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Management consultant Harry L Nolan jr has run his own management consultancy, based in Atlanta, since 1982.

This would seem to give him the credentials and local insight from which to write a book on Delta.

 
 
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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 5/8" in 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 only.

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 Amazon 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 resources.

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 jr

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 surely envy.

He became fascinated by Delta's fall from grace, and explained to me

I 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 offered?

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 unattributed hearsay.

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 2005.

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

In 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 for handouts.

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.

I 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.

It 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?

If 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 here.

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 performing planes.

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 in 1966 (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

Year

Industry Operating Profit (millions)

1987

$2,455

1988

$3,437

1989

$1,811

1990

- $1,912

1991

- $1,784

1992

- $2,444

1993

$1,438

1994

$2,713


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 Delta's CEO.

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 today.

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 performed satisfactorily.

But on the next page, he says

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 Book

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 them?

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 solutions.

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 answer.

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 companies.

Another Viewpoint

I asked veteran travel industry commentator Joe Brancatelli for his take on Delta's problems.  He replied

I 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.

So 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 worlds.

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.

Summary

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 Amazon 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 part

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 comments too.

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.

My 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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Originally published 21 April 2006, last update 19 Dec 2013

You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.

 
 
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