When I first met Dave Yost, the former CEO of AmerisourceBergen (ABC) and architect of one of Wall Street’s few successful mega mergers, he didn’t want to talk about the highly successful company he created. ABC was my former client, and I was meeting with Yost to learn more about his business. Yost knew that I had represented former New York Stock Exchange CEO Dick Grasso, and he was excited to share his encounter with the leader of what was once considered Ground Zero of American capitalism.
ABC was the melding of two mediocre drug distribution companies, Amerisource Health and Bergin Brunswig, and the newly combined entity was set to trade on the morning of 9/11 when the first of two planes crashed into the World Trade Center towers. Yost was at the NYSE to ring the morning bell, and he was accompanied by his board members and management team. Panic and fear immediately ensued, and Yost years later was still marveling at the leadership Grasso demonstrated amid the crisis.
“Dick Grasso’s leadership was extraordinary,” I recall Yost saying something to that effect.
Yost recalled, and another ABC executive told me in a separate conversation, that Grasso immediately took command, leading everyone who was in the building to the NYSE’s basement. Grasso personally tended to the needs and concerns of those in the building, including distributing drinks. Yost and the other ABC executive said that Grasso’s leadership was assuring and inspired trust and confidence.
Yost’s awe of Grasso’s leadership was particularly noteworthy as Yost was consistently ranked near or at the top of every survey measuring CEO pay and the shareholder value they delivered.
The real test of a CEO’s mettle is how they manage a crisis, and successful leadership often becomes the stuff of lore. Former Johnson & Johnson CEO Ed Burke is best remembered for his daring move in 1982 to voluntarily recall 31 million bottles of Tylenol after seven people died in the Chicago area taking cyanide-laced capsules of Extra-Strength Tylenol, the drugmaker’s best-selling product. The pills had been tampered with.
In those days, recalls of drug products were unheard of and Burke’s move cost the company more than $100 million, the equivalent of more than $326 million today. Burke was open and transparent throughout the crisis and garnered considerable praise for his forthrightness in dealing with the media. In a news conference only a month and a half after the tragedy, he gave a full chronology of what the company had done.
“(Burke) looked in complete control,” PR executive Albert Tortorella told the New York Times.
Another CEO whose crisis leadership is legendary is Elon Musk, who famously slept under his desk at the factory in Tesla’s early years when the company was having serious production problems and employees were expected to work round the clock.
“The reason I slept on the floor was not because I couldn’t go across the road and be at a hotel,” Musk told Bloomberg. “It was because I wanted my circumstances to be worse than anyone else at the company. Whenever they felt pain, I wanted mine to be worse.”
Ed Bastian, CEO of Delta Air Lines, won’t be remembered for his crisis management. More than a week ago, Delta was forced to cancel some 8,000 flights because of a massive IT meltdown caused by a flawed software update, which idled the operations of legions of companies in the U.S. and around the world. Delta’s rivals had their systems back up and running within about 24 hours, but the supposedly premium airline’s operations were disrupted for days, leaving some 500,000 passengers stranded at airports or waiting on hold for several hours to rebook flights.
Last Tuesday night, before Delta’s operations were fully restored, Bastian was luxuriating in first class on an overnight flight to Paris to attend the opening of the Olympics, where Delta is a sponsor of the U.S. Olympic team.
“While Ed was flying to Paris last night, crew were sleeping in airports across the country. Flight Attendants expect an apology and accountability,” the Delta Association of Flight Attendants organizing committee said in a statement. “We provided a roadmap to recovery and care for the affected crew members.”
There are some who might argue that Delta’s costly sponsorship of the U.S. Olympic team justified Bastian’s trip, but no doubt legions of the passengers impacted by Delta’s IT snafu also missed critical business functions, not to mention funerals, weddings, and other one-time events. Moreover, the U.S. Olympic team’s performance wouldn’t be impacted whether Bastian was in attendance.
I’m not alone in my disbelief about Bastian’s lack of front-and-center public leadership and his clueless decision to fly to Paris while thousands of Delta passengers were still left stranded.
“By golly, having Ed Bastian go off to the Olympics was perhaps the most Marie Antoinette thing any business could do,” Henry Harteveldt, a veteran airline industry analyst, told the Atlanta Journal-Constitution, Delta’s hometown publication. “I think Ed would have been a lot more useful to Delta, you know, helping to sort those bags, to get them delivered, and maybe even hand delivering some of those delayed bags to people who live in the Atlanta area.”
Added Jay Sorensen, an authority on frequent flyer programs: “’Bastian left for Paris last night.’ Nothing good will come from that sentence.” Sorensen also told the AJC that Bastian should have been “making the rounds” at Atlanta’s Hartsfield International Airport instead of leaving the country.
Delta issued a statement insisting that Bastian was “fully engaged” with the airline’s senior operations leaders and that he didn’t leave for Paris until he was certain the carrier “was firmly on the path to recovery.”
Delta’s handling of the mishap revealed a lot about the company’s corporate character, or lack thereof. The airline initially claimed the implosion of its IT network was the result of events beyond its control, which would have relieved the company of having to compensate the legions of passengers it inconvenienced and jerked around. To his credit, Transportation Secretary Pete Buttigieg rejected Delta’s claim and publicly tweeted that Delta customers impacted by the airline’s cancellations were entitled to full refunds, not credits for other Delta fights.
“If an airline offers alternative transportation and a consumer chooses not to accept the alternative offered for a canceled or significantly changed flight, the consumer is entitled to a prompt refund to the original form of payment,” the DOT said in a statement.
Nevertheless, the Washington Post reported that the DOT is examining text messages Delta sent to passengers whose flights were cancelled that allegedly didn’t make clear they were entitled to full refunds. Delta’s response to the Post spoke volumes.
The company said that it “takes our compliance obligations seriously” and that “next to safety, Delta’s number one priority is to take care of our customers and our people, something we will continue to do as we recover from the unprecedented effects on our operation from the CrowdStrike-caused outage.”
If Delta took its compliance obligations seriously, it likely wouldn’t be under investigation for violating consumer laws, which notably it didn’t deny violating. It’s untrue that Delta “took care” of its customers, as the airline left thousands stranded at airports or on hold for hours. Delta’s flight attendants’ union demanding an apology made clear its members feel management failed them.
If possibly Delta’s alleged violation was made in error, Ed Bastian would have been wise to master an understanding of the consumer laws that govern his business, rather than virtue signaling about Georgia’s election laws, as he did a few years ago to the delight of the corporate media but sparked the ire of the state’s governor.
Despite being the No. 2 U.S. airline based on flights flown, Delta didn’t build redundancies into its technology, nor did it have a crisis plan in place to manage a massive outage. That speaks very poorly of Bastian and his management team, whose bios you can find here. One would reasonably expect that airlines more than other companies would have detailed crisis contingency plans in place given all the moving parts of their businesses.
While Delta likely will take a quarterly financial hit, Wall Street isn’t worried as the company’s stock price is only down modesty. I suspect Bastian slept like a baby on his overnight flight to Paris, perhaps counting his Benjamins rather than sheep to induce his rest and relaxation.
Bastian received $34 million in compensation for his 2023 performance.
During the 2022 holiday season, Southwest suffered a 10-day problem with its crew scheduling software that resulted in about 17,000 cancellations, more than double Delta’s during the latest snafu. Despite that disaster, Southwest got off with a measly $140 million DOT fine. Although the airline suffered reduced bookings for two months, it recently reported record quarterly revenues and traffic.
Delta knows better than most airlines the considerable abuse its most loyal customers will tolerate. The airline last September announced sweeping changes to its SkyRewards program, a revamping so monumental that Washington Post travel writer Chris Dong declared it dealt “a significant blow to the middle class of travelers.” Although there was lots of moaning and groaning about Delta’s blow to its reputation, I’ve seen no mention of the controversy in any of the coverage of Delta’s latest debacle. (After the outcry, Bastian said the airline would make “modifications” to its rewards program.)
My Michigan friend Allan told me that Delta offered him 10,000 rewards miles after the airline cancelled his flight from Washington; if Delta offered rewards miles to all the customers whose flights were cancelled, that will make it even harder to find available rewards seats. It’s another reason why I prefer a 2% cash back credit card rather rewards miles. Cash is always king in the travel business.
Americans don’t have much choice when it comes to airline travel. America’s four biggest airlines — American, United, Southwest and Delta — control more than 70% of U.S. air travel. For passengers who live near one of the hubs where Delta controls most of the flights, such as Atlanta, Detroit, Minneapolis or Salt Lake City, choices are even more limited. Accumulated frequent flyer miles also keep customers tied to individual airlines.
Delta’s latest crisis will soon be forgotten, and Bastian will again be hailed as a great airline executive on Wall Street and the media until his inevitable next disaster. Sadly, Americans have become increasingly inured to chief executives receiving obscene compensations for subpar performances that’s responsible for the declines of once respected and admired corporations like Boeing, GM, Ford, Disney, American Express, and others.
Ed Bastian is most deserving of his induction into the Starkman Approved CEO Hall of Shame. The recognition comes with a box of fresh baked croissants from the Paris boulangerie of Bastian’s choosing.
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I welcome constructive feedback from readers and can be reached at eric@starkmanapproved.com