Delta Air Lines Just Made a Big Announcement

Delta Air Lines Just Made a Big Announcement.

This is a story a big announcement Delta Air Lines just made that will leave its more than 80,000 employees very happy.

It’s also about something even bigger: a smart way to compensate employees and build a culture where they might be motivated to do just a little bit extra for your company.

The announcement was about employee profit-sharing. Delta CEO Ed Bastian revealed the total number a bit earlier than usual this year: $1.6 billion.

It’s the biggest profit-sharing figure in corporate history, according to Delta, and it marks the sixth year in a row that it’s above $1 billion.

A Delta connection?

You can imagine the positive reaction from Delta employees. It should all work out to about two months’ extra salary.

In fact, Delta’s profit-sharing numbers have been much larger than other airlines in recent years. Couple that with some other Delta news of late:

Delta claims now to be the biggest U.S. airline based on revenue, and one of the world’s most profitable. (Many other airlines haven’t released their 2019 numbers yet, but this seems very plausible based on partial data).

Meanwhile, Delta was just rated the #1 U.S. airline by The Wall Street Journal.

Last year, TripAdvisor reviewers rated Delta the number-1 “major airline” in the U.S. (Southwest came in first for “low cost airlines.”) Another ranking put Delta at the #3 airline for traveling with kids (and tops among the legacy carriers).

Could there be a connection here between the accolades, the records, and the profit-sharing? Bastian seems to think so:

“For years, I would get beaten up by Wall Street. They thought the profits were theirs, and ‘Why are you giving the profits away to the employees? Wall Street has actually come full circle, and they realize that Delta is the most awarded airline in the world because of its employees.”

A tiny piece of real estate

It’s useful to watch the airline industry, no matter what industry you happen to be in. It’s sort of like watching a controlled experiment.

I’m sure it doesn’t seem like that if you’re actually working for an airline, but it’s a commodity industry with an aggressive but defined set of of competitors, and an almost universal customer base.

Whether you’re Delta, American, United, Southwest, JetBlue, Alaska or another airline, they’re all selling the same thing, really: a lease on a tiny piece of real estate inside a pressurized metal tube, combined with the promise of getting people safely from Point A to Point B.

Granted, if you live near a United hub, like I do, you’re probably going to be a United customer. Or if you have to fly from say, Seattle to Tucson regularly, you’re probably going to fly Delta or Alaska, since that’s who has nonstop service.

Beyond routes however, most of what separates the airlines is about price, or comfort, or customer loyalty programs, or the less-tangible things, like my favorite: simply how they make you feel.

Back up a little differently

Let’s use a Delta illustration to make that last point. It’s a favorite of mine, actually.

A few years back, some Delta customer service agents came up with an idea, after watching one Delta flight after another (after another) at the gate.

Wouldn’t it be faster to back the planes up from the gate at a 45 degree angle, they suggested, rather than backing straight up, using a tug to turn 90 degrees, and only then starting the engines?

I wrote about this whole trick in greater detail here, but in short: the agents suggested it, Delta adopted it, and now it shaves a minute or two off turnaround times, thousands of times a day.

One thing that strongly affects how passengers feel about an airline is its on-time rate. So, it’s easy to believe this small change has had at least some effect on a key metric of customer affinity.

Incentives and culture

Now, were the Delta employees in that example thinking explicitly: faster turnaround times might lead to better profitability, and more profit means a bigger bonus?

Maybe. But even if they weren’t doing the direct math, there’s something really intuitive about the idea that a profit-sharing culture is likely to coexist with one where employees will make serious suggestions, be taken seriously, and produce serious results.

If you’re a business owner, it’s intriguing to say the least: Would (partly) tying your employees’ compensation to the overall business change how they view and do their jobs?

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