Ron Allen's Right Stuff

Steeped in a legacy of fair treatment of employees and customer service first, Tech alumnus Ron Allen pilots Delta Airlines into the future.

More likely, the ideal personality for an airline pilot is closer to that of a good surgeon or lawyer--mature, unflappable, a person of solid judgment, unfailingly logical. Not spectacular, but steady.

"If you think about it, when you get on an airplane, you don't want the captain to be some silk-scarf flyboy," says Cecil G. Johnson, professor emeritus in the School of Industrial and Systems Engineering. "You want to know the man in the cockpit is emotionally stable, able bodied, and knows what he's doing.'

By extension, it's also what Delta has expected of its future executives. Johnson, who has consulted at Delta for years, had that image in mind in 1963 when he recommended one of his favorite senior engineering students at Georgia Tech to Delta for a part-time, temporary job as a methods analyst.

Twenty years later, that student, Ronald W. Allen, became president of Delta Air Lines. And less than four years after that, at age 45 the Atlanta native and 1964 industrial engineering graduate was named Delta's youngest chairman and chief executive officer ever.

Now 51, Ron Allen presides over an airline which has doubled in size under his stewardship, gobbling up Western Airlines in 1987 and most of the choice assets of bankrupt Pan American World Airways in 1991. At the same time, Allen also has been the man in command during two of only four years in Delta's history when the airline has lost money. In an interview the day after Delta's annual meeting last October, Allen admitted he never expected to reach the glories and headaches of Delta's top job.

'When I came with Delta, I was a temporary, part-time person. I never dreamed I would be in this jobę never in my wildest expectations. But that lets me tell our people, 'If I can make it, you can make it, too.' That's opportunity in Delta that is not blocked from the outside."

Allen had reached the rank of senior vice president at Delta by the time he was 28. "I think Ron was always a little personally uncomfortable with the way he had moved, the rapidity with which the promotions had come," says Russ Heil, senior vice president of technical operations at Delta and a 1964 aerospace engineering graduate of Georgia Tech.

His meteoric rise through the Delta ranks may have been due in part to the fact that Ron Allen fit the Delta profile of a steady, levelheaded corporate executive.

"Delta's senior leaders have always tried to encourage an environment of teamwork and team play. There really weren't any stars or any heroes. And certainly I think Ron fits that mold," Heil says.

llen is flattered by others' description of him as the unpretentious, low-profile, company man. "I think it's important in this industry, a very volatile industry, that you do keep an even keel," he says simply. "I know who I am, know where I came from and I'm very proud to be where I am. But I feel a part of every job in this company."

Delta's somewhat gray, conservative image is legendary in the airline industry. As its chairman, Allen has received much less publicity than his counterparts, Robert Crandall at American Airlines, or Stephen Wolf of United Airlines-- much less the superstar image of astronaut Frank Borman, who briefly led Eastern Airlines, or Borman's successor, the controversial Frank Lorenzo of Continental Airlines.

In that regard, Allen follows in the tradition of Delta's previous chief executives, men who carefully tended Delta's corporate culture and bottom line with little regard to personal image. It allowed Delta to develop a much-envied reputation as a company with one of the best management-employee relationships in any industry. According to Johnson, that dates back to the company's founding in 1924 as a cropdusting operation in Monroe, La.

"The founder was a man named C. E. Woolman, whose background was as a county agent," Johnson says. "He knew the charm that it takes to deal with farmers. If you're going to bring new ideas and new technology to a farmer, you've got to have a lot of 'good-people skills.' And that's something that persists in the Delta culture to this day."

Ron Allen agrees that Delta's ability to deal with people is a hallmark of its management style. But, he says, that idea didn't come naturally to him. His early mentor at Delta, W. T. "Tom" Beebe, schooled him in Delta's management style. Beebe, then head of personnel and later chairman of Delta, encouraged Allen to move from the methods and engineering side of Delta into personnel. Allen was reluctant. And that was only natural, according to Johnson.

"The first and second generation of top management in Delta were people who had a great deal of experience with people, not school experience. Starting with Tom Beebe and continuing to Ron, the managers have been people with more formal education. They had to learn the Delta culture, the common-sense things. They already came to Delta with the analytical textbook stuff," Johnson says.

"I wasn't sure personnel was what I ought to be doing," Allen admits. "But I said I would try it. And I found out that personnel is where the action is in this company.

"As an industrial engineer, I was trained to go out and design man- machine systems and then find the perfect individual to kind of fit into the job. I found out it doesn't work like that in the real world.

"One day we were dealing with a situation in one of our offices involving some of our people and Tom said, 'Here's how the textbooks teach this, but this is how it is here at Delta.' The difference was you didn't design the job first. You put the people first," Allen says.

Delta strives to make service to each passenger one of the hallmarks of its business. "It's simply attention to the individual. You can call it Southern hospitality, and I know the media has used that term about us, but it's just treating people right."

In fact, Allen recalls, a group of skeptical New York news reporters asked him whether a tradition of Southern hospitality could be imposed on the cattle car of the airline industry--the Boston-New York-Washington shuttle--after Delta bought the shuttle from Pan Am.

"Of course, we were going to maintain the Delta level of service. To give you an example, if you've ridden the shuttle, you know you deplane through the rear door. Well, a lot of grease and oil from the engines collects around that rubber seal on the rear door. You'd get off the shuttle and think how dirty it was. So since we started flying the shuttle we've got our people taking a dry mop and cleaning off that seal every flight.

"Those are some of the characteristics that we want to maintain. We want to present a service image to our customers that's just like the service image we presented in 1929, when we started serving passengers. That's the difference in Delta Air Lines. It's not a regional difference. It's what people respond to."

Still, Allen bristles at the suggestion that the Southern airline might be a bit slow-footed, as well. "We may not be thought of sometime as a slick, go-go company, but I'll assure you we are as go-go as any airline in this business."

"Delta has a conservative reputation, but what they really do is to move very stealthily," said Kevin Murphy, the airline analyst at Morgan Stanley & Co. "They are not a company that will sit dead in the water. They take a strong, silent approach."

The acquisition of both Western Air Lines and Pan Am assets surprised many analysts. But Allen says the acquisitions were not only smart business, but absolutely necessary.

"The growth was fast, but we had to move fast. It was important that we move, and not be put at a competitive disadvantage. And we were developing situations where we could have been put at a competitive disadvantage. With other carriers establishing gateways out of the Northeast to Europe, if we had not made the Pan Am deal, we could have been at a disadvantage. We turned that into a real advantage for Delta.

"We had a major void out West. We looked at different hub locations to complement what we'd done, for example, in Dallas-Fort Worth and Cincinnati and Atlanta. We needed that Western hub. We looked at every city from Phoenix to Denver to Las Vegas. Salt Lake City kept coming up as the best geographic location and Western had a hub there. It was a natural marriage, absolutely natural marriage. I would say, 'No, we didn't make the wrong move. '"

evertheless, stockholders and airline analysts have begun to question Delta's management more closely since the airline, in common with all major U.S. air carriers, began reporting major losses in 1991. For the year that ended last June 30, Delta reported a net loss of $506.3 million. And in the first quarter of its new year, Delta lost $162.5 million. Even though Delta's revenue rose during the quarter by 17 percent over the same quarter in 1991, the company's costs rose by 27 percent. The all-important cost-per-available seat-mile rose from 8.94 cents in 1991 to 9.46 cents in 1992.

Allen and executives at the other airlines attributed much of 1992's rises in costs and net losses to a summer fare war. Prices were cut in half and stampeding passengers nearly overwhelmed all of the airlines' systems, from reservations to baggage handling.

"If you go in and cut your prices in half, you fill up your airplanes, but your break-even is very high, your people are working hard, your regular business travelers are frustrated because they don't feel like they're getting the service that they deserve," Allen says. "Everybody is working very hard and you're not making any money. And that's a bad deal, a bad deal.

"We must get our costs down, but at the same time we've got to avoid some of the crazy things that were done in fares this past summer that don't make any sense."

Allen is not about to panic and kick hard at Delta's rudder. "We're going to do what must be done to bring Delta back to profitability, but in doing so we don't want to tear up the fabric. We've got the right formula. We do not need to change the formula. We're going back to the basics and really work on our costs--enhancing our service, enhancing our revenue. But we don't want to change our basic approach. A lot of companies that go through dramatic change make some mistakes in that regard. They lose the basic characteristics that set them apart. And we don't want to do that at Delta. We absolutely won't do that."

Even if Delta is resisting basic changes, the airline industry has changed and those who know Ron Allen say he has changed with it.

"There is a business environment that's much less stable than it was 20 years ago," says Russ Heil.

"Twenty years ago we were a regulated business and change tended to occur rather slowly. That's not the situation today. Not only is the change very rapid, but we also have much less control over the conditions that affect us. Ron has recognized that, since he moved into the chairmanship. Because of the change in the environment, it's been necessary for him to be more proactive in the public arena than was felt necessary by past Delta leaders."

Not only has Allen moved into the foreground of media attention, but he's also been a visible symbol of involved corporate management for the company's 80,000 employees. By the time of last October's annual shareholder's meeting, the Delta chairman had been on the road, meeting with Delta employees for 11 of the preceding 12 weeks.

"One of the keys to getting our costs under control is to communicate with our people," Allen says. "That's why I've been traveling so much. We've been telling our people more about Delta's cost problems, the problems of not being able to generate the revenues because of the fare situation, and the need for profitability. We've been out communicating that more openly than ever before."

The response, Allen says, has been overwhelmingly supportive. Last summer the airline opened an old-fashioned suggestion box. By late October, Allen said, 5,710 employees had submitted 12,884 ideas that already have resulted in $24.64 million in savings. As an example of a seemingly trivial suggestion that meant big dollars, Allen cites a decorative lettuce-leaf liner put on meal trays. "Nobody ever eats it. It always ends up on the plate back in the galley." What shocked Delta executives was that the company could save $1.4 million a year by eliminating the decorative lettuce leaf.

The most difficult test of Allen's well-honed skills for managing people has appeared to come from his battle with the leaders of Delta's only significant union, the Air Line Pilots Association (ALPA). "The leadership of the pilots' union is not on board with us. They're way out of touch.

"Our Delta pilots are on board with us. I've been to a lot of the pilot meetings myself. They have a lot of tough questions. Needless to say, they should have. They're very responsible. They're the finest pilot group in the industry and absolutely loyal. I have total confidence in our pilots. They're out to save us money on every flight. The frustrating thing for us right now is that the union leadership is playing a typical union game, and doing so hoping that if they don't respond, the problem will go away."

Notwithstanding the problems, Allen says he is confident about the future of his company. "We are seeing the results of our efforts. I think the trends are beginning to improve for us. I see a little light at the end of the tunnel. I would not speculate on when we would return to profitability, but I am encouraged."

The difficulties Delta has experienced, he says, can make Delta a better company.

"I feel the Delta family is stronger than ever before. We're going through the most difficult time we've ever gone through. But our people want so much to protect this Delta family that they'll fight for it. So we're optimists at Delta. We never lose our optimism."