Delta Air Lines is not the only airline that offers its employees unsolicited raises. American Airlines did the same thing in 2017. But oh what a difference between those two raises.
In a widely-praised move, Delta is giving employees a 4% raise starting next month. Meanwhile, American Airlines offered pilots an 8% raise and flight attendants a 5% raise in 2017. Wall Street reacted with a decisive thumbs down and we’ve seen over the last two years that the ROI has been elusive. Why?
Delta Raise: Vision-Based
Delta workers, with the exception of pilots, are non-unionized. Even so, labor relations at the Atlanta-based airlines are far better than its unionized counterparts at American and United.
Here’s the letter, in full, from Delta CEO Ed Bastian on the raise:
We’re heading into Labor Day weekend, the final days of a very busy summer. I want to thank every member of the Delta family for your incredible dedication and professionalism during the busiest travel season in Delta’s history. I want to share some good news about our investments in you and how we plan to support you even more in the time ahead.
Despite the record passenger volumes, airport construction in key hubs and difficult weather, you delivered operational reliability this summer at a level our customers have come to expect and love about Delta. Because of the success you continue to create, I’m happy to announce a 2019 pay increase, effective October 1. In addition, we expect this year’s Profit Sharing Day will be even better than last year’s.
As to the much-deserved pay increases, effective October 1, 2019:
- Ground and flight attendant scale employees worldwide will receive a 4 percent base pay increase at all steps of the pay scale, other than some international employees covered by an industry, government or collective bargaining agreement
- Eligible merit employees worldwide will participate in a 4 percent merit pool
While I’m proud of our success, I know that it’s been an intense year and a particularly long, hard summer. Maintaining our performance levels with record loads has put a strain on everyone and stressed our people and resources. Our dedication and stamina can only carry us so far.
We know we pushed the operation and our teams harder than expected this summer. Just as important as your pay raise, we need to make additional investments to improve the tools and resources needed to deliver an even better product and service for our customers. We will be making needed investments to improve a range of areas, including staffing, catering, equipment — everything from wheelchairs to GSE — and front-line leadership development among others.
Your divisional leaders will provide more details in the weeks ahead, but we want to continue hearing your feedback and ideas on what we can fix and investments that can be made. Please keep identifying those stress points that need to be addressed. And always remember that when it comes to safety, you are empowered to slow or stop the operation in order to protect yourself, your colleagues and our customers.
Leading the Delta family as your CEO is a great honor, and I will always work to support you as we continue our journey together. Thank you for all you do and congratulations on all you have achieved.
I love this letter because there are no “enhancements” (bad news disguised as good news). There are no “but” caveats. Instead, Bastian’s note expresses not just affirming words, but it is backed by an appropriate recognition in the form of a pay raise. And it does far more than say thanks. He outlines a vision going forward that will continue to inspire employees to work harder.
American Raise: Pity-Based
When American Airlines offered pay raises to its employees in 2017, fuel prices were rising rapidly. American had just reported a 67% drop in profits and at the same time failed to to raise airfare due to competitive pressure. Revenue was up 2% but costs were up 11%. Contract negotiations with pilots and flight attendants were two years away and neither party had demanded these wage/salary increases.
So why didn’t it work? As Gary Leff noted, American gave employees raises but not a vision of where the airline would go. CEO Doug Parker told skeptic investors that service would improve and therefore revenue would improve, but that never happened. Why?
What is missing from Parker’s 2017 statement below?
Today’s news is about doing the right thing and doing so not because we are contractually required to or because we are locked in a contentious contractual battle. We must continue moving past the days of discontent as we build a new American where team members trust each other and work together with our customers’ care in mind.
Ok, we can all stipulate the mid-contract pay raise was intended to build trust. But to what end? What vision was offered for where this increased trust would take American Airlines? Very little, if any. What a difference between Bastian’s note above, which includes info on how Delta is also increasing in the onboard product to create a better experience for customers and a more profitable airline.
Part of the problem is one of entitlement mentality. Delta employees, as a whole, feel well treated because their company takes care of them proactively and they feel the sky is the limit; that through hard work there is no limit to growth. Meanwhile, American employees feel entitled to pay raises. In 2017, unofficial complaints over the disparity between Delta and American led to the official pay raise. But employees still felt short-changed. Thus, even a preemptive effort to give them at least part of what they wanted failed to produce fruit. Instead, it merely confirmed in their minds that they got part of what they were entitled to, but would need more. And without it, service would suffer. And it has.
Sadly, it is a vicious cycle.
American must do a better job of expressing its grand vision for the future, going well beyond new route announcements. Until it can do that in a way that inspires its employees, all the pay raises in the world will not solve the underlying employee problem at American Airlines.
Also check out Kyle’s piece on this topic yesterday, American Airlines Gives Apologies, Delta Gives Raises which takes a look at this issue from a different angle, though with a similar conclusion.
image: American Airlines