Delta's Grinstein on Exiting Bankruptcy
Q: Doug Parker, the US Airways CEO, has some interesting ideas about how to consolidate the airline industry. Do you think he could end up being a titan in this industry? Or is he just a maverick?
A: I think he's a very good finance person, but you've got to remember: What was happening with the old US Airways, when they were in bankruptcy, and with Delta, that was two different universes. Airways' bonds were trading at 3.5 cents on the dollar. Their whole situation was hopeless. Doug had the vision to merge with them [when he was running America West]; he had an idea. But another piece of the puzzle is merging the operational stuff, the cultures, and they're still not done with that. Plus, Airways and America West had reasonably complementary route structures. There's no overlap like that with Delta.
Q: Conditions still look pretty tough for the airlines. The industry will probably be profitable this year, but fuel prices are still going up, we're closer to the top of the business cycle than the bottom, and many people still think there's too much capacity in the airline industry. What do you foresee?
A: Well, there's no way you can repeal the business cycle. There will be a downturn, and consolidation will take place. But I don't think it will be the traditional kind that the Street would love to see–one big airline absorbing another. It might be more like one airline buying the Atlantic or Pacific routes from somebody else. Putting two airlines together–labor and cultural issues are huge barriers.
Q: So now that you've steered a company through bankruptcy, let's say the CEO of an auto company or some other troubled business called and said, "Hey, we're heading into Chapter 11." What tips would you offer for surviving bankruptcy?
A: Get the right people in place, even if you have to let go of people you really like. You may make a few mistakes, and I did, but people are critical. You need people who are decisive, sure-footed, with the ability to communicate with a broad audience. They must also have some standing with that audience. So that when the creditors' committee asks, "Who is this guy?" you can say, "He's one of the best in the business."
Q: What mistakes did you make?
A: I'm not going to tell you. I don't want to hurt anyone's feelings.
Q: Other tips?
A: Do it as quickly as you can. Time is really short. Keep people's confidence up. It's like walking a tightrope between buildings: Look ahead, not down.
Q: You managed attract people like [Chief Operating Officer] Ed Bastian without offering them a lot of money upfront. How'd you do that?
A: I don't know. I just said, "You have a chance to do something great and exciting, and you may never get another chance like this." Delta also has a certain appeal; it has a storied past. That helped.
Q: Were there people you wanted whom you couldn't get?
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