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Delta’s Gorman Offers Insider’s View Of Merger

Posted: March 31, 2009 by Bill Carey Filed under: AMC/AEEC Annual Meetings Permalink

Delta COO Steve Gorman prefaced his keynote speech to the joint AMC, AEEC opening session yesterday by acknowledging that attendees have a full plate of technical issues to discuss over the next few days. He also threw a bone to the seated delegations of airline maintenance and engineering personnel. Delta CEO Richard Anderson, he said, used to run technical operations at Northwest Airlines (he also served as a deputy general counsel, chief operating officer and CEO), so it wasn’t beyond reason that another, future CEO was sitting among the tech-heads.

“Your next CEO of your airline might be sitting right next to you, so be really nice to him,” Gorman said. “It’s a trend. It used to be financial people; now it’s technical operations. I don’t know whether that’s good or bad.”

All kidding aside, Gorman then launched into a substantial, 38-minute explanation of Delta’s mega-merger with Northwest that filled in the lines, and then some, of the press release Delta issued the same day. While Gorman was speaking in Minneapolis, Delta announced from Atlanta that 40,000 Northwest flight attendants, pilots, airport lounge representatives and ticket and gate agents will henceforth wear Delta uniforms. New Delta signage now adorns 400 ticket counters, gates and baggage claim areas at Detroit, Memphis and Minneapolis-St. Paul. The airline plans to have all of its domestic airport locations rebranded by year-end, with international locations following in 2010.

“Until now,” Delta said, “significant post-merger changes, such as synchronizing flight schedules, aligning route maps, integrating technologies and work groups, have largely taken place behind the scenes.”

For the benefit of AMC and AEEC attendees, Gorman pulled the curtain aside on some of that post-merger activity. Integrating operations under a single operating certificate from FAA — Delta’s goal by the end of the year, has been a challenge. Between the two airlines there are 325 manuals and 110 major processes, he said.

“We start with the manuals and start looking for the differences — 325 manuals is just mind-boggling. Think of that when you have two airlines with that much heritage and history and both of them have been the product of a tremendous amount of mergers and acquisitions over the years,” Gorman related.

“This is not a time for innovation,” he added — something you usually don’t hear from a corporate executive. “No matter what process we use, we want to make sure we have subject matter experts at one of the two certificates that know that process, that can help in the course of putting together implementation and training programs and changing the manuals. … The last thing we want is something that no one knows about that we have to train everybody on.”

The former Greyhound Lines CEO who reduced the bus fleet and optimized routes before leaving in 2007 now finds himself overseeing the world’s largest airline, with 751 aircraft of 10 different types, flying more than 6,000 daily departures to 379 destinations. According to some “fun facts,” Gorman presented, Delta’s longest flight spans 8,502 miles from Atlanta to Mumbai; it’s shortest 49 miles.

“The question I get a lot internally is how in the heck can you have this many different fleets and make money? … We need those different [aircraft] sizes in order to maximize the revenue on the breadth of the network we have,” Gorman explained.

But Delta plans to keep its many-colored marbles and even build on the Airbus competencies of its Delta TechOps business to self-service its own enlarged fleet and more. Right now, Delta has in-house capabilities for less than 20 components on the Airbus A330 ranging to 1,200 on the Boeing 767. It will look at “what makes sense” to expand its capabilities into the Airbus fleet, and leverage that in the third-party MRO market.

While both airlines outsource heavy airframe checks, Delta comes to this marriage with a dramatically different philosophy when it comes to maintenance, Gorman said.

“The Delta philosophy has been, with the exception of the heavy airframe checks, where we have core competencies that we can continue to perform maintenance for all the Delta fleet in-house, to do so, but also to have an eye on what we can sell aggressively in the third-party MRO market,” he said. “From the Northwest standpoint, the philosophy [was to] outsource all of the maintenance, except for line maintenance in Detroit and Minneapolis. I can tell you unequivocally, going forward, the philosophy will be the Delta philosophy, where we will perform most of our maintenance in-house, we will always be looking at make versus buy.”

In other business, as we used to say in the newspaper world, the Airline Avionics Institute (AAI) bestowed Volare Awards to Bob Saffell of Rockwell Collins, in the Avionics Manufacturer category; Denis Michal of Thales, Avionics Product Support; Larry Patterson, Boeing, Avionics Engineering; Mark Sorensen of Northwest Airlines, Avionics Maintenance; and Rolf Goedecke of Airbus, the AAI Special Award.

Thor Stier of Airbus was awarded the AMC Roger Goldberg Award for extraordinary contributions. Axel Mueller, general manager with Lufthansa Technik in Tulsa and AMC Steering Group chairman, was named Man of the Decade.

Mueller, who started as an apprentice with Lufthansa in 1961, said he will retire this year and move back to Hamburg. There, he plans to indulge in music and teach his grandson “to become a good engineer and trumpet player.”

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