00:00I am here in Rio de Janeiro at IATA's annual meeting with Peter Carter.
00:04He is the president of Delta Airlines.
00:06Thank you so much for being with us.
00:07Well, thank you for having me.
00:09Good afternoon.
00:09Good afternoon.
00:10I want to start with a question that is on a lot of people's minds about consumer demand
00:14and how it's holding in given some of the increases in prices, given some of the questions
00:19around stress.
00:20How resilient have consumers been?
00:21We are seeing very strong demand, Lisa, in every region, every region in the world,
00:30which has been very, very great to see the consumer is strong.
00:36The economy is doing well.
00:38It's one of the things that we pay very close attention to, and whether it's the U.S. economy,
00:43certain economies in Europe are doing better.
00:47We see that in our consumer.
00:49Certain economies in Europe, that actually flies against what some people seem to think,
00:53where you've seen some of the numbers fly down.
00:55Where are you seeing actually growth in Europe that can surprise you?
00:58Well, the U.K. is an example.
00:59They're doing a little better than they have in the past, for sure.
01:03And I also think that the EU, in light of their investment in defense, we're also seeing
01:11some sub-signs there.
01:14How much have you been able to pass along the increases in price from fuel to consumers?
01:18I mean, has it been pretty easy?
01:19Have you been surprised at how little pushback you've gotten?
01:22Our consumer is resilient.
01:24We really focus on the premium customer.
01:28And roughly 40% to 50% of the increase in fuel costs, we've been able to recapture through
01:34pricing, which really becomes about 10% to 15% on the price of a ticket.
01:39So, fine is still affordable.
01:42And again, we've seen strong demand despite the need to recover some of our costs.
01:49We also have a refinery, which has been a terrific hedge for Delta through this because we pay
01:55less for jet fuel than any airline in the world.
01:59Has there been any pushback at all to higher prices?
02:03We really haven't.
02:04I think in part because we haven't seen it.
02:06I think in part, Lisa, because when you look at inflation since COVID, it's roughly been
02:13about 25%.
02:14But when you look at inflation around the price of an airfare, it hasn't been anywhere near
02:1825%, even with this increase to recover fuel.
02:22So, it's still very affordable and especially for the premium passengers, the premium leisure
02:29traveler, the corporate customer that we really focus on.
02:35So, this is going to be our busiest summer in the transatlantic.
02:40We are doubling down on our global network and global expansion.
02:44We already have the world's, I think, most connected network, but we're continuing to invest.
02:48We just launched our Hong Kong route yesterday with, I guess, today technically with our
02:54inaugural flight.
02:56So, there's so many exciting things happening.
02:58And again, we follow demand.
03:00You know, we launched seven new flights in Europe because our customers are saying they
03:06want to go to places like Porto and Malta and Sardinia.
03:10So, we're taking advantage of that.
03:12How much, are there certain places that you've identified that you want to create routes to
03:17that are harder to break into that might be really popular, but there are obstacles that
03:22have kind of emerged?
03:24Well, I think the best example of that right now is probably India, because we cannot fly
03:30over Russian airspace.
03:32But as we all know, India is the fastest growing economy, the biggest population, the largest
03:38democracy in the world.
03:40And someday we will serve India, but it's very difficult to serve India profitably without
03:46flying over Russian airspace.
03:48I know that later this year, you are planning to launch a flight to Riyadh, direct from Riyadh.
03:53Yes, yes.
03:53Is that still planned for later this year?
03:55It is planned for October 23rd.
03:58We're very excited.
04:00We met with Riyadh earlier today.
04:02They're our partner in that region.
04:04We think that is such a strong growth market.
04:09It's a country that's gone from the Middle Ages to the modern age in about a handful of
04:14years.
04:1540 million people live in Saudi Arabia.
04:18It's a large geographic area.
04:21They've got a lot of business travel.
04:24Obviously, oil and gas is huge there.
04:27So, we're going to start that flight.
04:29We know, obviously, with what's happening in the Middle East, that folks in America may
04:35not see that necessarily as the place they want to go right away.
04:40But as these new routes develop, it takes time.
04:42And we want to be there for when the day comes when they're ready to travel to Saudi Arabia.
04:48You believe that there will be sort of a rejuvenation of some of the business demand
04:51and the business activity in the region that will be at the same level as before the war?
04:56Not only will there be rejuvenation at the same level, we think there will be great growth.
05:04Remember, one of the things that they do really well in Saudi Arabia is they build things.
05:09And because of the war and what's happened in that region, we think there will be tons
05:14of business flowing in to help rebuild what has been damaged during the conflict.
05:22And then, of course, when you look at what Saudi Arabia is doing, when I was there last year,
05:27looked out of my hotel room, I think I saw 50 cranes.
05:31It's incredible what they're doing in that country.
05:34And we want to be a part of that.
05:36When you look around the world and you're looking at expanding your roots,
05:41how much are you looking at partnerships?
05:42Do you ever consider consolidation as well, just an outright merger and acquisition?
05:47No, we're not in the consolidation business, but we have grown through partnerships.
05:54One of our real core competencies, one of the things we do really well is we form JVs with airlines
06:00around the world.
06:01We have the best partners with the best brands and the best hubs, complementary networks that we can connect our
06:07customers to,
06:08which allows somebody to get on a flight anywhere in the U.S. and fly almost anywhere in the world
06:14that they would want to go.
06:17Korean is a great example.
06:19Korean is about to close their merger with ASEAN.
06:23I think December 17th they will have a single certificate.
06:27We already have such a great joint venture with them across the Trans-Pacific.
06:32We're going to continue to grow that because with that merger there's going to be that much more connectivity throughout
06:39Asia.
06:41Very excited for that.
06:43And Incheon, I don't know if you've been there, but it is I think among if not the most efficient
06:49connecting hub in the world.
06:52It's an amazing experience.
06:53How do you sort of plan forward when there are these geopolitical concerns that keep coming to the fore?
06:58For example, business travel from the U.S. to China has fallen off a cliff.
07:01A lot of tourist travel also.
07:02How do you plan for growth given the uncertainties between these two countries?
07:07I think we have the long view, Lisa.
07:09I think we remain focused and disciplined with respect to our strategy.
07:15And we know that there will always be geopolitical noise.
07:19And we are very, I think, disciplined about trying to keep the noise out and continue to build forward, continue
07:27to make sure that we know that demand will come back to China someday, that some of the restrictions that
07:34are in place will be lifted.
07:35And we have the relationships there.
07:38We have a great partnership with China Eastern.
07:42We saw them here as well.
07:45So we're ready when that economy is more open to U.S. business and U.S. business is more open
07:55to that economy.
07:57This geopolitical, I'll call it tension, or you said noise, I think, it will pass.
08:02Well, it's noise, but not really noise.
08:05I mean, it's also concrete.
08:06It's real.
08:07I mean, it's also sort of like the Middle East.
08:09It's noise, but it's not noise at all.
08:10It's a headwind for sure.
08:11And I just wonder, you know, everyone who I talk to here is very worried about oil prices where they
08:15are.
08:15Do you have contingency plans should things go up significantly higher?
08:19I mean, what's your sort of scenario analysis?
08:21So we are Delta is built for durable, sustainable growth.
08:29And part of that is we have the ability to manage through oil costs.
08:35We're very nimble.
08:37We have various tools available.
08:39We're very much focused and disciplined on using those tools.
08:43And in many respects, when you have a strong balance sheet, as we do, and we have a refinery,
08:49we can do things like trim capacity, off-peak flying.
08:55We can focus on flying as efficiently as possible, right?
08:59That saves fuel, of course.
09:02We do all of the things we can do, and we're still expecting to make around a billion dollars this
09:08quarter.
09:08So I think this is actually an opportunity for us to show how durable our business model is.
09:19And it's a proof point.
09:20I just want to finish up with premium.
09:22It's been leading the charge for quite a while.
09:24I know that Delta's really leaned into Delta One, the Delta One lounges.
09:28How far can that go, the idea, the demand for premium products?
09:32So, Lisa, we are finding that our consumer has an insatiable appetite for premium experiences.
09:41And everything that we have introduced seems to just be truly inhaled by the consumer.
09:47And so we haven't seen it.
09:50And I'll give you a great example.
09:51We opened a Delta One Lounge in LAX just a couple years ago, and it's been wildly successful.
09:58And now we're building a second Delta One Lounge in LA because it is, again, one of these things where
10:05we underestimated how successful it would be.
10:09So I think consumers are really excited about spending money on premium experiences.
10:17And I feel very fortunate that Delta and our people can provide those experiences to them.
10:23I'm waiting for the super-duper loyalty Delta One Extreme Lounge.
10:27Is that coming next?
10:28Who knows?
10:29Peter, wonderful to speak with you.
10:30Peter Carter, the president of Delta.
10:32Thank you so much.
10:33Thank you, Lisa.
10:34Really appreciate it.
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