Delta 'in fabulous shape' as CEO discusses upgrades, Bombardier and more
ATLANTA — Delta Air Lines “is in fabulous shape” as it enters the final quarter of the year, CEO Ed Bastian said this week at the Delta Flight Museum.
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Bastian spoke at an event where Delta showed off its new Airbus A350, the latest aircraft to join the airline’s fleet and one the company says is now its new “flagship” jetliner for international flying.
Beyond the new plane, however, Bastian fielded a series of wide-ranging questions about Delta. He addressed topics such as Boeing’s contentious battle with Canadian jetmaker Bombardier and Delta’s efforts to distance itself from U.S. rivals on service.
TODAY IN THE SKY: First look: Delta shows off new 'flagship' Airbus A350 in Atlanta (story continues below)
Bastian also tackled fallout from the wave of airline mergers during the past decade — “consolidation has been unambiguously great" for both U.S. carriers and their customers — as well as Delta’s multibillion dollar efforts to improve terminals at key airports such as New York LaGuardia, Los Angeles and Salt Lake City.
“We are in a multigeneration build of our airport systems. It’s been over 50 years since this country seriously undertook airport investment and infrastructure development,” Bastian said, adding that the time for substantial overhauls had come. “We’re not waiting for the government to do it, we’re doing it in partnership with all of our local airports and communities.”
He pointed to a $3.5 billion redevelopment project at LaGuardia — “the biggest project in Delta’s history, period” — and a $2 billion overhaul of Terminals 2 and 3 at Los Angeles.
TODAY IN THE SKY: Delta celebrates groundbreaking for new multi-billion-dollar terminal at LaGuardia (story continues below)
That Delta is able to help fund such projects points to a new era of financial and operational stability that the U.S. industry has enjoyed in recent years.
“This company is in fabulous shape,” Bastian said. “The reliability, the performance, the financial results, customer-satisfaction scores — every place we look in the company, we’ve seen substantial improvement over time. It’s very rewarding, because we — and our people — have put so much into this turn over the last 10 years.”
Bastian also waded into Boeing’s high-stakes spat with Bombardier.
The latest development there came Monday when Airbus, the European rival to Boeing, announced it was taking a majority stake in Bombardier’s C Series jet program that has been threatened with a 300% U.S. tariff.
The deal is the latest volley in a major trade dispute, as Airbus now plans to build some C Series jets at its new assembly line in Mobile, Ala.
TODAY IN THE SKY: Airbus takes majority stake in Bombardier's C Series program (story continues below)
Delta has ordered 75 of the C Series jets with options for up to 50 more, a deal that gives Delta a vested interest in the outcome of the dispute.
Bastian expects Delta will take the planes as ordered, but emphatically added: “Delta is not going to pay any tariffs.”
The C Series 100 ordered by Delta is expected to seat about 110 passengers, a size of aircraft size Boeing no longer makes.
“It’s pretty hard to find how Boeing’s being harmed,” Bastian said about Boeing’s basis for making a complaint against Bombardier, which Boeing alleges sold the C Series to Delta below cost.
TODAY IN THE SKY: Delta gives Bombardier big order for new C Series jets
“I don’t understand,” he said when asked specifically what he thought Boeing’s motivation might be for taking the fight to Bombardier over the C Series. “When you have a platform that you decided 10 years ago you weren’t going to make it, and then you’re going to try to prevent someone else from making it? I’m mystified.”
For Delta, he added: “We love the product. We can’t wait to bring it to market."
Despite the contrasting views with Boeing, Bastian said Delta would hold no grudge against Boeing in weighing potential aircraft orders in the future.
“We’ve got a very good relationship with Boeing,” Bastian contended. “People forget, Delta is the second largest operator of Boeing equipment in the world. That relationship is strong and it’s healthy. However, Boeing will need to continue to earn the right to win that next decade of support."
IN PICTURES: Behind the scenes at Delta Air Lines (story continues below)
Bastian on 'consolidation'
The number of big U.S. carriers has been halved during the past decade as a wave of mergers – “consolidation,” in airline industry parlance – has left the four biggest carriers controlling about 80% of the U.S. market.
But Bastian said that development “has been unambiguously great” for the U.S. marketplace.
His rationale is that the industry has right-sized to the point where airlines can turn a profit and move past the dramatic boom-and-bust cycles that characterized the industry in previous decades.
The profits, Bastian said, have allowed airlines to invest more in their facilities, airplanes and workers. In turn, he argued, that has created a better experience for customers. Against that, Bastian said airfares — even including fees — have remained relatively flat during the past decade.
TODAY IN THE SKY: Era of airline merger mania comes to a close with last US Airways flight (story continues below)
Service as a differentiator
Delta has increasingly set out to differentiate itself from its main rivals by upgrading its service, Bastian said.
On the operations front, he pointed to Delta’s on-time ratings and cancellation rates that regularly are among the best in the industry.
He also highlighted ongoing improvements that range from technology to in-flight enhancements. Among the items he mentioned were upgraded apps, new high-tech baggage tracking, the testing of biometric check-ins, new seats and services and an effort to refresh the airline's fleet.
Delta’s new A350 that was on display in Atlanta included new initiatives in the cabin. The most high-profile of those were swanky new business-class “suites” and a new international-style premium economy cabin. Both are debuting on the A350 and will be rolled out to Delta’s Boeing 777 jets during the next few years.
Those products are aimed at customers flying on Delta's longest overseas routes.
"We compete with some of the world’s greatest airlines, whether it’s in Singapore or British Airways or Qantas," Bastian said. "And we need to make sure our product — when we go internationally — is toe to toe. And I think the A350 will be.”
TODAY IN THE SKY: A look inside Qantas' new 787-9 Dreamliner
Elsewhere, Delta is updating its domestic fleet with bigger "mainline" planes that are increasingly replacing regional jets, which tend to be unpopular with customers. And some of the Delta's oldest mainline jets -- its MD-88 aircraft -- will be phased out by 2020, Bastian said.
Bastian described those efforts as a “continued drumbeat in improving the experience” for its workers and customers.
First-class upgrades: More for sale, less for free?
On domestic, Delta has made an effort to sell more upgrades to first class. That has occasionally rankled top-level frequent fliers who count free upgrades as one of their most-cherished perks.
Bastian addressed that change in response to a question from the audience.
“Five or six years ago, before we started selling first-class upgrades, we would only sell maybe 15% of the cabin in first class,” he said. “Today, we’re somewhere between 50% and 60% of the cabin. It depends on the route.”
Despite that, Bastian insisted “there’s a substantial amount of available inventory for free upgrades to first, (which) we think is very, very important for our customers.”
Bastian further explained the rationale behind the shift.
“One of the reasons that we moved to the paid upgrade opportunity — not only does it allow customers to provide certainty (about what cabin they'll be in), but we also have a very good product with our Comfort Plus, which we didn’t have in the past,” he said, referencing the carrier’s extra-legroom coach seats that it offers on domestic flights.
With that, Bastian said, “many of our loyal travelers that were unable to upgrade, they now have a place where they can actually have an enhanced experience versus the prior years where you’d be in the main cabin.”
Delta 'not in control' of Virgin Atlantic
One reporter asked Bastian to respond to a comment from Willie Walsh – CEO of the parent company of British Airways and Iberia – who said this summer that Virgin Atlantic "has been in effect controlled by Delta for several years."
Delta bought a 49% stake in Virgin Atlantic in 2012, a move that's led to a close partnership between the carriers.
“I don’t follow what he says,” Bastian responded to the question about Walsh's comments.
But he did offer some more background on Delta’s relationship with its British partner.
“Virgin Atlantic is a great company, a great brand,” Bastian said. “That last thing that Delta ever wants to do is to try to bring Delta into that brand. We paid for that brand to stand alone. We think it’s a great brand and it complements what we’re doing here at Delta.”
“Certainly, we provide our thoughts on the company and how we can improve the brand and enhance the company,” Bastian continued. “But they also provide us a lot of input of how to enhance Delta. You just need to look at our Sky Clubs, our lounges, over the last couple of years -- the new ones. They look very much like the Virgin Clubhouse. We’re working together very collaboratively. Delta is not in control.”
TODAY IN THE SKY: Virgin Atlantic gives first look inside new Dreamliner
