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Speaker 1: We need to talk about what's happening in the airline sector.

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Speaker 1: To Alex, I've got a theory. If you want to

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Speaker 1: know what's happening with the global economy, you don't ask

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Speaker 1: an economist. Definitely don't ask agin economist. Instead, you want

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Speaker 1: to ask an airline ceo. Why do you want to

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Speaker 1: ask a Neil airline ceo? Think about it, they said,

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Speaker 1: at the intersection of pretty much everything. Consumer dem on,

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Speaker 1: business confidence, global supply chains, the labor market, geopolitics, fuel prices.

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Speaker 1: The list goes on and on and on. So are

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Speaker 1: we heading for a soft landing with the global economy

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Speaker 1: or is the landing going to be a hard one?

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Speaker 1: We've got the perfect people to ask that question too.

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Speaker 1: The CEO of Delta is, of course Ed Bastian. The

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Speaker 1: CEO of Virgin Atlantic is shi Wis Delta Ren Brown's

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Speaker 1: forty nine percent of Virgin and Delta's just posted Q

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Speaker 1: three earnings. Fellas nice to see you, very good to

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Speaker 1: be with him. So we were having a little chat

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Speaker 1: in the green room beforehand. I talked to Shai every

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Speaker 1: once in a while in London. When I talk to

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Speaker 1: shi he talks to me about various things. One of

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Speaker 1: the things he talks to me about is the impact

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Speaker 1: that he's had on you. Ed in many ways this

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Speaker 1: this can be demonstrated, but I think the most critical

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Speaker 1: way it can be demonstrated is by what you're wearing

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Speaker 1: on your feet. He tells me that he is responsible

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Speaker 1: for you being cooler, for your footwear being better. He

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Speaker 1: takes credit for all of this. So we've got to

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Speaker 1: clear this up before we start the interview.

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Speaker 2: There's this true.

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Speaker 3: There's no question he gets a lot of the credit

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Speaker 3: for me being cooler.

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Speaker 2: Okay, that's a good start.

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Speaker 3: The foot where I'm not so sir. There's a lot

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Speaker 3: of people that feel like they've taken ownership of my footwear,

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Speaker 3: no choice. So Soshi has a line here to stand

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Speaker 3: in there.

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Speaker 2: So that's it.

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Speaker 4: That's not really Actually, that's some shade.

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Speaker 5: The only thing I would add to that if you

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Speaker 5: look at the timeline and admits it happened in the

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Speaker 5: last five years.

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Speaker 2: You've known each other for eleven years. Go figure. He

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Speaker 2: was he was in the queue. He's in the queue

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Speaker 2: and they didn't get him. The tour weren't tied. And

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Speaker 2: then he'll then I'll maybe give him.

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Speaker 1: I was going to ask you about this. I've never

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Speaker 1: I don't think i've ever seen him in.

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Speaker 2: A tie ever. I think, yeah, I think that's right. Okay, well,

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Speaker 2: I think we've I think we've resolved.

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Speaker 1: We've resolved this issue. Okay, everybody's using everybody's talking about

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Speaker 1: landings at the moment, So let's talk about landings. As

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Speaker 1: I said at the beginning, this conversation kind of brings

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Speaker 1: everything together. You guys see absolutely everything, and you've got

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Speaker 1: a credit card business, You've got an oil refiner, You've

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Speaker 1: got all of these things that allow you to figure

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Speaker 1: out what is happening in the world right now. If

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Speaker 1: you were to describe a landing that the US economy

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Speaker 1: is going to have, the global economy is going to.

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Speaker 2: Have, what kind of landing do you see?

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Speaker 3: Well, this has been the most forecasted recession I've been

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Speaker 3: in business over forty years that I think I've ever seen,

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Speaker 3: and as far as I'm concerned, I think we're going

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Speaker 3: to have a good landing. With respect to the confluence

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Speaker 3: of financial variables we're talking about. We have a consumer

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Speaker 3: in our country that is reasonably in good shape, particularly

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Speaker 3: as you get to the upper end of the income

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Speaker 3: strata in our business, specifically air travel. Forty percent of

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Speaker 3: our excuse me, seventy five percent of our revenues come

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Speaker 3: from the top forty percent of consumers, consumers that have

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Speaker 3: household earnings of one hundred thousand dollars a year or greater,

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Speaker 3: and at delta that numbers arguably even higher and virgin

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Speaker 3: i'd since it's also higher in terms of the higher

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Speaker 3: percent that cohort and the FED just released this data

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Speaker 3: just last week coincidentally, but we've been touting this for

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Speaker 3: some time. Accumulated over thirty trillion dollars of net worth

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Speaker 3: from real estate the market savings from pre pandemic to

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Speaker 3: current times. So our consumer is in really, really good shape.

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Speaker 3: The reality is that you're going to You've got winners

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Speaker 3: and losers in this economy, and the goods sector that

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Speaker 3: people accelerated purchases during the during the pandemic are maybe

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Speaker 3: doing as well. But if you live in the experience economy,

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Speaker 3: who most of us do, is doing quite well.

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Speaker 4: I think we need the ALEX indicator for this because

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Speaker 4: I'm a sky miles Delta person. I took a lot

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Speaker 4: of trips last year. I flew business class. This was

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Speaker 4: I am describing I am what you're describing.

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Speaker 2: Yeah, I love you, I don't love me yet because

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Speaker 2: we're not doing that this year.

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Speaker 4: We're going to like hunker down, we're saving. I mean,

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Speaker 4: I feel like I'm a good example of sort of

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Speaker 4: what you're trying to trying to get at. How can

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Speaker 4: you be so reliant that if.

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Speaker 3: You spending well, if you look at our planes, our

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Speaker 3: planes are full. Our planes are ful almost everywhere you go,

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Speaker 3: particularly internationally. The international economy is still recovering from COVID.

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Speaker 3: The other indicator I tell people is if you look

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Speaker 3: at a statistic. You guys are about the math and

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Speaker 3: the analytics. If you look at the airline industry has

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Speaker 3: a lot going on. To your point, guy, there is

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Speaker 3: one number in the airline industry that's proven resilient over

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Speaker 3: fifty years, and that's the percent of money spent on

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Speaker 3: air travel of the economy. It's one point three percent

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Speaker 3: a year and in year out. It broke during the pandemic,

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Speaker 3: obviously because people couldn't travel, But that gap in twenty

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Speaker 3: through twenty two of people that wanted to travel, the

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Speaker 3: inherent value of the size of the economy versus people

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Speaker 3: that could, that gap was over three hundred billion dollars

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Speaker 3: that people could not spend. So we're just now starting

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Speaker 3: to get back to normalize trends. So it's going to

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Speaker 3: continue to stay strong, I think for years.

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Speaker 1: If I could just I don't think you've ever beat

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Speaker 1: this quiet, but this is good, this is really good infence.

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Speaker 5: I'm just thinking about the Thaie proposition here and I

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Speaker 5: don't know how to respond, but if I can just add,

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Speaker 5: I think the US is slightly different than what we're

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Speaker 5: saying in the UK.

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Speaker 2: I think it's a story of two halves.

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Speaker 5: If you look at our kind of our numbers, we're

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Speaker 5: probably about ninety five percent percent of twenty nineteen in

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Speaker 5: terms of overall travel. In terms of the consumer the

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Speaker 5: retail side of it, we're probably one hundred and fifteen

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Speaker 5: percent in terms of revenue and about ninety five percent of.

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Speaker 2: Demand. But on the.

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Speaker 5: Corporate side, we're probably around seventy five percent. And that's

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Speaker 5: still underlines a very strong recovery in the US and

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Speaker 5: a weaker recovery.

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Speaker 1: That's going bank. Like, what is happening here? Is this

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Speaker 1: a permanent shift?

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Speaker 2: Yeah?

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Speaker 5: And you know we always think about is this a

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Speaker 5: structural or a transitory shift? It's hard to say, because

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Speaker 5: we're seeing both the tech sector of course, the strike

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Speaker 5: in the media and entertainment and the West Coast, and

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Speaker 5: just a general sensation that things need to hunker down

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Speaker 5: a bit because of this constant discussion on recession. So

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Speaker 5: I think it's it's difficult to say. What we are

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Speaker 5: seeing is longer booking cycle, so even the corporates are

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Speaker 5: buying well in advance, and the shorter end bookings tend to,

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Speaker 5: you know, take it a bit more cautiously. But I

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Speaker 5: think overall both that and I would agree that we're

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Speaker 5: just seeing the recovery of the international markets. There is

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Speaker 5: a softer landing or good landing as that said, for

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Speaker 5: the US economy. Europe has got to be probably a

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Speaker 5: year behind that, so there's so much more to bring

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Speaker 5: it back to twenty nineteen levels and beyond.

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Speaker 2: I think it's really the beyond that is interesting.

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Speaker 1: Mike Worth was sitting in that chair a few minutes ago.

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Speaker 1: I said, you were coming at He's like asking about

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Speaker 1: the sky miles story.

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Speaker 2: Actually, I love you too, Mike.

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Speaker 1: You rolled it out, you've rolled out the changes, You've

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Speaker 1: had to roll some of it back. What kind of

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Speaker 1: feedback are you getting now in terms of you've got

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Speaker 1: really loyal customers. They were obviously had the noises out

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Speaker 1: of joints a little bit. Do you think you've got

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Speaker 1: the balance right now?

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Speaker 3: You never get the balance rate in aggregate when you

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Speaker 3: get so many different people with an opinion. The two

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Speaker 3: things that we saw when we made the change. First

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Speaker 3: of all, the reason we made the change is because

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Speaker 3: you flies you know this, there is a lot of

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Speaker 3: demand for our premium product, our premium services or clubs,

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Speaker 3: our Delta one product, the telephone line, et cetera. We

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Speaker 3: needed to rebalance because we had far more premium customers

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Speaker 3: than ever and we're investing in premium assets, but we

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Speaker 3: just can't continue to keep up with the demand set

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Speaker 3: that we have. Any individual looks at that as to

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Speaker 3: how's it going to affect them, him or her, and

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Speaker 3: so you're going to get a lot of opinions. There

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Speaker 3: were some things that we did that I thought were

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Speaker 3: maybe too aggressive and trying to get to that equilibrium quickly,

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Speaker 3: and so we pulled back and we said we got

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Speaker 3: to go at this at a much more measure pace,

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Speaker 3: understanding as we build new premium clubs, new premium assets

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Speaker 3: to allow the demand set to be satisfied maybe in

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Speaker 3: a little bit better matter to.

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Speaker 4: Do that point, I had to wait online to get

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Speaker 4: into the lounge. When I went to France and business class.

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Speaker 4: She was very upset about, very said, I was definitely

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Speaker 4: an entitled New Yorker moment for me at JFK. But

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Speaker 4: what else are you looking at other other things in

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Speaker 4: the Stylus program that now is going to be on

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Speaker 4: board for tweaking?

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Speaker 3: Well, the lounge access certainly was one of the important

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Speaker 3: things the lifetime Loye. We took miles out of the equation.

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Speaker 3: We've had this balance between miles we're called scum OUs.

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Speaker 2: You got to change the name.

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Speaker 4: No money.

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Speaker 3: Uh No, we are making we are we are. We

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Speaker 3: are making it much more dollar denominated in terms of

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Speaker 3: loyalty and as compared to solely solely miles, which is

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Speaker 3: what it historically had been. And we've been transitioning for

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Speaker 3: quite a number of years, and so we've had an

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Speaker 3: element of both. People have found it confusing trying to

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Speaker 3: keep up miles and dollars. So we move, we move

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Speaker 3: pretty quickly. We've pulled back in some ways people that

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Speaker 3: have long time loyalty with the airline in terms of

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Speaker 3: miles in seats, we're grandfathering and creating.

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Speaker 2: New statuses for them. So we're trying to find a

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Speaker 2: good equilibrium here.

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Speaker 1: So one of the things that occurred to me as

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Speaker 1: I watched this unfold was what people are really saying

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Speaker 1: is getting through an airport is really hard. They want

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Speaker 1: to they want to make that journey through the airport

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Speaker 1: easy and once they get on board, fine, but getting through

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Speaker 1: the airport is a tough It depends on who you've

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Speaker 1: it's fine, yes, okay, good disclaimer. Are you when you

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Speaker 1: look at the airports that you operate in? Are you

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Speaker 1: happy with the airports that you're dealing with right now?

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Speaker 1: What Terminal three we've got new scanners coming through. Are

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Speaker 1: they going to work? Is the Terminal three experience? What

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Speaker 1: it would like you? What you would like it to be,

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Speaker 1: because the whole a lot of what it's been talking

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Speaker 1: about is that initial experience of going through the airport.

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Speaker 5: Indeed, and you know, we look at journeys rather than

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Speaker 5: just the point of flying, so end to end and

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Speaker 5: our impact of course is the greatest in our clubhouses,

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Speaker 5: in our lounges that we share with Delta, and of

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Speaker 5: course on the plane. But if we could see a

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Speaker 5: better experience at airports, especially at Heathrow, but around the world, that.

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Speaker 2: Will make a tremendous difference.

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Speaker 5: And indeed, you know, Terminal three at tea Throw is

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Speaker 5: the home of virgin home of Delta, and it's the

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Speaker 5: oldest terminal, it's over sixty years old. So we need

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Speaker 5: to think of what next for that experience, how we

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Speaker 5: can with a new leadership team at a Teathrow, make

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Speaker 5: a new home for our customers. But you know, overall,

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Speaker 5: with safety, which I think is you know, new systems

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Speaker 5: and new machines, joining up the biometrics and a quicker

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Speaker 5: passage of your baggage, there are many many things we

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Speaker 5: can do, but I wish we could control it from

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Speaker 5: start to finish all over the world.

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Speaker 2: That's never going to happen.

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Speaker 1: Yeah, let's we started off the conversation talking about all

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Speaker 1: the things you do which gives you great visibility on

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Speaker 1: what's happening with the economy. I was thinking about we

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Speaker 1: were talking about this this morning. Is Delta a conglomerate.

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Speaker 1: It's got an airline, it's got a refinery, it's got

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Speaker 1: a card business, it's got a really big maintenance business.

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Speaker 1: You put all this together, is the whole fit logical?

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Speaker 1: Can I think of Delta as a conlober you said

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Speaker 1: earlier in the interview, we are an airline.

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Speaker 2: Are you an airline or an airline?

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Speaker 3: We are an airline, but we also appreciate the fact

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Speaker 3: that the airline business has a lot of volatility.

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Speaker 2: To it, right, and this has also snouns.

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Speaker 3: And so what we've been after is trying to find

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Speaker 3: a more diversified stream of earnings for stability, for our

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Speaker 3: investor base, for our employees, for our customers, so that

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Speaker 3: we can ride through these challenging times, turbulent times that

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Speaker 3: we inevitably have seen and will continue to see. So

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Speaker 3: with the credit card revenues being a big part of it,

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Speaker 3: through American Express, through our MRO, in terms of third

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Speaker 3: party servicing, through the work we're doing trying to control fuel.

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Speaker 3: People think about the airlines as having a lot of

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Speaker 3: factors outside of your control.

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Speaker 2: It's implied a little bit of your question.

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Speaker 3: We've taken a contrary and view for many years of Delta.

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Speaker 3: We control much more and focus on the things we

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Speaker 3: can control as compared to things that we can't control,

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Speaker 3: and trying to do a better job of managing that

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Speaker 3: and that's what you're seeing. So you're seeing I wouldn't

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Speaker 3: call it a conglomerate, but you're seeing an airline taking

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Speaker 3: control of its future and its outcome. And as a

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Speaker 3: result of that, the market also gives us value a

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Speaker 3: lies market cap in the world in terms of an

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Speaker 3: airline out there, and also the top revenues, which.

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Speaker 4: Brings us to geopolitics and sort of how to hedge

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Speaker 4: that risk. And obviously what's happening in Israel has created

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Speaker 4: a lot of stripe within the industry. Shia, I know

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Speaker 4: you're also Israeli, so this is a particularly vulnerable issue

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Speaker 4: as well. Do we know can we quantify yet what

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Speaker 4: losing those that the air traffic is going to do

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Speaker 4: for earnings, et cetera.

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Speaker 2: Well, I'll start with that one.

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Speaker 5: You know, the situation in Israel, of course, after the

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Speaker 5: atrocities of October the seventh, is still unpredictable, so I

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Speaker 5: think there are right now. The major impact is being

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Speaker 5: of course, people are not flying into Israel, and because

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Speaker 5: of that, they're not flying also to the area, into Jordan,

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Speaker 5: into Egypt, into other locations, and there has been an

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Speaker 5: immediate impact on the price of fuel, which has gone up, yeah,

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Speaker 5: gone up quite considerably since then. I think from here

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Speaker 5: on it depends on what the outcomes. If Israel can

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Speaker 5: contain it's war to the south and to Gaza and

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Speaker 5: really taking out the Hamas, then that's one outcome. And

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Speaker 5: if God forbid it becomes a much more for regional conflict,

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Speaker 5: then we don't know how it's going to impact. But

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Speaker 5: I think, you know, overall, war in the Middle East

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Speaker 5: is always a dampening, but I don't think we've seen

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Speaker 5: tremendous amount. We have three flights to day, I think,

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Speaker 5: so we have two flights today. Delta has three flights

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Speaker 5: to day to Israel, and of course we're not flying

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Speaker 5: until it's safe to do so we we'll have to

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Speaker 5: see what the broader implications are.

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Speaker 2: Let's wrap it up. Ed, you're here in New York

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Speaker 2: is getting a CEO of the Year award.

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Speaker 1: Thank you this evening. Congratulations, thank you. What does that

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Speaker 1: mean to you? What does that mean to the airline?

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Speaker 3: Well, first of all, it's because of the one hundred

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Speaker 3: thousand women and men of Delta Airlines that I'm receiving

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Speaker 3: that award, So on my behalf, I'm accepting it but

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Speaker 3: it's really for our team, because our team did an

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Speaker 3: incredible job managing through the pandemic, and I think that

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Speaker 3: was the reason why we were selected to receive this award.

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Speaker 3: It's a great honor to be to be recognized by

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Speaker 3: your peers across multiple industries, but it's really a great

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Speaker 3: honor for our people because I'm really proud because they're

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Speaker 3: the real heroes in They came in every single day

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Speaker 3: when people were told to stay home, and we kept

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Speaker 3: the airways open during the worst of times, putting our

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Speaker 3: lives at risk to make certain that doctors and nurses

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Speaker 3: and frontline responders could.

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Speaker 2: Get to where they need to be.

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Speaker 3: No one that was traveling during the pandemic who wanted

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Speaker 3: to travel.

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Speaker 2: People were traveling because they had to.

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Speaker 3: Travel, and we were And it wasn't just Delta, it

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Speaker 3: was the airlines as a whole that kept the airways

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Speaker 3: open that enabled our country to recover and manage through

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Speaker 3: this and three years later, it's remarkable. Three years ago

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Speaker 3: we were down to only ten percent of our revenues.

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Speaker 3: This year we just reported our third quarter results record

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Speaker 3: high in terms of revenues. Ever, because of the hard

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Speaker 3: work they did during that period, of time, and of

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Speaker 3: course the great loyalty we have from our customers.

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Speaker 2: Guys, it's great to see you, good to see you.

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Speaker 2: Thank you, thank stopping, Thank you. Yeah. I think we

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Speaker 2: we we cleared up. But now the ties, the issues.

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Speaker 2: I'm working on ties with him. So you're gonna be

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Speaker 2: an ascot. And what do you think.

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Speaker 1: That I would pay good money to see I would

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Speaker 1: even buy it for him.

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Speaker 2: There you go, me too.

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Speaker 1: Yeah, I know what I'm it's a new fund creative.

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Speaker 2: Thank you very much, both