Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Well, last month, Delta Airlines forecast profit in sales that
Speaker 2: fell short of Wall Street's estimates for the final months
Speaker 2: of the year, suggesting a slow recovery from a challenging
Speaker 2: summer travel season. For an update on the business and
Speaker 2: the latest on Delta's partnership with the private on demand
Speaker 2: aviation provider wheels Up, we bring in Ed bast And,
Speaker 2: CEO of Delta Airlines and George Mattson, CEO of wheels Up,
Speaker 2: both joining us from Atlanta. We should note that Delta
Speaker 2: does own close to forty percent of wheels Up. That's
Speaker 2: according to Bloomberg Data. Guys, thanks so much for joining us.
Speaker 2: We're going to get to the wheels Up partnership and
Speaker 2: the exciting news that you guys have when it comes
Speaker 2: to new aircraft. But I wanted to ask each of
Speaker 2: you the same question that I've asked every CEO that
Speaker 2: I've spoken to over the last week, and I want
Speaker 2: to start with you, what does a second Trump administration
Speaker 2: mean for Delta Airlines.
Speaker 3: Well, I think you've seen from the market's reaction there's
Speaker 3: a lot of optimism in the corporate community. I know
Speaker 3: for Delta specifically, and aviation industry. The president, the former
Speaker 3: president now the current president elect, knows our industry quite well,
Speaker 3: was very supportive as we worked with him in his
Speaker 3: previous administration, particularly as we went through COVID, got the support.
Speaker 3: We are the original industry that got the Cares Act started,
Speaker 3: and the support to keep our employees employed, and we
Speaker 3: look forward to continuing to work with him in a
Speaker 3: second administration.
Speaker 2: What about ED when it comes to regulation during the
Speaker 2: next administration, because I think many people would say that
Speaker 2: Biden administration took what some would call it hostile stance
Speaker 2: on airline M and A. Do you expect that to
Speaker 2: change under Trump? Will it lead to a new round
Speaker 2: of airline consolidation.
Speaker 4: I don't know about consolidation.
Speaker 3: I guess as possible, but I can tell you that
Speaker 3: the Biden administration, particularly the Department of Transportation, who we
Speaker 3: work most closely with, we were quite frustrated with the
Speaker 3: amount of regulatory overreach that we saw continuously through the
Speaker 3: last four years. And we hope there's a new sentiment
Speaker 3: that's pro employee, pro consumer, pro business, and a good
Speaker 3: balance between the three.
Speaker 5: And George, let's ask that same question to you you
Speaker 5: think about a second Trump administration, what would that mean
Speaker 5: for Wheels Up?
Speaker 4: Yeah, thanks, Kate.
Speaker 1: I think as Ed said, you know, the prior administration,
Speaker 1: we're in the prior administration. Obviously, there was a strong
Speaker 1: support for aviation in general, US aviation in particular. And
Speaker 1: you know, what really drives our business as much as
Speaker 1: anything else, is a good, solid, strong economy. Obviously, the
Speaker 1: markets have reacted very positively to the results of the election,
Speaker 1: and the economy appears to be quite strong and resilient,
Speaker 1: and I think ultimately that's going to support our business
Speaker 1: plan went forward.
Speaker 5: And let's also talk, of course about the relationship between
Speaker 5: your two companies, Delta and Wheels Up. And Ed, I'll
Speaker 5: ask you this question. Delta, according to our data, owns
Speaker 5: more than a third of Wheels Up. You've also supported
Speaker 5: Wheels Up with credit and access to capital. Why own
Speaker 5: so much of Wheels Up? What is in it for Delta?
Speaker 3: Well, what's in it for Delta is the opportunity to
Speaker 3: create a new level of premium in commercial aviation that
Speaker 3: hasn't previously existed in terms of a partnership. And more
Speaker 3: than just a partnership, it's an ecosystem that's linked between
Speaker 3: private and commercial. We know many of our private aviation
Speaker 3: consumers also fly commercial fly in Delta, and we want
Speaker 3: to make it easier for them to make those choices
Speaker 3: when they have the opportunity to fly private and vice versa.
Speaker 3: When there's private aviation consumers that may occasionally need a
Speaker 3: commercial flight, whether it's going to Europe or some other place,
Speaker 3: we want Delta to be their airline of choice.
Speaker 1: Ed.
Speaker 2: Would you consider buying the company completely?
Speaker 4: No, that's not in the carts.
Speaker 3: We deliberately wanted to make certain we had investors with
Speaker 3: us when we made this decision, and I think having
Speaker 3: the external validation of investors beyond just Delta was helpful.
Speaker 2: Hey, George, I want to talk about the fleet because
Speaker 2: there was big news last month when Wheels ups it
Speaker 2: would buy the Embray or Phenom fleet of from Grand
Speaker 2: View Aviation. It's one hundred and five million dollars deal.
Speaker 2: It's part of this three year plan to transition to
Speaker 2: Embraer and Bombardier challenger aircraft. You're also though, moving away
Speaker 2: from Cessna citations. What's the thinking behind this apart from
Speaker 2: just a newer fleet.
Speaker 4: Yeah, thanks Tim.
Speaker 1: When I arrived here just over a year ago. Have
Speaker 1: you spent eleven years on the Delta board. We obviously
Speaker 1: had a number of first aid priorities, but one of
Speaker 1: the priorities over this first year was building a long
Speaker 1: term strategic plan and a fleet plan that supports that plan.
Speaker 1: We have a significant, loyal, strong member base, a really
Speaker 1: strong brand. Most of our members have been individual leisure customers.
Speaker 1: We are increasingly becoming a provider of choice to corporate customers.
Speaker 1: I think through our Delta partnership that's only going to
Speaker 1: become more important going forward. As we looked at our fleet,
Speaker 1: it was a little older than we wanted it to be,
Speaker 1: and it was a little bit more complex than we
Speaker 1: wanted it to be, with four fleet types operating, which
Speaker 1: we've now distilled down to two fleet types. And in
Speaker 1: deciding to modernize the fleet, what we did is we
Speaker 1: basically selected the two most popular aircraft types in their
Speaker 1: respected categories, with the deepest install bases the largest secondary
Speaker 1: markets in order to be able to buy those aircraft
Speaker 1: at fleet scale over a period of time.
Speaker 4: This is going to.
Speaker 1: Really significantly transform the product offering we're able to deliver
Speaker 1: the customers, the experience, the reliability, the efficiency that comes
Speaker 1: both with the aircraft themselves and also the simplification of
Speaker 1: the fleet. We're going to enhance that fleet with best
Speaker 1: in class connectivity. I think Delta was a real leader
Speaker 1: in providing free, high speed satellite Wi Fi on the
Speaker 1: air aircraft.
Speaker 4: We've announced a commercial partnership with Go.
Speaker 1: Go to provide a similar low Earth orbit satellite Wi
Speaker 1: Fi capability on all of our aircraft. We're very excited
Speaker 1: to I've been able to jumpstart this fleet transition by
Speaker 1: acquiring brand View, which has the largest.
Speaker 4: Fleet of on demand feed on three hundred and three
Speaker 4: hundred e's.
Speaker 1: In the market, and that tr transaction is going to
Speaker 1: close very very soon, and we're going to immediately be
Speaker 1: able to offer that at fleet scale to both our
Speaker 1: charter customers but also our programmatic member customers.
Speaker 4: And I think when you look.
Speaker 1: Forward at the progress we're making financially in the first year,
Speaker 1: this fleet modernization is an important unlock for the next
Speaker 1: phase of that of that profitability journey as well.
Speaker 5: And I also want to talk of course about Delta's
Speaker 5: fleet and ed we have to talk about Boeing. You're
Speaker 5: a major Boeing customer, and to put it mildly, the
Speaker 5: company has had a lot of problems. They've recently raised
Speaker 5: new capital though they've gotten past the workers strike. But
Speaker 5: that being said, how quickly do you expect Boeing to
Speaker 5: actually get back on a normal production schedule here? And
Speaker 5: are you anticipating further delays when it comes to deliveries
Speaker 5: and certifications.
Speaker 3: Were, as you may know, not anticipating any Boeing deliveries
Speaker 3: because we have none outstanding in the next couple of years,
Speaker 3: so in the immediate term we're not impacted at all.
Speaker 3: But I do believe that they have made the right
Speaker 3: decisions around raising capital to invest in their business, around
Speaker 3: a concerting, Their employees are properly taken care of and compensated,
Speaker 3: and so they can get back focus on delivering high
Speaker 3: quality airplanes to our industry. I think it's going to
Speaker 3: be a number of years before you see a steady
Speaker 3: stream of airplanes starting to return, and well, hopefully sooner,
Speaker 3: but I think we are all realistic that this is
Speaker 3: going to be a very challenging turnaround still to come.
Speaker 2: When you say a number of years, would you count
Speaker 2: that number on one hand or two hands?
Speaker 3: A couple fingers?
Speaker 4: Okay, so a.
Speaker 2: Couple I like that Hey, we're speaking with that Bashion,
Speaker 2: CEO of Delta Airlines and George Mattson, CEO of Wheels Up,
Speaker 2: both joining us from Atlanta. Ed, well, we have you
Speaker 2: give us an update on capacity in the market.
Speaker 3: Here.
Speaker 2: We hear it's improving, but is it improving for both
Speaker 2: premium and economy seats right now?
Speaker 3: The market has rationalized. I think this past summer we
Speaker 3: saw in the US marketplace there were a lot of
Speaker 3: seats for sale, had a pretty big impact on pricing.
Speaker 3: A number of the airlines, particularly those on the lower
Speaker 3: end of the price scale, have been struggling. They all
Speaker 3: most of them have lost money this year, lost money
Speaker 3: in the in the peak summer even and have had
Speaker 3: to implement a number of self help measures to ensure
Speaker 3: that they can find better balance between supply and demand.
Speaker 3: On the premium side, that's where growth has been in
Speaker 3: the industry, and Delta has led the way. And you know,
Speaker 3: any of the airlines, there's a couple of us out
Speaker 3: there that are more focused on premium have done quite
Speaker 3: well over the past couple of years over those that
Speaker 3: are that are more in the commodity sense. We're price
Speaker 3: is the principal determinate of the consumer purchase. They've struggled
Speaker 3: and they continue to struggle, and that's why you see
Speaker 3: the supply and being rationalized.
Speaker 5: So that's the view on the commercial airline demands. George,
Speaker 5: give us a peak inside what demand for air space
Speaker 5: looks like, because you think about coming out of the pandemic,
Speaker 5: we know that there was a big uptick when it
Speaker 5: comes to private jet travel. What are you seeing right now,
Speaker 5: especially as we head into some of these peak travel
Speaker 5: demand periods.
Speaker 1: Yeah, I think in general, I would just say that
Speaker 1: the industry remains quite healthy.
Speaker 4: We certainly saw.
Speaker 1: A very big sort of demand bubble from COVID, and
Speaker 1: when people did start returning to flying, a lot of
Speaker 1: folks who hadn't flown private started to fly private, and
Speaker 1: so we've seen that, I would say normalize. The industry
Speaker 1: feels relatively stable here, but I think when you look
Speaker 1: kind of medium and longer term, has really strong macro headwinds.
Speaker 3: Right.
Speaker 1: I think you know, the vast majority of of aircraft
Speaker 1: private jet aircraft are.
Speaker 4: Still wholly owned by individuals or.
Speaker 1: Corporations, and so the opportunity for on demand and fractional
Speaker 1: providers to continue to grow I think remains very strong
Speaker 1: uh as as as commercial aviation becomes in some ways
Speaker 1: more challenging with congestion and other and other challenges, I
Speaker 1: think it becomes a more a more interesting alternative. And
Speaker 1: I think one of the really interesting things about what
Speaker 1: we're doing with Delta is really trying to break down
Speaker 1: the barrier that has always historically existed between commercial and
Speaker 1: private aviation into one, you know, seamless aviation solution.
Speaker 4: And so I think as we are successful in doing that,
Speaker 4: we're going to draw more.
Speaker 1: Participants into the industry hopefully through our offering and expand
Speaker 1: expand the market in the in the process. But to
Speaker 1: answer your specific question, I think generally things feel quite
Speaker 1: healthy right now.
Speaker 2: Yeah, So George, help us understand the profile for somebody
Speaker 2: who would you know, maybe they're a Delta one customer,
Speaker 2: but they're also able to fly wheels up. What is
Speaker 2: that look like from an income perspective, a net worth
Speaker 2: perspective where they'd actually make the jump and they'd make
Speaker 2: that choice the most recent Bitcoin rally not necessarilywithstanding.
Speaker 1: Yeah, Look, there's different there's different cuts at what at
Speaker 1: sort of what level of income or net worth constitutes
Speaker 1: the ability to fly private.
Speaker 4: I've seen numbers in the mid single digit millions of
Speaker 4: dollars of networth. I've seen numbers that are higher.
Speaker 1: I've seen a study that suggests ninety percent of people
Speaker 1: who can afford to fly private under that definition have
Speaker 1: never flown private. So and so you know, you have
Speaker 1: if you think about our partnership with Delta Airlines, a
Speaker 1: couple of really big pools of potential customers. One is
Speaker 1: the forty five thousand or so Delta corporate customers, where
Speaker 1: Delta is often the leading provider of travel period to
Speaker 1: that company. And so we're offering this within that framework
Speaker 1: as an additional alternative, as a sleeve, if you.
Speaker 4: Will, of an existing broad corporate agreement.
Speaker 1: And then when you look at the individual customer, which
Speaker 1: is sort of just your question, you know there are
Speaker 1: many If you believe that ninety percent of people who
Speaker 1: can afford to fly private never flowing private, well where
Speaker 1: are they? They're in the front of the cabin generally
Speaker 1: at the commercial airlines, and you know there may not
Speaker 1: be you know, flying private every time. But again, this
Speaker 1: idea of a solution that could be commercial, or it
Speaker 1: could be private, or it can be a hybrid of
Speaker 1: the two. Is where I think we're going to find
Speaker 1: demand for those for those customers from those customers, and
Speaker 1: I think there's a lot of them out there who
Speaker 1: don't quite know how to access our industry quite yet,
Speaker 1: and we're trying.
Speaker 4: To fly that.
Speaker 2: Hey, Ed, I got to another capacity question for you,
Speaker 2: because I know that you're already thinking about how things
Speaker 2: look in twenty twenty five. We're already looking forward to
Speaker 2: spring break in summer peak flying season. With Boeing's recent
Speaker 2: strike your turbofan maintenance, do you see a shortage of
Speaker 2: capacity across the industry or at least at your airline.
Speaker 3: I would expect for for the next year, though we
Speaker 3: haven't given guidance for next year. Actually stay tuned next
Speaker 3: next week, next Wednesday, we have our investor Day in
Speaker 3: New York, so maybe you can get it, you can
Speaker 3: get some insight. Then I expect the industry is going
Speaker 3: to move as the economy moves. Is an industry that's
Speaker 3: driven by the economy, not just US, but on a
Speaker 3: global scale. And for those carriers that are premium, such
Speaker 3: as Delta, we have the ability to drive probably a
Speaker 3: little higher capacity than the broaduct economic growth.
Speaker 2: Okay, and Ed, I know that well I don't know. Actually,
Speaker 2: it doesn't seem like there's still any lingering effects. When
Speaker 2: it comes to the crowd strike issue that you had
Speaker 2: over the summer, I know you recently filed a lawsuit
Speaker 2: against CrowdStrike. You've said you've suffered about five hundred million
Speaker 2: dollars in financial impact from that event. As the dust
Speaker 2: has settled, what are the long term applications, what's the
Speaker 2: financial implication, Well.
Speaker 3: The implication is exactly what you said. There was a
Speaker 3: five hundred million dollars immediate impact from those five days,
Speaker 3: and there were additional damages on obviously the brand and
Speaker 3: the remaining impact as it took some time for our
Speaker 3: customers that were really disappointed to come back to Delta.
Speaker 3: So all of that's included in the lawsuit that has
Speaker 3: been filed and will be pursuing vigorously.
Speaker 4: But from a go forward basis, we learned a lot.
Speaker 3: We thought we were surrounded by the very best that
Speaker 3: you can protect yourself with both CrowdStrike and Microsoft, and
Speaker 3: we realize that you can take these guys at anywhere
Speaker 3: close to face value in terms of what they tell
Speaker 3: you they're responsible for. So we've all learned to dig
Speaker 3: in deeper as to how these systems and processes flow.
Speaker 3: And it's not just Delta. I think it's the world
Speaker 3: at large, thousands and thousands of companies that were impacted
Speaker 3: on a global scale, not realizing how CrowdStrike was injecting
Speaker 3: directly into the kernel of the operating systems, potentially fall
Speaker 3: health code which is and then Microsoft distributes it. So
Speaker 3: that was a huge learning for us, and we've done
Speaker 3: the audits immediately and we'll be we've already made made
Speaker 3: some pretty significant changes in our technology security infrastructure to
Speaker 3: prevent that from ever happening again.
Speaker 5: Well, really appreciate the detail that you gave us there.
Speaker 5: We'll keep an eye on that lawsuit, but while we
Speaker 5: still have you guys, only a couple of minutes left.
Speaker 5: Most people think about commercial and then they think about private.
Speaker 5: But George, I'm really interested to hear about how you're
Speaker 5: thinking about these charter operators such as JSX, for example,
Speaker 5: where you can get on a thirty seat jet at
Speaker 5: an airport, either a private airport or a commercial airport,
Speaker 5: and they seem to be a lot cheaper than of
Speaker 5: course chartering a private jet. Is that a threat to
Speaker 5: your business? You think about the convenience and the affordability
Speaker 5: of some of these operators, and they seem to be
Speaker 5: picking up steam.
Speaker 4: Yeah.
Speaker 1: No, Look, there's certainly been there's certainly been some progress
Speaker 1: made in the introduction of this sort of hybrid commercial
Speaker 1: private by the seat.
Speaker 4: Product or alternative.
Speaker 1: It's still quite different than private aviation, really more kin
Speaker 1: to commercial aviation frankly, in that you know you're buying
Speaker 1: a seat. It's not private, it's scheduled on their schedule
Speaker 1: and so on.
Speaker 4: So look, there may be a place for it.
Speaker 1: I mean, it's operating under a fairly unique set of
Speaker 1: regulations called Part three eighty.
Speaker 4: It's a bit of a different construct.
Speaker 3: It's being looked at in different ways by different folks.
Speaker 4: But look, we see it as an alternative that certainly
Speaker 4: people consider. Look, if you're one person or two.
Speaker 1: People traveling and you're looking for something other than commercial,
Speaker 1: and you know you don't want to get your own plane, it.
Speaker 4: Sort of fits that niche of the market. If you
Speaker 4: will you're traveling with your family or a larger group. Frankly,
Speaker 4: private aircraft of your own can make as much economic
Speaker 4: sense as that alternative.
Speaker 1: But look, there certainly has been some growth within that
Speaker 1: segment and it remains to kind of be seen where
Speaker 1: it goes from here.
Speaker 2: Hey, guys, really appreciate you both joining us and spending
Speaker 2: quite a bit of time with us this afternoon. Know
Speaker 2: you're both busy. That was Wheels Up CEO George Mattson,
Speaker 2: also with Delta CEO Ed Baston, both joining us from Atlanta.