A few months back, I took America's leading automaker, General Motors (NYSE:GM), to task for a marketing ploy of paying people $500 to not buy its cars. That was truly dumb. But Delta's (NYSE:DAL) latest announcement threatens to knock GM out of the winner's circle for corporate bonehead of the year.
To summarize, Delta, which back in July reported losing two and a half times its own market cap in a single fiscal quarter, has decided that its real problem is its image. To repair its image, Delta interviewed several advertising consultants, including Omnicom's (NYSE:OMC) BBDO and WPP Group's (NASDAQ:WPPGY) Ogilvy & Mather and J. Walter Thomson, to see who could best revive Delta's brand. In the end, Delta settled upon Ogilvy.
In its press release announcing the new partnership, Delta described its decision to retain Ogilvy as "part of a comprehensive 360-degree plan set in motion earlier this year to reinvent itself while sustaining growth." Um, Delta? It's kind of worrisome to have to explain this to a company that flies airplanes for a living, but when you turn yourself around 360 degrees, you wind up pointing in exactly the same direction as before.
And let's review, for just a second, where Delta has been pointing lately:
It has more than $20 billion in long-term debt and is shelling out about $750 million a year in interest payments. Delta needs to convince its pilots to ante up $1 billion in wage concessions, and its other employees another $1 billion, in order to stay in business (and even that may not be enough). Meanwhile, its precarious financial position, with even its CEO voicing the "B"-word publicly, has its pilots sufficiently frightened that more of them than Delta had anticipated are retiring and taking lump sum pension payments (draining the company's pension fund ahead of schedule). These are real problems, and money spent on painting a pretty picture for the air-traveling public isn't going to solve a one of them.
Wake up, Delta. If you want to fix your business, then fix your business, and quit fussing over your image. Quit handing out fat corporate paychecks to management. Stop caving in to union demands for raises against your (and the employees' own) better judgment. And when all else fails, charge your customers what it costs to provide them your services. If they won't pay up -- fine. Let them fly American (NYSE:AMR) or Continental (NYSE:CAL) or whoever else is willing to sell them a $300 ticket for $99. That kind of business you don't need. And guess what? Neither do your shareholders.
Do you love horror stories? Read Delta's (it comes in installments):
- Delta Cuts to Run
- If Delta Craters, or When
- Delta's Dilemma
- Discord at Delta
- Delta Doomed, Yet Investors Board
Fool contributor Rich Smith owns no shares in any company mentioned in this article.
