Should Delta Help Wheels Up?

Delta plans to prop up the failing private jet company. Is this a good use of resources?

Dear Readers,

Education is funny. I don't remember any formulas from my MBA program, but I do recall my strategy professor asking the same question 10 times in each three-hour class: "What business are you in?"¹

I was reminded of his question this week when Delta Air Lines announced it wants to lead an investment group in taking over the private jet company, Wheels Up. In sharing terms of a non-binding agreement in principle, Delta said it wants to guarantee half of the $500 million Wheels Up needs to continue operations, while offering restructuring assistance. Delta, which has had a large investment in Wheels Up and otherwise might lose it, has financial and strategic reasons to keep the company afloat. But is this the time to walk away? Even if Delta makes a profit, is it worth the effort to meddle in a non-core business?

Delta has one of the strongest management teams around. I am sure executives considered this basic strategy question and decided saving Wheels Up is worth the effort. But as a lover of simplicity, I argue the opposite: Passenger airlines are complicated and specialized businesses that often struggle to produce a standardized customer experience in the best of times. Delta should not waste resources fixing companies that do not fit its core mission.