Delta CEO Ed Bastian spoke at the Alliance Bernstein 37th Annual Strategic Decisions Conference on Thursday, trumpeting the turnaround for his airline – they’re going to be profitable in June and expect to make money for the second half of 2021.
He dropped several interesting tidbits along the way about their American Express card partnership, blocked middle seats, and Delta’s strategy going forward.
- The Delta Amex partnership has fully recovered Co-brand American Express spend is “starting to exceed 2019 already.” They’re “back to 2019 levels of card acquisitions” which is important because new signups need to replace the normal attrition of cardholders cancelling, even aside from the pandemic. They’ve stopped the bleeding of their cardmember portfolio and people are using their cards.
- Blocking middle seats worked. Not really though. Delta trumpets earning a “35% price premium” over the competition without business travel, suggesting that people will pay more for a better product, in this case more room thanks to blocked middle seats. Of course Delta ended middle seat blocking so they don’t think it helped them that much.
When there wasn’t much passenger demand, it didn’t cost them seats they’d otherwise be able to sell. And it meant lopping off the bottom one-third of seats for sale at the lowest prices, so of course average fares were higher.
- People are avoiding OTAs like Expedia Delta.com is doing more booking volume than it was in 2019, and over 50% of transactions are now made directly by consumers with Delta rather than through online travel agencies. They view their distribution strategy with services like Sabre as shifting to try to pay for bringing premium passengers, not just volume.
- Business travel will be different. Bastian believes “traditional corporate travel will be reduced 20% – 30%,” because a lot of trips just won’t make sense anymore. But but overall business travel volume won’t be lower like that, “the mix and nature of travel changes.” He sees video technology like Zoom as complementary to business travel, it “makes you mobile, gives you freedom to move and travel more” since you can work efficiently while you’re on the road.
While “some international overnights to Europe won’t return” he expects that domestic business travel volume from July 1 forward for 12 months will be higher than 2019 domestic business travel levels.
- Will continue to grow with Airbus Bastian highlighted the billions in taxpayer money they were given, how that contrasts with countries that provided subsidized loans (and it didn’t save any jobs because Delta downsized through voluntary buyouts and committed to no layoffs anyway). He noted that their new, larger planes lower cost per seat miles, and that they’ll keep taking Airbus planes. Delta, which has led the protectionism campaign against foreign airlines, doesn’t buy Boeing.
- Delta expects future government bailouts Bastian has internalized the moral hazard of bailouts, declaring “we’ve proven the government will be there for us if ever needed again.” (This was such a mind-blowing admission I’m flagging that it takes place at 47 minutes 59 seconds.)
For better or worse, the country needs an airline industry. Bastian says as much here and goes further by saying the government will act as a backstop to ensure it.
Some of the loans were securitized, right? So the government will see some of DL’s success returned to them.
Only chumps put spend on Delta credit cards. With how worthless SkyMiles are these days, Amex must be making a killing off the exchange fees.
I haven’t had any problem with Delta award travel. I’ve redeemed over 100,000 mile in 2021.
I guess they can’t complain about the ME3 now, even though him and the other legacy CEOs probably will.
@Dave – what was the itinerary? A one way red eye coach from LAS?
If you redeem for domestic, Delta Skymiles can give you fair value
I spend on mine for the enhanced MQM boost this year, will make Platinum or Diamond because of it (depends on how much I fly in Nov/Dec).
@Shawn Those flights have been lie flats for the last couple of months…not a bad way to go!
@ Gary — The people in THIS household are not using their crap credit cards. I would rather connext through MEX four times. 😉 I certainly hope Bastian is wrong. Next time, they should be forced to borrow on the open market. Oh, wait, Capitalism is dead.
This is the most disgusting rip off airline ever for redemption perhaps in the world even for a mere economy seat.Its a raping and a cancer and other airlines like American seems close to be near copying them in a monkey see monkey do business with united neck and neck as well
I have always found uses for my SkyMiles. Far from useless!
Just a note on the Delta/Airbus-Boeing relationship.
Delta has asked Boeing for years to build an all-new replacement for the 757 and 767 given that Delta operates the largest fleet of both of them (more than 150). United has a similar sized 767 fleet but has far fewer 757s.
There is no economic replacement for the 767 considering ownership, fuel and maintenance costs. The 757 and 767 are incredibly versatile and well-built planes and they are still reliable and cost efficient. The benefits to replace them have to be high which means Boeing has to start from scratch.
The A321 is the closest replacement to most of what the 757 can do/did. The MAX in its largest version (not in service for United, the only US airline that has ordered it) could compete with parts of the A321 but the MAX family has been repeatedly grounded just as has been new delivery 787s.
Delta will undoubtedly buy the A220-500, the 150ish seat potential latest generation narrowbody that will have best in class economics, not the repeatedly reworked 737.
This is probably one of the best times to note that Delta is not buying Boeing products but will if Boeing returns to being the global leader in commercial aerospace that made them the premier global heavy manufacturer.
Don’t bash airlines becoming government entities – there are lots of successful and non wasteful government supported businesses. Finally, now with the too big to fail mentality and the backstop of government bailouts, all airlines will get better customer service and flying standards. The golden age of flying is ahead!
I can see the 35% difference, and I am happy to pay more for Delta service.
I paid more to drive a BMW instead of a Hyundai, so yes, I pay more to get better service.
The government should never again bail out the airline industry. All the bailouts did was keep the airlines afloat and prop up the share price…If they need to, they should be allowed to go bankrupt and wipe out shareholders. We can’t afford to socialize the risks and costs while privatizing the profits. It’s how free markets work.
@DMNYC It is truly revolting how we privatize gains but socialize losses. The common man gets screwed and the wealthy grow even more so.
@Jake Delta is a lot more Kia than BMW. I got a real good laugh out of that one.
@ Daniel. Unlike the auto bailout in 2008, which resulted in the reward of recovery coming back to taxpayers and the Government as a profitable “loan,” I have yet to see how any of these airline bailouts comes back to us in the same way. Unless I am missing something. As far as I can tell we just threw money at the airlines so that they can feel even more emboldened. And paid $150K in over priced wages to senior flight attendants just so they can sit on their sofas for months.
I will stand corrected though if anyone can show me differently. As far as I can see it was disgusting how taxpayers just handed out money to airlines. And Bastian’s comment just throws salt on the wound.
ONLY if the bailout is earmarked to provide more customer service help. They recently moved my flight, TWICE back a total of over 3 hours and now it’s taking off before I land from my first one.
FIVE hours on hold (callback wasn’t even offered) which wasn’t even answered (you have a 90 minute wait), FOUR hours waiting for response from their messaging service. Then took TWO times to get us on the flights I even typed out for them.
Oh, and, yes, I first tried to use my app to change my flight. Response on app, Sorry you cannot change this. Please contact a Delta representative.
I still see the price premium even though they’re no longer blocking middle seats. All else equal, WN will start getting more of my business again. I’m pretty happy with Delta but given their current service/amenities I don’t really want to pay more than a 10% premium.
@Stuart: Going from memory, I believe the govt lost $9 billion bailing out auto companies
@Patti: I’ll teach you to fly if you split the cost of a Honda Jet. Got $2 mill?
Delta accepted funding from the Payroll Support Program, PSP. However, two days ago My wife had to phone Delta regarding online check-in not working, and she was on hold for over four hours before she had to hang-up. She also texted Delta, as requested to do on their website. Again, no human response for far more than eight hours, and it was time to give up. The third method of contact provided by Delta was to message Delta at Delta.com. Another failed attempt at communication by Delta. The issue was corrected at the airport by a ticket agent. But even then, the check in kiosk and baggage drop lines were overwhelmed with passengers. The frustration of the ticket agents was clearly visible.
Delta participated in the PSP but doesn’t have enough employees to run its current operation. Ed Bastian should be held accountable for this lousy customer service.
Delta miles are expensive by themselves, but the AMEX SkyMiles Gold Card has been offering multiple statement credits. For me, the statement credits have paid the annual fee at least once now.