WEBVTT - Delta Air Lines CEO Ed Bastian Talks Demand

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<v Speaker 1>Ed Bastian here in Dubai tonight. He's going to receive

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<v Speaker 1>the AT twenty twenty four Airline of the Year award.

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<v Speaker 1>That's why he's here. He's also here as well for

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<v Speaker 1>the eightieth i Arta AGM, which is going to be

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<v Speaker 1>taking place here at the start of next week. But John,

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<v Speaker 1>you bring up you bring up a couple of stories.

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<v Speaker 1>Actually you bring up what's happening with Boeing, but you

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<v Speaker 1>also bring up the issue that we had earlier on

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<v Speaker 1>in the week with the American numbers and the impact

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<v Speaker 1>that that had on the rest of the sector.

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<v Speaker 2>Ed.

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<v Speaker 1>Great to see you, congratulations on the award. First of all, oh,

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<v Speaker 1>thank you guys. It's good to be with you.

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<v Speaker 2>It's good to be in Dubai, and really proud of

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<v Speaker 2>our team have their ability to continue delivering outstanding results

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<v Speaker 2>for our customers. This is what makes these awards, first

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<v Speaker 2>of all, very humbling to receive, but hungry to continue

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<v Speaker 2>to win them.

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<v Speaker 1>Yep, you've got to keep it up.

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<v Speaker 2>Don't go to keep it up.

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<v Speaker 1>Let's talk a little bit about kind of what is

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<v Speaker 1>happening in the market right now and those customers that

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<v Speaker 1>you talk about. We did see the American downgrade in

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<v Speaker 1>terms of its guidance a few days back. I'm not

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<v Speaker 1>going to ask you a comment on what is happening

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<v Speaker 1>over at American, but really just to kind of get

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<v Speaker 1>a comments on whether you're comfortable with your current guidance.

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<v Speaker 2>Yeah, the demand has been really strong. I think that

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<v Speaker 2>was the issue that were the American numbers, and you

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<v Speaker 2>know the quarter, as we've indicated all along cerads the

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<v Speaker 2>last several years, that consumer demand and that priority to

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<v Speaker 2>invest in experience continues to be really, really healthy. June

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<v Speaker 2>for US is always the largest travel month of the

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<v Speaker 2>year of the calendar, so we still have to see

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<v Speaker 2>how June's going to go, but I'm confident it will

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<v Speaker 2>be a good result for the full quarter, and we'll

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<v Speaker 2>see how June runs out.

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<v Speaker 1>Are you seeing any evidence that inflation and its inflation

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<v Speaker 1>day We're going to be watching those numbers that inflation

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<v Speaker 1>is starting maybe to hit the middle class traveler. The

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<v Speaker 1>middle class traveler is beginning to rethink maybe the attitude

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<v Speaker 1>towards travel, which has been really strong over the.

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<v Speaker 2>Last few years. I don't see it. You know, our

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<v Speaker 2>consumer tends to be at upper end of the income scale.

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<v Speaker 2>Our traveler tends to go internationally. Our consumer is prioriti

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<v Speaker 2>is in travel above things. So while you may be

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<v Speaker 2>hearing from a number of industrial sectors trade downs occurring,

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<v Speaker 2>we're not seeing that in our numbers.

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<v Speaker 1>Do you think you will see that at some point?

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<v Speaker 1>Do we go to a more normal? Is this the

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<v Speaker 1>new normal in terms of what travel is going to

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<v Speaker 1>look like? Will this continue to persist? The store market

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<v Speaker 1>continues to do very well. We're obviously seeing an upper

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<v Speaker 1>end consumer that is still fairly flushed with cash. Is

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<v Speaker 1>that something that lasts years?

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<v Speaker 2>I think it's going to continue for quite a few

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<v Speaker 2>years to come. One of the factors people don't give

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<v Speaker 2>enough consideration to is our industry's capacity is lower that

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<v Speaker 2>it's been given the constraints around OEMs, whether it's Boeing

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<v Speaker 2>or engine issues. So our economy is a lot larger

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<v Speaker 2>than we were historically, go back pre pandemic, Yet the

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<v Speaker 2>amount of capacity that we're all able to fly is

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<v Speaker 2>significantly constrained, and that's what's keeping demand as well as

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<v Speaker 2>pricing pretty so.

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<v Speaker 1>So okay, pricing, so fares is still fairly robust, don't you.

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<v Speaker 2>Prepares on balance are about twenty percent higher than they

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<v Speaker 2>were pre pandemic.

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<v Speaker 1>You bring up business travel as well. Is that something

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<v Speaker 1>that it has come back. It's maybe come back significantly

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<v Speaker 1>more slowly than we've seen in terms of the retail story,

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<v Speaker 1>But is that coming back and ultimately given that bigger economy,

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<v Speaker 1>is that a bigger number someway down the road.

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<v Speaker 2>Well, business business travel this year, particularly in twenty twenty four,

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<v Speaker 2>has really stepped up. As we went through the return

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<v Speaker 2>from the pandemic. In twenty two and twenty three, business

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<v Speaker 2>travelers were still a bit sluggish, largely because they weren't

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<v Speaker 2>back in their offices and they were still working from

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<v Speaker 2>various remote locations. Once companies have finally laid the edict down,

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<v Speaker 2>you needed to get back and particularly as some of

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<v Speaker 2>those businesses started to getting a little challenge themselves, people

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<v Speaker 2>wanted to be back in the office that opened up.

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<v Speaker 2>They need to travel for consultancies to go visit clients,

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<v Speaker 2>for people to get back out on the road to

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<v Speaker 2>see their own people. So we've seen business We saw

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<v Speaker 2>about a ten point increase in business travel at the

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<v Speaker 2>start of the year and net's continuing to climb.

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<v Speaker 1>Middle of the top line. Okay, so we talked about

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<v Speaker 1>that it can get middle. What's happening in the middle

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<v Speaker 1>of the P and L. You still seeing What kind

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<v Speaker 1>of inflation are you seeing in the business.

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<v Speaker 2>We're seeing inflation, but it's starting to moderate a bit.

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<v Speaker 2>For us. The biggest part of our inflation story is wages.

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<v Speaker 2>Is our people, which is the best type of inflation

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<v Speaker 2>we can have, and our people continue to grow wages

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<v Speaker 2>in the four to five percent per animal rate. We're

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<v Speaker 2>continuing to work on productivity and efficiency so we can

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<v Speaker 2>take some of those rates and make certain that their

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<v Speaker 2>productive increases other parts of the supply chain. You know

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<v Speaker 2>where the supply chain is still not where it needs

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<v Speaker 2>to be. We talked about the engine issues. We still

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<v Speaker 2>don't how much is not holding you back. Well, it's

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<v Speaker 2>significantly against not just delta, it's the industry and the

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<v Speaker 2>turntimes are longer. You now have turntimes on planes that

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<v Speaker 2>could extend up to months rather than weeks, which they

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<v Speaker 2>should be. Parts are higher than ever, material costs are growing.

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<v Speaker 2>You know, the manufacturers across the industry are having challenges.

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<v Speaker 1>This doesn't sound like an economy that you'll describing that

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<v Speaker 1>that needs needs rate cuts right now.

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<v Speaker 2>Well, it's it's an economy right now from I standpoint,

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<v Speaker 2>that's doing well. But there's not just one consumer out there. Okay.

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<v Speaker 2>Our consumer again tends to be in the upper end.

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<v Speaker 2>Our consumer generate a tremendous amount of wealth and continues

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<v Speaker 2>just to have that wealth through the pandemic. The markets

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<v Speaker 2>up real estates are. Unemployment is extraordinarily.

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<v Speaker 1>I don't need more help, is basically what you're saying.

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<v Speaker 2>The lower end, Yeah, I think there's I think there's

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<v Speaker 2>some challenges. So that's something that the FED will will

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<v Speaker 2>look at all the data. I don't think an airline

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<v Speaker 2>is necessarily the.

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<v Speaker 1>Pretty You've got a pretty good view of what's happening

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<v Speaker 1>in the economy.

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<v Speaker 2>Our business is doing quite well. Okay. You bring up Boeing.

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<v Speaker 1>You talk about what's happening with the with the OEM's

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<v Speaker 1>Boeing and Airbus, but it's also the engines, as you

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<v Speaker 1>mentioned the and Whitney engine issues that we've been seeing.

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<v Speaker 1>How long does this last? How long? How much of

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<v Speaker 1>a struggle is it to get hold of the kit

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<v Speaker 1>that you need right now?

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<v Speaker 2>How much?

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<v Speaker 1>How long do you think the problems that we're seeing

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<v Speaker 1>at Boeing and Airbus and Pratt and Whitney are going

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<v Speaker 1>to be lasting for well.

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<v Speaker 2>Right now, we have no Boeing orders that were anticipating

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<v Speaker 2>up delivery on in the next several years. So from

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<v Speaker 2>our standpoint, it's really an Airbus story. Airbus has been

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<v Speaker 2>a great partner and Airbus continues to provide us the

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<v Speaker 2>planes and the technology that we've been expecting for them,

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<v Speaker 2>and they were right through the pandemic. The engines are

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<v Speaker 2>going to be a bigger issue, particularly for us the

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<v Speaker 2>gear turbo fan that's slowing down a little bit about

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<v Speaker 2>the amount of new deliveries that we can take us

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<v Speaker 2>more engines than it is planes. And what is causing

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<v Speaker 2>us to do is maintain the existing fleet we have

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<v Speaker 2>a little bit longer. So that's another cost to the business.

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<v Speaker 1>You are well known for keeping your fleet for longer

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<v Speaker 1>it had. The age of the average aircraft has come

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<v Speaker 1>down a little bit over the last few years. But

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<v Speaker 1>does that strategy work in an environment where the sustainability

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<v Speaker 1>question comes in? If you fly all the planes, they

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<v Speaker 1>inherently tend to be less efficient. Is that something? Is

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<v Speaker 1>that a problem that you're going to come across at

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<v Speaker 1>some point?

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<v Speaker 2>I don't think so. Again, I think this is transitory.

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<v Speaker 2>I think the OEMs will get their parts. I think

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<v Speaker 2>they will get the transition all. A lot of this

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<v Speaker 2>is about labor and the fact that many of the

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<v Speaker 2>engine not just the Tier one, but down into the

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<v Speaker 2>tier three and tier four of the supply gen let

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<v Speaker 2>a lot of people go, so it's experienced, it's staffing

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<v Speaker 2>its rates. I mean, it's a very complex story, but

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<v Speaker 2>long term, I feel good about our sustainability story. We're

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<v Speaker 2>taking our overall footprint down in the range of one

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<v Speaker 2>to two percent per year every year, and that's going

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<v Speaker 2>to continue to go on and as we get new planes,

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<v Speaker 2>those numbers are going to go down faster.

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<v Speaker 1>Politics is going to become a bigger and bigger issue

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<v Speaker 1>over the next few weeks and months as we approach November.

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<v Speaker 1>When you think about who goes next to the White House?

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<v Speaker 1>What if the next administration need to do to keep

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<v Speaker 1>the aviation market that you've just described, this buoyant market,

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<v Speaker 1>this market with momentum, keep it going. What do you

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<v Speaker 1>need to see from the next administration to keep it

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<v Speaker 1>on track?

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<v Speaker 2>Most important thing is infrastructure investment. Maintaining the current structure

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<v Speaker 2>is challenging, and they need to continue to modernize the technologies.

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<v Speaker 2>They continue to need to get air traffic controllers staffed

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<v Speaker 2>and hired and in position to enable us to grow,

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<v Speaker 2>and from an investment standpoint, that's where we were very

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<v Speaker 2>happy to see the FAA reauthorization bill finally come about.

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<v Speaker 2>It took unfortunately months, if not a year or year

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<v Speaker 2>overdue in its delivery, but it's here now and we're

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<v Speaker 2>going to work closely with the FAA to make that happen.

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<v Speaker 1>Just to wrap the conversation up, you feel like you

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<v Speaker 1>are on the front foots at the moment. This is

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<v Speaker 1>an airline that is growing. What is the capacity constraint

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<v Speaker 1>that you are seeing right now that is going to

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<v Speaker 1>slow your race of growth down? If I'm gonna invest

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<v Speaker 1>in looking at Delta, is this as good as it gets?

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<v Speaker 1>What does it get better?

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<v Speaker 2>From hand? We're doing well on campacity growth. This year.

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<v Speaker 2>We expect to grow our top line in the mid

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<v Speaker 2>single digits, you know that foward to six seven percent range,

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<v Speaker 2>which I think is healthy growth considering particularly the growth

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<v Speaker 2>we've had over these last handful of years. This year

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<v Speaker 2>will be the highest revenues in our company's history. Support

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<v Speaker 2>are sixty billion dollars plus, remind us, and the outlook

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<v Speaker 2>I think is strong because I think think the supply

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<v Speaker 2>chain and the extreends are only going to get a

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<v Speaker 2>little bit better as we move forward.

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<v Speaker 1>At Congratulations on the award, the ATW award that you'll

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<v Speaker 1>be getting here a Dubai this evening. Great to see

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<v Speaker 1>you here in Dubai. Thanks for stopping by to see

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<v Speaker 1>us here. Thanks guys Blimberg. Great to be with it.

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<v Speaker 1>Thank you very much.