By 2029, your nearest airport may have changed so much that you won’t recognize it.
So predicts Delta Air Lines CEO Ed Bastian, who spoke with Recode’s Kara Swisher and Jason Del Rey onstage at this year’s Code Conference. Many of today’s airports across the US were designed and built 50 to 70 years ago, with artwork and impressive architecture before security that non-passengers would come and stare at.
“We’ve got to flip it around, put our physical layout back by the gates where people want to get to,” Bastian said, suggesting instead that security could be at the front of the building. He also predicted that airlines like Delta will be tracking flyers’ bags with RFID, reducing the number of carry-ons.
“[Currently] you see people looking to line up and everyone wants to get on at the same time, and most of them have their belongings. Why does anyone want to sit in an airline seat longer than they have to?,” he asked. “People don’t, but they want to get on board, and they want to make sure that their property gets on board with them … [If you were sure] that your bag will be there waiting for you when you get to the baggage area at the end of the flight, would you really try to carry that bag on?”
You can watch the interview below on YouTube, or listen to it on our podcastRecode Decode— which is available onApple Podcasts,Spotify,Google Podcasts, andTuneIn. But if you’re short on time, scroll down to find a full, lightly edited transcript of Kara and Jason’s conversation with Ed.
Kara Swisher: Thank you for coming.
Ed Bastian:Well, thank you for having me.
Kara Swisher: I assume you flew Delta. I want to get to something because what’s been in the news, unfortunately — I want to talk about the innovations in the airline industry — but what’s been the focus recently of innovations that have happened is the Boeing crashes. One of the things that’s important is airlines have to innovate and get different and become better and better. Talk a little bit about this impact on your industry, when you’re thinking about innovations versus safety versus changes, and where things are going.
Well, for a start, safety is always the utmost priority.
Kara Swisher: Sure.
So there’s never a compromise around safety. I really can’t speak too much on the Max, we don’t fly the Max. Sometimes in life you’d rather be lucky than smart and that’s this one we got lucky on. We’re an Airbus customer in that fleet size, the A321neo, and happy that we made that decision a few years ago, obviously.
But safety is not something we compete against. It’s not something … and if you think about the US aviation market and the travel, we’re the safest form of transportation in the world, of any form. Of any form of mobility, the US aviation market is the safest. I think it speaks to the fact that this was truly a one-off, in my opinion.
Kara Swisher: A one-off?
A one-off in terms of what happened. There’s certainly going to be lessons learned. We don’t know all the facts yet.
Kara Swisher: Right.
I think there’s still some facts that are continuing to come out of this. Boeing will figure it out. I have no doubt about that. They’re a great technology company. We wouldn’t be here in this room if it wasn’t for Boeing, together.
Kara Swisher: Right.
Right? So it’s fundamental to who we are. It’s the lifeblood to our industry, so I’m — it’s not something that I’m concerned about.
Kara Swisher: The reporting that’s coming out shows a lot of corner-cutting, a lot of trying to get things more automated, all kinds of things. It doesn’t show a great picture of technological innovation that’s going on in airlines. Maybe I’m misreading a lot of these stories …
Well, as these, the 737, which is the core plane, is the most successful …
Kara Swisher: Yes.
Widely used plane in the world. As they continue to grow and extend it, they adapted. They made a decision around these sensors with an MCAS decision, which fundamentally is flawed. I think they’ve admitted that, as much. I can’t explain why, I’m not there. But it’s not something that at Delta we ever take for granted. Safety is paramount to everything we do.
Kara Swisher: But how doyouevaluate it when you have them making these changes? They’re competing on features. I think there was a lot of hurrying to compete with Airbus.
Oh, when we evaluated the Max, we spent a year studying that airplane, studying every element. Because we already fly 200 737s, so different variants. We studied every part of that airplane, every version to make certain that it was something that, because we maintain it once we take the plane in, it’s our property. So we need to understand.
Safety, candidly, was not something ever high on the list, thinking that there’s a high risk, it’s not safe. Honestly, it’s somewhat unthinkable, what’s happened. I think we’re still all, we’ve been traumatized as an industry. Still getting our minds around what happened. But it’s not something that we’ll ever compromise or take for granted on.
Jason Del Rey: To be clear, you do business with Boeing?
Jason Del Rey: Right. You don’t second guess anything about that relationship when you see something like this happen?
Not at all, not at all. Sixty percent of our airplanes that we fly are Boeing. Boeing has been the most successful aviation company in the world. We know the insides of the plane, the technical details of it, the engines, whether it be GE or Pratt & Whitney that’s produced. This is something that we’re still learning. I think even the speculation is, obviously, premature. But I have utmost confidence that this is going to be solved. I think the issue they’re going to face is more, as we’re moving through this, how quickly can it even be brought back into a world of consumer confidence.
Kara Swisher: Talk about that consumer confidence. Because one of the things, we almost had Dennis [Muilenburg] here, actually, I guess he thought better of it. But we’ll do a good interview with him. We’re going to be doing it and everything. But when you think about innovations, one of the things that was pressing it was innovations to make these planes work more automatically, work easier for the pilot, so that they’re easier to fly. What do you look for when you’re looking for aviation innovations? What are some of the ones that you are looking at?
Well, one of the biggest ones is efficiency. You want to be able to fly it farther, fly it with more people on it, fly it more fuel efficiently, and fly it with the composite materials that are lighter. The planes we’re bringing in today are on average 25 percent more fuel efficient — which, by the way, all of us want to do that. It’s the right thing to do from our stewardship perspective on the environment. Twenty-five percent more fuel efficient than the variants that we’re retiring.
The core aspect of the plane, first of all, is the core economics. Then the second part, again, safety is in its own category, safety. We understand that plane. I’ll tell you, when we did the study of the plane, we never had a big discussion of MCAS. I mean, I’m sure if we got into the plane and made a decision to buy it, we probably would have had some questions, but we never even went there. Second thing is when we look at planes, it’s customer comfort. We want the plane to be something that our people can serve well and our customers enjoy flying on.
Kara Swisher: I’m sorry, what are the innovations you’re looking for? Is it fuel efficiency? Is it more AI in it and data that you can get from these planes?
Well, it is certainly the efficiencies I talked about. The data is already there. Yes, the new variants are throwing off more data. The problem we have with a lot of the aircraft and the engine data that’s being produced, trying to figure out what do you do with it? What’s relevant? What’s the real meaning behind it? We’ve got amazing predictive maintenance technologies that we’ve already at Delta deployed. We run, I think, the best maintenance operation in the world. I was telling a group I was speaking at earlier today, 10 years ago we bought Northwest Airlines. We had a really difficult year — our first year of integration. We had 6,000 cancellations due to maintenance alone in that year, in one year, in 2010.
Kara Swisher: Yeah, I think I rode those planes. But go ahead.
Jason Del Rey: Based on what? Is that just the age of the planes?
It was maintenance issues, lack of familiarity in terms of what some of the clauses were at times. It was just integrating the fleet. This past year we had 60, six-O, the entire year. A 99 percent reduction in maintenance cancels. No airline in the world can talk to that in terms of those types of numbers. But it tells you that it’s predictive technology and engine technology, we’re using…
Jason Del Rey: And what did it say? This is going to break?
We’re using the data so I don’t know what more data we’re going to get to, you’re not going to get better than 60 in a year. So we’re already pretty skilled in that, in the knowledge set. I think when the airplanes themselves, as these new variants come out, whether the Max or the A321neo, there’s going to be more information and data to share. But I think that will then be the industry learning as compared to just Delta.
Jason Del Rey: What does R&D look like for a major global airline in 2019?
Well, we’re investing aggressively. We’ll invest almost $5 billion in capital, which is fundamentally our R&D. Our technologies run multiple years. They’ll run up to 20 to 30 years as we roll out new fleets. Airplanes, airports, we got new airports going up in LA and Seattle, Salt Lake, New York, rebuilding LaGuardia.
Kara Swisher: Finally.
Exactly. Our digital technologies, we’re spending half a billion dollars, just pure technology-driven digital being the big part of it. That’s a run rate, that $4 billion to $5 billion level that we’re going to continue maintaining. That’s close to, to put it in context, close to 10 percent of our top line is going into that space. At the same time, we’re generating — because we’ve got the balance sheet and the health of the company back — we’re generating also just about as much free cash flow of the company, as well.
Jason Del Rey: In the consumer digital experience right now for Delta, what is not where you want it to be? What needs to be fixed or improved?
There’s a lot we can improve. I wouldn’t say it’s not where, we’re not unhappy with it because …
Jason Del Rey: I’ll say that.
Okay, you can say that, but I’ll tell you that we are within our peer set doing a great job as we’re innovating. The thing we had to do that people lose sight of with this 95-year-old company is that we had to build the foundation first. We spent several years building the infrastructure and the architecture and being able to get at the data, because it was truly an incredible maze of spaghetti strewn all around the company with all legacy systems.
We’re bringing the digital technologies almost on a weekly basis now into the market. Our Fly Delta app is one of the best-rated airline apps out there. We’ll get better, there’s more we can do. I think the big thing you’re going to see us do is bring the technologies not just into the hands of the customers going mobile, in terms of controlling your experience with Delta, but into the hands of our employees. So that our flight attendants, our pilots, our gate agents, our people in reservations, in maintenance, can actually start to interact more efficiently with each other and with customers to continue to run an even better operation. Digital changes the game entirely.
Kara Swisher: What about, one of the things they were talking about earlier was facial recognition of getting on and off planes. I do Clear, I’ve had Clear for almost a decade now. I had it from a very early …
The old Clear and the new Clear?
Kara Swisher: The new Clear, all the Clears, which I like, which … I trade inconvenience for my entire identity, which I realize now. But one of the things I’m talking about is this idea of facial recognition, safety on planes. It’s not just safety of the planes, it’s safety of getting on the planes, safety within the planes. Do you see yourself pushing heavily into that area where you, “This is a raging passenger. We’re not letting them on the plane. This is someone who has a history.” This is …
Kara Swisher: Do you think it’s okay to facially recognize people?
If we have a reason to believe a passenger is not safe, we have an obligation to not let that passenger on board the plane.
Kara Swisher: Sure, but what do you think about the idea of using facial recognition to board planes?
Well, we use facial today in Atlanta for international. Now, it’s an opt-in so you don’t have to do facial. If you decide to do facial, facial is run by the Customs and Border Patrol, so it’s not Delta making that decision, it’s the government. And they use that facial recognition to check against their industry database.
Kara Swisher: How doyouuse it?
We use it to speed up the process. It’s really the government’s technology. We’re implementing it in our airports to allow customers to go through the process without any paperwork at all. So whether it’s check-in, but the question about getting on an airplane passes through the government’s hands. That’s where CBP takes control.
Kara Swisher: Yeah, I know, they just got hacked yesterday so I’m disturbed by that question. How do you feel about that? How do you think customers react to that idea that they have the convenience of getting on a plane but they’re also having their face tracked? Or is it just like a ticket or a …
Well, I think at the end of the day, it’s a more effective tool in terms of being able to make certain it’s not just the person who it is, the person that’s returning to the country is the same person that left, it’s not a different identity. I think, secondly, it will be a more efficient process, as the reason you use Clear, is that you get through and it’s a faster process, and you can avoid — those lines at CBP as you come into the country can be difficult. We got to find a way to accelerate. I think people value time.
Jason Del Rey: Do you think if … Have you found yourself having to think harder about decisions around facial recognition than you might have a couple of years ago for a couple reasons, for the political climate we’re in? For just …
Kara Swisher: Privacy.
Jason Del Rey: Yeah, privacy discussions. You see inside the big tech companies. You see employee activism. Are you thinking about these issues in a different way than you might have a couple of years ago?
No question. As we continue to expand our technology into the spaces you’re talking about with digital and being able to let our consumers know more about us so we can know more about them and be able to engage in a deeper relationship, we have to maintain that same level of trust and care that we have with putting you in the sky, as compared to protecting your private identity and your data.
We have a lot of people looking at all the technologies that we’re thinking about rolling out, making certain they comply with all privacy laws. We’re not a technology company at its core, so we’re not ever marketing the data or selling the data. But we still want to make certain that we’re adhering to those same privacy standards.
Kara Swisher: So, explain how you think the flight experience will work in 10 years, because it’s changed so drastically. I mean, I’m old enough to remember just walking through an airport. Now that’s, obviously, for safety reasons, not allowed any more. There were the hijackings, and now there are terrorist attacks. What does flight look like?
Well, the flight experience continues to get better, you know, our operational performance has been incredible. We just ended, this past weekend, a run where we had over 40 days in a row without a cancellation in the world. We are running the levels of excellence in performance that we’ve never seen.
And the flying experience is getting to the point where value for money is also significant, because consumers today are paying 40 percent in real dollars less than they did 20 years ago for the price of a ticket. So, the deregulation of our industry back in the 1980s has worked, it democratized travel, it brought people out. I never stepped foot on a plane before I was 25 years old. How I ever got this job, I’m still not quite sure, still trying to figure out. You know, it wasn’t affordable, wasn’t something I did when we grew up. Now our kids think I am a dinosaur, if you don’t fly.
I think the big change, Kara, is going to be in the airports going forward. And that’s why …
Kara Swisher: Meaning? What will they look like?
The airport is going to look significantly different. First of all, we are going to take the stress out of the airports. We realize the airports …
Jason Del Rey: Is that why I’m seeing beer gardens everywhere in Newark Airport? A garden in the airport, it doesn’t …
Not at our gates.
Jason Del Rey: Okay.
But one of the things about airports we have to remember, these were built 50, 60, 70 years ago for an era that has long past us, so volume, security apparatus, even the physical layouts. Back then, people would come to the airports to look at the marvel of the front head house, we called it, the front door, the artwork. When did you ever spend time in the front of an airport? You never go there. Right now, you just go directly to security, you only ever stop at the counters because you’ve got your mobile. But all of our physical layout is out front. So, we’ve got to flip it around, put our physical layout back by the gates where people want to get to, and make that front, or almost, for security, getting into the property to begin with.
You are going to see a very different boarding process, the other reason for tremendous stress. You see people looking to line up and everyone wants to get on at the same time, and most of them have their belongings. Why does anyone want to sit in an airline seat longer than they have to? People don’t, but they want to get on board, and they want to make sure that their property gets on board with them. Well, if we have with RFID technology, which we now rolled out, confidence, and we are well over 99 percent into that rate, that your bag will be there waiting for you when you get to the baggage area at the end of the flight, would you really try to carry that bag on? If you had confidence that it’s going to be there, you’d say, “Sure, let me have it,” to take that space up.
We are looking at even taking the boarding queues out, taking the podiums out. You put podiums, that just gives people reason to line up. What if there’s no podiums?
Kara Swisher: You just run crazy for the entrance!
No, no. We are going to get chairs. We got nice chairs like this, chairs so that people can sit down. And agents with technology in their hands, the digital technology I’m talking about, that they can serve as a host or hostess rather than a ticket-taker. Transaction, that’s how you build relationships.
Kara Swisher: I’m sorry, explain this to me. Instead of arguing with people and getting in line, essentially, you do what? You sit in a chair and what? You scan your eyes…
People wait until they get on board, rather than everyone wanting to get on board at the same time.
Kara Swisher: How do you change people’s behavior patterns like this?
Well, if you don’t have some place to stand, what do you do?
Kara Swisher: Look for a place to plug in my phone.
Look for a place to sit. It’s going to take time, we are experimenting with it. But it’s knowing that the agents are out there with a technology in their hand, and that’s who you need to talk to. And these people will be trained to try to scoop up bags if there’s bags that can be checked, but again, it’s going to take some time. There has to be confidence that the technology works and it’s being delivered on. We put the technology in, these are still teething pains, a lot of it’s going to be around network bandwidth. 5G is going to be a big deal for us in the airports.
Kara Swisher: Because?
Because we actually have the wifi capabilities to actually implement this at the level of fidelity that we are looking to create.
Kara Swisher: At this would create this ability to check people in, in a very different way?
Yeah, with the RFID today that we have, the technology, we have scanners out there, we have sensors, they’ll pick up the bags, you’ll be going on to the belt loader. It is trained, the belt loader, that if that bag is going to the wrong destination, it will stop the belt loader. And it will cause the gate agent or the ramp agent to go look at it and figure out where that tag is, get it onto the right plane. It will also be able to track it, you can track your bag on the Fly Delta app, you will know where it is, you’ll see it get to the baggage claim before you do, as you walk into it it will tell you what baggage area you need to go to. That’s what we are creating for the future, and technology is going to be critical in getting there.
Jason Del Rey: I want to get back to something you mentioned earlier. You were talking about efficiency, looking to fly farther, have more people on a plane. I am 5-foot-7 on a good day, and I am not comfortable in coach, and maybe after my podcast, I will be moved out to a different section of the plane.
Kara Swisher: No.
Jason Del Rey: No? OK. Shit. It was a good try. I hear, “More people on the plane” and I get nervous about seat size, about a lot of things. Can you unpack that a little bit? Is there a day that we can look forward to where the lowest level of seats is something that is more comfortable than it is today?
We haven’t changed our seat pitch, our seat size, our seat length in years. I am 6-foot-3 …
Jason Del Rey: I know, we are going to talk about that.
And, by the way, I fly coach most of the time, too.
Kara Swisher: Hmm, you too … okay.
I’m back there with you, it’s more fun back there. It’s kind of boring up there.
Jason Del Rey: Aisle seat, I hope? You need that leg in the aisle, no?
I try to get an aisle seat when I can, but I don’t always.
Kara Swisher:Isit more fun back there?
It is much more fun back there, there’s no question about that!
Kara Swisher: I never go back there any more.
You don’t want to look?
Kara Swisher: I do not.
You should come back with the people.
Kara Swisher: I shall not. I like sitting up front with all the white guys, it’s great.
You need to come by, there’s two white guys, we’ll be happy to let you sit between us.
Kara Swisher: They wonder how I can possibly be there. They are like, “What are you doing here, little lady?” Anyway.
But when your question gets to, really, how do you value the seat? And because what I mentioned earlier is that tickets prices have come down by 40 percent, people get great value, and as a result of that, you have really low fares, and you have what we call in our business, “basic economy.” That seat has the lowest fare, you don’t get anything with it, you get the small seat, which…
You have opportunities, if you have an extra $10 or extra $20, to move up into Comfort Plus seat, which will get you extra few inches, not that much money, or even first class. One of the big changes we made in our business is, we brought first class fares down. Remember, they used to be like 10x. They are down to affordable levels, so we sell most of our …
Jason Del Rey: What’s that? Three, five x?
No, no. It’s between two to three x.
Jason Del Rey: You can tell I know nothing about first class.
You need to try that. You can buy an upgrade many times for $100.
Kara Swisher: That’s what Virgin America pioneered, and then it closed.
Well, we’ve been doing that well before they were doing it. And so, now what you have is that you’ve created a much greater value for money for people. We’ve seen our customer satisfaction scores, for lots of reasons, go through the roof. We are well into the 50s, we are used to be at 25 a number of years ago.
Jason Del Rey: That’s NPS score?
NPS scores. And we continue to make great progress.
Kara Swisher: So, one more thing in innovation I think we’re remiss if we don’t talk about what’s going on in Georgia right now because that’s where your headquarters are — but carbon-free jet fuel. David Wallace-Wells was talking about the idea that the planes are things that are really problematic for climate change. And I know all the companies say, “We are trying to fix climate change,” but, you know, your business is problematic for the planet. Do you put money into innovating on carbon-free jet fuel, for example?
We are certainly investing in biofuel resources, but that is not the big answer. The big answer for us is becoming a lot more efficient in terms of usage. Every plane that we put out there today is 25 percent more fuel efficient, the new ones, than the ones we are retiring. We are replacing a third of our fleet over the next five years, that’s significant. We’ve made a commitment to reduce our carbon footprint by 50 percent, five-o, by the year 2050. And that’s an industry goal, but Delta has made that a specific commitment. And we are on a good track, we are reducing it somewhere between 1 and 2 percent per year every year along that journey. We capped our emissions at 2012 levels, and every year they continue to come down.
The bigger planes, putting more people on planes, you may not like that, Jason, but that helps with efficiency in terms of having fewer planes in the sky. It helps with our stewardship responsibilities.
And the other thing that we are one of the only airlines that does is that, if you feel particularly concerned about this issue, you can offset your personal carbon footprint on our website, we’ll calculate for you what you created and a cost offset.
Kara Swisher: Offsets. I don’t…
Well, we’re investing…
Kara Swisher: It’s interesting, the carbon offsets. I once had some Google people, they were like, “We are doing carbon offsets on our private planes,” and they were flying around Kilimanjaro. And I was like, “So, you are flying to look at Kilimanjaro, but you are paying carbon offsets. Why don’t you just not fucking fly around Kilimanjaro?” It was a really interesting thing. So, this is really not a solution.
But that is for an average customer. The average customer can go in, and it’s like $5 to fly from Atlanta to LaGuardia. We’ll take that $5 and we’ll do something, we’ll put trees back, whether it’s the Amazon or whatever we’ll do. And I know there’s a controversy as to the efficiency of those offsets but we are looking into that as well. But we are the only, one of the only airlines I know of that’s doing that.
Jason Del Rey: And you think what you are doing today is enough?
No, no. We are not there yet. We’ve reduced it by 1 to 2 percent a year, but we’ve got a lot of progress to go.
Kara Swisher: So, to finish, we really have a few minutes. You can choose between unions with Bernie Sanders or …
We’ll squeeze in both.
Kara Swisher: Okay, or abortion rights.
You gave me great topics. Is our clock almost over? I’ll filibuster.
Kara Swisher: No. We have about a minute, go for it.
What do you want me to say?
Kara Swisher: Reproductive rights. You’re headquartered in…
You know, we are in the state of Georgia, we are headquartered there, it’s obviously become a big issue. It’s an incredibly emotional issue, there are a lot of people on both sides of this issue. We carry 200 million people a year, we have 80,000 employees. We can not, as a company, take one group and put it over another group, when you’ve got such an emotional, some would say almost religious, view as to what the right answer is. I think, this is something that the courts need to settle and resolve, not corporate America. At least for us, I can’t win.
Kara Swisher: Disney is weighing in.
Well, Disney has talent not willing to work. This is our state, this is where we live, this is where we have 35,000 employees. And, whichever way you go on the topic, you are going to alienate millions, tens of millions of people. This is an issue that is uncomfortable, when you get to the point of social activism with CEOs, this is something we’ve been trained to stay away from. This is a relatively recent phenomenon, no war, you want everybody to love you, you don’t want to make enemies, and this is something we are still wading through.
Kara Swisher: And unions. Go ahead, Jason.
Jason Del Rey: You were in a unique position over the last year where you’ve had the NRA coming at you on one side and you’ve more recently had Senators Bernie Sanders and Elizabeth Warren coming on the other side. So, quick recap, NRA …
So, we are even.
Jason Del Rey: NRA situation after the high school shooting in Florida, you were made aware of discounts for some NRA members to fly to their annual convention, you did away with that, and NRA went after Georgia lawmakers to eliminate a tax break that you all took advantage of.
Yes, it costs us $40 million a year, that same Georgia legislature was just talking about …
Jason Del Rey: More recently.
Kara Swisher: We love your legislature in Georgia. Go ahead.
Jason Del Rey: No. 1 fan, Kara Swisher.
Kara Swisher: Alabama.
Jason Del Rey: More recently… I’ll try to recap this correctly. You can correct me if I’m wrong. Part of your employee base is … There’s a union drive going on and there were some flyers found in some of the break rooms that were seen as trying to discourage unionization. And so obviously, for presidential candidates like Bernie Sanders and Elizabeth Warren, it’s a big issue. They’ve come at you for that.
Kara Swisher: So you get drawn into it?
Jason Del Rey: Yeah.
I’m not saying we can’t get drawn into it, but I think you’ve got to decide where you go because it’s got to be relevant. So, on this topic issue, we had flyers out there. They were out there. It was over a year ago, by the way, that this happened. It was only out for a few days and it had equating union dues to buying a video game console, to save the money.
Jason Del Rey: Saying “Would you rather …”
Buy a video game. It was inappropriate. It was wrong. I didn’t know about it. A bunch of our people didn’t know about it. As soon as we found out about it, we had them pulled. A year later they show up because the union got Senator Sanders engaged, and he tweeted out to me the copy of that and said at the same time we’re paying our ramp agents $9 an hour to work. Trying to get people aware of the fact that we’re making billions in corporate America and these poor people out in the hot sun with … Which was a total lie. Our starting salary for the ramp is double that and we have the most generous profit-sharing and benefits program in the industry. We have an agent working on the ramp and once they get the full seniority after 12 years it was making $75,000 a year top scale in there.
Jason Del Rey: Where are the $9 an hour coming from?
I have no idea.
Jason Del Rey: Is there anyone at Delta making $9 an hour?
No. The opening, as I say, the starting salary there as well as others is almost double that. So, this is a fake issue and it was there because it was opportunistic because there was this flyer out and I wrote him back and we made it public. Delta employees have gotten an 80 percent pay increase over the last 10 years. 80 percent. I don’t know any company 80,000 strong that can make a statement they paid all their employees 80 percent more over the last decade. Delta has. And so I feel totally vindicated that our employees have … not only are they deserving of it because they perform at the highest levels, we also have the greatest relationship with them in serving customer needs.
Jason Del Rey: I have one more question. Did the flyers, while in poor taste — I think you said, or something along those lines — did they express how the company feels about this effort? This union drive?
No, it was in poor taste. No, it doesn’t. Do I have an opinion on this? Absolutely. My job is to take care of my people. If somebody finds some way better to take care of my people, I’ve got the problem. And that’s my responsibility, not someone else’s. And we do a darn good job of it, too.
Kara Swisher: All right, next question. Questions from the audience. Go ahead.
Audience member: Hi Ed. Going by the core business, first of all, congratulations for running the best-run domestic legacy airline. Two questions for you. I’m your best client, I’m a Diamond for as long as they existed, but Delta has led the industry in actually devaluing frequent fliers for their most loyal customers. You mentioned, citing upgrading from coach to first, that took away the traditional upgrades. So tell me, one, how do you feel about the importance of the customer, your most loyal customers? And lastly, how are you going to compete with Mint on JetBlue domestically?
First question, on loyalty. We did the effect of killing social security when we changed the loyalty program to … It always used to be mileage-based and we now make it revenue-based. The customers that are providing the greatest revenue value get the most points. That’s the way almost every loyalty program out there is today. But unfortunately, if you’re the first to go, it’s tough being the pioneer in that space.
The other thing that we did at the same time, though, is that we’ve made the usage of those points significantly more available, because now we allow the points to float dynamically with price points in the market. And we have seen a 30 percent increase in the amount of usage and redemptions of the points because of the way the program is now structured, than the past. It used to be very rigid at 25,000 mile break to get a domestic ticket and 50,000 for an … Now you can get them as low as 5,000.
And one of the other things we’re doing with technology and digital is we’ve gotten to the point where you can actually use those miles and you can purchase that upgrade using miles for maybe 1,000 miles or whatever the number is for an individual segment, right on your phone. If you’re going to the airport and you can just look up and it’s two clicks and you can upgrade. So we’re creating greater availability.
I didn’t get the question about JetBlue.
Audience member: JetBlue Mint. How are you competing?
We compete very well with those. That’s our market. That’s our core bread and butter. It’s our business travel. And Mint’s a good product, don’t get me wrong, but it’s relatively a niche product for them. We’ve got that throughout our entire system.
Kara Swisher: Yeah. Mint is dreamy. I will try the Delta One, but Mint is dreamy.
Audience member: Hi. So, I fly a ton, all sorts of different airlines, mostly internationally, and it does feel that compared to the international carriers, the big American carriers are just worse and across many dimensions. Why?
Well, you’re not flying Delta enough, obviously. That’s one of your problems. Because at Delta that’s not the case. We rank, I mentioned our net promoter scores, we put them up against all the international competition on a regular basis and regularly we’re in the top tier with those carriers.
There’s different types of international airlines. You’ve got the Middle Eastern airlines that are subsidized, tens of billions of dollars by their government, to give a lavish appeal and adornment to the airline. If our government gave me tens of billions of dollars, I would be able to provide that for you. But we don’t and we need a level playing field and we’re… This administration has actually been quite helpful in that.
Jason Del Rey: I was going to make an NRA joke but I won’t.
Thank you. Second thing is what we’re doing is, we’re continuing to invest and accelerate the growth of our international product. So, the Delta One Suite that Kara just mentioned won the award last year as the best new international product in the sky. And it’s an enclosed suite. It’s our first-class cabin.
We’ve got new Delta Premium Select onboard. We’re bringing a lot of new innovation into the international marketplace, bringing in new airplanes as well. But fundamentally it’s also about the people. We have wonderful people, and I’d put our people up against any international airline there is.
Kara Swisher: Also you obviously haven’t flown Aeroflot like I have. Go ahead.
Nilay Patel: Hey, Nilay Patel from the Verge. So, we spent a lot of time at this conference talking about antitrust and regulation in tech. Airline industry is obviously the opposite, massively deregulated, huge amount of consolidation. A lot of people would connect that to crappy experiences and coach upsells, across the entire line, just the bad experiences everyone here is talking about. What lessons would you give to the tech industry having experienced this moment in reverse?
Well, while we are deregulated, we are heavily regulated. Twenty percent of what you pay us comes off our top line, goes to the government in taxes. That goes into airport taxes, excise taxes, fuel taxes, heavily taxed. Second only — and it’s a close second — to the alcohol and tobacco industry, in terms of the rate of taxation that we absorb. The FAA, regulators are inside our company every single day. So we’re substantially regulated.
We’re deregulated from a pricing standpoint. The government used to actually set the prices of the tickets. Now they let the free market sell .. it’s not, the premise of your question is wrong. It’s not an unregulated environment whatsoever.
I also take issue with you with the numbers. I’m talking about Delta. I can’t talk about my competitors, but I can tell you at Delta, your experience or whatever you’re saying is not on Delta because our net promoter score or customer satisfaction scores have been climbing over the last 10 years. Our operational reliability is at a level we’ve never seen.
And as you see us investing $5 billion in new planes, new airports, new technologies, a year for the next five years, it’s going to be pretty dramatic, the continued improvements you’re going to see. So I’d say fundamentally, you need to fly Delta more, but that’s what our numbers are and that’s why we get the revenue premise we are.
Nilay Patel: Do you think the amount of it … By the way, I’m also a Delta frequent flyer.
Okay, good. You need to do it more.
Nilay Patel: Can you add a Chicago-SF route? That’d be great for me. And, do you think the amount of consolidation in the industry has been healthy?
I think it’s been incredible. This is an industry that went from boom [to] bust with bankruptcies galore. Scale, no one had scale to compete. The reason we’re performing the way we are, and we’ve got the balance sheet back and our investment grade rating back, is that we have the scale to invest for the long term. This is a high-capital, a capital-intensive business with big fixed costs. You’ve got to be able to plan for the long term and have scale to implement to be able to bring you the benefits you have. And as I said, prices continue to come down every single year. So, consumer value is, I think is, few industries could match with respect to the declining prices we’ve seen for consumers.
Kara Swisher: Okay, last very quick question.
Jason Nazar: Hey. Hi Ed. Jason, the CEO of Comparably. We actually have a bunch of data on you and your competitors and your employees rank you as probably the best airline. One of the things I’m kind of curious about is other than just better benefits and paying them more, is there anything from a cultural standpoint that you do to create a better environment that then comes back to the customer experience?
Well, absolutely. This is about a service business. People love to talk about the airlines with the technology and the airports and the aircraft. It’s got a lot of big shiny objects. Fundamentally, it’s a people business. It’s the only thing that we have that our competitors don’t have. It’s our people. Because we all have the same equipment, we all fly to the same places, we all pay the same amount for jet fuel. It’s the culture and the values of the company that makes the big difference. And so personally, that’s my No. 1 job, as I just told Jason, taking care of our people. I’m out every single day in front of ‘em. Our leadership team is engaged with them. We spend an enormous amount of time, in the sense that it’s a team. It’s a direct relationship that works.
We also have, as I also said earlier, an incredible profit sharing plan. Fifteen percent of the profits of Delta go to the employees. They don’t go to the managers. They go to the employees. This past Valentine’s Day, we paid $1.3 billion in profit sharing to the employees. Fifth year in a row of over a billion dollars. No company has paid a billion dollars once. We’ve done it now five years in a row and this year coming up is going to be the sixth.
So they feel like they share in the success, and the investments we’re making in tools and technologies and new equipment are tools that they can go do an even better job for them. So, they feel the support that you have. But it’s a full-on thing. This is not something that you will be sending out over social media compliments. You’ve got to personally be engaged with them every single day. It’s a business I love because it’s just dealing with people. And Delta’s got a great culture and a great history of that.
Kara Swisher: Okay. On that note, thank you, Ed.
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