Delta's Grinstein on Exiting Bankruptcy
Q: Allow me to be cynical for a moment and assume that law firms like litigation, because they make more money that way. So where did the discipline come from? How did Delta enforce its aversion to litigation?
A: The discipline really came jointly. There are always unsung heroes in situations like this, and John Varley, one of our in-house lawyers, he was really our communicant with the law firms. He watched all of the issues and made sure we did everything we could without litigation.
Q: What were some of the key moments of progress along the way?
A: There were a lot of opportunities to have rows with the creditors' committee, but one thing that helped is that we were overcoming some of their concerns. Like our revenue per available seat mile, which was about 83 percent of the industry average in 2005. We got that up to about 94 percent in 2006. That was one of the cornerstones of our turnaround. We also said we were going to take out $3 billion of costs and $1 billion of wage and benefits. We were on track, or exceeding, all of that.
Q: US Airways made its bid for Delta in November of 2006. Do you think that sped up Delta's exit from bankruptcy?
A: Yeah, I do. It became apparent once the creditors turned down US Airways that that was a critical, pivotal decision. I think we would have gotten to a unifying event eventually. But the US Airways hostile bid galvanized everyone. Every employee, politician, corporate executive, we were united against it. It created an enormous sense of momentum.
Q: Delta has moved around a lot of its planes. What's the strategy?
A: If you look at other airlines, like Northwest and United, they look very similar to what they looked like before bankruptcy, although with lower costs. But we had 18 or 20 percent of our routes international before bankruptcy, and we've steadily moved that up. Before bankruptcy, we had 64 wide-body flights a day between Atlanta and South Florida. That's too many seats, which means you have to sell them at a discount. By putting those planes into international markets, we're using them more efficiently. And now we mostly use narrow bodies for Florida.
Q: Why couldn't you restructure the fleet like that prior to bankruptcy?
A: Because we were running out of money. We did some other things pre-bankruptcy, like taking down our hub at Dallas-Fort Worth. But we were also stockpiling cash. Once we were in bankruptcy, we used the tools of bankruptcy to reduce other costs. Once those costs were down, we could do things like restructure the fleet.
Q: Did you ever think liquidation was possible?
A: I never thought it was a likely outcome. We were certainly in better condition than US Airways when they went in. It was clear they were going to liquidate until America West came along.
Q: What were some of the scary moments?
A: Right after we filed, we had a limited amount of liquidity. That was scary. In November and December of 2005, we were having a row with the pilots over our second concession with them. They were threatening to strike. That was extremely difficult. The pivotal point was when they realized that the creditors' panel was not going to rule for them. We also realized we had to get the confidence of the creditors' committee. Show them we're not the enemy, that our fiduciary goals were the same as theirs.