:11:59.320 --> 0:12:02.720 carrier in the US, fifth in the world because of 0:12:02.760 --> 0:12:06.840 a Western Airlines merger, and they also start Transpacific service 0:12:07.480 --> 0:12:11.400 to Agya. And in the nineties they would continue their 0:12:11.480 --> 0:12:15.360 their path of growth. Uh they were part of the 0:12:15.480 --> 0:12:19.839 Civil Reserve air Fleet during operations Desert Desert Shield and 0:12:19.880 --> 0:12:26.480 Desert Storm, and PanAm, which had gone bankrupt in ninety one, 0:12:27.400 --> 0:12:32.800 would end up having its assets largely purchased by Delta, 0:12:32.920 --> 0:12:37.960 so routes and PanAm Shuttle were acquired through this process. 0:12:38.000 --> 0:12:43.080 So PanAm was one of a whole bunch of airlines 0:12:43.600 --> 0:12:48.440 that went bankrupt around this time. Essentially, you started seeing 0:12:49.120 --> 0:12:51.160 a lot of airlines going bankrupt towards the end of 0:12:51.200 --> 0:12:54.960 the seventies all the way up through the mid two thousand's. Uh. 0:12:55.000 --> 0:13:00.160 And it was ugly, y'all. Yes, but Delta did get 0:13:00.160 --> 0:13:04.600 to its profits in and it also introduced Olympic planes 0:13:04.679 --> 0:13:08.040 because the Olympics were in Georgia and that was where 0:13:08.120 --> 0:13:13.480 Delta was headlined. And then we're getting into what we 0:13:13.480 --> 0:13:17.800 were alluding to earlier with the brink. So why if 0:13:17.840 --> 0:13:20.680 things are going so smoothly for Delta, I mean, despite 0:13:20.720 --> 0:13:23.800 the the blip that they had in the nineteen eighties, 0:13:24.640 --> 0:13:28.040 why did they have this issue where they had to 0:13:28.080 --> 0:13:32.760 go into bankruptcy protection? And moreover, how did they climb 0:13:32.880 --> 0:13:38.599 out of it. We're going to talk about the unintended 0:13:38.679 --> 0:13:43.720 consequences of deregulation when we come back from this word 0:13:43.720 --> 0:13:57.960 from our sponsor. So earlier I mentioned that you had 0:13:58.040 --> 0:14:04.160 this thing happened in that ended up really affecting the 0:14:04.200 --> 0:14:08.840 airline industry and gave Delta an early boost. That was 0:14:08.920 --> 0:14:13.880 this same issue that we would see dismantled in nineteen 0:14:14.040 --> 0:14:18.280 seventy eight. Yes, the Airline Deregulation Act of nine to 0:14:18.320 --> 0:14:22.280 be exact, it allowed a bunch of smaller airlines to 0:14:22.320 --> 0:14:26.200 open up and cause the larger airlines to have to 0:14:26.280 --> 0:14:29.160 kind of scurry to keep up with the competition. Yeah. 0:14:29.240 --> 0:14:34.160 So with regulation, with the government setting these things like 0:14:34.400 --> 0:14:37.560 setting the air fare rates and setting routes and setting schedules, 0:14:39.160 --> 0:14:44.640 it was starting to rub passengers the wrong way because 0:14:44.880 --> 0:14:49.400 airfares were high. There was no competition because the government 0:14:49.440 --> 0:14:52.160 told you how much the tickets had to be a right, 0:14:52.200 --> 0:14:55.360 so there was no way for one company to say, well, 0:14:55.400 --> 0:14:58.280 we're going to try and win more customers by dropping 0:14:58.800 --> 0:15:02.080 the air fare for the one route. You didn't get 0:15:02.080 --> 0:15:04.720 to decide all your routes. You could propose routes, but 0:15:04.720 --> 0:15:07.400 the government would have to approve it. So if you 0:15:07.440 --> 0:15:12.080 wanted to propose a new route from Atlanta to let's 0:15:12.120 --> 0:15:15.480 say Topeka, Kansas, you'd have to submit that to the 0:15:15.480 --> 0:15:19.880 government first before you could get actual approval to do that. Uh. 0:15:20.240 --> 0:15:24.800 You had to submit schedules to the government too. This 0:15:24.880 --> 0:15:28.720 was all meant to help make sure the industry grew 0:15:28.800 --> 0:15:33.720 in a way that was uh supported by the government. 0:15:33.760 --> 0:15:36.320 But at this point, a lot of the a lot 0:15:36.360 --> 0:15:40.280 of the customers were not terribly happy because they felt 0:15:40.280 --> 0:15:44.680 like they were paying a lot of money for things 0:15:44.720 --> 0:15:49.880 that probably could be of rated lower put at a 0:15:49.920 --> 0:15:54.640 lower cost. The the airlines themselves, the big ones weren't 0:15:54.720 --> 0:15:58.200 terribly upset with the regulation. They were getting pretty regular. 0:15:59.400 --> 0:16:02.160 I was thinking prices exactly they were making. They were 0:16:02.200 --> 0:16:04.920 making bank is what they were doing. But then in 0:16:06.280 --> 0:16:10.000 the government decides to deregulate the industry. This creates an 0:16:10.000 --> 0:16:14.120 incredible amount of competition rapidly, and so you started getting 0:16:14.120 --> 0:16:18.080 into price wars, and you're talking about companies that haven't 0:16:18.080 --> 0:16:21.240 had to deal with this for four decades. Yes, some 0:16:21.360 --> 0:16:26.280 of those price wars meant cutting airfares so low that 0:16:26.720 --> 0:16:28.840 it was starting to eat into profit margins. It was 0:16:28.880 --> 0:16:35.000 starting to make the companies, uh, become less stable financially. 0:16:35.440 --> 0:16:37.600 They had they had to deal with airlines that had 0:16:37.680 --> 0:16:41.120 smaller fleets and less bells and whistles. But we're offering 0:16:41.200 --> 0:16:44.400 flights out a fraction of the cost, which you know 0:16:44.680 --> 0:16:49.320 all those coach passengers are all about. Right. So the 0:16:49.400 --> 0:16:53.680 question was should the larger companies focus mainly on longer 0:16:53.960 --> 0:17:00.000 flights that these smaller airlines weren't really able to accommodate. Uh, 0:17:00.120 --> 0:17:03.800 you know, how could they compete in that same space? 0:17:04.480 --> 0:17:10.359 And we saw a lot of airlines start up in 0:17:10.359 --> 0:17:12.760 this era, we saw a lot of them shut down. 0:17:12.800 --> 0:17:14.480 We saw a lot of both, Like we saw a 0:17:14.520 --> 0:17:16.960 lot of the same ones that start up failed well. 0:17:17.000 --> 0:17:19.960 And three of the big original four airlines did not 0:17:20.200 --> 0:17:24.520 survive this competition, PanAm, Eastern, and t w A all folded. Yeah, 0:17:24.720 --> 0:17:30.639 so this gut ugly. It also led to some pretty 0:17:30.720 --> 0:17:35.240 big cost cutting measures for the companies that did survive. 0:17:35.359 --> 0:17:39.080 So people who worked for these airlines started to see 0:17:39.240 --> 0:17:43.199 their salaries uh stagnate, like wages were not going up 0:17:43.240 --> 0:17:46.879 along with the rest of the industry and um. And 0:17:46.920 --> 0:17:50.320 then we also hit at this time an economic slowdown. Yes, 0:17:50.680 --> 0:17:55.240 so multiple things are all happening around this era, and 0:17:55.240 --> 0:18:00.800 and the fallout of this deregulation Act would take of course, 0:18:01.359 --> 0:18:07.119 it would take decades to unfold, to unravel, right, I 0:18:07.160 --> 0:18:14.560 think generally speaking, when people who oppose government regulation are 0:18:14.680 --> 0:18:18.040 thinking those thoughts, they point to things like the regulation 0:18:18.080 --> 0:18:21.320 of the airline industry and say, see how that was 0:18:21.359 --> 0:18:26.200 bad for customers because we had this mandated airfare and 0:18:26.560 --> 0:18:29.800 you couldn't get that bargain price to to go fly 0:18:30.480 --> 0:18:34.400 you know, whatever airline you wanted. You were stuck having 0:18:34.400 --> 0:18:37.680 to pay these higher the higher costs on the flip 0:18:37.720 --> 0:18:41.199 side of that. Uh, it solved some problems, but it 0:18:41.280 --> 0:18:45.639 made other problems. Yeah. Yeah, it's's constant battle, you know, 0:18:46.680 --> 0:18:49.000 even today between what is good for the customer and 0:18:49.000 --> 0:18:52.160 what is good for the company and finding that right balance. Um. 0:18:52.200 --> 0:18:54.800 But Delta is hit kind of especially hard by these 0:18:54.840 --> 0:19:00.280 smaller airlines like air Tran in Jet Blue because they 0:19:00.320 --> 0:19:02.760 didn't have a lot of international travel, so most of 0:19:02.800 --> 0:19:07.439 their travel was domestic Delta that is, so they're in 0:19:07.520 --> 0:19:12.320 direct competition with these small airlines. They don't have extra 0:19:13.200 --> 0:19:17.760 you know, revenue builders out there, right because it wouldn't 0:19:17.800 --> 0:19:20.399 be for a few years before Delta would start building out. 0:19:20.480 --> 0:19:23.959 It's more of its international travel. They had a little bit, 0:19:24.000 --> 0:19:25.920 but it's not what they were known for right now 0:19:25.960 --> 0:19:29.080 more than like I think of their revenue came from 0:19:29.119 --> 0:19:34.119 domestic flights. So where when you see a more competition 0:19:34.240 --> 0:19:36.480 in your space where your where your bread is buttered, 0:19:36.600 --> 0:19:38.719 then you're gonna take a hit. But even still they 0:19:38.760 --> 0:19:45.000 were struggling along and then then we have the absolute 0:19:45.040 --> 0:19:50.840 awful disaster September eleven terrorist attacks. Yes, I was supposed 0:19:50.840 --> 0:19:54.439 to fly that day. I it was a little unreal 0:19:54.480 --> 0:19:56.520 for me. I was working at a daycare with children 0:19:56.560 --> 0:19:58.359 at the time, so someone told me what happened. I 0:19:58.400 --> 0:20:00.280 had to wait for a break to go watch a 0:20:00.359 --> 0:20:07.000 TV and it horrible. Yeah, it's still surreal to think 0:20:07.040 --> 0:20:10.760 about that day. And of course, you know, I didn't 0:20:10.760 --> 0:20:14.280 fly that day. All flights were grounded and this was 0:20:14.320 --> 0:20:17.280 across all airspace in the United States. It lasted for 0:20:17.400 --> 0:20:20.440 two days and UH stranded a lot of people in 0:20:20.480 --> 0:20:24.399 a lot of different places. Also meant that airlines were 0:20:25.200 --> 0:20:30.000 really in a bind to try and UH once operations 0:20:30.000 --> 0:20:32.159 began again to get people to where they would be, 0:20:32.280 --> 0:20:35.879 they were understandably really hesitant to fly at this point. Yeah, 0:20:36.000 --> 0:20:39.360 and so Delta, Delta was not alone in this. I mean, 0:20:39.400 --> 0:20:42.679 all the airlines took a massive hit from this, but 0:20:42.800 --> 0:20:47.560 Delta ended up losing two point four billion dollars over 0:20:47.600 --> 0:20:50.000 the course of two thousand one and two thousand two. 0:20:50.119 --> 0:20:54.960 It was their first financial loss in six years. And um, 0:20:54.960 --> 0:20:57.280 it was only the beginning of their kind of nose 0:20:57.440 --> 0:21:01.879 dive into the brink. Yeah. They decided to try and 0:21:02.000 --> 0:21:07.679 compete more directly with these budget airlines by launching a 0:21:07.680 --> 0:21:11.159 a service called Song and this was their their version 0:21:11.280 --> 0:21:15.919 of budget flights I've flown on Song aircraft before. Actually 0:21:15.960 --> 0:21:19.040 Song Aircraft they got a few amenities before some of 0:21:19.080 --> 0:21:23.200 Delta's other aircraft did that. I really liked a lot. Yeah, 0:21:23.280 --> 0:21:26.320 but you know what, Song overall didn't do very well. 0:21:26.359 --> 0:21:30.440 That's true. Um In two thousand three, their CEO, Leo 0:21:30.520 --> 0:21:34.040 Mullin retired, Yeah, this was where when he retired, one 0:21:34.040 --> 0:21:37.520 of the things that he was getting criticized for was 0:21:37.600 --> 0:21:43.760 that he had offered some massive bonus packages for executives, 0:21:43.800 --> 0:21:47.119 a lot of golden parachutes. Yeah, when they're supposed to 0:21:47.160 --> 0:21:50.000 be cutting costs and when they're not offering their employees 0:21:50.080 --> 0:21:54.800 raises or yeah, and they're trying to avoid going bankrupt, 0:21:55.200 --> 0:21:59.639 and this week have this This was a dark time 0:22:00.200 --> 0:22:04.280 for people who worked at Delta. It's very tough and 0:22:04.440 --> 0:22:08.679 very demoralizing. If you're an employee, a rank and file employee, 0:22:09.200 --> 0:22:12.320 and you hear about an executive who comes in. Maybe 0:22:12.320 --> 0:22:17.280 this executive spends six months at Delta, maybe this executive 0:22:17.280 --> 0:22:22.000 makes some terrible decisions. But because part of that executives 0:22:22.800 --> 0:22:25.879 agreement to come work for Delta was a golden parachute 0:22:26.520 --> 0:22:30.600 guarantee that even if that person were to leave the 0:22:30.680 --> 0:22:32.639 job or be fired or whatever that they would have 0:22:32.720 --> 0:22:36.880 a certain amount of money or stock or whatever. Uh. 0:22:36.960 --> 0:22:40.280 That was like, you know, you had regular employee saying, well, 0:22:40.359 --> 0:22:43.560 this is totally unfair. If I come in to work 0:22:43.600 --> 0:22:45.840 and I do a terrible job for six months, you 0:22:45.880 --> 0:22:49.240 don't reward me. Yeah, yeah, it was. It was unfair, 0:22:49.320 --> 0:22:53.800 and hence the retirement quote unquote Yes. Now this caused 0:22:54.200 --> 0:22:56.840 Delta by the fourth quarter of two thousand four to 0:22:56.960 --> 0:23:01.320 have lost two point two billion dollars, their single largest 0:23:01.560 --> 0:23:06.359 loss in a quarter. And so then, uh, they the 0:23:06.359 --> 0:23:10.879 new CEO of Delta tries to take some measures to 0:23:11.000 --> 0:23:14.440 turn things around. Yeah, he negotiated a gift back by 0:23:14.440 --> 0:23:16.919 the pilots of one third of their pay and benefits, 0:23:18.480 --> 0:23:21.000 which I guess if you really like working for Delta, 0:23:21.080 --> 0:23:22.760 you're gonna give up some of that pay for some 0:23:22.840 --> 0:23:25.920 a little bit more job security. Um. They're also trying 0:23:25.960 --> 0:23:27.879 to make flights more efficient at that time, having a 0:23:27.920 --> 0:23:33.199 shorter turnaround time and conserving fuel and lowering fares. They 0:23:33.200 --> 0:23:35.760 saved about a billion dollars doing all this. Yeah, they 0:23:35.840 --> 0:23:39.520 also sold some of their fleet and they also cut 0:23:39.560 --> 0:23:43.639 about five thousand jobs. But they were still hit with 0:23:43.680 --> 0:23:47.240 more misfortune because Hurricane Katrina hit in August of two 0:23:47.280 --> 0:23:51.800 thousand five, and it pushed oil prices way way up 0:23:51.840 --> 0:23:55.480 to sixty or seven dollars a barrel. Yeah, and that 0:23:55.920 --> 0:24:00.280 was the last straw for Delta. Delta had been eating 0:24:00.359 --> 0:24:03.879 off having to file for bankruptcy protection, but at this 0:24:03.960 --> 0:24:09.560 point it was too much, and on September two thousand five, 0:24:10.600 --> 0:24:15.280 Delta would declare Chapter eleven bankruptcy protection. And here's an 0:24:15.560 --> 0:24:17.440 interesting thing. They were not the only airline to do 0:24:17.520 --> 0:24:21.480 it that day. Nope, Northwest Airlines filed less than a 0:24:21.480 --> 0:24:25.080 half hour later. Yeah, according to reports, but over this 0:24:25.160 --> 0:24:30.800 five year period of turmoil, Delta lost about ten billion dollars. 0:24:31.440 --> 0:24:39.000 That's crazy, an So this seems like Delta is really 0:24:39.040 --> 0:24:41.879 in dire straits. I mean, the airline industry was in 0:24:41.960 --> 0:24:46.080 dire straits. Almost half of the indigeny's capacity was operating 0:24:46.160 --> 0:24:52.520 under bankruptcy oversight. So how could Delta pull out of 0:24:52.600 --> 0:24:55.280 this nose dive? We'll explain in just a moment, but 0:24:55.400 --> 0:24:58.280 first let's take a quick break to thank our sponsor, 0:25:07.080 --> 0:25:11.760 Okay Ariel. How did Delta pull out of this? Well, 0:25:12.200 --> 0:25:16.960 first they cut additional costs and then they sold Atlantic 0:25:17.000 --> 0:25:20.679 Southeast airlines, and then they cut their flight capacity out 0:25:20.720 --> 0:25:23.280 of the Cincinnati hub, which explains why it's so hard 0:25:23.320 --> 0:25:25.679 for me to get back home now, it's true. And 0:25:25.720 --> 0:25:31.080 then they did like an internal company reboot that costs 0:25:31.080 --> 0:25:34.760 them three billion dollars. This is actually a very bold move, 0:25:35.200 --> 0:25:39.160 right that that they see the need to redefine themselves, 0:25:39.160 --> 0:25:44.320 to reposition themselves, to restructure all of these rewords, and 0:25:44.840 --> 0:25:49.720 it would mean having to spend three billion dollars while 0:25:49.920 --> 0:25:52.719 you're in chapter Yeah, it's it's it's a whole lot 0:25:52.760 --> 0:25:58.080 of investment for very little guarantee and it took nineteen 0:25:58.119 --> 0:26:01.520 months to do. Yeah, so is a long term invest 0:26:01.600 --> 0:26:04.200 But these are things that I think a lot of 0:26:04.480 --> 0:26:08.840 businesses struggle with, this idea of you're taking a big 0:26:08.960 --> 0:26:11.480 risk and you know it's going to take a long 0:26:11.520 --> 0:26:14.640 time for that risk to pay off because there's so 0:26:14.720 --> 0:26:19.560 much emphasis on short term gains and short term turnaround. 0:26:19.680 --> 0:26:21.960 But for Delta, it worked. Yeah, And I guess you 0:26:21.960 --> 0:26:25.240 could figure they're thinking they're in chapter eleven already, so 0:26:25.640 --> 0:26:29.600 compared to the ten billion dollars they lost, it's only 0:26:29.640 --> 0:26:31.440 a third of that. It's only a third of that. 0:26:32.240 --> 0:26:36.080 Um they're already failing this is the hail Mary for them. Well, 0:26:36.280 --> 0:26:39.600