This is the strategy for America's best airline
This is the strategy for America's best airline
How Delta beats the competition on customer service while increasing revenue and profit.
Hello everyone 👋
This week we are talking about Delta, America’s best airline. Their strategy of premium + great customer service is full of insights for any organization who wants to be the best in their industry.
If you want to dive deeper, click into the footnotes for further commentary and other links you can explore.
I. Delta’s unrivaled customer service strategy
The airline industry does not tend to inspire warm and fuzzy feelings. A canceled flight or having to call customer service can require an abundance of patience and a little good luck, except for those who fly on Delta Airlines.
The Wall Street Journal (WSJ) maintains an annual ranking of the best U.S. domestic airlines and Delta has taken the number one spot for six out of the last seven years1. It took the second spot in 2020, despite the pandemic chaos.
The WSJ ranks the airlines on the following criteria2:
On-time arrivals
Flight cancellations
Extreme delays
Baggage handling
Tarmac delays
Involuntary bumping
Complaints
While revenue and profit aren’t here, Delta is also killing it on that front. Revenue has increased steadily over the last 15 years (except during 2020 and 2021) and profit has followed suit3.
Delta’s customer service strategy is built on three pillars: happy employees, practical customer experience and a good future vision.
II. Employees, customers and the future
Happy employees are the rock on which Delta has built their business. All airlines face the same conditions—bad weather, mechanical issues, unexpected consumer demand, pilot shortages—and it is clear that having capable individuals can make a huge difference. A capable employee can help you deal with a flight cancellation easily or he/she can make your life hell.
Many organizations claim to put employees first but the reality on the ground doesn’t always match the aspirations in the sky. Here’s how Delta follows through with tangible actions.
Delta has the most generous profit sharing plan in the industry. In 2023, employees received bonuses equivalent to 10.4% of their annual pay (around one month’s pay)4 and Delta has paid out over $11 billion dollars since 2007.
In comparison, American employees received 1.1% and United employees received 9.2%5 of their annual pay.
It’s also interesting to note that only 20% of Delta employees are unionized while other airlines have 80% and 85% union density6. The lack of unions may be forcing Delta to be proactive in their employee relationships, adjusting their pay in real-time, instead of waiting for a contract to end.
Glassdoor rankings also shed light on how employees feel about the company. Delta has a 4.2 ranking and 86% approve of the current CEO7. United is ranked at 3.9 and 66% CEO approval, while American is ranked at 3.7 and 48% CEO approval.
The second pillar of the Delta strategy is a practical customer experience. Their “Bags on Time” guarantee is a good example here.
Delta guarantees that checked bags will come out in less than 20 minutes after the plane arrives at your destination. If not, they give you 2,500 Skymiles. Delta isn’t the only airline that offers this guarantee but it reflects a confidence in their ability to unload planes rapidly and efficiently.
You can also see the practical elements of their strategy in the free Wi-Fi, free snacks and comfortable planes. Delta’s planes are typically older than the competition but they have managed to maintain a modern feel on the inside.
Their philosophy on delays also stands out as practical. Delta sometimes delays flights for many hours but they believe a delay is the better option than a cancellation. You might have to wait for several hours but you will reach your destination.
The third pillar is a good vision for the future. Delta has positioned themselves as a premium brand, backed by great customer service. Delta’s metrics for investors reflect their clear vision.
They highlight their on-time performance (83%, the industry best), their low rate of complaints and their customer service. You don’t hear Delta talk about having the lowest fees, a metric that makes more sense for a low-budget airline such as JetBlue.
There’s also something about the hub choices Delta has made. The five U.S. airports with the fewest delays in 2023 were Minneapolis (MSP), Seattle (SEA), Salt Lake City (SLC), Detroit (DTW) and Atlanta (ATL) (8), all five are Delta Hubs. They might fly into poorly run airports—Orland (MCO), Las Vegas (LAS), Palm Beach (PBI) and Fort Lauderdale (FLL)—but they didn’t establish their hubs there8.
The hub and spoke model is the standard for airlines today and having good hubs makes a huge difference in logistics.
As always, the strategic decisions may seem obvious in hindsight but it is clear not every airline thinks in the same way.
III. Improving your customer service strategy
The three pillars of Delta’s success can be applied to any organization.
Let’s start with happy employees. Consider moving beyond the “table stakes” perks of competitive pay, 401(k) retirement matching, and health vouchers. You need to find perks where your organization is clearly the best, just like Delta and its profit sharing plan.
For the practical customer experience, it comes down to what customers actually want. Delta has mastered the fundamentals of arriving on time, minimizing extreme delays and handling your baggage efficiently. They then added other perks like free Wi-Fi. Think about what things you customers would really value, at the fundamental and optional level.
Finally, every organization needs a clear vision for the future. It doesn’t have to be complicated, Delta focuses on being a premium brand with great customer service. Every employee should know if they are contributing to that future vision.
I have always loved flying Delta and it is clear that many people feel the same. Their premium brand + customer service strategy continues to pay off, even after the craziness of the pandemic subsides.
That’s all I have for this week!
Talk soon,
Ruben
The quote by COO Mike Spanos reflects the Delta strategy in one sentence: “Safe, reliable operations led by caring people – that’s how we earn our customers' trust every day”. https://pro.delta.com/content/agency/erp/en/news/news-archive/2024/january-2024/delta-again-named-top-u-s--airline-by-wall-street-journal-for-20.html
The WSJ focuses primarily on the customer experience while ignoring other business metrics. However, their consistent ranking over more than 10 years is a great gauge for measuring success over the long term. https://www.wsj.com/story/the-top-5-airlines-of-2023-e040abe5
Note the consistent increase in revenue (and the huge drop during the pandemic). From a financial perspective, Delta runs a great business. https://www.macrotrends.net/stocks/charts/DAL/delta-air-lines/gross-profit
It is incredible how a small chunk of money, relative to the overall annual profits, can have such an outsized impact on employee satisfaction. https://news.delta.com/delta-invests-employees-across-globe-provides-profit-sharing-equal-104-annual-pay
United’s profit sharing is close to Delta but American’s is widely out of step. However, profit sharing is not the only thing behind happy employees, otherwise United would also be known for customer service. https://onemileatatime.com/news/american-airlines-profit-sharing/
I am skeptical of the role of unions in modern industries and Delta seems to prove my point. However, I don’t think United or American should transition away from unions unless they are committed to a multi-year culture change. https://www.forbes.com/sites/tedreed/2020/03/26/airline-workers-will-be-paid-until-sept-30-as-labor-unions-secure-historic-protections/?sh=686ffeadb806
The CEO approval stands out for me, especially the low score for American. Glassdoor doesn’t capture the approval ratings of union leaders, a major factor for United and American. https://www.glassdoor.ca/Reviews/Delta-Air-Lines-Reviews-E197.htm
There’s more to uncover here as it is not clear if Delta got lucky in their hub choices or if it was strategic. I would guess that both played a factor and Delta has influenced the efficiency of their hub airports. https://www.insubuy.com/which-airports-have-the-fewest-flight-delays-for-holiday-travel/