Delta has repeatedly made the decision over the last few years to take the path less traveled. In its latest move, Delta has decided to pull out of the US airline industry’s lobbying group, Airlines For America (A4A), because it doesn’t agree with the group priorities and decisions. It’s not entirely clear to me if this is a smart move or not, though it may end up working well for both sides.
JetBlue may have liked to call itself “contrarian,” but Delta has certainly gone against the grain more often when it comes to working with other airlines. Delta seems to have two options… my way or the highway. Here’s just a partial list of examples.
- Highway: Delta couldn’t get a joint venture with Korean, so it decided to punish the airline.
- Highway: Delta wanted more connectivity from Alaska in Seattle, but it couldn’t get it, so it built its own hub and is slowly ending the partnership.
- My Way: Delta bought a chunk of Virgin Atlantic and remade the airline’s network to fit Delta’s London needs.
- Highway: Delta couldn’t get American to pay a huge increase in costs to maintain its interline agreement, so the agreement ended.
- Highway: Delta exercised an option to extend a contract for 50-seater flying with Republic, despite expectations that it wouldn’t. Delta knew that it would be difficult for Republic to do the flying thanks to the pilot shortage, so it waited and then sued Republic for performance problems.
- My Way: Delta has spearheaded the fight against the Middle East carriers, and United and American followed along.
As you can see, this quite often ends with relationships frayed and partnerships damaged. The decision to leave A4A just furthers that.
The point of A4A is to be a lobbying arm for the US airline industry to push its agenda in the US government. Every industry has one of these kinds of groups. It’s really helpful for advocating for things that are generally supported by the industry at large. But lately, Delta has found itself with its own agenda. Because of that, it has been at-odds with A4A and with the group’s membership. Since Delta has been pushing so hard using its own people to get its agenda through, it decided it didn’t need to waste $5 million a year to participate in a group with which it didn’t often agree.
What were the sticking points? Well in Delta’s press release, it said A4A had “failed to support Delta on several key issues, including the growing harm of government-subsidized carriers in the Middle East and the damage the Export-Import Bank does to U.S. airlines. A4A also has advocated for the nation’s air traffic control to be separated from the FAA and put into a private organization – a move opposed by Delta.”
We all know the story on the Middle East carriers. The problem for A4A is that there isn’t a united front in the industry. While American, Delta, and United appear to be on the same page, Alaska, Hawaiian, JetBlue, FedEx, and UPS are all members of A4A as well. And they all benefit from the status quo.
Regarding the Export-Import Bank, well, that’s one that Delta has long hated for providing financing options to foreign airlines that buy Boeing-built aircraft. You can see why Delta might not like that, but it speaks out of both sides of its mouth. Delta didn’t have a problem when Gol in Brazil received Ex-Im assistance to fund maintenance services from Delta’s TechOps team. But Delta is thinking about this from its own perspective. Boeing, a very powerful company, would be in a world of hurt without Ex-Im bank assistance. The reason is that other aircraft manufacturers have their own banks to do this in their own countries. If all of them went away, fine, but otherwise, Boeing stands to feel the most pain by far. So there’s no clear industry stance here.
And then there’s privatizing air traffic control. Delta is strongly against it, but not everyone feels that way. Again, Delta found itself on the opposite side of the coin.
Now, the remaining A4A members decided to each pay more to make up for the loss of Delta’s $5 million in annual dues. So for A4A, this will continue to be business as usual, possibly with more effectiveness internally since there won’t be as many squabbles between carriers. But without one of the nation’s biggest airlines onboard, it might lose some clout.
On the other hand, Delta will now be doing it alone and pouring money into lobbying directly. I asked Delta if it was planning to form a separate group of its own, but I received no response. Either way, Delta is active approach is going to cloud the picture a little bit from a Washington perspective. A united front is much cleaner and easier to get behind.
In the end, you don’t want a group that has one outlier airline that hates what you do, so it’s better that they part. But maybe the more interesting question is… why does Delta have such a different view of the world in the first place?
Brett, Boeing just announced record earnings for this quarter, based on commercial aircraft sales, which coincides perfectly with Ex-Im being in liquidation (not being able to guarantee any new loans). Boeing will be just fine, though like all government programs this one will sadly be revived.
Eric – Doesn’t matter if Boeing will be fine or not when it comes to Washington. You can be sure that Boeing is beating down doors in favor of this. Not that it matters anyway, looks like we’re very close to it finally get renewed anyway.
Delta sounds a bit like the Republican Party.
As for Ex-IM, all they have to do is cap maximum loan guarantee at a low enough amount so as not to help the big boys, just the small businesses. Easy.
By the way, how many of these loan guarantees actually have to be paid? In other words, how many default?
Very few default, but the promise of government backing enables recipients to get lower interest rates.
Highway/My Way: having their own refinery, which apparently pulled in record profits: http://articles.philly.com/2015-10-16/business/67453277_1_trainer-refinery-jet-fuel-crack-delta-subsidiary-monroe-energy
They really do not need anyone else but themselves… And I have to say that I really admire “Delta-as-a-business”.
Just waiting for EK to launch ATL now that Delta is pulling out of DXB due to “unfair government subsidies” …
i wish they could “highway” gogo inflight internet. they keep plugging it as a way to work in the air, but the speeds are so crappy working is impossible.
The Ex-Im bank was designed so that, for example, a farmer in Hungary could afford to finance a John Deere tractor to make his farm profitable. It was never designed for a corporation so wealthy (such as the ME carriers) that could pay cash for a 777 tomorrow. The Ex-Im bank’s charter needs to be changed that makes loans on a case-by-case basis based on need. The ME carriers can get access to plenty of credit to purchase airplanes, they are simply taking advantage of poorly written language in the Ex-Im policy. In the same way they are taking advantage of the Open Skies agreement. What morons agreed to let the ME carriers fly anywhere they want in the US as long as US carriers get to fly where they want in the UAE? It’s a desert folks! There are only three cities worth flying into anyway. The Open Skies agreement should have been written to let give the ME carriers access to a controlled number of cities. I believe Germany limits ME access to any 5 cities they wish in Germany.
The problems the US carriers are seeing, in addition to inferior service, is the product of bad policy by the US government.
I have to agree with ChrisO on Open Skies. It’s not a 1:1 “open” deal when you tell a US based carrier they can fly anywhere in UAE and in return their airlines can fly anywhere in the US. For all the howling about level of service and the US carriers don’t compete, they really did get a raw deal IMO and applaud Delta at fighting it.
As for Delta’s so-called attitude of late, my feelings are mixed. If they were doing poorly it would be easy to criticize but given how well they are operating it seems to be working. I live in a DL fortress hub city so my options are limited, but there are other options. I’d consider paying less and connecting somewhere if I could consistently depend on the other guys as I do DL. I’ve completed over 45 segments this year and Delta has been superb at providing the service I paid for – point A to point B on time.
Wasn’t Delta CEO Richard Anderson the Chairman of A4A just a few short years ago?
Well at least now this song is stuck in my head.
Not quite a “highway” but picking fights over the HND slots with AA certainly also falls into the pattern of aggressive behavior.
Bgriff – Actually that is part of a broader example that I forgot to include. Delta is hell-bent on ensuring that no further liberalization at Haneda occurs unless it can move its entire hub over there. So until that happens, Delta will fight everything there. It’s completely against what every other airline wants.
Another example of this is the fight that DL is putting up at DAL against WN after UA sold their gate rights to WN and didn’t leave any space for DL.
To me, A4A will always be the Air Transport Association, considered a club that politicians liked and the organization handed out lots of money and “in kind.”
So DL, goes. Well they just gave the 6-months leaving notice, but now the Board says: Just Get Out Now!
But really, how can any organization keep a group of nuts like these guys together–AA, DL, and UA; JetBlue and Southwest; Alaska and Hawaii; FedEx and UPS, with Atlas? Not even a Spirit, Allegiant, Frontier or a Mr. Branson to drive them crazy.
A4A head since 2011, Nicholas Calio, previously worked for George W, but Dems seem/seemed to like his willingness to work with them, too. (Compromise? OMG!) How long will it be before he gets kicked out or the whole organization falls apart.
Someone has to kick in to pay the membership dues they lost by having DL depart. Stay tuned!
As a former senior Hill staffer with Transportation and Infrastructure Committee experience, I can’t I’m surprised and I also can’t say this is a good idea. Delta’s gov’t relations operation already has the reputation for being overly combative and constantly picking fights while A4A is somewhat more strategic. Brett doesn’t mention that Delta actively fought against ending the oil export ban, which was perceived as them biting off way more than they could chew (not their issue area, and not something that was expected to have an impact on the price of fuel, but they got involved because of their refinery).
Also, while Delta had a good story to tell about Ex-Im, they went about very aggressively, which certainly alienated people sympathetic to their case.
Lastly, having spent about 6 years on the Hill, I can’t ever remember a major corporation leaving a trade association. It just doesn’t really happen and its odd. It’s often why companies lobby outside of their trade associations, since it can be hard to get a trade association to go along with your entire lobbying agenda.
Ten stars out of five for Delta’s operational efficiency. They’re the king of the skies in that respect.
One star for their ability to deal with other airlines and external bodies, especially internationally. And that could come back to bite them badly.
If/when United gets its act together operationally (which it will) it has far better partnerships and long haul fleet plan to compete with the ME3. More non stops to India and a Star partner in that country for feed.
Where is SkyTeams’s closest hub to India? Because Air France/KLM is ailing and not going to help Delta compete against the ME3? I’m thinking its Saudi.
You forgot to mention as a “Highway,” Delta’s scorched earth attempt to keep flying out of Love Field, AND the recent suing of Republic. They appear to be out of control…
Alex – I did mention the Republic suit. As for Love, I don’t know that I’d file that in the same bucket. This isn’t an industry issue. Delta wants to keep flying from Love. I don’t blame the airline for trying to pull every lever on that one.
Oops sorry I see the Republic suit now. Thanks for the response BTW.
On Love Field, they are asking the Feds to pull funding for Love Field if they don’t get their way, and are fighting an extreme uphill battle in regards to the letter of the law and the leases governing the gates. Not to mention they could have avoided the whole mess if they had just paid United for the gates when given the opportunity. Delta felt the asking price was too steep, so Southwest swooped in and paid United very handsomely. All to say they are trying to obtain what the didn’t want to pay for and threatening everybody in Dallas if they don’t get what they want. I’ve see Godfather movies with less chutzpa than that.
Alex – Fair enough on Love. It’s definitely an aggressive stance. I just don’t see it in the same vein as others. In the other examples, these are airlines they should be trying to work together. In this one, it’s all competition the whole way through. It’s just a matter of how hard Delta is pushing in the competitive environment.
If DL wasn’t a pretty decent airline to fly with it’s highly on time operations and decent cabin service, it would be in a bad spot with all their scuffles. But, they make up for it with one of the better products in the sky.
Personally I prefer Doug Parker’s style of leadership over Anderson’s — Parker’s equally competitive while at the same time not obnoxious. That said, Anderson is getting the job done at Delta, and Delta isn’t really wrong in the positions it stakes out, so it’s hard to be critical of their behavior.
If I can find 1 point that I just don’t get why the other airlines don’t agree with it is Delta’s view about Air Traffic Control. I feel that if we made it a pay to play we would lose many things that makes the United States competitive over the Middle East or AUS or another country where flight training is big money and the airlines are big money as well. Perhaps someone could tell me the A4A view.
Delta is certainly increasing their market share in the Pacific NW. Everybody know about their increase in Seattle but to lesser degree In Portland also. It is at the expense of Virgin America, United, American/US Air, Frontier and Spirit. Jet Blue grew some at PDX this year but Alaska & Delta free a bunch.
For the first time in 20 years of flying I was bumped from a First Class seat on Delta with their Code Share Virgin Atlanta. ATL to LHR. The agent informed me that it is Virgin’s policy to “overbook” including first class.
Has anyone had this happen or heard of this policy?