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Travel's most forward-thinking insiders will gather September 18–19 for our annual Skift Global Forum in New York. In just a few years, Skift's Forums — the largest creative business gatherings in the global travel industry — have become what media, speakers, and attendees have called the “TED Talks of travel.”
Skift Global Forum 2019 will take place at Jazz at Lincoln Center’s Frederick P. Rose Hall in New York. This year's Forum speakers include CEOs and top executives from Booking Holdings, Delta Air Lines, Expedia, Air France-KLM, Marriott International, Amtrak, and many more.
In private conversations, executives from other airlines sometimes bemoan the existence of Delta Air Lines, asking why it must keep making travel experience so much better.
They have a running list of complaints. Delta was the first major U.S airline to add business class seats with privacy doors, prompting customers at other carriers to ask why their favorite airline wasn’t doing the same. Delta is also the only U.S. airline offering meals in economy class on many coast-to-coast domestic routes, and the only carrier overhauling its long-haul coach class service to include welcome drinks, amenity kits, and upgraded food.
Soon it’ll probably be the first major global network carrier to offer free Wi-Fi, a move the airline’s competitors probably will copy. Look for the American Airlines and United Airlines to make an announcement a few days after Delta.
Delta can afford to be more generous because it charges for it. As Ed Bastian, its CEO, loves to say, the airline earns a significant revenue premium compared to its domestic competitors. Delta executives claim they earn about 10 percent more in passenger revenue than other U.S. carriers.
This did not happen by chance. While its competitors were in cost-cutting mode at the end of the Great Recession, Delta invested, betting travel demand would return and customers would pay more for premium products. The strategy has been successful, with Delta reporting almost $2.2 billion in net income for the first six months of this year, on revenues of $23 billion.
Some question how long this can last. If the economy sputters, customers may trade down, looking for less expensive products and fares. But in an interview previewing his appearance Sept. 18 at Skift Global Forum in New York City, Bastian said he’s bullish the good times will continue.
Skift Editor’s Note: This interview has been edited for clarity and length.
Skift: On earnings calls, you and some competitors say demand for travel is probably stronger than ever. Can this continue? Do you fear business and leisure travelers will cut back, leaving the industry in trouble?
Ed Bastian: I think the demand for our product, or services, and our industry is substantial at present as you mentioned and I see it continuing. When you think about historically how airlines looked to manage growth, people generally used GDP as a proxy for determining the level of demand expectations in the marketplace. I think technology has changed that dramatically. I think consumers are now more aware of various parts of the world, more interested, more curious. They feel a much greater proclivity to taking that adventure than ever before, whether it’s our young millennials who are famous for wanting experiences and getting that picture as compared to owning something, or even the baby boomers and everyone in between.
I think what’s feeding that also is airfare, which has never been more affordable on a worldwide basis, and continues to to drop. Fares are down from 25 years ago, probably 40 percent inflation adjusted. Every year, you see airfare affordability continues to rise, so I see no reason to anticipate the growth rates that we’re seeing subsiding anytime soon.
We’ve been growing our top line for high single digits now for a couple of years running. We’re looking for that again in the third quarter and I hope for some time.
We’re providing great value, getting consumers options. We’re expanding and diversifying new revenue streams with our branded products and loyalty arrangements with [American Express], and as well as other products such as [maintenance, repair and overhaul] for our maintenance customers.
Skift: You’ve been a transportation brand for almost a century. But you’ve been telling investors you want customers to know Delta as a trusted consumer brand, like Apple or Starbucks. Why the shift?
Bastian: Well, transportation is the core of what we do. You mentioned Apple. Apple fundamentally provides a technology in the hands of its consumers. But I think there’s more to loyalty than the simple service you provide. I think we’re in a competitive marketplace. We want our consumers to continue to grow more attached to our brand, to have greater affinity, greater loyalty, as well as even greater trust in the airline they choose, whether it’s reliability or knowing that we have their back when they need us.
We carry more consumers and have more consumers as customers than many leading consumer brands around the world. I think it’s time for Delta to step up and take its position as one of the leading consumer brands in our country. We get rated like that consistently, whether it’s the technology we’re providing or the services on our app. We have people that make a huge difference in meeting customers’ needs, and so I think that loyalty and that affinity toward the Delta brand is perfect in terms of what it means to continue to generate a premium of revenue share and greater growth prospects for the future.
This is not something that we just sat around in a room and decided this would be interesting. It’s what our consumers are telling us.
Skift: Do you think that sometimes there’s a lag in consumer sentiment? Your data shows customers are happier. But if you ask a bunch of people about airline service, many will still say, “All airlines are horrible.”
Bastian: I agree with you. I think there’s still some lag effect. When we look our net promoter scores at Delta this year, we’re consistently generating a net promoter score of 50 or above on our domestic business. We’d never seen anything close to that. It’s been a climb over the last 10 years, and we continue to get better. Repeat purchases and the premium we generate relative to our competitors tell us that customers are noticing the difference at Delta.
That differentiation is what matters when you talk about a brand. Twenty years ago, I think the huge question for our industry was one of commoditization. Even 10 years ago, it was commoditization. The only thing that customers really wanted was the cheapest price possible. Today you still have a commodity component, and you have some customers that only travel once or twice a year, and so airfare is their determinant. But given the investment that we’ve made, we’re now the leading business airline in the U.S. as well as the world.
Skift: Demand is booming. But a couple of airlines in Europe say they’re worried about a growing backlash against flying because of environmental reasons. The Dutch airline KLM, in which Delta is an investor, is encouraging people to “fly responsibly.” Have you noticed an effect on your transatlantic business?
Bastian: We’re not seeing any of that at all. As I mentioned, we had our highest volume in our history in the second quarter, and the top revenues in our history, $12.5 billion in the second quarter. Highest load factor in our history.
Environmental sustainability is an important topic. We will continue to look for ways to improve because our mission here is that no one better connects the world. We have to protect the world, and we have to be seen as advocates of our future and our industry. I don’t think eliminating travel is something that’s going to actually make the world a better and safer place or help the planet, but I think there’s steps that we can all take to ensure that we’re responsible in how we manage our footprints we leave behind.