No wonder Delta Air Lines agreed to outsource its computer operations to IBM. The bankrupt carrier's reorganization plan, filed in court Tuesday, and related documents reveal that its Delta Technology unit experienced "unprecedented attrition" and internal chaos leading to severe operational disruptions following its Chapter 11 filing in 2005.
As a result of the employee exodus, the company was forced to implement an expensive bonus program to entice key IT personnel, including CIO Shirley Bridges, to remain on board. The situation, "if not addressed, would have seriously impacted [Delta's] ongoing operations," the company said in Tuesday's reorganization document.
Under the retention plan, according to related U.S. Bankruptcy Court records filed earlier this year, certain Delta Technology employees will receive the full value of their incentive package if they remain with the airline through March 15, 2007. They also are eligible for the bonus if their job is outsourced.
In August, Delta said it was outsourcing the management of the bulk of its computing infrastructure to IBM, under a seven-year deal of undisclosed value. It wasn't immediately clear how many Delta Technology employees would be affected by the contract.
For the purposes of the retention plan, Delta grouped its IT employees into six tiers, depending on rank and seniority. Tier one executives are eligible to receive up to 70% of one year's salary in bonus payments. On the lower end, tier six rank-and-file workers can receive up to 20% of their salary. Delta formulated the plan with help from compensation consultants Watson Wyatt.
In bankruptcy court filings, Delta indicated that attrition within its IT department in late 2005 was 20%, compared with historical rates of less than 4% annually. The company said 31% of its systems engineers quit following the bankruptcy, while 18% of its project managers left. It also noted that two CIOs jumped ship following the September 2005 Chapter 11 filing and took a number of key tech workers with them.
Home Depot, SunTrust Banks, and Electronic Data Systems were among the companies that poached IT workers from Delta, according to the court filings. Home Depot was using the airline's former employees to implement "kiosk technology in its stores similar to Delta's airport kiosk technology," Delta said.
Delta also indicated that, following its insolvency, only 39% of the IT workers to whom it offered jobs would accept positions.
Delta said it began to experience significant operational problems in late 2005 as a result of the mounting chaos within its IT department. For instance, in October of that year, the system used to set daily pricing on major flight segments went down for more than 12 hours, costing the company more than $4 million in lost revenue, according to one court filing. IT outages also led to numerous flight delays during the period, which cost the airline about $38 per minute.
Among other things, Delta Technology maintains the airline's routing and control systems, supports the Delta.com Web site, supports Delta's Cornerstone gate control system, and supports the airline's baggage handling software. "Without the efficient functioning of these systems Delta would not be able to operate," the airline said.