We'd like to see airlines break out of the commoditized product, too. Delta is in one of the better positions to do so.
On May 2, Ed Bastian takes over as the new CEO of Delta Air Lines, replacing the retiring Richard Anderson. Bastian has been Anderson’s close deputy, helping to turn around the airline from bankrupt carrier to one of the world’s leading airlines, one whose playbook is often copied by others.
Bastian has been with Delta — except for a brief break — since 1998 and has held various leadership roles including chief financial officer and his current post as president.
Wall Street analysts expect Bastian to continue running Delta with the same general strategy as Anderson. They did, after all, work side by side on most of the changes.
The Associated Press interviewed Bastian by phone following his appointment. The incoming CEO explained the need to still invest internationally, improve the airline’s regional jet service and continue its efforts to make passengers want to fly Delta because of the experience, not the ticket price. The answers have been edited for length and clarity.
Associated Press: Low fuel prices have caused other airlines to irrationally set prices and routes. How do you defend against that?
Ed Bastian: There’s always going to be a low-cost competitor in our marketplace. The answer about how it is different today, compared to how we’ve competed in the past, is that we’ve got the staying power. We’ve got the cash returns that we’re investing in the product, service and our people. Price is always an important part of a travel decision. But we’ve been very clear that we don’t see our product as a commodity. We’re out to break the commoditization cycle.
AP: Are increased labor costs a problem?
Bastian: Our people need to share in the success of the airline. We’re paying out bonuses equal to 21.4 percent of annual salaries, across the board. But we’ve got to stay disciplined. When we look back at our fourth-quarter results, we retained about two-thirds of the fuel savings to the bottom line. Some of it went, as it should, to improved employee profit-sharing and compensation, some of it went to lower fares, which were down 5 percent on average.
AP: What is the role of regional airlines?
Bastian: They play an important role but less than they have in the past. The regional fleet is smaller. Four or five years ago, we were at over 700 regional jets and we’ll get down close to 400 by the time we’re done with the fleet changes we’re making. But they’re still a very important part of the product. What are the things Delta needs to do to improve in the future? I would say the space with the greatest opportunity still for improvement is the quality of the regional experience.
AP: You have a stake in Brazil’s GOL. Any concerns?
Bastian: Brazil is in a tough place. There’s no question about it. It’s a tough place from the economy, from a political situation, from a currency perspective, commodity prices are really hurting the local economy there. But it’s also the most important market in Latin America. We own about 10 percent of GOL currently and we are assisting in its restructuring, in terms of trying to raise additional liquidity because the next two years will be tough. We do think that GOL, over time, will have the staying power and strength. We’re very impressed with the quality of the product and service.
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Photo Credit: Delta Air Lines President Edward Bastian smiles as he listens to questions from the media during a news conference in Tokyo. Junji Kurokawa / Associated Press
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