Another strong quarter for Delta. Investing to create more customer loyalty is paying off. What a concept: doing what it takes to keep people keep coming back.
A decade ago around a third of Delta Air Lines tickets were sold via online travel agencies. That amount today is somewhere between 10 and 15 percent, and CEO Ed Bastian only sees it continuing that way.
“Delta.com is going to take more and more of the traffic,” he told analysts on an earnings call Thursday after the release of the company’s second-quarter results.
“So I don’t think we need to put a stake in the ground and say that we won’t sell over those channels. But at the same time, the online agencies are aware that they need to provide a differentiated experience to our customers in order for us to continue to invest in them and together our content on their sites.”
Airlines, hotels, and tour operators that were once happy to have intermediaries distribute their products are looking at new ways to entice customers back into the fold.
Delta’s tactic in this battle is an improved loyalty offering. Earlier this year it signed a new contract with American Express, worth an estimated $7 billion a year by 2023. Loyalty revenues grew 19 percent to $1.2 billion in the quarter, including around $100 million benefit from the American Express deal.
“Our strategy has been to build something that consumers want to buy and let them choose how they buy it and that’s led to a continuation of a migration towards Delta direct channels and Delta loyal customers and I think that’s how we see the landscape continuing to evolve,” said Delta President Glen Hauenstein.
“The question is do you want to…[be] more aggressive and say no to customers who might want to buy a product in a certain way or distributors? The answer is, we would never want to do that. We would just want to continue to focus on buying directly from Delta…”
Delta has been unaffected by the worldwide grounding of the Boeing 737 Max aircraft, which has affected some of its rivals.
“I think the reintroduction, when the time comes, is going to have to be carefully managed, no question. But in the interim, we’re going to continue to watch and see the developments there. But I don’t think we should be looking to second-guess or call out the current or the expected actions of our competitors,” Bastian said.
Delta itself came pretty close to ordering the aircraft before deciding to go for the Airbus A321neo.
One of Delta’s stand-out airports in recent months has been Boston. Over the next couple of years the airline is looking to take its daily departures up to towards 200 frequencies a day, bad news for someone like JetBlue.
Previously, Delta had shared a terminal at Logan Airport with other carriers but will take the space over entirely later this summer.
“It will allow us to continue to grow in Boston,” said Hauenstein
“And what we’ve been focused on is making our hubs more efficient so we can drive higher earnings and targeting those cities that are high growth. And Boston, Seattle, Austin, Nashville all fit that profile of cities where growth and growth travel is significantly higher than they are across the system in general.”
Delta saw net income rise 39.3 percent percent to $1.4 billion with operating revenue increasing 6.5 percent to $12.5 billion.
The revenue performance was a second-quarter record for Delta and included a 10 percent increase in premium product ticket revenue. Geographically it was good news across all regions but Delta’s domestic business was the stand-out performer, recording revenue growth of 8.8 percent.
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Tags: 737 max, delta, delta air lines, earnings
Photo credit: A Delta aircraft above a beach. The company enjoyed a good quarter. Neuwieser / Flickr