- 12 hours ago
Category
🗞
NewsTranscript
00:00Yes, I'm very pleased to be in Napa Valley. It's a tough life for some at the Cancelo Sparks Summit
00:05here with Ed Bastian, the CEO of Delta.
00:07And this entire event is about leadership. And boy, are we being confronted for moments of leadership right now.
00:13Two leaders of the world, the two key economies meeting at the moment.
00:17And I'm interested as to how you see U.S., China and whether it impacts your business very much.
00:22First of all, thank you for having me. And it is fabulous to be out here.
00:25I think it's on everyone's top of mind right now.
00:27In our business, in transportation, it's actually interesting.
00:30It's the one market of the world where travel actually has not returned to post-COVID levels.
00:37In fact, it's less than half of what it had been because the two countries, not just economies, have been
00:44decoupling a little bit.
00:45And so it's so important the fact that we have our leaders of both countries together talking about how we
00:50can start back again to start building trust and creating better relationships.
00:55Now, that coupling, in many ways, the conversation has been around a geopolitical moan of anxiety when it comes to
01:02conflict in the Middle East that has big implications for your business.
01:06Absolutely.
01:06Now, can you remind our audience, TV and radio, how much you've seen jet fuel increase for the business and
01:11how you've managed to weather it?
01:12Because you put plans in place over the years that you've been running this business to ensure that you can
01:17really weather such shocks.
01:18Yeah. So several things. First, jet fuel prices have doubled just since the start of the conflict.
01:24Over the last 30, 60 days, we've had at Delta over $2 billion of higher costs in the current quarter.
01:31On a run rate basis, it's almost $10 billion a year, so a huge amount of money.
01:36The way we've managed that, first, is building a brand that is resilient, that people understand.
01:43If fuel prices are up, we're going to have to find ways to cover it.
01:46We have a consumer base that is willing to pay a higher cost.
01:51We're not covering the whole thing.
01:52But in the current quarter, we're expecting to cover relatively half of the increase in price in a relative short
01:58period of time, which is pretty good.
01:59The second thing we did over a decade ago, we bought our own refinery on the East Coast and the
02:04Delaware River outside of Philadelphia.
02:06That's some foresight.
02:06And in this quarter alone, we expect to save somewhere between $200 million and $300 million of cost, fuel cost,
02:14which is more than twice what we paid for it.
02:17So you're able to, in many ways, try and mitigate it for a consumer, but a consumer that you have
02:21very thoughtfully tailored yourself towards being more premium, ultimately.
02:25How are you thinking about Delta leaning into that as we continue to see a remarkably resilient consumer's willingness to
02:33spend and to travel?
02:34Well, there's several consumers out in the marketplace.
02:36People talk about the consumer.
02:38Our consumer is a higher-end consumer and is incredibly resilient.
02:42We have seen the demand strength right throughout the year.
02:45In fact, when the war started, it seemed like it even ticked up another notch.
02:49So we're seeing significant growth and we're continuing to see significant growth in our business.
02:54Why would it tick up another notch?
02:55Suddenly people were like, I need to buy now?
02:57I think there's a little bit of that.
02:59I think more important that people understand, typically when wars happen, people pull back and sit back.
03:05We've been through so much change, so much disruption.
03:07There's so many things coming at people.
03:09And I think some of this is the post-COVID effect.
03:11I'm not going to sit and wait to see what the next headline is going to be.
03:15I'm going to go now.
03:16I'm going to go as long as I feel safe and be willing to invest in myself, invest in our
03:22experience, see the people and the places I need to be at.
03:25You've been willing to invest in even new routes just in the last week or so, announcing that you're going
03:29to be going to certain parts of Europe.
03:31So transatlantic routes, because it's dining off a moment of sport and football.
03:35But how do you decide which routes are working for you right now, which ones you open, which ones you
03:39slow down on?
03:40Well, our routes to the Atlantic, to Europe, are doing very, very well.
03:44Now, I would say exit Europe travelers point of sale into the U.S. has been down a bit.
03:49But that's a trend that we've seen for several years.
03:53But Americans specifically are going to Europe.
03:55We're launching just in the next week to Sardinia.
03:58We're launching to Malta.
04:00We're launching to Porto.
04:03Just three brand new routes for us in the midst of everything going on.
04:07So that tells you where the consumers want to be and who they are.
04:11And they're principally Americans wanting to invest in their experiences.
04:15We are with Ed Bastian, the CEO of Delta for our TV and radio audiences at Bloomberg.
04:20I'm interested in how you also invest in your people, because you've actually increased wages in this inflationary environment in
04:27a time where you're just saying you've got two billion more in costs of jet fuel.
04:31How tough is that to do for you, or is it just a no-brainer?
04:35On the surface, you would think it'd be difficult.
04:38But when you understand our strategy, when I talk about our asset, our most important asset are our people.
04:44It's our culture, protecting the people that get us through tough times.
04:48It's an even more important time to invest in them.
04:50So we were pleased to announce a couple of weeks ago that we'll be increasing everyone's wages, the company, by
04:564% starting June 1st.
04:57That's our typical schedule every year, sometime in the spring, that we announce the increases.
05:03And it's the most important investment I make.
05:06There's a lot of things about this business that cost a lot of capital.
05:09But human capital is the most important capital that we have, and particularly in times of trouble.
05:15Because they're the ones that are keeping customers coming back and providing that premium experience and opportunity for our brand
05:22to continue to rise.
05:24In times of trouble comes opportunity, particularly when you're on such solid footing.
05:29Look, in many ways, do you look at talent that now comes on the market very sadly because of what's
05:34happened with spirit?
05:34Or are you thinking about the way in which the industry is going to change around you?
05:38Because we might see consolidation.
05:39It might not be from you, but it might be more broadly the way the market has to go.
05:43Well, you're seeing rationalization.
05:44Whether it's consolidation or not, I don't know.
05:46But you're seeing rationalization because when fuel prices at this level, companies such as Spirit, by the way, which didn't
05:54go out of business because of fuel prices.
05:56They went out of business because they had a bad product that people didn't want.
05:59It was a bad strategy.
06:00Good people with a bad strategy.
06:02And we've hired a fair number of the Spirit people, as many of the other airlines are, bringing their equipment
06:08in.
06:08Our industry continues to rationalize itself.
06:11And if you've got a good product that people are willing to pay for, you can grow.
06:14And you see at the lower end of the marketplace, those airlines that don't have the quality of the experience,
06:21even though they're a lower price point, they can't afford to offer the lower prices in the environment in which
06:26we're in.
06:27With that pressure on prices, there might be this worry that companies are more anxious about innovating, investing in innovation.
06:34Now, Ed, time and time again, we have you actually on our tech show because you're so aligned with the
06:39tech area, with Joby, I think of the way in which you've thought about the future of travel.
06:43You're also, though, thinking about the future of premium flights and wheels up is another area in which you've worked
06:49with.
06:50How are you thinking about innovation at this moment in time?
06:55Innovations are like, like, airlines people think about as a transportation company.
06:58Airlines are a technology company, whether it's the app and the ability to give consumers better control of their experience,
07:06better information, better displays, whether it's our own people having better data to make better information, whether it's the engine
07:11technologies we deploy.
07:13We're in the high tech business fundamentally, but it's tech for human's sake.
07:19And I think that's the other thing in this AI world.
07:22A lot of people get confused about tech for tech's sake.
07:24No, it's tech to make our people smarter.
07:27I love to call AI augmented intelligence.
07:29I don't know why we have to call it artificial.
07:32It should give people tools to do a better job.
07:34And then it gives them the opportunity to preserve and grow their development, not actually limit their opportunity.
07:41You've actually just made a commencement speech, I believe, where you used AI initially to maybe put thoughts to paper
07:48of what you were going to say.
07:49And then you ripped it up.
07:50You said, I have to use a pencil here.
07:52What was it that you feel that AI can bring to you as an individual, AI can bring to your
07:57employees, augmented?
07:59What is it that they can't?
08:00Well, I did that.
08:02And it was more out of curiosity.
08:03I was never intending.
08:04But I was just curious because I was in the middle of writing it.
08:07And I said, I've never done that before in terms of used AI for something like that.
08:11So let me see.
08:12And I've done commences in the past.
08:13And it came out, but it was very sterile.
08:16It wasn't my voice.
08:18And people wanted to hear me and who I am, the soul, the warmth, the appreciation, not some algorithm of
08:25me.
08:27And by the way, I thought the speech went quite well.
08:30That got the biggest applause from everyone in the room because there is such lack of trust in the technology.
08:37But there's also anxiety.
08:38Look, there's a whole world of new graduates who are worrying about jobs that they're going to get, worried about
08:43AI displacing them.
08:44How are you talking about your employees about doing that?
08:46Because I'm sure you're using AI to benefit and ensure that we're more productive.
08:49But does that come at the cost of actual people that you hire?
08:52Well, no, not necessarily.
08:54I think that over time, it's going to make us better.
08:56It's going to make us smarter, not less.
08:59It's better able to serve customers, be able to provide more attention to needs, give better information to support.
09:05No.
09:05So I do not believe that AI in our industry is principally a cost-saving measure.
09:11It's an opportunity to develop better service.
09:14And if you have better service, you're going to have better growth and better revenues.
09:17And thinking of innovation, many have hoped that we'd see innovation solve some of our climate issues, some of that
09:23cleaner jet fuel, for example.
09:24How are you able to balance that in this moment as well?
09:27Well, we're still paying attention to it.
09:29Sustainable aviation fuels is our pathway.
09:32It's hard.
09:33It's expensive.
09:34There's not a lot of technology that's being deployed.
09:36We're continuing to invest in it.
09:38We need all stakeholders around the table.
09:40We need government.
09:40We need customers.
09:42We need the energy companies to participate.
09:45I'm impressed.
09:46Yes, we're seeing improvements there, but it's been very slow.
09:50But you are able to remain committed for your stakeholders in a transition to a cleaner output from the aviation
09:57industry.
09:57Yes, and I think the biggest thing that people miss is not just the sustainable fuels.
10:02It's the better engine technologies.
10:03It's about being able to forecast the skies, the turbulence and whatnot so that we can provide safer, more reliable,
10:10actually cleaner service through the air using technology there.
10:14Looking at new forms of transportation.
10:16And Jet Zero is a company that we've been involved with where they have the opportunity to reduce fuel emissions
10:22by 50 percent.
10:23And I think over the next decade, you will see planes flying with such a significant amount, less amount of
10:29fuel being utilized.
10:30Those are the those are the moonshots.
10:32So sustainable aviation fuel is going to take a long time.
10:35That's the ground war.
10:36But actually, the opportunities are in the sky.
10:39And the opportunities are with leadership.
10:41And that's exactly what we're talking about throughout this day at the Cancelo Spark Summit.
10:45Bastien, what a joy to have you with us.
Comments