It sounded like a great idea. Creating a new, low-cost airline using planes that are sitting idle and workers that would otherwise be redundant. Leveraging existing resources (such as gates, booking systems and maintenance) to build an airline that is lower cost than competitors. Then making it better than JetBlue, with more legroom and TV channels, in order to win back customers on high-traffic leisure routes. However, less than three years later, Delta decided to fold Song back into Delta.
Last week Advanced Competitive Strategy students welcomed John Selvaggio, former president of Song, into the classroom to learn of the rise and fall of Delta’s now-unwanted lovechild. It was intriguing to hear about the design and early success of the new airline and how Delta’s bankruptcy brought down the fledgling airline.
Song was the first-ever airline to target women. “All airlines target the male business traveller, so we decided to go after the uncontested part of the market,” opened Selvaggio.
They wanted to create something fresh and new to beat off JetBlue and the legacy carriers. Research showed that women booked over 75 percent of all leisure trips and had different needs than men. Song created a new target customer, dubbed “Discount Diva”-a successful woman, age 45, with a household income of over $75,000, who was interested in fashion, health and design. Targeting women did not limit the airline’s appeal.
“Where women go, men always follow,” joked Selvaggio.
The airline generated a lot of publicity and did well in the beginning. It got off the ground very quickly because it didn’t have to recruit and train new flight attendants or obtain aircraft. Song quickly became the most profitable part of Delta and won numerous awards.
“Even male business travellers who used to fly Delta preferred us, in spite of not having a separate first-class cabin,” said Selvaggio. The airline had struck a chord and its brand was regularly featured higher in airline rankings than Delta.
However, Delta’s bankruptcy soon forced Song to face the music. Several senior managers had to retire in order to protect their pensions, including Selvaggio. This meant many of the key supporters of Song were now gone. Bankruptcy ended Song’s expansion plans, and it had to start fighting Delta over scarce resources.
The financial pressures also made it hard to support two brands in the market. But the final source of pressure came from Delta’s unions, which resented Song’s success and were angry that flight attendants who wanted to transfer to Song lost their seniority privileges.
Therefore new CEO Grinstein decided to fold Song back into Delta, announcing in October 2005, “As Delta continues its transformation to become a more customer-focused airline, we are incorporating the best of Song into the best of Delta.”
However, it remains to be seen how much of Song’s success can be transferred into the ailing old airline. Given all the turbulence in recent years and further aggressive competition for low-cost carriers, the future still looks tough for the 80-year old airline. Could this failed venture be Delta’s swan song?