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Shoring up international operations is Delta Air Lines Inc.’s biggest challenge and opportunity, incoming Chief Executive Officer Ed Bastian said.
The affordability of plane tickets overseas is the main reason behind a decline in operations abroad, Bastian said Thursday in an interview, a day after he was named to succeed Richard Anderson as CEO. The airline has said a strong dollar is weighing on results. Passenger revenue from international markets fell 6 percent last year, while U.S. sales excluding those from regional affiliates rose about 5 percent, according to data compiled by Bloomberg.
Improving foreign operations is just one challenge Bastian faces in keeping Delta among the top airlines worldwide in terms of operational and financial performance. Bastian, who currently is Delta’s president, also must reach out to Delta’s front-line employees, who were loyal to Anderson. The carrier has said that a pilot-union proposal that includes a 40 percent raise over three years is unreasonable, raising the possibility that contract talks with its 13,000 aviators may drag on.
For now, Delta doesn’t plan to increase its stakes in overseas airlines beyond its existing investments in China Eastern Airlines Corp. and Brazil-based Gol Linhas Aereas Inteligentes SA. Delta should close on its purchase of a 49 percent stake in Grupo Aeromexico SAB soon, he said. Brazil’s economy is too weak for Delta to increase its 16 percent stake in Gol, Bastian said, who assumes his new post on May 2.
Delta remains optimistic about the Chinese market, he said. The Atlanta-based carrier has a 3.55 percent stake in China Eastern. Delta may look for additional investments in overseas airlines in the long term, though he doesn’t expect U.S. mergers, he said.
“I don’t see any major moves in the U.S. marketplace,” Bastian said. “We already have great scale.” Delta purchased Northwest Airlines Corp. for $2.75 billion in 2008, a combination for which Bastian led integration efforts.
Bastian said the No. 2 U.S. carrier by traffic will continue to press U.S. regulators on many of the policy issues favored by Anderson, who was outspoken on what he saw as unfair competition by Middle Eastern airlines and has fought privatization of the U.S. air-traffic control system. Anderson will remain active with the company as executive chairman.
“He will be an important member of our board, but would not be the leading face of the company,” Bastian said.
This article was written by Michael Sasso from Bloomberg and was legally licensed through the NewsCred publisher network.