Delta CEO Says Delta’s Product Is Not a Commodity

Delta Air Lines CEO Richard Anderson appeared on CNBC’s Squawk Box morning program today.

Anderson addressed questions from the hosts about the airline’s profitability, differentiation in the market, and security.

But it was the historically low cost of fuel that caused Anderson to show a bit of joy this season. “It’s been awesome,” Anderson said, breaking character. “Next year we’ll have about a $3 billion reduction in cost of fuel.”

Delta isn’t turning around and giving that money back to passengers in terms of lower fares, it’s making investments in real estate and aircraft. “We bought a lot of Boeing airplanes,” Anderson said.

Anderson spent the bulk of his appearance arguing that Delta’s product is different now, from the front of the plane to the back. “Unlike a hotel business we can’t segment with different properties. We have to segment on the same airplane. It’s essentially four products on the same airplane,” he said.

Anderson tried to argue that consumers aren’t choosing based just on price. “We’ve always taken the view that one of the things that had to change in this industry is we always treated ourselves as commodities. The reason why we’ve become the most profitable the most successful high-quality airline in the world is we’ve decided that we’ve got to take care of our customers and we do not provide a commodity. It’s very hard to run an airline of our quality this year we’ll have almost 200 days with no cancellations. This is not a commodity.”

Airline Security

Anderson showed strong support for the current state of the Transportation and Security Administration (TSA). The TSA “is a sophisticated risk-based model and Jeh Johnson has led a very important transformation of how we use intelligence to manage risk in the aviation industry,” he said.

“What’s really happened is we moved from trying to screen 100% of everyone to risk-based screening and I think that’s the key,” Anderson said. “It’s not profiling. It’s taking all the data that we have as an industry and that the government has and using that data to be certain that we deploy air marshals correctly and have screening.”