Delta's Depression: The Ron Allen Years and Livery

On May 12 1997 Delta Air Lines CEO Ron Allen announced his resignation after ten years at the helm and 34 years at the airline. At the time the news seems to have been met with some shock especially as the airline refused to say why exactly he decided to leave.

The surprise was partly because the airline was firmly in the black by 1997 recording profits of around $900 million for the year which itself followed a record $662 million profit in 1996, whilst its stock was up 17% within a year. In retrospect however Allen's departure seems less of a surprise.

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At the time of his resignation Allen himself said:

"My personal goals during the past three years were to lead Delta Air Lines back to sustained profitability and position our company to be poised for growth  to make Delta a leader. Delta has realized great progress in both of these areas, and the company is in excellent condition."

If this was true it wasn't always so. Allen's tenure had seen Delta through (or made worse depending on your viewpoint) a period of major strife.

Allen had spearheaded Delta's acquisiton of Pan Am's European network in 1991 but these routes lost money and between 1991 and mid-1994 Delta as a whole lost over $1.9 billion. The losses were partly due to competition but also to the economic downturn which afflicted the entire industry in the early 90s after the Gulf War. Allen instituted a major cost-cutting programme called Leadership 7.5. Its goal was to reduce Delta's per-passenger-per-mile costs from 9.26 cents to 7.5 cents. By 1997 it had reduced the costs to only 8.75 cents but this was still lower than its competitors and had returned the airline to profitability in 1995.

Unfortunately Leadership 7.5 also severely damaged staff morale and company performance at what had been a family-like airline. In 1993 Delta had registered the least complaints from passengers but following the downsizing it was the fifth-worst airline in the USA. There was much criticism that the wrong cuts were made which affected the ability to provide good customer service whilst an across the board 5% pay cut in 1993 affected everybody except management. In 1994 the airline announced it would lay-off thousands of employees (lay-offs were unprecedented in its history) and later it began hiring temporary staff (again unprecedented for Delta).

Additionally, though the markets were happier, the airline's revenues were flat and Allen's love of golf rather than management appears legendary. He even managed to get an award named after him but not a very flattering one - PlaneBusiness Ron Allen Airline Management Award - for embodying the traits an airline CEO should NOT possess. More positively Allen's time did see the expansion of Cincinnati into Delta's second larest hub.

In the end though it appears the reason for his departure was financial. With Delta's stock over $100 he asked for a massive 10 year contract full of stock incentives which the airline balked at. That didn't stop him making a fortune more from the airline however, as he gained an insane severance package worth $500,000 a year for 8 years plus other frills which amounted to tens of millions more.

One of the last things Allen did at Delta was introduce a new livery - dubbed thereafter as the 'Ron Allen' scheme. It was not very well received. I can still remember myself reading about in Airline Illustrated in a WH Smiths and being rather unimpressed. Very conservative, anything that replaced the classic widget colours was always on a hiding to nothing I guess. The scheme has grown on me over the years and suited the 727 and MD-80s well. Following Allen's departure the scheme lasted less than three years when it was dropped in favour of the 'Colors in Motion' scheme - dubbed Deltaflot and Wavy Gravy. Neither scheme was exceptional to be honest. The two aircraft (757-200 and 767-300) shown here are both wearing the 'Ron Allen' scheme and are both Gemini Jets releases.

Gemini have mucked up the registration on the 757, which I assume is supposed to be N601DL. Delta was the launch customer for the Pratt & Whitney PW2037 powered 757 with the first aircraft N602DL arriving in November 1984. N601DL was actually the first of Delta’s aircraft to fly, on 1st June 1984, but was kept back for testing purposes. N601DL was one of the first pair of aircraft to be retired and she was scrapped in late 2008.

Delta received 15 (N101DA-115DA) of its original 20 plane order for 767-200s before switching to the larger series 300 from November 1986. 25 of the standard 300s arrived up to July 1993 registered N116DL-N139DL and N140LL, N1402A with several having DE or DN suffixes. In the meantime they had already begun to receive 300ER variants with N171DN arriving in June 1990 – followed by 62 further examples and 24 767-400s. The 767s along with MD-11s and later 777s enabled the full replacement of the DC-8-71 and L-1011 fleets. N196DN remains in service largely on Delta’s European network and received winglets in mid-2010.

References

The Inquirer, 1994. Delta Planning Up To 15,000 Job Cuts To Slice Costs The Chairman Could Be On His Way Out. The Airline Has Lost $1.9 Billion Since 1991.

Boulton G, 1997. Delta chief's resignation a surprise - Cincinnati Enquirer

Bynum, R. 1997. Delta chief announces sudden retirement at 55. Associated Press

1997 Blomberg, WHY CEO ALLEN IS LEAVING DELTA AIRLINES

Institute of Management and Administration, Cost Reduction and Control Best Practices

FlightGlobal, 2000. Delta continues rebranding with another livery revamp

Grantham, R, 2005. Millions richer, ex-CEO departs Delta payroll. Atlanta Journal.