How hostile bid rallied Delta

US Air takeover offer angered workers, raised their morale

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February 23, 2007|By Cox News Service

ATLANTA -- US Airways handed Delta Air Lines an unexpected gift when it launched a surprise takeover bid three months ago. After years of morale-sapping cutbacks, Delta had a common enemy that united and revved up the work force.

The challenge for Delta will be keeping up the momentum now that the takeover battle is won.

"You can tell when all your people, including your pilots and ... everybody else is exactly on the same page. There is huge strength in that," said Delta chief executive Gerald Grinstein.

Delta is working to keep the unity going as it makes its final approach toward emerging from bankruptcy court this spring. One employee group is working on a sequel to the "My Delta" anti-merger campaign that rallied thousands of workers during the successful fight against US Airways' hostile merger bid.

Likewise, Delta has resumed employee seminars, held in the old downtown Atlanta Macy's store, that are designed to boost morale.

A more tangible part of the effort: a post-bankruptcy compensation system that will likely reward rank-and-file employees with significant cash, stock, pay raises and profit-sharing checks later this year, according to Delta's personnel chief.

The attitudes of Delta's 47,000 employees have a big effect on the bottom line, said Les Hough, a consultant and labor expert who formerly worked at Georgia State University. Morale is closely tied to the quality of customer service, something that particularly matters to airlines' most profitable customers, business travelers.

"The frequent fliers, they notice," Hough said.

For most of this decade, that's been bad news for Delta. Morale suffered as years of discord, pay cuts, fleet cutbacks, red ink and other challenges whittled almost 30,000 people from the Atlanta carrier's payroll after the Sept. 11, 2001, terrorist attacks.

A 2003 controversy over executive pensions and bonuses soured many employees. Tensions between unionized pilots and the rest of the mostly nonunion work force intensified during pilot pay cut talks.

The months shortly after Delta filed for bankruptcy protection 18 months ago were the darkest, said Christopher Muise, who represents white-collar employees as a nonvoting member of Delta's board of directors.

"Engineers were leaving in droves," he said, and many others felt trapped. "People just could not see the light at the end of the tunnel."

Muise partly credits the seminars at the old Macy's with helping turn things around.

The seminars started about a year ago with two-day sessions. Grinstein, Chief Operating Officer James M. Whitehurst and other top executives met with employees in informal sessions, sometimes over cocktails. Muise said the events helped increase employees' confidence.

"Executives were so busy running the company that it forced a dialogue," he said.

The presence of Grinstein, 74, also helped, some said. He set the tone by taking a big pay cut after he stepped in as CEO in 2004. The longtime board member stepped in after CEO Leo F. Mullin resigned. Mullin had drawn fire from employees after Delta disclosed that he and other senior managers had been granted millions of dollars in retention payments and other bonuses while the airline was undergoing huge losses and job cuts. Grinstein also showed the door to most of the executives involved.

"I think people feel better about management, upper management, and [Grinstein] has a lot to do with it," said Peggy Franks, a flight attendant with 30 years at Delta. "I feel like he's just a breath of fresh air for us."

It helps that the airline's recovery seems to be progressing, noted Timothy S. Mescon, business dean at Kennesaw State University. Workers grow more bullish as they see financial reports suggesting the carrier's overseas expansion and other strategies are working, he said.

Mescon said he asked the pilots and flight attendants on a recent flight how they feel about Delta these days.

"To a person, they said they were very, very pleased with the redirection of the airline," he said.

To be sure, not everyone feels energized or confident. But even some who remain wary credit the US Airways battle with forging a common purpose.

Delta's pilots' union and Delta Board Council, the employee representative group, organized anti-merger rallies for workers. Thousands wore red "Keep Delta My Delta" buttons and petitioned Washington politicians as part of a campaign to discourage Delta's creditors from considering US Airways' $10 billion takeover offer. The offer died last month after the creditors threw their support behind Delta's stand-alone plan.

The Delta Board Council, which spearheaded the "My Delta" effort, is now looking at ways to spin it forward, though no details are set.

Keith Rosenkranz, a Delta co-pilot, said the threat of lost jobs from a takeover wiped out differences between groups that had blamed each other for internal turmoil.

Muise, the Delta Board Council member, said employees also worked harder to serve customers.

"We saw an absolute sea change in many, many of our flight attendants," he said. "In December we had the best customer satisfaction metrics that we've had since we started measuring them, and that was in the midst of a takeover attempt."

How long can Delta keep the good feelings going?

"Depends on how good we are at keeping it," said Grinstein. "Delta had that relationship for years and years and years. ... If [everyone] understands how valuable that is, then it can be preserved."

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