In a world of wars and walls, Delta Air Lines, Inc. DAL claims a goal of unity.
“Our mission is to make the world a smaller place,” CEO Ed Bastian said Wednesday at the Detroit Economic Club. “It’s something the world is pulling against, and we’ve got to lean into that. We bring the world together, and we’re doing it more than ever.”
What’s Going Wrong
Part of Delta’s strategy is expanding its international business from 40 percent to half of the mix. But the process hasn’t been easy.
Problem No. 1 is resistance to air travel, Bastian said.
“The industry continues to be a volatile industry,” Bastian said. “We deal with everything going on — macro, we live in that world [of struggle], the volatility, the social discourse that’s out there. The world seems to be pulling away. Call it protectionist or call it just fear, it’s part of society.”
The continued expansion of foreign competitors is Bastian's greatest concern, he said. Delta has been lobbying for the U.S. to enforce a trade treaty that cuts the reach of major Middle Eastern competitors.
The "high quality service" of Emirates, Etihad and Qatar Airways is in itself a challenge for Delta, but no more so than the airlines' inimitable business models.
“The problem with that is they are 100 percent government-owned and they have been subsidized by their governments to a tune of over $50 billion over the last 10 years," Bastian said. "They have no incentive to make money."
So the Middle Eastern firms are expanding into global markets with extraordinarily low, competitive rates that American companies cannot afford to rival, Bastian said. The U.S. airline industry stands to lose a lot of international business unless legislators step in with accommodating trade policies, the CEO said.
"The Trump administration ran on a platform of enforcing U.S. trade treaties and protecting U.S. jobs," he said. "This, I believe, should be exhibit A ... This is the No. 1 trade dispute in our eyes going on in international trade today."
Despite the competition, Delta has managed to achieve a significant post-bankruptcy turnaround — again, not without effort.
Technologically, it’s replaced Boeing 747s with smaller, more fuel efficient Airbus 350s. Delta has 80 new planes joining the fleet next year, including Airbus 330s and 321s, Boeing 737s and the Bombardier C Series.
From a business standpoint, it’s the only airline maintaining ownership stakes in global competitors. As a shareholder in Air France KLM SA, China Eastern Airlines Corp. Ltd. (ADR) CEA, Air Mexico and Brazil’s Gol Linhas Aereas Inteligentes SA (ADR) GOL, Delta has helped close industry-wide technology gaps, align the customer experience, and optimize exchange of consumer intelligence, its CEO said.
“The big thing for us right now is the investment that we’re making in our international partners,” Bastian said. “... We want to be the international airline of choice in the long term, and we’re learning a lot from those cultures in terms of what to sell and how to present Delta to the global markets.”
A People Business
But the real differentiator and the secret to Delta’s success is “the spirit of the people," Bastian said.
“The only thing that truly sets an airline apart is people and the warmth of service,” Bastian said.
Delta keeps its workers happy by distributing 15 percent of profits — $1 billion each year for the last three years — to employees, he said.
(Pro tip: If you’re planning a Delta flight and want smiley staff, Bastian advises a Valentine’s Day departure. That’s when the bonuses arrive.)
Staff maintenance is the alleged secret to Delta’s success: 240 days last year without cancelled flights, a one-in-1,000 ratio of misplaced bags and the second-best rating in the industry for on-time performance, behind only Hawaiian Airlines, according to Conde Nast.
The Future Of Flight
As it continues its upward launch, the Atlanta-based airline is looking to set new standards for in-flight service, Bastian said.
Delta is considering opportunities to monetize complimentary snacks by requesting that food companies pay for sample distribution, and it’s moving toward a free Wi-Fi model by investing in new satellite technologies.
Bastian said he's keeping an eye on trends in autonomy — even if he's not yet sold on the concept.
“I’m not getting on any planes that are flying themselves."
The CEO predicts that drone travel is relatively far off and not valuable to margins.
“Airfare is one of the cheapest bargains we’ve got in society today,” Bastian said. “There’s not going to be a price point where the technology is going to be able to enable another run of consumer demand because we’re already taking care of that demand very well.”
Photo: Delta Air Lines CEO Ed Bastian, left, with WJR-AM host Paul W. Smith at the Detroit Economic Club on Wednesday. Photo by Matt Friedman.
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