Airline Without a Pilot
The inside story of Delta's success, decline and bankruptcy
Author Harry L Nolan jr makes the point that many of the
histories of Delta are either 'trips down memory lane' or
else have been commissioned by the airline. Both types of book are unlikely to give a dispassionate and
rigorous analysis of the company's successes and failings.
But does Nolan's own work truly give an inside story of
the airline?And does it fairly give an
accurate story of the airline?
His book tells what many readers may want to believe, but does that
make it true and fair? I'm not sure.
Here's a book with a premise
many of us may instinctively agree with - Delta's problems stem from poor
leadership at the hands of its last several CEOs.
While I don't necessarily disagree
with the author's claim, I found precious few facts in the book to
support it, and I'm unpersuaded the problems are exclusively the
fault of the CEOs. The author is undoubtedly correct that
some/much blame flows through to the CEOs, but does he
convincingly prove his case? No.
An interesting read, but
the almost complete lack of specific facts and
attributed/sourced claims in the book makes it impossible to
accept his assertions as proved.
About the Book
The softcover book
measures 9 1/4" x 6 1/8", and is
thickness. It has 234 pages with large sized text and
generous margins, making for a quick and easy read. It is
copyrighted 2005 and seems to have gone to press a month or two
after Delta declared bankruptcy on 14 Sep 2005.
The book is printed onto
average grade off-white paper, and disappointingly features only
one illustration and no tables, charts, or graphs. It is printed in black
There is also a photo of the
author on the back cover.
The book lists for a
daunting $24.95 - why so much for a slim black and white
paperback!? Fortunately, it can be purchased on
for the more reasonable price of $15.72. The book is
also available in hardcover, listing for $10 more.
The book has nine
chapters, plus Prologue, Introduction, Epilogue and Appendix.
Unfortunately it has no index, a disappointing omission in a
non-fiction work. Neither does it have any footnotes, or
Bibliography, or List of Sources, or any other reference
The book is published by
Targetmark Books. This appears to be the author's
own self-publishing brand. There is, of course, nothing
wrong with a self-published book, but the fact that no
mainstream publisher would take the book adds to my concern
about the nature and style of its content.
Like some other
self-published books, it suffers from the lack of professional
editing. There are consistent errors (eg confusing the
words insure and ensure) and inconsistent layout and typography.
This should not detract from the underlying content, but it
certainly doesn't add to it.
About the Author, Harry L Nolan
After fourteen years in the
marketing field, author Harry L Nolan jr founded his own
management company in Atlanta, Management Advisory Services Inc,
in 1982. He says he
fills a role as strategist, sounding board, executive mentor and
the voice of employees and customers.
He has done work for
companies of varying sizes, giving him access to a cross section
of businesses in different fields. During his studies, he
had a chance to study with management guru Peter Drucker at the
NYU Graduate School of Business, an experience many of us must
He became fascinated by
Delta's fall from grace, and explained to me
was particularly motivated to write the book to answer the
question, “What happened to Delta?” How can a company that
many considered to be at the top of the industry in 1987 be
on its knees 17 years later?
Researching the Book
The book is unusual because
almost none of its claims are supported by facts and none are attributed to
comments from any specific person. In legal terms, this is
not only 100% hearsay, but we are not even allowed to know who
the people providing the hearsay 'evidence' are or what their
specific ability to provide their commentary may be.
However, Nolan does tell us
that the book is based on interviews with 59 anonymous sources,
who he describes as being a mix of present and former employees
plus Delta frequent fliers.
Maybe one can understand why
a present employee might not want to be quoted when criticizing
the company's current management. But Nolan says retired
Delta employees also refused to be quoted, for fear of
jeopardizing their retirement. What possible hold does the
company have over retired people who no longer work there?
Would Delta choose to
arbitrarily withhold the pension entitlements from retirees who
provided negative commentary about historic aspects of Delta's
management, decades ago? That seems most unlikely.
And how about the Delta
customers - why should they fear having their comments
attributed to them? I write negative things about airlines
every day without (yet!) any airline doing terrible things to me
when taking a flight. Why are these people also anonymous?
For that matter, surely not
every person had only negative comments to make. Why not
at least attribute whatever positive comments may have been
Not knowing any of the
background of the 'accusers' that Nolan relies upon to base his
book makes it impossible for us to evaluate how fair and
complete their story is, and therefore also makes it impossible
for us to evaluate how fair and complete Nolan's story is.
A court of law will not
convict on unattributed hearsay, and it seems unfair and
unrealistic that Nolan expects us to roundly condemn (in
particular) two of Delta's recent CEOs (and at the same time
excuse just about everyone else at Delta) based on his own
Let me put the concept of
59 unnamed sources into context. I've also recently
read a fascinating history of
Boeing - Legend and Legacy : The Story of Boeing and its
People (highly recommended and being sold by Amazon at a
bargain price). Author Robert Serling interviewed more than 59 current and retired Vice
Presidents of Boeing alone - as part of his researches for this
Boeing history, he interviewed 66 VPs, in addition to
tens/hundreds of other people at all levels of Boeing. All
of a sudden, 59 interviews, an unknown number of which were with
people who had no closer connection to Delta than that of being
an occasional passenger, doesn't seem such a massive act of
research, does it.
What the Book Claims
It is Nolan's claim that
Delta was unique among the then existing airlines back in the
'good old days', because it was co-founded and developed by a
kindly caring gentleman, CE Woolman, who (using Nolan's words)
'fostered a mutual respect and love of his fellow man among his
employees. Woolman’s equitable, humanistic leadership
approach to the company, its employees and its customers' made
Delta uniquely liked, respected, and successful.
Woolman was CEO of Delta
until he died in 1966. The next three CEOs all had
continuity with the Woolman era - Charles Dolson
(1966 - 1971), WT Beebe (1971 - 1978) and David Garrett (1978 -
1987), and Nolan seems reasonably neutral in his assessment of
their respective times in office.
Nolan says Woolman's legacy
remained (and remains, to a lesser degree) strong among employees, but was
increasingly spurned in the CEO office; in particular, he claims
that CEOs Ron Allen (CEO between 1987 and 1997) and Leo Mullin
(CEO between 1997 and 2005) caused such harm to Delta as to be
the root cause of the airline's bankruptcy filing in September
I asked Nolan to explain
exactly what he felt to be the turning points and key errors on
the part of Allen and Mullin. He replied
the early 1990s, Allen's decisions took Delta from a highly
profitable company for [the preceding] decades to four years
of losses totaling $2.0 billion. To recover, Allen
sponsored a consultant-led program (known as Leadership 7.5)
that broke the Delta tradition of no layoffs and no salary
cuts; as a result, employee loyalty plummeted and never
completely recovered. The trust and mutual respect
between employees and management was broken.
The arrogance of Allen's replacement, Leo Mullin, and the
team of outsiders (many of whom knew nothing about
commercial aviation) he brought in to help him lead, further
damaged the company. Their arrogance was continually
demonstrated by an ongoing disrespect for the values and
experience that had made Delta successful.
Immediately after 9/11, Mullin and his top executives, with
Board approval, granted themselves bankruptcy proof pension
trusts which were kept secret for a year. During this
year Mullin laid off thousands of employees; cut the
salaries of those who remained; negotiated with the Pilots'
union for a pay reduction; and begged the Federal Government
Once the secret trusts became public in early 2003, Mullin
and his team lost all credibility with employees, the
government and many customers. Mullin's tenure
resulted in $5.0 billion in losses for Delta.
And what of the current CEO,
Gerry Grinstein? In the book, Nolan seems ambivalent
towards Grinstein, pointing out that as a Board member, he
shared some of the culpability for what went on under Allen and
Mullin, but also asking, through the pages of his book, that
Grinstein stay as CEO until he has completed the job of
restructuring and turning the company around. I asked him
for clarification about Grinstein :
Current CEO Gerald Grinstein, a Delta Board member since
1987 (when Delta acquired his Western Airlines), replaced
Mullin as CEO in January 2004. Grinstein has
demonstrated strong leadership qualities in his career and
since he took over as CEO. However, he failed to
exercise those qualities during his 17 years on the Board to
help select the right CEO and ensure the CEO made decisions
in Delta's best interests. I share the admiration of
many that Grinstein, aged 71 when he took over as CEO, would
take responsibility for trying to turn Delta around.
Nolan went on to add further
to the material in his book, saying that while he recognizes
Grinstein's leadership strengths, he sees significant weaknesses
in his leadership team.
am very disappointed that Grinstein has continued to place
confidence in senior executives who have not demonstrated
the ability to lead in their career before and at Delta.
is hard to understand some key decisions of the current
Delta leadership team. For example, I believe it
unnecessary that they should be spending millions of extra
dollars in implementing the current, ongoing, 'Velvet Rope
Tour' initiative to explain Delta's future plans.
The Velvet Rope Tour involves flying participates to Atlanta
free of charge (taking up seats that could be sold); housing
them in expensive hotels; feting them to dinners catered by
a top dollar firm; and making presentations in a rented
facility (although Delta has its own facilities available
that could be used for free). This program was
developed in conjunction with the same consulting firm that
has been heavily involved at Delta during the entire period
of Delta's decline in the 1990s and now bankruptcy.
While I had Nolan's ear, I
also asked him to predict the future. What would happen if
Delta failed to successfully emerge from Chapter 11?
Delta is unsuccessful at emerging from bankruptcy, I predict
AirTran will buy the Delta name (just as ValuJet bought
AirTran for their name) and rebrand AirTran to Delta.
The Book's Proof (1) - Delta
outperforming its competitors
Let's look first at the
book's claim that Delta was unusually successful during the
Woolman era. Ooops. The book provides nothing to
support that statement at all. Indeed, the closest it gets
to any type of financial analysis is some data on page 70 that
refers to the period between 1966 and 1987 - the 21 years
immediately after Woolman's death.
Nolan does tell us, on page 49,
that Woolman's frugality - for example, picking up used paper
clips and rubber bands - was 'instrumental in putting and
keeping Delta on the road to a consecutive string of profitable
years unprecedented in the airline industry'. But he
doesn't give any details as to which years those were, nor does
he explain how this feat (whatever it may have been) is
unprecedented in the industry. Just how well did Delta
out-perform its peers? And was its success really a result
of having lower costs than other airlines? Author Nolan is
silent on all these things, relying instead on empty
claims with no support behind them.
Nolan offers some anecdotal
stories about how Woolman was a humble person who went to great
efforts to remember personal details of his employees, and who
would make sure all revenue paying passengers were accommodated
on a flight before taking a seat himself.
But he never really explains
how much of a role Woolman had in founding Delta - he simply
describes Woolman as a co-founder, and it is unclear when
Woolman became CEO. Indeed, for that matter, we're never
even told Woolman's first name, just his initials. We're not told anything of his
background, or what he did before co-founding Delta.
For the record, Collett
Everman Woolman was born in 1889, in Indiana, and grew up in
Urbana, IL. He graduated from the University of Illinois
with a BA in agriculture, married his wife (Helen) in 1916, and
moved to Louisiana in 1920. He was first involved in
aviation in 1925 when he founded a crop-dusting company.
He was inducted into the National Aviation Hall of Fame
posthumously, in 1994. A short bio can be read
Although Nolan says he has
reviewed every annual report the company has published, none of
this information - which is surely critical to prove his claims
- is summarized or presented in any tables or charts.
He tells us how Woolman and
Donald Douglas of Douglas Aircraft Corp would do a deal for many
planes worth many millions of dollars on a handshake. But
he doesn't tell us such practices were far from uncommon back then - many
other airline CEOs did business the same way, and he also
doesn't tell us that Woolman's refusal to consider Boeing
planes, being instead blindly loyal to Douglas, probably cost
Delta an important competitive advantage at a time when Boeing
was trouncing Douglas in terms of offering more popular better
The 1966 - 1987 statistics
At last, on page 70 - a
third of the way into the book, we're given some
statistics under the heading 'impressive financial results'.
And, at first blush, they do seem impressive - in the 21 years
between 1966 and 1987, Delta's revenue increased 16.7 times,
from $319 million up to $5.3 billion, and total assets increased
over 17 times to $5.3 billion, and shareholder equity increased
over 15.5 times, up to $1.9 billion.
But, are these results all
that impressive? Let's look at another result the author
also offers as an 'impressive financial result' - at the same
time that revenue and assets increased 17-fold, annual profits
increased only six fold, from $66 million up to $405 million.
The actual profit margin steeply declined, from 21% in 1966 down
to 8% in 1987.
Why did Nolan choose this 21
year period? Perhaps because it marks the period between
the death of Woolman and the start of the Ron Allen CEO-ship.
But don't you wonder what would have been the result if he chose
different time periods, and also what the data was for the time
Woolman was himself heading the airline?
To put these numbers
further into context, the US Airline Transport
Association reported total US aviation revenues of $5.75 billion
(Delta had a 5.6% market share) and in 1987, total revenues were
$57.0 billion (Delta had a 9.3% market share).
It would seem that Delta
grew at a rate faster than the industry as a whole, supporting
Nolan's contention of impressive financial results. But in
1972, Delta merged with Northeast Airlines, and in 1987, it
added Western Airlines too. So Delta's apparent growth is
not only due to its own corporate success, but also due to the
two other airlines it merged with. Nolan makes no mention
of the impact of these mergers on the results he quotes, and so
the underlying growth of
Delta alone is not known. The chances are it is much closer to -
and possibly even below - the industry average.
So is Nolan's claim that
Delta did very well during this particular 21 year period
correct? He doesn't give us sufficient
information to evaluate his claim.
The Book's Proof (2) - Delta
underperforming its competitors
The book's thesis is in two
parts - the first part is that Delta did better than its
competitors during Woolman's tenure and for the 21 years
following. As discussed above, we have no data to support
the possible success of Delta during Woolman's tenure, and
insufficient data to support the claim of better than industry
success in the 21 years following.
The second claim says that
subsequent to 1987, Delta did worse than its competitors.
Nolan in particular refers to the four fiscal years 1991-94
inclusive, during which Delta accumulated operating losses over
$2 billion dollars.
But, Delta's financial
problems during these four years weren't unique only to Delta.
Industry-wide, operating profits dropped, starting prior to
1991, as this table shows
Industry Operating Profit (millions)
So the industry as a whole lost money for the three years 1990 -
1992, while Delta lost money for the four years 1991 - 1994.
It would seem that Delta's problems during this time were a
reflection of industry-wide problems rather than exclusively the fault of
Subsequently, Nolan attempts
to have his cake and eat it too - on p 84 he says
While the Pan Am deal was a key factor in the four
consecutive years of losses for Delta, 14 years later the
company is benefiting from it. ... While Allen's
deal cost Delta dearly, it is helping the company survive
So, viewed from the
perspective of 14 years later, should we conclude the Pan Am deal
(Delta bought some of the assets of Pan Am in 1991) was a good thing
or a bad thing? Nolan doesn't tell us.
And later, on p 102, he says
Financially, looking only at the beginning of Allen's tenure
in 1987 and comparing it to the end of it in 1997, he
But on the next page, he
The credit for these favorable results belongs primarily to
the Delta people, not to their CEO.
Wait a sec - that doesn't
sound fair. The credit for favorable results belongs to
the amorphous concept of 'the Delta people' (a phrase that gives
me the same level of discomfort as when I hear a politician
refer to 'the American people'), but the blame for
anything bad belongs exclusively to the CEO?
Moving on to the Mullin
period, Nolan points out, as a criticism of Mullin, that Delta
started losing money prior to 9/11/2001. Delta first had
an unprofitable quarter in the first quarter of 2001.
This was, again, an
industry-wide phenomenon. Too many people (including
airline CEOs) have simplistically chosen to use 9/11 as a
scapegoat for the airline woes of the last six years. But
the industry's problems preceded 9/11, and probably can be
blamed directly on the collapse of the dot com boom at the end of the 1990s.
The airline industry's net profit was
$5.3 billion in 1999 - the best result ever. The next
year, it had collapsed down to less than half that - $2.5
billion, setting the scene for an enormous loss in 2001 ($8.3
billion) and continuing in the years that followed.
Significant Omissions in the
While the book does consider
some of the watershed events in Delta's past, and discusses the
wisdom - or lack thereof - in such actions, there are plenty of
other issues it is silent on.
To consider just the very
recent past, it is entirely silent on issues such as Delta's
relationship with travel agents, the startup by Mullin (and
close down by Grinstein) of its Song 'airline within an airline'
and its Simplifare initiative in January 2005. Were any of
these good or bad actions, and who deserves credit/blame for
And while the book criticizes some
management actions, it is silent on the background that caused
the issues to become crises, and doesn't suggest alternate
For example, the 'Leadership
7.5' cost cutting program initiated under Allen is roundly
criticized. But the book tells us nothing about whether
Delta's costs were truly higher than the industry averages, and,
if they were higher, how they came to be higher.
And while Allen's decision
to lay-off staff is viewed very negatively, what other options
were available to drastically cut back on costs? Even in
Japan, the former concept of 'secure jobs for life' has been
sacrificed on the altar of financial reality; why should Delta
alone continue to guarantee jobs for life; especially when it
can't afford such a grand gesture? Are we to blame Allen
for the social change that swept through all companies and
industries, weakening the ties between employers and employees?
I've spoken to former Delta
flight attendants who have laughed and joked at the ridiculously
generous conditions they worked under back in the 'good old
days'. Enormous amounts of paid time off, months of sick
leave each year, and outstandingly generous flight privileges
(even in retirement); while such people certainly weren't
complaining at the lavish treatment they received as flight
attendants in the 1970s and 1980s, they're also sufficiently
realistic as to accept that the tightening of such benefits was
inevitable and necessary.
Spreading the Blame
Nolan seems to suggest that
Delta's frontline staff have retained some of the positive
spirit from the good old Delta. Maybe a precious few have
retained such an attitude, but there are plenty who haven't.
Don't the surly front line staff, their supervisors who permit
such hostile attitudes, and the managers who don't train or
control their people sufficiently, all deserve a share of the
blame as well?
Perhaps Nolan's answer to
that issue would be that the CEO is ultimately responsible for
the actions of all employees. But that is only half the
The other half of the
answer, which Nolan lightly touches on, is the lack of adequate
Board of Directors supervision. If we're to seek the
ultimate culprit (assuming there is a single ultimate culprit, a
questionable assumption) is it not the Board of Directors?
Why did they select
inadequate CEOs? Why did they passively allow the CEOs to
damage the company? Why didn't they force Allen and Mullin
out of office sooner?
If we're to seek the real
villains behind Delta's problems, and similar problems at so
many other companies, we should look beyond the CEOs and instead
consider the shadowy and ineffective boards of directors at such
I asked veteran travel
Brancatelli for his take on Delta's problems. He
have most trouble with the claim that Delta was the best
airline ever. That is often claimed, but it truly
seems like a Southern/Southeast regional thing. Up in
New York, we always thought they were arrogant (and not in
the way New Yorkers liked arrogant) hicks. As we say
here, they all had cotton in their mouths.
I think by making the claim, the writer inadvertently shows
one of Delta's real problems : It NEVER saw itself
rationally in the market. It believed its own
Atlanta-centric view of things. As it expanded,
especially in 91 on the Pan Am routes, it had a horrendously
overconfident view of things and a totally skewed and
impractical world view.
Now, as to Allen and Mullin. Mullin, of course, was a
disaster. He'd be the modern equivalent of Nero
fiddling while Rome burned--if only Nero did fiddle while
Rome burned. He came in from the banking business,
surrounded himself with self-aggrandizing fools, took the
money and ran. His tenure was when the seeds of
destruction that had been planted earlier flowered - and he
couldn't see the flowers for the forest, so to speak.
So Mullin's culpability is unquestioned.
Allen's issue's are a little more complicated. His two
most disastrous decisions were the so-called Delta 7.5 plan
and his go-it-alone plan for the Pan Am acquisition.
Delta 7.5's goal was to cut the airline's operating costs to
7.5 cents. It manifested itself via huge cuts,
predominantly in direct-to-customer service reductions.
Few people at the airport, etc. And remember, this is
when the Big carriers were charging super-premium fares and
Delta had that inflated reputation. So every
incremental cut became huge news, every bad passenger
experience was a crisis of faith. It alienated
passengers, no hard thing to do, but disgusted employees,
which WAS hard to do because they were devotedly non-union
and were drinking the same Delta-is-great KoolAid.
The Pan Am decision was worse. Delta, which had NO
international experience to speak of, swallowed PA's Europe
network whole. And since Pan Am had been losing money,
it was DL's decision that since they never did ANYTHING
wrong, they didn't need the 'failures' at Pan Am to help
them. In fact, DL claimed that the Pan Am network
(then hubbed in Frankfurt) would be profitable in the first
30 days. They bled like crazy in 92 and eventually had
to retreat, all but destroying the value of what they
purchased. And it all had to do with arrogance.
They didn't realize that Pan Am's problem was not running
the overseas routes, but the lack of domestic feed into JFK.
Delta also didn't really have feed at JFK and they knew
nothing about overseas. So it became the worst of both
But Allen and his management team were a product of DL; most
of them had never worked anywhere else. They believed
their own hype. So you could blame Allen.
But I would blame the system that created Allen.
How is it possible for
airlines - multi-billion dollar enterprises crammed full of
presumably intelligent, well experienced and well qualified
executives, and aided by the most respected international
consulting firms, accounting firms, and attorneys, to lose so
much money? Are the airlines really truly venal?
Stupid? Or is it just a very difficult industry with
industry-wide cyclical issues, and external pressures (such as
9/11, fuel prices and the economy in general)?
It is probable that there
are elements of truth in all these possible explanations,
although plainly no single explanation, by itself, is adequate (the latter excuses
- which the airlines themselves
love to deploy - are particularly inadequate, and are contradicted by the
consistent profitability of a few airlines such as Southwest,
which shows it is indeed possible to succeed in the airline industry).
And so, Nolan's book, in
which he attempts to lay the blame for Delta's problems primarily at
the feet of two recent CEOs, is likely to be overly
simplistic also. It is a bold claim to make, and one which
demands a high level of proof in order to fairly convince us.
Unfortunately, that high level of proof is not present, and if
this were a court of law, we'd have to enter a verdict of 'Not Guilty'.
Those who have suffered at
Delta's hands - employees, ex-employees, and passengers, will
love his book. But the rest of us will be left with an
empty incomplete feeling after reading it - sure, we want to
believe Nolan, but we need more proof, and need to also consider
the culpability of Delta's Board of Directors.
The book lists for $24.95
but can be purchased on
for the much more reasonable price of $15.72. The book is
also available in hardcover, listing for $10 more. But
perhaps better to simply borrow it from the local library.
STOP PRESS : Author Harry
L Nolan jr refers my review to his attorney
On Thursday morning 13
April, I sent this review to Nolan with a cover note saying, in
I'm pleased to add a
second page of response/rebuttal from you if you wish, and
if you feel anything I've said unfairly/incorrectly
misstates your views and commentary, I'll of course either
correct such things or add your perspective to those
He thanked me and promised
to get back to me over the weekend.
Not having heard further
from him, I sent an email early Thursday morning, 20 April,
reminding him the review was being published that evening.
Six hours later I received an email from him, claiming my review
'has many flaws - factually and professionally'. However,
Nolan disdained to correct these flaws and instead closed his
note with these comments :
This is not a threat and I hope you do not perceive it to
be. However, in fairness to you, I must inform you
that I have turned this matter over to my attorney. He
is quite knowledgeable about commercial aviation (probably
knows more than you and I combined). In addition, he
is very familiar with Delta and the facts about that
company. I would not have printed the book without his
having reviewed the manuscript.
request is you forget you ever read my book and quietly give
the “review” a proper burial by pressing delete.
Which gives Nolan the
distinction of being the first person in 4.5 years of publishing
material on this website to
threaten me with a lawsuit
tell me he has referred my article to his attorney.
If you're curious to know
more about the book, perhaps the best response is to borrow it
from the library rather than to buy a copy.
Further update : Nolan
has changed his mind and now wants to make available the
chain of recent emails between us for you to read, offering this
as his response and rebuttal. And so, if you'd like to see
what he has to say, please click here.
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21 April 2006, last update
19 Dec 2013
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