The airline industry is an unspeakably difficult one. As of 2021, there are 18 major passenger airlines in the United States. The list of airlines that have died is so long that it takes up four separate Wikipedia articles for the US alone.
Yet Delta Air Lines has been operating continuously since 1925. That’s so long ago that there are barely people alive still who were alive then. By most accounts, the invention of the airplane itself was not but twenty-two years prior on the sandy beaches of Kill Devil Hills, North Carolina.
Originally known as Huff Daland Dusters, the company started as a crop dusting company that spent its time fighting boll weevils hungry for Mississippi cotton. By 2019, it was the second-largest airline in the US and the sixty-ninth-largest company in the US.
Delta has faced its fair share of tough times and troubles. It even declared bankruptcy in 2005. Yet the airline remains unbroken, a feat which only two other massive US-based airlines can boast: American Airlines and United Airlines.
In this article, I’m going to talk about how Delta keeps climbing.
How we got here: a brief(-ish) history of airlines
To understand how remarkable it is that Delta Air Lines has stayed afloat for so long, you need to understand the airline industry first. It’s such a logistically complicated, capital-intensive industry that few can hack it. And I really do mean few – even the notoriously complicated car industry has up-and-coming Tesla. (And before you say, “there’s always Virgin Atlantic,” I regretfully have to tell you that they folded in 2020.)
The early years
The airline industry started in earnest in 1914, when Tony Jannus created the St. Petersburg-Tampa Airboat Line. That was the first passenger airline. The first passenger flight was 23 minutes and went from St. Petersburg to Tampa.
The airline industry continued to grow over the next several years, especially with the influx of trained aviators that came from World War I. It was in the 1920s that we saw the beginning of such venerable companies as American Airlines, Pan Am, Trans World Airlines, Northwest Airlines, and – yes – Delta Air Lines.
Service was sporadic, but the industry as a whole managed admirably during the Great Depression. The arrival of the Boeing 247 and Douglas DC-3 in the 1930s, in particular, helped the industry grow. The former could hold 10 passengers and travel at 189 mph, and the latter up to 28 passengers at 192 mph.
Around the time of World War II, the aviation industry really started taking off. Boeing, Lockheed, and Douglas created machines to drop bombs on Japan. After the war ended, they realized that those old bombers could make for good passenger planes with some minor alterations. Plus, innovations such as cabin pressurization allowed for cruising at a higher altitude.
All of this set the stage for…
The Jet Age
When you watch TV shows like Mad Men, it’s easy to get sucked in by the sheer glamor of air travel at the time. There was so much going on in the industry that was exciting, that it’s tough to know where to start!
Riding an economic boom out of World War II, the United States, along with much of the West, was ready to spend some money. At the same time, technological advancements from WWII were increasingly being used in civil aviation.
The first jets came out in the 1950s, and with their big old turbine engines, they could fly high, fast, and far. Suddenly, transcontinental and even intercontinental travel was no longer the territory of cars, boats, and trains. The jet engine could send a person from New York to San Fransisco in record time, let alone New York to London!
In 1958, the titan airplane Douglas DC-8 came out, boasting the ability to move 119 people at 590 mph. Hot on its heels, Boeing cranked out the 707 which could move 181 people at 600 mph. Fast forward a decade, and Pan Am was flying the first jumbo jet – the fabled Boeing 747. It could move 490 people at 640 mph.
The money was there, and so was the technology and the desire to fly. The overall experience of flying at this time was better than it would ever be.
But good things don’t last forever, and there are good reasons for that.
The Deregulation Era
The 1910s through the mid-1970s were incredibly kind to the airline industry. That’s what makes the next 45 years of business all the more shocking. Every single US legacy carrier has filed Chapter 11 bankruptcy since 1978 at least once. Many companies dissolved or were acquired afterward as a result. Thus the only super-big airlines that remain are Delta, American, and United.
In 1978, the US government signed the Airline Deregulation Act into federal law. As a result, the federal government could no longer control fare prices, routes served, or which companies entered the market. The idea was a good one – lower barriers to entry and allow start-ups to get into the airline industry.
And to be sure, deregulation had some nice impacts. Fares went way down. Airlines could add routes with greater ease, which coupled with better airplanes, meant longer flights with fewer layovers.
The stats practically tell the story alone here. Less than 20% of Americans flew in 1965. By the twenty-first century, at least half of Americans booked at least one round-trip per year. Deregulation, in short, is why I could fly from Atlanta to San Fransisco for about $250 today.
But deregulation is also why I would have to sit in a seat with 30 inches of legroom, pay $60 to check a bag, and eat stale cookies. Granted, a worse customer experience in return for a much-lower fare can be considered a very good thing when you’re talking about an essential service like an airline! After all, if I don’t like it, I could always pay double and sit in First Class.
You see, when startups started swamping the airline industry, the legacy carriers started aggressively lowering prices. Their profit margins got lower and lower, but to the big guys, it was worth it to push out the dilettante start-ups. Customers started expecting lower-priced seats, and the airlines couldn’t exactly push their fares back up like they might have wanted to. And thus, the contract with the devil was signed, and US-based airlines resigned themselves to decades of tight profit margins.
The Post-9/11 Era
Here’s the lousy thing about tight profit margins. When freakish problems arise – and they always do given enough time – it’s very easy to slip from a slight profit to massive loss. On that evil day in September when terrorists from Al-Qaeda hijacked Flights 11 and 175 and sent it careening into the World Trade Center, the airline industry changed along with the rest of the country.
Flight traffic dropped fast and stayed low until at least 2005. Around the same time, oil prices started going up to unbelivably high prices, driving up variable costs for airlines where margins were already so thin you couldn’t see them. Less revenue, more costs. You can see where this is going.
The bankruptcies rolled in at a gut-wrenchingly fast pace. Here is a very incomplete list, with the biggest names bolded:
- January 2002: Sun Country Airlines
- August 2002: US Airways
- December 2002: United Airlines
- April 2003: Air Canada
- October 2003: Midway Airlines
- September 2004: US Airways (AGAIN)
- December 2004: Southeast Airlines
- September 2005: Northwest Airlines, Delta Airlines
- January 2008: Big Sky
- March 2008: Aloha Airlines
- April 2008: Frontier Airlines
- May 2008: Air Midwest
- August 2008: Gemini Air Cargo
You get the idea. It’s like I said – not a single legacy airline made it to 2019 without a bankruptcy. Not one!
A series of complex mergers and acquisitions took place since 2005 to keep the airline industry going. The deregulation dream of startups led to a cruelly ironic aviation world where only megacorporations could succeed. That brings us to the inevitable end result: Delta, American, United, and Southwest now control 70% of the passenger airline market.
The Post-COVID Era
The year 2019 was pretty good for aviation. But 2020? Not so much!
The pandemic caught every single airline in the world with their pants down. United, Delta, and American lost over $10 billion between April and June 2020 alone, and the losses kept coming in.
But to airlines’ credit, they also seem to have learned from the prior era. They made good use of their bailout money, retiring old planes and pausing unprofitable routes. They’re also stockpiling cash while interest rates are low.
How this is going to turn out in the long run is anyone’s guess. Being over-leveraged is really dangerous, but airlines seem to be doing OK. At the time of writing, the stock prices for Delta and Southwest have nearly recovered to their pre-COVID positions. American and United are recovering more slowly, but they are still recovering.
What kills airlines?
You might think that Delta Air Lines has only made it this far because it’s a designated survivor. Maybe they just got lucky and to read into their business anymore is a fool’s errand. After all, they did go bankrupt in 2005 and Uncle Sam cut them another check in 2020.
But here’s thing – ever since deregulation, US airlines have constantly struggled. The industry is an absolute monster and staying afloat is a nightmarish task that would make even Sisyphus shudder.
For one, the costs of staying in business are incredibly high. Planes are expensive. People who are allowed to fly planes are expensive. Oil is expensive.
On top of that, the single biggest factor in choosing a flight, for most consumers, is price. Expenses are high and revenues are kept low by tough competition and extremely price-sensitive customers. It’s a very tricky balancing act.
Meanwhile, people generally don’t like flying. Security is a hassle. Sitting in a tiny seat is a hassle. Red-eye flight times and 45-minute connections are a hassle. Airlines are fighting high expenses, low revenues, and frustrated customers.
Then on top of all that, random happenstance can dramatically impact whether flights can fly and whether people want to fly. No one wanted to fly after 9/11. No one wanted to fly during COVID-19. Heat waves, snowstorms, and other natural phenomena can send cancellations and delays rippling through super tight airline schedules which are – I cannot emphasize this enough – scheduled as tight as possible to make as much money as possible while keeping fares as low as possible.
So really, a better question is, “how can an airline survive at all?” (The answer isn’t always taxpayer money!)
How’s Delta doing?
Delta has been doing well all the way from its bankruptcy in 2005 to the COVID-19 pandemic. In 2018, they posted a profit of $16.4 billion, with $17.8 billion coming in the next year. Even in the horrible year of 2020, Delta Air Lines managed to make $125 million in profit.
Indeed, Delta left the middle seat open for a long time and still managed to do better than other airlines. It was the last US airline to do so, and flyers clearly appreciated the concern for their safety. American Airlines posted a $7.6 billion loss last year, and Southwest lost half a billion.
On top of all this, JD Power Rankings gave Delta the highest score out of all airlines on its customer satisfaction list. They even managed to go UP during the pandemic.
In other words, Delta’s doing all right!
Why is Delta succeeding?
Consider for a moment, the things that customers really care about when it comes to airlines. Then let’s evaluate how well Delta serves those needs.
For fair comparison, I’m going to compare Delta to American and United. Your local favorites like Alaska, Southwest, Hawaiian, and JetBlue are all too niche for a fair comparison. Thus, I’ll stick to the big 3.
First, customers care a lot about ticket price. This is a repeating theme over and over when it comes to the airline industry. Now it is true that Delta is not the cheapest out there – there are low-cost carriers like Spirit Airlines that give you just enough space to cram your knees into someone else’s seat back. But if you compare Delta to United and American, their ticket prices are pretty close. I expected this not to be the case, but the data shows otherwise.
Next, people care about where they’re going and how to get to. That is, cities served and number of connections. The best proxy for this information is “number of routes served.” United serves 369, American 350, and Delta 324. A bit lower, but in the same general ballpark.
Now this is where Delta pulls ahead of the rest of the pack. Most people want their flight to arrive on-time. Delta does so 83.8% of the time. United comes in at 80.7% and American Airlines achieves a paltry 79.4%.
One of the worst feelings when you’re traveling is when the airline loses your luggage. It’s not common, but it’s enough to make you really mad. Delta loses only 1.55 bags per 1000 passengers. United loses 2.9. American somehow manages to lose 4.3 out of 1000. (Seriously, American Airlines? You’re the one repping the country’s name?)
How are they managing this?
Delta is better at getting you where you need to go on-time with your luggage. It does this while being reasonably priced and having high customer satisfaction scores.
You might chalk this up to their competition’s nigh-infinite incompetence. This is an industry where the companies are so big and so essential that chief executives don’t even have to pretend to care.
But I don’t think that’s the whole picture. The truth is, Delta has a reputation for being nice to its employees. They just gave all their employees a 4 percent raise recently. If you want even more specific data than that, Delta Air Lines has a 4.4 on Glassdoor. United has a 4.1. American has a 3.9. All of these are pretty good scores, but they’re not close.
Are they perfect? No. They’re no strangers to a little bit of union-busting, for example. But then again, they’re nice enough to their employees to prevent them from beating passengers up and dragging them off full flights.
If you ask the folks who write for Delta News Hub what makes the company different, they’ll say its their “change power.” They approach changing situations with a sense of purpose, are masters of coordinating rapid change, and they’re quick to take action. They cite their decision to block middle seats during the COVID-19 pandemic as a good example.
Normally, I’m way too skeptical to take corporate literature as truth. But in this rare case, I think Delta hit it right on the money. More than any other airline, they’re ready to change on a moment’s notice. They’ll block off middle seats and change routes. If old aircrafts are losing money, they’ll retire them. They pay attention to what people want and what makes money, and they do it.
I know this sounds small, but really let it sink in. How many megacorporations can swing on a dime like that? And beyond that, how many megacorporations in a technically complicated industry with immense federal oversight can change like that?
I’d wager that it’s very few. They have the competence and presence of massive company, but with that little tiny bit of startup that’s needed to respond to change as fast as it happens. You don’t see that kind of behavior in other three-company industries like cell phone service (Verizon vs. AT&T vs. T-Mobile). It’s exceedingly rare.
Delta Air Lines has been with us for 96 years, and I bet there’s another 96 coming. After shaking off the COVID-19 pandemic with relative grace, the company is poised to continue to dominate the skies.
Delta is here because they can roll with the punches. Deregulation, terror, disease, and ever-shifting customer demands have threatened to tear the company up, but none of them did. Delta accepted the problems, chose to be like water, and adapt to new situations.
Take note! If a 91,000-person, $47 billion company can roll with the punches, so can you.