Businessweek Talks- Delta CEO Ed Bastian

Week on iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show weekdays at two pm Eastern only on Bloomberg Radio. So ed, So much going on in the world. Let's start on the sort of geopolitical geo economic front, the trade war. Are you seeing any blowback through your business from that? Not in a

material way. We're seeing some effects, particularly in Asia. Uh, they tend to be more around our big corporate customers, automotive manufacturing that that are not seeing the same type of demand for their products, so they're pulling back some of their spend and travel patterns. But Asia for us is one of the smaller regions than our total revenue pie and uh, we're not We're not seeing a white We're watching it hopefully, but we're not seeing a major

a major decline. And so on a week like this when you see yet another geopolitical issue in the Middle East, obviously disruption in the oil market, how does that play through, if at all, for you in terms of your fuel costs, in terms of your hedging strategies, any elements that are sort of popping up there, Well, it's a reminder of how volatile the business climate, the environment in which we operate.

That said, you know, we're already seeing fuel prices start to moderate, you know, after the spike over the weekend. We've built our business to be sustainable at much higher fuel prices than sixty five dollars print, which is worths trading today. So we're on the front end of that h anticipating what we might face in terms of future future challenges. But from a revenue durability standpoint of balance sheet perspective, we think we're pretty well situated. So let's

talk about your investors. You know, you have won a lot of plot. It's from your customers and there's some investors who are very much on board, and by certain measures the stock has done very well, but by other measures that it feels a little bit stagnant. Uh dare I say it? Uh? What's the street missing? Well, I think it's is. It's a proven story. You know, our largest investor, Warren Buffett, he owns eleven percent of Delta. I think he has a great line is about our industry.

We were like the Chicago Cubs of the of the business world. You know, we didn't have a bad decade. We had a bad century, and we're we're on a different, different platform now. We've you know, the last ten years, we've really invested in the fundamentals of running a great airline with reliability and performance and service levels unseen in Delta's history and candidly within the industry as a whole,

in terms of scale. That's been been rewarded by our customers with customer satisfaction scores and brand loyalty and preference at levels we've never seen before, which we're taking back and continuing to reinvest in the customers, reinvest in our airports and our technologies, while at the same time generating you know, meaningful free cash flow. I think that's the other thing the investors historically have not seen from the airlines.

While the airlines may have performed at certain periods of time. They also spent back what they what they made on on labor, on technology, on on capital and and fleet. We're doing that, but we're also returning a meaningful amount. So this year, Delta we expect to make over five billion dollars for the fifth year in a row in terms of profits, but we'll also have free cash flow

delivery this year of over four billion dollars. And so I think that that performance and that consistency of performance over time is rewarding. And I do think that that investors will will stay with us and and hopefully see see improvements in the p So there has been a bit of a divergence. It feels like across the global airline industry. You feel like it feels like you're you're one of the have so that there may be some have nods out there. Are we going to see some

more consolidation and will you participate in that? I don't think you'll see consolidation in a meaningful way in the US. You may see it in in it's made other other parts of the of the airline market not necessarily participating relative to Delta. Internationally, I do think you'll see Uh, Europe, you're already seeing it. You're seeing bankruptcies in Europe in terms of some of the European carriers. I think you'll

continue to see some consolidation trends there. Uh So on the on the global scene, that's where we've been investing. We've invested in a number of our partners and really not consolidation. It's more to have influence within within our

our global network of carriers. Uh you'll see more of that from Delta potentially, but I don't think on the US side you'll see and what do those partnerships tend to look like now and what might they look like in the future, either geographically or are there new and different things that that you can try to sort of create that that family as it were. Sure, Well, you know, one of the things I think that has not been successful in the airline world are the alliances. You know,

we we am self critical SkyTeam Alliance. I don't think we've we've brought a lot of great I too, customers. I don't think we've brought a lot of great value to our member airlines. And we're going at this thing in a very different approach. We're going at it through Delta making bilateral investments in the most important partners. We own forty nine percent of Virgin Atlantic. We own forty in Mexico, the two closest carriers to us on either

side of of the country. We're invested in Air France KLM. We've invested in Korean, We've invested in Shahna Eastern, We've invested in gold Down in Brazil. And as a as a consequence, what you see is you see this network of influence that we're having within those companies. So those companies want to know what what Delta has learned about operational efficiency and prowess and in premium. We want to learn what it takes to win in those local markets.

And then over time, while we can't own them in terms of whole owned consolidation, we can have meaningful enough investment that we create an international network of carriers that will be uniquely tied where you have Delta as as the center p That's that's our goal. And when you think about the long term, UH to think of Delta today,

we serve two hundred million customers a year. Right, if you add the customers from all those carriers I just mentioned, you're up to over five million customers a year that we serve. There's never been an airline network and an air airline, you know, combination. You forget consolidation that delivers that kind of value across geographies. We have an opportunity

to create that. And so do you have people knocking on your door at this point saying, yeah, why don't you come over and uh spriakles having that magic tuk on. There's there's there's there's a lot of a lot of questions going on and conversations at all times. And you know, we answer, we answer every knock that that cars. Some we answer some way. Some we say no, we can't, we can't do that. But there's there's a there's there's

there's a strategy here that's unique within the industry. The other groups are not doing that, and I think it's going to be an advantage for Delta. So let's talk about your customers, both business and consumer. And you talked a little bit about it. I don't want to put word to your mouth like a little bit of weakness maybe from a business perspective, from the global or from the Asian market overall. Um generally, businesses, it feels like are a little bit cautious right now globally, maybe for

geopolitical reasons. We certainly hear that through earnings reports from from big companies. What do you see from your business customers? I see a healthy U S. Consumer. We know the US consumer drive the U S economy, and the consumer demand is very, very healthy in the U S. We just finished the busiest summer in our history by a meaningful amount. Revenues this year are up seven percent year on year, which they were up also the year prior.

We are with within the Fortune one d We are in the top quartile of growth companies within the Fortune one. We've been there the last couple of years. People don't expect Delta to be seen at that level of growth. We're seen as a mature company. I think we're seeing We're seeing a lot of growth in travel and the preference to the Delta brand, specifically within the travel spaces growing at unprecedented levels. Uh. Summer you know was great.

The Ford look on the holidays look strong. Uh. We don't have a crystal ball that goes out what's beyond the book and curve of our customers, but we watch, we watch all the t leaves. We see what's happening in retail. We see what's happening, and you know, the other sectors of the economy, corporate corporate demands still very strong again. You had some pockets around around automotive and manufacturing, some of the industrial segments. There's some weakness that are

affected by the geopolitical climate. But broadly speaking, financial services UH, service based UM industrials or companies rather are are are providing a lot of growth, and we're seeing we're seeing meaningful growth in those segments as well. What worries you for the consumer right now as you look around, You know, the thing I worry most about is that everyone gets obsessed with wondering when the next recession is going occurring.

We talk ourselves into Yeah, honestly, I do because because it's about consumer confidence right and um, the consumers are doing well. Unemployments at record low levels. I think people are are are seeing a lot of opportunity in the marketplace. We got a new economy. You've got winners and losers that are being created at a faster pace than ever before.

So that disruptive entent and I think we know the you know, we all have to understand what's what's happening within that, But the consumers are getting great value air fas ADULTA one of the reasons we're growing as an industry's fast air fas are down in real dollars over the last twenty years, and so you think about that, you know, it's it's it's remarkable. And every year they go they declined by another one to two points. And so that's another reason why the travel industry is booming

the way it is. So take me inside the plane. You know, I'm a loyal Delta customer. I've been for for many years. I've grown up in Atlanta. I've seen, you know, pretty massive change, especially over the last few years in your plane and and just sort of the services. What what do you feel like as you look back over the past couple oterations, what's really worked? What hasn't worked in terms of things that sumers especially is said, Okay,

I really like that, do more of that. Well, the biggest thing that's worked is A is the core reliability of of of the product. You know, we are we have set a much higher set of consumer expectations of Delta than ever before. Our on time reliability, our cancelation rates are are are as well. We've we've got a goal to cancel cancelations because we know that's probably the biggest stress point for consumers. And we're we're well on our way. This past year, fifty days of the year,

we did not have a cancelation worldwide. Um So, so we're raising the bar. And when you have that platform of strength up there, then it gives you the opportunity and to to get more more adventurous, you know, to whether it's in where we fly, how we fly, our technology are digital innovation that we're bringing. Uh. We hear great things about the fly Delta app and it's working because more customers than ever before are booking on Delta. Almost fifty of our US travel is book direct on Delta.

Just just five years ago that number was less than half of that. So that tells you that we've got a lot of trust, we've got a lot of preference, we've got a personalized service that people want to see. Um there's certainly things that we're experimenting with catering and meals, and I think everybody's got their views. Some things work,

some things don't. We we you know, one of the things we've we've introduced over last year as pre ordered feel meals and your chance to go in and select your entree and and hopefully it'll it'll taste as good as it looks on the on that screen. So when you think about, you know, sort of the moment we're in in twenty nineteen, it feels like we're also thinking about consumption and sustainability and all of our personal and

sort of corporate carbon footprints. For for lack of better term, what do you see happening in the short term, in the mid term when it comes to your industry in terms of new planes, new designs, and and how do you get your arms around that, both from a buying perspective and a CAPEX perspective. I well, sustainability is is. I think that's one of the existential threats to our industry. If we don't get out in front of that, we're doing much more in that realm than we give ourselves

credit as an industry and as Delta specifically. You're gonna hear us talk and hear me specifically talk more and more about that because I think our consumers need to hear that. Uh, it's bigger issue today in Europe, but it's it's coming here to the U S as well. You know, one thing we did on the sustainability level, Jason as we froze our carbon footprint in two thousand and twelve and said all growth from that point forward was going to be carbon neutral. And we've done that.

We have grown this airline since two thousand and twelve without increasing our carbon footprint at all. Now that that's that's a great statement. There's more to be done in that regard. Long term, we want to reduce our overall footprint by but we had to stop to stop the growth. Ways we're doing it is exactly what you said, uh, New new engine technology, new airplanes that are lighter and

are more composite based. Every plane that we put in the service is more fuel efficient than the planes we take out, and fuel is nine percent of our footprint is jet fuel. We're investing in biofuels at at at a heightened pace. We are the only airline that owns its own refinery, so we have we have some energy

technology and expertise within the space. We announced just the other day, you know, in the Pacific Northwest recycling venture that we're working on where we take forest debris and try to bring the rosin and and and manufacturing process to produce biofuel, which we think, if works could could generate up to ten percent of our jet fuel needs on the West Coast using biofuels, you know, which are

today very uneconomical to to to operate within. We're investing in in elimination of single plastics aboard our our aircraft, in our lounges. We've got the electrification of our ground service equipment and many airports that we're working, and so there's there's a lot we're doing. And then on top of that, we're also purchasing carbon offsets to the extent that we're not off setting enough through the through organ It means we're going out and buying and investing and

sustainable renewables in other parts. And by the way, our our customers can also join us on the journey. Every customer to the extent that they want to offset their personal footprint can go on our website as they purchase a ticket and see what their footprint is and what it would cost to offset it, and we'll we'll make it well, you know, we'll pass that contribution along to h to offset for the individual customers. But but I

think that there's more that needs to be done. It's it's it's a it's it's an issue for uh employees. You know, employees want to work for for not just a great company, but a great company that does great things. And this is an issue for the future. And if we're going to grow, we have to grow sustainably. And we can't grow sustainably if we're depleting the resources of our planet. Well, let's talk a little bit about your employees.

You're down there in Atlanta, robust growing market. How hard is it for you to sort of get the people you need sort of across the board. At this point, we're we're having great success. Our hiring brand has never been stronger. We just announced a couple of weeks ago that we're hiring a thousand flight attendants, you know, to come into Delta over the next few months. We had over a hundred thousand applicants for those one thousand positions just in two weeks. Uh, so it's almost too much. Uh,

you know, pilots, we're hiring pilots. UH, getting you again, you know, ten to twenty x the number of applicants qualified applicants to the actual individuals. This year, we'll hire somewhere between five and seven thousand people in all walks around Delta, whether it's pilots, flight attendants, mechanics, airport agents, technologist,

knowledge workers. We're a growing company. We're growing our top line by seven percent, and we need to continue to expand our skills to be able to support that growth. So let's talk a little bit about your job. What's the what's sort of the biggest thing on your plate right now when you think about sort of long term strategy as you parse out a day or a week, what are you spending maybe a disproportionate amount of your time thinking about I always spend it to a portion

of many times spending about thinking about our people. Our people are the key to everything we do. Uh. If I'm found to be self critical of the company fifteen years ago when we were in in the bankruptcy process in a very difficult time, it's because the company lost its relationship loss it's it's it's it's means the meaning of what that service meant and the values and the special the special advantage that we have having the great Delta team that we have on the property. So whether

it's makes sure we're hiring the very best. You know, we hire not just for for aptitude, but we hire for attitude and and and and what it means in terms of having a heart for service, keeping them engaged, keeping us with us on the journey. I'm speaking in all all foreigns, whether it's in a galley of of an aircraft, sitting and coach on board the plane, in the cockpit, in the airport's town hall meetings. So there

there's there's a lot of my energy. And by the way, you know, using video and using all kinds of social media tools to connect to our people. I want our people to to to think and hear from me what I think, and I'm I'm not afraid to kind of think out loud and let people know what what's coming down the road and and the excitement that that that I sense, and what we can do as a team to continue to win that We've We've got an employee

base that that you know is very transitory. You know, they don't show up most of them in an office. You gotta go out and find them. And that's why I travel so much, because I'm out finding them. And was there an AHA moment for you in this job where you realized, Okay, I've got I've got to dedicate more more time to this. Was there an interaction, was there something where it just clicked on, or was this something that you set out to do from the beginning.

I think this is something unknown for easily a decade or more. Again, when when you go through a near death experience like we did in the bankruptcy, and you see, you know kind of the challenges we we had, we had in places taken fifty pay cuts, losing benefits, losing pensions, you really heart wrenching family decisions that we're being forced based on our economic arrest. The thing that I promised our employees is that when we are profitable, first of all,

we're gonna share the returns of that. So fifteen percent of our profits to this day go back to our employees. And this year we'll we'll we'll have over one point five billion dollars that will be distributing to our employees on Valentine's Day. But even more importantly like that, they need to see see a very visible leader. They need

they need to understand the leadership. They need to have that relationship because they're out in the front lines and customers every single day in the public eye, and they need to know that their management team has their back, that their CEO is going to stand with them, you know what, whatever challenge that they have we're faced, and they're they're always going to be rewarded for doing the

right thing by a customer. Well, and speaking of that visibility, it feels like someone in a job like yours, more is expected in terms of social issues. You face some of that down in Georgia and in Atlanta. Uh, you know, increasingly CEOs are being called on to sort of take a stand. What do you make of that? I think

it's uh, it's inevitable, all right. I think when you have some of the dysfunction that's going on in society today, when you when you look at you know, the the what public views in terms of politicians, you know, it's kind of a record lows in terms of credibility and the divisiveness that sits in our political systems without without kind of pointing fingers that anyone. By the way, it's

not just in the U S. It's it's worldwide. Um. It's interesting corporate leaders have actually risen in in in people looking to corporate leaders to speak into that leadership vacuum. I think you hear politicians, at least certainly privately, telling us corporate America, you need you need to lead, you need to you need to speak, you need to kind

of show the way. And those of us that lead large organizations Delta eighty thousand people worldwide, that that's a big that's a big army of people that that that I'm speaking to. I think you have to be careful as to what topics you speak to. You have to know the values of your company, not the values of your person, for the values of your company, as to what's relevant. I'm not looking to be a social activist. I'm not looking to change the world. I'm looking to

improve Delta and stand by that Delta's values. But if you see something in the world that runs counter to what we believe in and what our mission is, I think we're required to speak. And the other thing that technology and social media has done, it's eliminated the response. Done right. You don't have time to go back and say, let's let's have a huddle on this topic. Let's let's

call the board and take a pulse. Um if you you know, because you're you're measured by speed as well as your decision, and and and and so it's challenging, you know as a CEO. You know, growing up, I was always trained to to not be in that position. You don't want to antagonize anyone. You want all people of any of any persuasion to love Delta. Unfortunately, the world's the world's a little more complicated. And how do

you think about the brand? You know, I mean, I think about that this is a brand that has moved more and more into the public, not politically, but just more. I mean, I believe even that the New Bachelor is the Delta pilot. I mean, so, like, how do you sort of uh sort of get your arms around all the different ways that it may manifest itself in real time? Well, well, you have to embrace it. You got you got to recognize the world's changing um again, whether it's it's it's technology,

social media, entertainment. You know, we we are a brand that's out in the consumer rise. You know, we we live in the world. You know, We're not a brand that and you're sitting in the back of the plane, you're hearing it. I'm getting I'm getting it every day. Yeah, and and so when you're out in the world and you're experiencing the world and your brand that flies. We're not sitting on some store shell. We're sitting with people. Uh. You know, you have to be dynamic, you have to

embrace it, and you have to go with them. By the way, you're not always going to get it right, which you always have a chance to correct it right. All right. Just want to ask you a couple of more questions that sort of about sort of the the way you work and and sort of the way you view the company and yourself as you look around the industry. Who's a competitor that that you admire? I think southwester is done a fabulous job. You know, they've been very

true to their mission. They've they've been very diligent ank on this and they've gone over forty years without losing money, which is hard in this business. And I admire their execution and their discipline and their focus on their on their on their purpose. All right. So, what's the best advice a mentor or a boss or or a friend has given you that you sort of take to heart as you go about doing your job. Well, there's there's been a lot of advice people if I said to

this day. Every day I get to get advice. I think one of the one of the things that has always resonated with me around leadership is that you know, you need to look at the people you surround yourself with, both in business in life. Uh. You know, the crowd you keep is going to be largely dictatory where you're

going in terms of your trajectory. If you want to lead people, make sure you have people around you that are bigger than you, They're stronger than you're they're better than you that you're not afraid of, that you can learn from, and you kind of kind of kind of look, look, look to put yourself in position for success for your team and the people you're with. And I tell you I would not have been nearly as successful in my career if I didn't have some great people you'll buy

my side, pulling me along. And you've got to You've got to lean into that. You've got to look for those people in your life. Biggest mistake or sort of darkest moment in the past five ten years in your job, clear of the darkest moments. When we filed for bankruptcy, I was I was in the courtroom in New York here and uh, and you talk about a public admission of failure. There's not a more humbling experience than that. And honestly, once you go through something like that, all

other failure is relative. Right. It's like, and then you failed to to to get better. You don't, you don't, you don't. You don't fear as much because already you've already acknowledged that. And I think that's one of the things that that we've been successful. We've had a courage about us. Yeah, if you weren't doing this job, what would you be doing anything anything out in the in the world. I'd be a professional baseball player. Really, I'd love to do. Why is that That's what I wanted

to do as a kid. Yeah, I love I love baseball. I grew up in New York and I was I was a Yankees fan. That I wasn't great, I wasn't a good hitter. Kind of made it to high school and that was about it. But I I just I just love, love love baseball. As you know, America's pastime. I'm glad to see it's more in oversurgence you have think you're seeing you're seeing people people talk more about baseball, uh these days. But I got a pretty smart, pretty

prominent place that a Yankee stadium. I believe Delta does right. There's down at sun Trust as well, or there is you know, we we do we do it sun Trust and you know it's it's kind of Delta in both those parks. Single biggest thing you're excited about for the company looking ahead five tenures. I am so excited what we're doing with our ground experience in our airports. We're

building a new airport at Laguardy. It's desperately needed, building a new airport at l I think any New York are listening or watching this right now, can we'll hardly agree with you on that. We're going to complete the build at JFK that we have. We're going to We're building a brand new airport Salta City. We're building a new international terminal in Seattle, and the and the terminals that we're building are going to be for the future, not for the past. So you know, using technology and

looking forward. You know, the airport infrastructure we have today was built for the nineteen sixties. You know, the crowds of security apparatus, it's all backwards, you know, we need we need space by our gates for have people to have a more comfortable boarding experience. You know, in the nineteen sixties, you didn't stop, you know, you didn't worry about getting to the gate because you were in the lobby and you could do good board. Security wasn't wasn't

an issue. You could board, you know at the last minute. Well, the first the opening door to an airport. These days, you know, as really as your security and people don't stop in the headhouse. But yet all real estate is centered there. So we've got to flip them around. Uh, using technology to enhance the effectiveness and the efficiency of

security in that whole line. You know, the boarding process, you know, getting customers to believe that with r F i D technology, you know, your bags will be there for you when when you arrive. Everyone doesn't need to to arrive with all their bags and make the onboard process as as difficult as it can be at times. Um, But our team does a great job. You know, we're

anticipating customer needs. The other thing I'm really excited by, you know, beyond the next five ten years is the international you know, we have a great opportunity as to talk about all the seeds we're planting, the investments in our international partners. It's going to take time to harvest and take time to learn, and take time to to to really root itself. But over the next decade and beyond, you know, Delta is going to be a great international airline.

We're a great US airline, now I want to be a great international airline. I think we have the opportunity to be that deerline for our US based consumers. Thanks for listening to Bloomberg Business Week. You can subscribe to the podcast on iTunes, SoundCloud, or Bloomberg dot com. You can also listen to our radio show every weekday at two pm Eastern only on Bloomberg Radio