Friday, November 16, 2012

Delta Air Lines Different Approach to the Business (which has nothing on Walter)

The WSJ has a fascinating article on Delta's different approach to running an airline.

1.  Instead of outsourcing its maintenance business, Delta has a huge facility in Atlanta, with a corps of mechanics whose average experience is 19 years.  That facility makes money for the airline because it also does maintenance work for outside air fleet owners.  See item 3 below.

2.  Delta owns its own oil refinery, cutting out an expensive middle-man in the ongoing challenge of fuel costs.  Again, see item 3 below.

3.  It flies older airplanes.  Although used airplanes are less fuel efficient than the new ones, Delta buys them cheap.  It has the maintenance capability to keep them up.  See item 1 above.

4.  When it buys new airplanes it buys last year's model.

5.  It has been able to maintain the unusual, decades-old tradition of keeping it pilots non-unionized.

6.  It got rid of its pension albatross several years ago when it went through bankruptcy.

Item 1 reminds me of Walter creating a captive fulfillment firm for his company, created it in a matter of months, when he figured out how expensive and poorly run the traditional outside sources of that service were.  Now that captive firm, like Delta's Atlanta maintenance facility, not only does the work for his related Austin group of companies, but also for third parties.   Item 3 reminds me of Walter's propensity to hop on an airplane and go to a bankruptcy auction to buy cheap an expensive piece of equipment for the Austin group.  Item 2 reminds me of plans being kicked around in Austin to buy a textile mill to supply the Austin-group's Tiffany-quality, in-house silk-screening division.

No comments: