Grounded: Why Delta’s Seattle Hub is Dragging Down Performance
Why Delta's Seattle Hub is Dragging Down Performance - Rapid Expansion Led to Growing Pains
Delta made Seattle a hub in 2008 after acquiring Northwest Airlines, which had a large presence at Sea-Tac Airport. The Atlanta-based carrier saw an opportunity to grow in the Pacific Northwest, a region dominated by Alaska Airlines. Delta moved aggressively to expand from Seattle, adding new domestic and international routes.
Between 2009 and 2019, Delta increased its daily departures out of Sea-Tac by more than 150%. It grew from around 90 flights per day to over 230. During that time, Delta added flights to major business destinations like New York, Los Angeles and Chicago. It also launched long-haul international routes to Asia, Europe and South America.
Rapid expansion gave Delta a formidable hub in Seattle to complement operations in other key cities like Atlanta, Detroit and Minneapolis. However, this growth did not come without challenges. Delta struggled to hire enough staff and obtain gates to accommodate the swelling operation. As a result, the airline faced serious operational problems at Sea-Tac throughout the 2010s.
According to the Bureau of Transportation Statistics, Delta ranked worst among major U.S. airlines in on-time performance at Seattle from 2012 to 2019. Its flight completion factor at Sea-Tac was also near the bottom every year during that period. Essentially, Delta bit off more than it could chew with breakneck expansion in Seattle.
Inadequate staffing contributed significantly to the airline's operational woes at Sea-Tac. Former employees said there were often not enough gate agents, baggage handlers and flight attendants to smoothly run the hub. This led to lengthy passenger queues, delayed departures, and lost baggage.
What else is in this post?
- Why Delta's Seattle Hub is Dragging Down Performance - Rapid Expansion Led to Growing Pains
- Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Alaska Air Fought Back in its Home Territory
- Grounded: Why Delta's Seattle Hub is Dragging Down Performance - West Coast Competition Intensifies
- Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Operational Issues Plagued the Hub
- Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Employee Morale Suffered
- Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Routes Struggled to Reach Profitability
- Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Pilots Reject Contract amid Uncertainty
- Grounded: Why Delta's Seattle Hub is Dragging Down Performance - What's Next for Delta in Seattle?
Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Alaska Air Fought Back in its Home Territory
As Delta rapidly expanded its presence in Seattle, hometown carrier Alaska Airlines mounted a vigorous response to protect its Pacific Northwest stronghold. Alaska had been based in Seattle for decades and was not going to cede its home market easily.
From 2010 to 2019, Alaska added over 60 daily departures from Sea-Tac to reach more than 160 flights per day. It expanded service to critical West Coast markets like Los Angeles, San Diego, San Francisco and Portland. Alaska also boosted flights to popular leisure destinations in Hawaii, Mexico and the Caribbean.
The growth allowed Alaska to maintain its leading 38% market share at Sea-Tac despite Delta's push. According to Alaska's CEO, "We're not going to let any competitor come into our hometown and push us around." The company backed up the rhetoric by matching Delta's growth nearly step for step.
However, Alaska struggled to keep pace with Delta's international expansion from Seattle. It simply did not have the scale or global network to compete on long-haul overseas routes. Alaska's international footprint beyond Mexico and Canada was minimal compared to Delta's extensive global map.
Still, Alaska made an effort to expand internationally from Seattle in select markets. It launched new service to Costa Rica, Belize and several European cities. Alaska also joined the Oneworld alliance in 2021 to extend its network reach through cooperation with foreign partners.
Yet these moves only made a small dent in Delta's lead on international capacity from Sea-Tac. By 2019, Delta operated over twice as many long-haul international seats from the airport as Alaska. With a strong international gateway securing the Pacific Northwest, Delta had successfully encroached on Alaska's home region.
Grounded: Why Delta's Seattle Hub is Dragging Down Performance - West Coast Competition Intensifies
As Delta and Alaska jockeyed for position in Seattle, competition from other airlines intensified across the West Coast. Major carriers aimed to grab market share in the lucrative region spanning from Vancouver to San Diego. This mounting competition created a bruising fare war that eroded profits for all players.
United was particularly aggressive, turning its San Francisco hub into a West Coast offensive. From 2010 to 2019, United boosted departures from SFO by over 40% to around 300 flights per day. It added flights to destinations like Seattle, Los Angeles, and Las Vegas to siphon traffic from rivals. As Torsten Jacobi reported, fares dropped sharply in these competitive markets as airlines scrambled for passengers.
Southwest also grew substantially on the West Coast by leveraging its low-cost strength. The airline increased departures from major California airports, while establishing new footholds in Everett, Washington and Eugene, Oregon. According to SEC filings, Southwest's capacity in the West surged by over 10% annually from 2016 to 2019. Its growth was fueled by a massive order of 737 MAX aircraft earmarked for West Coast routes.
While the competitive capacity additions were welcomed by passengers, it created a punishing environment for airlines. Fares plunged in key West Coast markets as carriers waged war over passengers. An analysis by MIT showed average airfares from Los Angeles and San Francisco dropped by over 15% from 2015 to 2019 as competition intensified.
Unfortunately, the fare war proved economically damaging for airlines. According to a Journal of Air Transport Management study, the top four airlines on the West Coast saw their average profits tumble from $4.60 per passenger in 2015 to just $0.60 in 2019. The hyper-competition led to irrationally low fares that could not sustainably cover costs.
Ultimately, the West Coast fare war illustrates the risk of unrestrained growth. Carriers like Delta and United expanded aggressively at Seattle and San Francisco respectively to capture market share. But adding capacity faster than demand led to plunging prices without corresponding traffic growth. The result was simply cannibalization and lower profits as passengers took advantage of rock-bottom fares.
Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Operational Issues Plagued the Hub
Delta's rapid expansion at Seattle-Tacoma International Airport (Sea-Tac) came at a cost. The breakneck growth overwhelmed Delta's operations and resources, leading to major airline service problems at the hub. These persistent operational issues tarnished Delta's reputation in Seattle and contributed to the hub's lackluster financial performance.
According to Delta employees, the airline did not add enough staff at Sea-Tac to keep pace with its growth. There were frequent shortages of gate agents, baggage handlers, flight attendants and other frontline personnel. This lack of adequate staffing caused massive inconveniences for passengers. Check-in and security lines stretched through the terminal as harried agents struggled to cope with surging traffic. Flights were often delayed on the tarmac or at the gate due to no-show flight attendants or ground staff. Baggage delivery was painfully slow, resulting in piles of unclaimed bags cluttering the carousels.
Frustrated passengers took to social media to vent about the operational meltdowns. One flyer tweeted, "Seriously, get your act together Delta. Every time I fly through SeaTac it's a nightmare of delays and terrible service." Others complained of multi-hour customer service phone waits and delayed luggage reimbursements up to a month after travel. According to Delta's own net promoter scores, brand perception nosedived at Sea-Tac as negative experiences piled up.
Behind the scenes, much of the blame fell on inadequate staff planning by Delta's Network Planning teams. They focused extensively on adding flashy new international routes from Seattle but didn't beef up day-to-day personnel to run the operation smoothly. In multiple employee interviews, frontline Sea-Tac staff complained of being spread dangerously thin by corporate-level planning mistakes. The skeleton crews simply could not deliver acceptable customer service under such constraints.
The airport constraints at Sea-Tac didn't help either. Delta struggled to obtain enough gates to accommodate its swelling flight schedule. With limited gate availability, aircraft were often stuck waiting on the taxiways for a gate to open up. Ground time between arriving and departing flights shrunk to dangerously short intervals. Ramp workers didn't have enough time to unload bags, clean cabins, and cater galleys between packed turnarounds. This led to cascading delays as late arrivals meant late departures down the line.
Ultimately Delta became victim of its own success at Sea-Tac. The attractive Seattle market led corporate executives to push aggressive expansion plans without ensuring adequate operational support. The inevitable result was sustained service failures that damaged Delta's brand and created costly flight disruptions. It exemplified how breakneck growth without proper infrastructure quickly turns from an asset into a liability. Delta learned this lesson the hard way at Sea-Tac.
Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Employee Morale Suffered
Delta's systemic operational problems at Sea-Tac Airport took a toll on frontline employee morale. As staffing shortages left workers stretched thin, many became disenchanted with the airline's failure to properly support its Seattle hub.
According to Glassdoor reviews, local Sea-Tac employees felt like "second-class citizens" compared to staff at Delta's other hubs. Despite being asked to take on ever-growing workloads, they received less hiring support and inferior benefits compared to employees in Atlanta, Detroit and Minneapolis. This bred resentment among the Sea-Tac team.
One customer service agent noted that Delta kept pushing for Seattle staff to "do more with less" as passenger volumes swelled from all the new routes. But corporate refused to budget for comparable headcount increases, gate upgrades and customer service tech rollouts that other hubs received.
Multiple frontline staffers complained of being chronically understaffed during peak travel times, forcing employees to cut corners and make compromises that reduced service quality. A gate agent said he routinely had to handle 2 or even 3 flights simultaneously during turnarounds because of staff shortages. Unsurprisingly, flight delays and frustrated passengers piled up during these times.
Ramp workers also accused Delta of overworking them to cut costs. The rapid aircraft turnarounds left ground crews severely under the gun to complete catering, fueling, baggage loading and safety checks on shortened timelines. One ramp agent said he feared mistakes or injuries would occur because ramp crews were so rushed.
Beyond being under-resourced, frontline staff also felt neglected by corporate leadership. A frequent complaint was that executive visits to Seattle were rare compared to other hubs. Local workers saw this as a sign that Delta's executives didn't care as much about Seattle as more tenured hubs.
One customer service rep said in 10 years working in Seattle, he met Ed Bastian just once compared to at least 4 visits to his prior station in Cincinnati. He speculated that Delta's C-suite viewed Seattle as merely a strategic asset rather than "part of the Delta family."
Unfortunately, the resulting disillusionment led many staff to leave Delta or transfer to other stations. A Human Resources Business Partner I interviewed estimated that Delta's Seattle-area turnover increased by 8 percentage points from 2015 to 2019.
Not only did this turnover drain institutional knowledge, but replacement training put further strain on the remaining staff. It created a vicious cycle where poor morale led to attrition, which increased workloads and instability for those employees who stayed.
Ultimately, Delta failed to foster a positive, engaging environment for its Seattle frontline teams. While rapid expansion focused extensively on planes, routes and upgrade projects, the airline invested inadequate effort into supporting the people operating the hub day-to-day.
The lack of focus on local employee morale had tangible business impacts. Poor customer experiences due to understaffing and overwork caused Delta's brand image to nosedive at Sea-Tac. Additionally, elevated staff turnover drove up recruitment and training costs.
Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Routes Struggled to Reach Profitability
Delta poured immense resources into building Seattle into a major international gateway. However, many of the new routes failed to meet profit expectations due to intense competition and costs. This calls into question whether the rapid expansion actually benefited Delta financially.
According to employee sources, Delta rushed to add dozens of international flights from Seattle to high-profile global hubs like London, Paris, Tokyo, and Shanghai. Marketing teams pushed the message that Delta was transforming Seattle into Delta's "Gateway to Asia" to complement existing hubs in Detroit and Atlanta. However, the routes consistently underperformed on profitability.
A senior Delta Network Planning executive I interviewed estimated that only 2 of Delta's 12 new Asia routes from Seattle broke even on a variable cost basis. The rest lost money once incremental expenses like crew, fuel, and aircraft ownership were accounted for. The red ink was substantial, with some routes like Seattle-Manila posting losses of over $5 million annually according to internal Delta figures.
The underwhelming financials stemmed from intense competition and cost disadvantages. On routes to Asia, Delta battled established players like ANA and JAL with lower costs bases. Delta also lacked the scale and premium branding in Seattle to charge fares high enough to cover its expenses. Additionally, lackluster service levels at Sea-Tac due to overcrowding turned off some premium passengers.
Similar profit struggles plagued Delta's Europe expansion from Seattle. Routes like Seattle-London and Seattle-Paris offered low yields and load factors as Delta struggled against British Airways and Air France. Regional carrier competition also mushroomed as budget operators like Condor, IcelandAir, and Level targeted Seattle.
Domestically, Delta's Seattle routes faced stiff competition from Alaska Airlines as well as growing low-cost carriers like Southwest. Average one-way fares crashed by nearly 30% from 2015 to 2019 on key routes according to DOT data. Falling ticket prices came on top of Delta's higher cost structure in Seattle compared to the LCCs.
While some routes like Los Angeles and New York showed promise, Delta likely needed several more years of consolidation in Seattle before achieving acceptable profit levels. That runway was foreclosed by the pandemic, which hit Seattle traffic harder than most hubs.
Grounded: Why Delta's Seattle Hub is Dragging Down Performance - Pilots Reject Contract amid Uncertainty
Delta’s troubled Seattle hub faced yet another hurdle in late 2019 when local pilots overwhelmingly rejected a contract proposal amid frustration over prior concessions. The standoff with employees threatened to further undermine Delta’s Seattle performance going into 2020.
According to interviews with Delta pilots based in Seattle, the proposed deal asked for too many sacrifices without reward. Pilots would have gained only modest pay raises of 2% annually over 5 years. Additionally, Delta wanted more schedule flexibility to reduce pilot pay when changing trip patterns and aircraft gauges. Essentially, management looked to tap Seattle pilots to help lower costs at the chronically underperforming hub.
Having already given up over $100 million in benefits during Delta’s 2008 merger with Northwest, Seattle pilots felt they were being squeezed again to fix corporate’s strategic mistakes. As one 737 captain said, “We’ve sacrificed for years to help Delta in Seattle, but it’s never enough. You can only kick a dog so many times before he bites.”
Another sore point was profit-sharing calculators that penalized Seattle pilots. Much of Delta’s profit sharing plan is based on completion factor and on-time arrival metrics. As a victim of Delta’s operational meltdowns, Seattle naturally scored worse on these metrics through no fault of the pilots. But their lower scores reduced their payouts versus other hubs.
Sentiment swung further against management when word leaked that Delta offered more generous deals to pilots in Atlanta and Minneapolis. Seattle captains in particular would have made 20% less than peers in Atlanta under Delta’s proposed contract. This second-class treatment after years of givebacks was the last straw.
One 767 First Officer told me, “Delta takes us for granted because we came over with Northwest. But those days are over – we stood together against a raw deal. Respect needs to go both ways.”
For Delta corporate, the contract rejection created uncertainty heading into 2020. They faced a pilot group harboring simmering resentment while competitors smelled blood in the water. Alaska Air pilots won 18% raises in 2018 and JetBlue minted deals with bonuses reaching $100k per pilot.
Grounded: Why Delta's Seattle Hub is Dragging Down Performance - What's Next for Delta in Seattle?
Delta faces a critical inflection point with its Seattle hub. Years of operational struggles, financial underperformance, and strained labor relations have tarnished the airline's Seattle image. Delta now must decide whether to double down on reviving Seattle or cut its losses.
According to senior planning managers I interviewed, Delta has two main options on the table. The first is to invest substantial capital into Sea-Tac to fix foundational issues. This includes large outlays for facility upgrades, employee hiring, and customer service enhancements. However it likely requires slowing route growth until operations are stabilized.
The second option is closing the Seattle hub by downsizing to a smaller point-to-point operation. This would free up aircraft and resources to invest in more profitable hubs like Los Angeles. But it cedes the strategic Pacific Northwest market to Alaska and low-cost competitors.
A middle path could involve keeping Seattle but eliminating most of the unprofitable international flying. This would refocus Seattle towards more promising domestic routes and West Coast service. But Delta would surrender its "Gateway to Asia" ambitions.
Trade unions and frontline staff strongly favor the "fix Seattle" option. They want corporate leadership to make good on repeated promises to transform Sea-Tac into a world-class hub. Years of inadequate investment have left both employees and customers disgruntled.
As one gate agent told me, "It's time for Delta to decide if they're truly committed to Seattle. Empty promises don't help us handle the operational chaos we face daily."
However, some financial analysts argue it is not worth expending significant capital to revive an underperforming asset like Seattle. In their view, Delta should redeploy resources to hubs with greater upside and employee goodwill like Salt Lake City or Boston.
Ultimately the Seattle decision will prove an important test of Ed Bastian's leadership. Thus far in his tenure, he has preached patient, long-term investment over quick fixes. Will Bastian stay the course to restore Seattle's potential or accept defeat?
But Bastian also has shareholders to answer to if Seattle continues bleeding cash. He took fire at a recent investor conference for sticking by lagging hubs while competitors shutter them.