Delta Aims for Infrastructure Overhaul
Delta Air Lines is undertaking a billion-dollar upgrade aimed at making the technology laggard an industry leader. But will unstable economic and travel environments stand in its way?
CIO — The sepia-toned photos lining the walls of Delta Air Lines’ Technology office inadvertently tell the story of an airline mired in tradition: reservation agents from the 1950s shuffling through 3-by-5 cards, crew-cutted control tower personnel sorting through sheafs of paper. While reservation agents are no longer working off index cards—and haven’t been for some time—Delta Air Lines has been known throughout the aviation industry as a technology laggard. As little as five years ago, much of the company’s operations remained paper-based, and Delta was one of the last major carriers to invest in the Internet.
But in 1998, the 78-year-old airline embarked on an enterprisewide shift. In an attempt to catch up with industry peers like the largest U.S. carrier, American Airlines—an IT pioneer that created Sabre before any airline had a computerized reservations system—and number-two United—a fast technology follower—number-three Delta began a multiyear, billion-plus overhaul of its IT systems. Thus far, the Atlanta-based airline has spent almost $1.5 billion on technology in the past several years, with more than $50 million of that total going to what it calls the Delta Nervous System (DNS), an entirely new infrastructure on which it has been building applications that automate everything from tasks done at the gate and boarding area to baggage-handling, and inventory and revenue management.
Creating a new technology backbone and building all new applications on top of it—while continuing to run an airline—is no easy task in any environment. But the project has also met with a harsh dose of reality along the way. Though work on DNS began in a time of prosperity and stability, $13.9 billion Delta Air Lines has since hired a new CEO, slashed more than 20,000 jobs and gone through three CIOs, the economy has tanked, and America suffered the worst attack in U.S. history leaving the airline industry reeling with bankruptcies, belt-tightening measures and beleaguered major carriers partnering up in an effort to save themselves. "It has actually been like trying to change cars while driving down the highway at 100 miles per hour," says Henry Harteveldt, a San Francisco-based travel and airline analyst for Forrester Research. "Oh, and by the way, one of the cars just blew a gasket."
Many companies would pull over and turn off the car—or even put it on blocks in their garage. And the longer the economy suffers, the harder it will be for companies to stay their course. At a time when some airlines have shelved expensive IT efforts, Delta has continued to invest in more infrastructure and applications, albeit on a delayed schedule.
Delta, which made $990 million in 1998 when the work on DNS began, lost $1.2 billion in 2001 and $1.3 billion in 2002. Last year, it spent $200 million on new IT development (down from $218 million in 2001 and $371 million in 2000) even though total capital spending for Delta decreased by a billion dollars last year. "Delta continues to see this as a key investment," says Curtis Robb, Delta’s current CIO. "And Delta Technology will play an integral part in returning Delta Air Lines to profitability." Analysts add that continued investment has the potential to eventually make Delta a leader not only in technology but in the airline industry overall.
But if and when that will happen remains to be seen.
