ATLANTA — US Airways handed Delta Air Lines an unexpected gift when it launched a surprise takeover bid three months ago. After years of morale-sapping cutbacks, Delta had a common enemy that united and revved up the work force.
The challenge for Delta will be keeping up the momentum now that the takeover battle is won.
"You can tell when all your people, including your pilots and ... everybody else is exactly on the same page. There is huge strength in that," Delta CEO Gerald Grinstein said in a recent interview.
Delta, which operates a hub at Salt Lake City International Airport, is working to keep the unity going as it makes its final approach toward emerging from bankruptcy court this spring. One employee group is working on a sequel to the "My Delta" anti-merger campaign that rallied thousands of workers during the successful fight against US Airways' hostile merger bid.
Likewise, Delta has resumed special employee seminars, held in the old downtown Atlanta Macy's store, that are designed to boost morale.
A more tangible part of the effort: a post-bankruptcy compensation system that will likely reward rank-and-file employees with significant cash, stock, pay raises and profit-sharing checks later this year, according to Delta's personnel chief.
The attitudes of Delta's 47,000 employees have a big effect on the bottom line, said Les Hough, a consultant and labor expert who formerly worked at Georgia State University. Morale is closely tied to the quality of customer service, something that particularly matters to airlines' most profitable customers, business travelers.
"The frequent fliers, they notice," Hough said.
For most of this decade, that's been bad news for Delta. Morale suffered as years of discord, pay cuts, fleet cutbacks, red ink and other challenges whittled almost 30,000 people from the Atlanta carrier's payroll after the Sept. 11, 2001, terrorist attacks.
A 2003 controversy over executive pensions and bonuses soured many employees. Tensions between unionized pilots and the rest of the mostly nonunion work force intensified during pilot pay cut talks.
The months shortly after Delta filed bankruptcy about 18 months ago were the darkest, said Christopher Muise, who represents white-collar employees as a nonvoting member of Delta's board of directors.
"Engineers were leaving in droves," he said, while many others felt trapped. "People just could not see the light at the end of the tunnel."
Muise partly credits the seminars at the old Macy's with helping turn things around. They are known as the Velvet Rope Tour, to suggest that workers get a behind-the-velvet-ropes, inside view of Delta's turnaround plans.
They started about a year ago with two-day sessions. Grinstein, Chief Operating Officer Jim Whitehurst and other top executives met with employees in informal sessions , sometimes over cocktails. Muise said the events helped increase employees' confidence.
"Executives were so busy running the company that it forced a dialogue," he said.
The 74-year-old Grinstein's sage presence also helped, according to some. Grinstein set the tone by taking a big pay cut after he stepped in as CEO in 2004. The longtime board member stepped in after Leo Mullin left in the wake of the bonus/pension controversy, which erupted after the airline spent tens of millions on the perks despite huge losses and job cuts. Grinstein also showed the door to most of the executives involved.
"I think people feel better about management, upper management, and (Grinstein) has a lot to do with it," said Peggy Franks, a flight attendant with 30 years at Delta. "I feel like he's just a breath of fresh air for us."
It helps that the airline's recovery seems to be progressing, noted Tim Mescon, business dean at Kennesaw State University. Workers grow more bullish as they see financial reports suggesting the carrier's overseas expansion and other strategies are working, he said.
Mescon said he asked the pilots and flight attendants on a recent flight how they feel about Delta these days.
"To a person, they said they were very, very pleased with the redirection of the airline," he said.
To be sure, not everyone feels energized or confident. But even some who remain wary cite the battle with US Airways for forging a common purpose.
Delta's pilots' union and Delta Board Council, the employee representative group, organized anti-merger rallies for workers. Thousands wore red "Keep Delta My Delta" buttons and petitioned Washington politicians in a campaign to help discourage Delta's creditors from entertaining US Airways' $10 billion offer. The offer died earlier this year after the creditors threw their support behind Delta's standalone plan.
The Delta Board Council, which spearheaded the "My Delta" effort, is now looking at ways to spin it forward, though no details are set.
Keith Rosenkranz, a Delta co-pilot, said the threat of lost jobs from a takeover wiped out differences between groups that had blamed each other for internal turmoil. "Common goals have a way of uniting people," he said.
Muise, the Delta Board Council member, said employees also worked harder to serve customers.
"We saw an absolute sea change in many, many of our flight attendants," he said. "In December we had the best customer satisfaction metrics that we've had since we started measuring them, and that was in the midst of a takeover attempt."
How long can Delta keep the good feelings going?
"Depends on how good we are at keeping it," said Grinstein. "Delta had that relationship for years and years and years. ... If (everyone) understands how valuable that is, then it can be preserved."
Mike Campbell, Delta's human resources chief, said the airline has sent about 25,000 employees to the velvet rope seminars and plans to send all by this summer.
Campbell said Delta also plans to unveil several types of compensation this month that most employees will receive after Delta emerges from Chapter 11, though he didn't share details.
Meanwhile, a pool of roughly 1,000 Delta managers from top executives to midlevel managers will receive a 2.6 percent stake in the new Delta worth roughly $260 million, with another 1.4 percent in reserve for future awards. That's about half of what United Airlines' management got after that carrier's Chapter 11 case.
Delta management convinced a key committee of the airline's creditors that it needed to spread the stock and other compensation among a bigger pool of managers and rank-and-file employees.
There's one other issue that could put at risk Delta's success at sustaining the good feelings — finding Grinstein's replacement.
Grinstein has said he plans to step down soon after Delta emerges from bankruptcy. Whitehurst, the chief operating officer, and Delta finance chief Ed Bastian are said to be leading internal candidates, but Delta's creditors will have a big say in picking Delta's new board of directors and CEO.
Mescon said he's "deeply concerned" about how Delta will handle the transition to new leadership, given Grinstein's pivotal role in restoring many employees' faith in the company. "You can't let those employees down again," he said.