Tuesday, September 27, 2005

Why Delta is Going Bankrupt

No doubt you’ve been reading that Delta Airlines is facing bankruptcy. Today I finally figured out why. I used to think the reasons involved an archaic hub-and-spoke business model, an anachronistic labor-management relationship, and severe pension liabilities—all exacerbated by recent spikes in fuel prices. I’m sure those are important contributing factors, but they’re not sufficient to explain Delta's plight. I now have the missing piece to the puzzle, and it’s a small mundane banal seed that has sprouted into a vast deadly weed. That deadly weed has created a hideous fissure in Delta’s corporate foundation. Confused? Read on.

I hold a Gold Card status with Delta, which means that I have accumulated a lot of frequent flyer miles with the company. A couple months ago I decided to cash in some of those miles to fly my in-laws to our home for Thanksgiving. I expected a simple transaction. Wrong. I was able to book the reservation, but to confirm it the folks at Delta needed to know my PIN number.

PIN number?? I responded. I didn’t even know I had a PIN number.

Well, yes you do, they responded. You must have designated one a few years ago.

Okay, I said. I don’t remember it. What is it?

We can’t tell you, they said. We can mail it to you.

Mail it?? When I forget a password with 21st century companies, I can get my password or designate a new one via e-mail within minutes—even after responding to security questions.

So my wife and I agreed to wait for a letter with the PIN number. (10 business days, they said. What century am I living in???) We waited for six weeks. Three times my wife called (itself a grueling on-hold-hell process) to complain, and three times we were politely told that the PIN number had been mailed to us even though we never got it, three times we were assured that the letter would be remailed, three times we never received it, and three times we were reminded and that if we didn’t have the PIN number we’d forfeit my in-laws’ reservation.

This afternoon, while at the airport on a business trip, I went to the Delta desk and demanded the tickets, which I finally received. But after telling the agent my hard luck story, she confessed that she didn’t understand it either. So she called an in-house number for a definitive expert response while I waited in front of her. Eventually, the agent insisted that the expert talk to me directly because she (the Delta agent) couldn’t understand what the expert was telling her (that’s a bad sign).

The lady on the line told me that it wasn’t even Delta who was sending me the PIN number. It was a partner company independent of Delta, and the letter looked enough like junk mail so that we might have tossed it into the trash by mistake. Okay, I said, what’s the name of the company, so we can be on alert for it? She didn’t know. And she didn’t know anybody who does know. Well, I asked, what’s the rationale for having another company do the PIN work for you in the first place? She couldn’t say.

So what in the hell do I do now? I asked. Well, she suggested, if I wanted to create a new PIN, I would have to write a formal snail-mail letter to Delta with documented proof of my address, and then Delta would send me a letter with a PIN number!!

I’ll stop now, because I still don’t know whether to laugh or cry. But do you get the idea here? What we have here is a glacially slow, cost- inefficient, time-consuming, unexplainably opaque, employee-confusing, customer-alienating system. Systems like these do not occur in isolation. Undoubtedly there are a zillion other similar ones across Delta—in procurement, logistics, reservations, supply chain management, maintenance, personnel, you name it—and that’s what’s strangling the company. I just tapped into one of those insane systems. Multiply this sort of stuff exponentially across the entire company and you will see why Delta is going bankrupt.

It’s not the people. Throughout the entire process every Delta person we spoke to was unfailingly polite, courteous and sympathetic. That’s not enough. It’s the system and the thousand subsystems around it that’s the killer. While successful companies like Dell, Progressive Insurance, Amazon, and Zara obsess on speed, transparency, agility, and friction-free customer care—deeply troubled companies like Delta force their employees and frequent flyer customers to jump through the most onerous, irrational, hyper-bureaucratic hoops imaginable. Small wonder Delta’s heading for bankruptcy. Meanwhile, I still don’t have a damn PIN number!

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