AeroBio: Ed Bastian, new DL CEO

Ed Bastian
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Ed Bastian

Ed Bastian is the new CEO of Delta Air Lines and from that position he is a global leader of airlines. A few of the details about Ed:

  • He’s 6’2”
  • An accountant
  • Avid golfer and skier
  • Wears a tie to work every day
  • Drives a Tesla
  • Though he was passed over when his predecessor was elected CEO, he stayed with Delta.

Here are a few recent, thorough  interviews which add some perspective to this important aviation executive:

CNNMoney (New York)

Ed Bastian takes over Delta Air Lines today when the economics in the industry have never been better. But that in itself poses a challenge for the new CEO.

by Chris Isidore / May 2, 2016

Delta just reported nearly a $1 billion profit in the first quarter, up 27%. Thus far, lower fares have been more than offset by fuel cost savings. The airline is projecting healthy profit margins will continue.

“He inherits an airline in very good shape and he’s been working closely with [retiring CEO Richard] Anderson to make it so,” said Philip Baggaley, airline credit analyst for Standard & Poors. “But what does he do for an encore? 2015 was probably the peak year, even if this ends up being another good year.”

Bastian and Delta face a number of challenges in besting 2015.

1) Labor concerns. Delta’s pilots union is demanding a 40% pay hike, after the rank and file rejected a tentative contract reached with the airline last year that would have raised pay by 14.5%.

2) Rising fuel prices. Jet fuel prices have started to climb and are up 60% from the lows hit earlier this year, even if they remain well below 2015 levels.

3) Falling fares. Airfares are falling and are likely to keep getting cheaper into next year. Delta reported that the amount paid per mile flown by passengers fell 5% in the first quarter, which resulted in a slight decline in revenue.

Delta’s not alone. Its biggest competitors have also been battered by investors’ concerns about similar issues at Delta’s rivals. Delta (DAL) shares are down 17% so far in 2016. American Airlines (AAL) and United (UAL) have fallen by even more. Only Southwest (LUV) has bucked the trend — up 3% in 2016.

RELATED: Delta’s new tracking system promises end of lost bags

Bastian won’t comment directly on the pilots’ demand for a 40% pay hike, other than to say, “Our pilots are the best and we want our pilots to be paid the best and that’s our commitment to them.”

Baggaley said it will be tough for the airlines to hold off union demands for wage hikes. But even if the carriers can afford big increases now, it could mean problems ahead.

“This works as long as economy is strong and fuel prices are low,” he said. “But if one or both of those things change, it can squeeze profits very quickly.”

RELATED: Airfares just keep getting cheaper

Still, the airline industry is hardly recognizable from where it was a decade ago.

Delta and Northwest airlines both filed for bankruptcy within minutes of each other in 2006. Bastian was integral to guiding the airline through that bankruptcy process as its chief financial officer at the time. He was one of the candidates to be Delta’s CEO in 2007 when the board turned to former Northwest chief Anderson to lead the airline in its post-bankruptcy period.

The following year Delta bought Northwest for $3.1 billion, leading to a round of consolidation that took the industry down to four major carriers – American, United, Delta and Southwest – controlling more than 80% of the nation’s air traffic. Delta ended up No. 2 behind American in terms of traffic.

The mergers, and the steady improvement in the economy, helped the three largest airlines, which had been losing money, to become profitable. The fall in fuel prices that started in mid 2014 sent those profits to record levels.

 

CNNMoney (New York)

ed bastian

Ed Bastian Talks About Delta’s Past, Present, and Future

By Jack Harty in Atlanta / May 2, 2016

Ed Bastian officially takes over the reigns from Richard Anderson as the CEO of Delta Air Lines today, and last Friday, he sat down with a large group of media and talked about the past, present, and future of Delta.

RELATED: Delta Air Lines’ CEO Anderson to Retire, President Bastian to Succeed

“This airline has never performed better in history. So, it was an interesting time for Richard to hand over the keys to me and say ‘don’t screw it up,’ and we are working very hard not to screw it up. I give Richard enormous credit for the timing of this; it is very hard for leaders to walk away and retire when there is so much enthusiasm going in the business, and as we say, there is still a lot of gas in the tank,” Bastian explained.

During the hour long talk and Q&A, he covered a variety of topics; he touched on what is driving Delta’s strong operational and financial performances, views on TSA/security, the Gulf Carriers, ATC privatization, fleet changes, product investments, and more.

 

Commodity vs. Premium Provider

“The number one thing that we have done over the last 20 years that has changed Delta the most is that we have decided that we are not going to compete as a commodity provider; we are going to compete as a premium provider which means that you have to deliver a premium service with a higher quality, better reliability, a better product than your competition, and get paid for it. It is not just about the providing; you also have to figure out how to get paid for it. I think the fact that we are competing on the quality of the service, product, and not just price is great news for the airline. Although, we will always have a commodity component to our product as there will always be a part of our customer segment base where price is the determining factor, and we are catering to them as well.”

 

What is Driving Profitability?

ed bastian“I think that most people think that one of the things that is driving our profitability today is the low fuel prices. Granted, low fuel prices are a good thing, and we are not debating that. But it is not low fuel prices that is driving the story. If you look at 2005 when Delta was at its lowest low (when both Delta and Northwest independently filed for bankruptcy), fuel prices were $55 a barrel. In 2015, we achieved our highest profit ever in hour history, and fuel prices were $54 a barrel. Essentially the prices are the same. Then, people attribute our record profits to higher fares, and candidly, that is not the case either. Looking at the airfare report the U.S. DOT recently released, the average domestic fare for the full year in 2015 was $377 which, inflation adjusted, is down 3.8% from the 2014 average of $392. However what is more impressive is that the $377 was 19.2% lower than an inflation adjusted price of $467 in 2000. So fares are down more than 19% since 2000.”

“Since it is not high fares or low fuel, the success for Delta is that we were at a brand deficit in 2005; every seat we sold in the market in 2005 was earning 10% less than our competitors, but now, we are at a brand premium. We had a 10% premium over the competition for every seat we sold in 2015 which is worth about $8 billion to Delta. We have become a premium airline, delivering a premium service, and getting paid a premium for it, and it is clearly thanks to the Delta people. When you look at it, we are running the best airline on the planet, and no airline comes close.”

 

2016 First Quarter Operation Stats

To backup how Delta is “the best airline on the planet,” he pointed to some recent operation statistics for the first quarter of 2016:

  • Delta’s completion factor was 99.4% in what is traditionally one of the most challenging weather quarters of the year
  • On-time arrival rate was about 86.5%
  • 68 perfect mainline completion factor days between January 1 and April 28
  • Delta has had 15 “brand perfect days” where there was not a single cancelation on either the mainline or connection side (of which the airline only had a 11 of for all of 2015)

Bastian then pointed out that all of the operation stats for the first quarter of 2016 are all up year over year. So, Delta has not stopped climbing; it continues to break its own records.

 

Bastian on TSA/Security

“Beyond our operations, we have been working to distinguish ourselves in other ways. One way is with the TSA and security processing. When we think about our customers’ travel experience, they may not always distinguish security and going through the airports from Delta or TSA, and we have to partner hard with our TSA colleagues. I know some of our competitors have been pretty vocal about the poor performance of TSA and the length of the lines, and while I guess it is good to draw attention to the topic, I think it is a lot more important to be doing something about it rather than just complaining about it. We recently signed a memo of understanding with the security firm CLEAR; it is the biometric security identification company, and we are going to be purchasing a 5% stake in the company which will give us better access for our customers. We hope to have it in all of our main hubs this summer.

CLEAR has negotiated that for all of our loyal customers that participate in our loyalty program to get a discount for CLEAR, with our Diamond Medallions receiving it for free. We are also working with the TSA on staffing; we have offered staffing at no cost to TSA to help them keep the cues moving since not everything that the TSA does in an airport requires a badged TSA representative. This has helped them already. We are also providing engineers to help with working on the cuing design, and we will pilot a new lane structure in partnership with TSA and the Atlanta airport which should begin in the next 30 to 60 days.”

Update: The Atlanta Journal Constitution has reported that the south security checkpoint at Hartsfield-Jackson will be closed temporarily starting May 4 at 7PM to install new automated screening equipment to help with the long lines.

 

Gulf Carriers

When asked about his take on the Gulf Carriers, Bastian responded: “I am absolutely right along side with Richard’s views on the Gulf Carriers. We do believe that these subsidies are not just real but that they are also distorting the picture. The example I love to give on the Gulf Carriers when people question if there is actually a subsidy arrangement going on, you got three carriers where their home markets—U.A.E. and Qatar—have a combined population the size of Rhode Island, and yet, they have more international wide-bodies on order than all of the U.S. and Chinese air carriers have put together. How is that possible? It is not possible without some type of aid. I am equally frustrated and equally engaged in the debate.”

 

Privatizing ATC

ed bastian“My position on privatizing ATC is very similar to Richard’s. We think the air traffic organization being split off from the FAA and run by either a non-profit or a group that has potentially private interests is not in the best interest of our customers nor airline operators. I realize that there are differences in opinion in the market place, but I come back to what I talked about before; we are operating at an all time high using the same air traffic systems, personnel, and technologies. Are there opportunities for improvement? Absolutely. We think working those opportunities with the NextGen Advisory Committee within the existing framework will be a much more collaborative and more productive process than spending the next several years determining how to structurally divide and separate the responsibilities of air traffic control from the FAA. It is by far the safest system in the world; it is by far—in our opinion—where we operate the best performing systems that we see anywhere in terms of our operations, and we ask the question why it is not working for others. I cannot answer that, but I can tell you that it is working for Delta. We fly in the same geography as the others. We are the biggest carrier at LaGuardia and JFK which are probably two of the most congested markets in the country, and we operate the largest airport in the world here in Atlanta. It works for us. We ask people to focus on what they can do to improve the current position rather than throw it out and start with a new structure.”

 

Debt Level and Facility Investments

“Over the last five years, Delta has generated over $30 billion in operating cash flow, and we had a philosophy that we started 10 years ago that for every dollar of cash we generate that we take 50 cents on the dollar and put it back into the business to ensure that this business never gets into the state of disrepair that we found ourselves in. Then, we take the other 50 cents and either pay down debt or give it back to our owners. It is a very simplistic formula, and a lot of it has gone down to pay down debt in the recent years as well as be invested back in our owners. Over the last five years, we have invested about $15 billion dollars into facilities and fleet. We have also brought down our debt level from about $20 billion to about $5 billion which is where we expect it will be at the end of this year.”

“We have invested billions in airport facilities, and you’ll continue to see this over the next several years. We have opened up new terminals at Atlanta and New York JFK, and we are in the process of opening a new facility in Seattle. We have also updated our facilities in Detroit and Minneapolis, and we are working very closely with the Mayor on the LaGuardia redevelopment plan as well as the JFK master plan. A few days ago, we announced an extension of our Atlanta lease as well as an investment of about $6 billion into new facilities and updates to our terminals for future growth opportunities over the next 10 to 20 years. We are also working on a new facility in Salt Lake City, and we are also working closely with LAWA on a potential terminal move at LAX.”

 

Fleet Modifications

“We have been actively working to replace inefficient and older airplanes which provides increased a significant cost improvement and greater passenger satisfaction. Since 2009, Delta has retired over 400 narrow-body and regional jets while refreshing another 300 of our aircraft. We are in the midst of refreshing our 757-200, 737-800, A319, and A320 fleets.”

 

CSeries and Up-Gauge Strategy

ed bastian“We were pleased to announce the acquisition and investment in the Bombardier CSeries. We have 75 firm orders coming from Bombardier with options for an additional 50 more. The product we purchased was the CS100 which is a 110-seat product. It is an absolute wide-body feel in a narrow-body aircraft. It is 20% more fuel efficient than the 717 which was a game changer for us four years ago; it also provides a 30% maintenance cost advantage as well. Back when we did the 717 deal, it was a game changer for us because we knew that we needed an up-gauge strategy because of the looming challenges in the regional space. We could tell that there was a pilot shortage and high fuel prices the economics were not good for 50-seat aircraft. Our customers did not like being on these aircraft, and our employees did not like that these were being operated by third-party carriers. Since we needed to up-gauge, that was why the 717 deal came about. The CSeries is going to be the next evolution of that strategy as we continue to up-gague the airline out of the regional space into the mainline space.”

RELATED: Delta Becomes the Largest CSeries Customer

RELATED: Bombardier CSeries Makes Third Atlanta Appearance

 

Airbus A321 Order

ed bastian“We will have a total of 82 A321s in our fleet when they are all delivered. We have gotten great pricing, and as you can see in our press release, we have alluded to that. We are not investing in the new engine technology, but we are investing in the current engine technology and getting end of the line model pricing as a result.”

RELATED: Delta Air Lines Confirms Order for 37 Additional Airbus A321s

MD-80 Retirements

ed bastian“There will be several different aircraft brought in to help replace the MD-80s. First of all, it is a large fleet for us to replace with about 115 that we would like to retire by the end of the decade. The A321s are going to be a part of the replacement plan, and we are going to be up-gauging a lot. A big part of the success at Delta over the last five years has been our up-gauging strategy, not just from the regionals to the mainline but within the mainline as well, providing more sources of revenue with more seats on airplanes. The A321 will seat around 188 while the MD-88 seats 149. So, we may not have to replace as many of the MD-80s as a few less shells may be needed, but the market will dictate this. We also have 50 more 737-900ERs coming over the next four years. While the CS100 is not likely to be a part of the replacement plan given that it has 110 seats and we are not looking to down-gauge the airline, we do have firm options on the CS300 which we are very interested in as it has 130 seats.”

 

Will Delta Order More Boeing?

ed bastianWhen asked if Delta will come back to Boeing for more orders after going with Airbus and Bombardier over Boeing, Bastian responded that “we are already taking more 737-900ERs. At the present time, we are not in the market as there is not a significant need in the domestic nor international market at the present time. However, we are always talking with Boeing as they are not just an important supplier but also an important customer of ours in the Seattle community. I have a lot of respect for the team in Seattle, and Ray Conner is also a good friend. At the present time, their present product nor their commercial offerings did not match what the CSeries will provide us nor the A321s, and Boeing was at the table in every one of the contests we had.”

When asked about the 787 orders that Delta inherited from its merger with Northwest, Bastian said “it is still on the books, and we’ll look to evaluate it.”

 

International Premium Economy

“We are also active in the international space, and we are looking forward to the arrival of our newest international flagship, the A350, which will arrive next Spring. It is going to be a great product, and as you know, we are in the process of retiring out 747s…we are clearly investing a lot into our product, especially with the lie-flat seats on our trans-con and international flights. We will bring a new international Comfort+ cabin which will debut with our A350. The cabin will be its own cabin to itself, and it is going to be significantly improved. We have had some interesting opportunities to learn about the premium economy product from our partners at Virgin Atlantic and Air France. We believe that while we have made substantial enhancements to the front of the plane but that it has created a greater divide between business and the main cabin. So, we will add the premium economy with the A350 and expand it to the 777 fleet.”

 

Europe Bookings

“Interestingly, our summer bookings are quite strong to Europe, and there is a resiliency from the travel public…yes, there are some weak pockets, especially Brussels. We are suspending one of our two services to Brussels due to the market demand as well as the infrastructure challenges Brussels is having with their airport.”

 

Istanbul

“Istanbul is a city we have served for many, many years. A couple years ago, we put it in a seasonal rotation where we operated it during the peak season, but not in the Winter. When we look at the security environment in Istanbul as well as Turkey as a whole and what the demand is—with the U.S. demand being way off whether it be in the cruise industry or just the general market—we are looking at load factor that is not sustainable for us to operate.”

 

Tokyo Haneda Slots and Narita

“We have been very vocally opposed to the daytime opening piecemeal of Haneda. We believe that if you have Open Skies that you should be able to have Open Skies and not have Open Skies that are closed when the government wants to close them. As a result of that when Haneda gets opened on a piecemeal basis, that has a direct impact on our Narita operations. As you know that if you are going to fly directly to Tokyo on a nonstop as your destination, you want to go into Haneda as opposed to Narita because of the geographic proximity. We have long invested in Narita with 50 years of investment in Narita. We were previously in Haneda before the government moved us to Narita 50 years ago, and as a result of that, we feel that the level of the investment and the support we have provide was not being fully contemplated through the piecemeal opening. We support true Open Skies. So if Haneda is going to be open, it should be open not on a piecemeal basis. With respect to our specific routes that we have applied for, we do anticipate of getting LA as we currently operate it during the night time, and we hope we get that for the day time. We have applied for Minneapolis where we have a strong base of customers in Minneapolis based on the long history that we have had between Minneapolis and Tokyo as well as the business community will continue to express their need for good service to Tokyo, and if that turns to be Haneda, all the better. We have also applied for Atlanta to Haneda. I do not know what the odds are of getting all three, but we are going to try out best to support our 8pitch. Given that we are the largest carrier between the U.S. and Japan and that we do not have a local partner that we can rely on, we think that we have a great case for those opportunities.”

 

Aeromexico Partnership and Potential Stake

ed bastian“Aeromexico is a proud partner of ours, and hopefully, we will be closing the proposed transaction in either the late third-quarter or in the fourth quarter of this year. We are very excited about that. Today, we own about 17% of Aeromexico, and before the year is out, we will own about 49%. The reason why we are investing in Aeromexico is that Mexico is a wonderful country with 120 million people and is one of our closest trading partners, but we do not have Open Skies between the U.S. and Mexico. However, I was very pleased that it recently passed through the Mexican senate to open the skies for travel between the U.S. and Mexico, and we expect the U.S. Department of Transportation to do the same later this year which will help facilitate Open Skies and anti-trust immunity. Still today, we are competitors in the transporter market space with Aeromexico, even though we are partners and owners. However, we will be able to work collaboratively with them later. When you look at the demographics of the economy in Mexico, it is growing a lot faster than the U.S., and even Mexico City, the largest city in the world, is very close to us. We need to provide better access, and it is a very young demographic which is important to consider for the next generation. When I look at the returns and margins Aeromexico makes today, we can share a lot as partners and improve the performance for the shareholders.”

RELATED: Delta Air Lines to Boost Stake in Aeromexico

 

China Eastern and Delta in Shanghai

“When you think about China, it is clear that China is going to quickly overtake the UK as the largest international travel market to the U.S.; in fact, it will probably happen in the next 12 to 24 months as it is rapidly happening as we speak. You need to be with a strong partner if you are going to capitalize on that growth opportunity, and as we look within China, the most important market place to us is Shanghai. It is the commercial capital of China, and it is 16% of all high value premium travel goes through Shanghai. So, it is a logical place for us to have a great partner that is headquartered in Shanghai which would be China Eastern. It is a long-term development, and Chinese airlines are coming up quickly (the learning curve) as they are making big aircraft investments by buying the latest technology. I think that where they are right now that they are learning the soft skills like the quality of your service, the product, and the technology which coincides with the hard skills; this is where we come in working along side with China Eastern in learning from us what they can do to improve their customer experience on-board, improve technology, and improve marketing opportunities. We are careful as we do not have Open Skies between the countries nor anti-trust immunity so the partnership is at very much at arms length, but as partners go, there is a lot of traffic that we are already supplying them over Shanghai. I think that when you look at the growth for the future that it is going to be the most important hub not just in China but eventually for the nation I think because if you look at what is going on in Japan as Narita is shrinking as many airlines are moving their operations to Haneda as where many of the Chinese markets are starting to run into some issues in terms of growth to get the premium travel.”

RELATED: Delta to Acquire Stake in China Eastern

 

GOL and Brazil

When asked if Delta regrets its investment in GOL since the economic and political situations in Brazil has deteriorated, Bastian said: “Brazil is a very important and strategic market for us; one of the areas when I talk about the development of Delta over the last few years, a big part of that is international expansion and growth, and the Latin countries where we have been least represented over history, and Brazil was the largest country within Latin America with also the largest population and economic base. Even with the reductions they have seen in the current market, we realize that it is volatile, but we know it will come back. If you’re going to invest in a market, you have to be in there for the long term, and we are. We are working with GOL very well with providing as much as support as they need. We are confident that once the storm is over in Brazil, we are confident that GOL will be one of the airlines standing. I do not know if all the airlines will be, but I know that GOL will be standing and that we will have an even stronger partner.”

 

Virgin Atlantic Moving To Delta’s Reservation System

“The cutover is scheduled for November of this year, and this is a really big deal. This will be the first time in industry history where you will have the international operations of two carriers operating the use same passenger, reservation, and operating platforms and systems. Now, everybody will have the same data so there will be even more consistency for customers. It is also going to give Virgin Atlantic access through our technology which we believe is state of the art. I know we can do better which is why we are constantly investing in our technology. This will give Virgin Atlantic a look in our investments as the airline is a relatively small carrier that may not always be able to afford technology at all times. I think they spend maybe $50 million a year in technology while we spend $350 million a year on technology investments. If that experiment goes well, some of our partners may become more interested in it.”

 

Global Joint Ventures Over Alliances

ed bastianWhen asked if Delta has ever considered a global joint-venture with airlines from around the world over SkyTeam, Bastian explained that “we are not looking to overtake SkyTeam. We have the current CEO of SkyTeam as a Delta employee who was put in place earlier this year. This indicates our support for SkyTeam and to help drive the SkyTeam agenda as this is where you get the largest value of corporation, but as you get a regional basis, there is no question that there will be opportunities. For example between GOL and Aeromexico, work to tighten their bridges of cooperation and give them a common ownership structure that we have today. Also, Korean Air is always looking for better opportunities into South America and other Latin countries, and they come to us to see what we can do rather as compared to going through SkyTeam. I don’t have any specific examples looking at a global joint-venture network, but this is something that I do look at for the next five years as other opportunities for collaboration in our equity-partner network. However, SkyTeam is the principle source for partnerships.”

 

Refinery Update

“The refinery has been a great story for us, and I know that a lot of people back four years ago when we brought the refinery wondered whether we lost our minds. The story behind the refinery that people have had a hard time understanding is that we are probably the only owner and operator of a refinery that wants to see fuel prices come down. We do not want to make money at the refinery; we actually want to make lower amounts of money at the refinery because that means that the crack spreads refine gloss is coming lower which provides a great value for us as we have a lot more leverage to lower fuel prices than to make a profit at a stand-alone refinery. When we turned on Monroe in 2012, it had been closed, but it is now the largest supplier of jet fuel into the New York harbor. We brought in a 40% more supply into the New York Harbor… jet cracks today are at a substantially lower level than in recent history, and I think that we are a contributor to that. Last year, we made $300 million—largely due to higher fuel prices—which is about twice as much as we paid for it. The refinery is already paid for in essence, and we are going to keep it as a market force to keep our crack spreads as low as possible.”

 

SkyMiles

ed bastianWhen asked about how SkyMiles have been de-valued and how to keep its Medallions happy as the program has undergone big changes such as less upgrades and revenue changes over the last few years, he responded: “anytime you make changes, there are always a lot of people that are happy and a lot of people that are not happy, and that is part of the evolution in the business. We have the highest net-promoter scores in the industry across all levels of service, and while I realize that there is a component of our loyalty program where people are a little frustrated with what they use to expect to what is actually happening today, that is part of the challenge. We had more redemptions in the first quarter of this year than in any time of our history where members redeemed miles for 2.2 million award trips in the first four months of this year making it one award trip for every three-and-a-half seconds, and the average mileage redemption per ticket was down about 10% from last year. While there are some anecdotal frustrations and clearly some frustrations, one of our goals was to expand the accessibility and availability of rewards across the broader spectrum, and it is happening. While some of the changes have impacted lower fare tickets, we have also increased the amount of rewards granted to higher fare travelers, and we have talked about the need to migrate our business model in evolving into a premium experience, and we are ready to reward our premium travelers with premium rewards.”

 

Sustainability

“We have won five out of the last six years Fortune’s most admired airline. We have wont the Business Travel News award five years in a row, and we are now working on winning number six this year. USA Today announced we won its Road Warrior Survey where we were overwhelming picked as the number one airline in the U.S. for high traveled customers. The best gauge for success is back to the revenue premium. Going from 10 years ago at 1-% deficit deficit to a 10% premium. Why is this all going to be sustainable?”

“The reason is all very simple; it is being driven by the best employees in the industry, and I know our every one competitors gets up and says they have the best employees. However, I know that this is truly the case at Delta, especially when you look at the culture, service, hospitality, net promoter scores, and the premium customer experience. There is a debate in the industry whether this is a commodity or not, but we carried 185 million passengers last year; that is 185 million passengers who paid a 10% premium to be on Delta when all of them had lots of choices for the travel experience around the world. This is a premium experience, and this is is premium airline. We have premium employees, and we are thrilled to share our rewards with our employees. Last Valentine’s Day, we shared the greatest profit sharing ever in history.”

 

Millennial Customers

“We have a lot more to do ahead; we have a lot more in the technology space and the changing demographics of our customer base, the millennial generation. The millennials will be half of our employee base by the end of this decade, and it will be a large amount of our customer travel base. We are the preferred product to the next generation and already starting to win their loyalty.”

 

Wall Street Journal

ed bastian

Delta Chief Had Long Climb to Top

Ed Bastian is focused on building upon a string of successes at the airline

By Susan Carey / May 2, 2016

Incoming  Delta Air Lines Inc. Chief Executive Ed Bastian ran the New York marathon two years ago after promising he would complete the 26.2-mile race if his airline attained a leading market share in the city.

His path to the top spot has been a marathon as well.

Mr. Bastian, 58 years old, becomes CEO on Monday, 18 years after joining the Atlanta-based company, now the nation’s No. 2 by traffic. In that time he has resigned once, helped steer Delta through bankruptcy and helped shepherd its merger with Northwest Airlines Corp. 

Delta is in much better shape now. It has a towering market capitalization of $31.5 billion, is profitable, has little debt and leads in operational reliability. Still, it faces hypercompetition and is vulnerable, like other international airlines, to external events such as the recent terrorist attacks around the globe.

Mr. Bastian tries not to keep “an anxiety list” and is focused on building on a string of successes, he said Friday on the shop floor of an engine overhaul facility at Delta’s maintenance base at Hartsfield-Jackson Atlanta International Airport.

Ed Bastian’s Log Book

  • A new Delta Air Lines CEO takes controls Monday. Mr. Bastian, age 58, has been preparing for the captain’s seat for decades
  • Eldest of nine children raised in Poughkeepsie, N.Y., son of a dentist and hygienist who worked out of a home office.
  • Attended St. Bonaventure University, studied accounting.
  • Joined Price Waterhouse as an auditor in 1979.
  • Worked in international finance at PepsiCo Inc. for six years.
  • Joined Delta as controller in 1998.
  • Head of restructuring during Delta’s 2005 bankruptcy case.
  • Passed over for CEO job by new, post-bankruptcy board, which chose former Northwest Airlines chief Richard Anderson as CEO. Stayed and was elevated to Delta president.
  • Joined Delta board in 2010. Director of Delta partners Aeromexico, Virgin Atlantic, Brazil’s GOL.
  • Succession plan announced in February moves Mr. Anderson to executive chairman and Mr. Bastian to CEO, effective Monday.
  • Golfer and skier, active in church, purchased a Tesla in April. Wears a tie to work no matter what. Started a weekly employee video called ‘Ask Ed Anything.’

Source: Delta, WSJ reporting

The executive joined Delta in 1998 as controller but quit in 2004, upset by the company’s approach of using employee concessions to underwrite cheaper fares, he said. The company, with a bloated cost structure and a revenue disadvantage to its peers, had tried to restructure but the effort didn’t work.

“I was very vocal,” he said. “I didn’t agree. I was out of favor in that regard.” So he left to take the chief financial officer post at an Atlanta-based lighting firm. He wasn’t there long. The new Delta CEO lured him back months later, promising him the post of CFO, vowing to hire someone to attack the revenue problem and to be open to bankruptcy.

After he returned, Mr. Bastian showed the same colors he displayed as a young auditor just out of university at what was then Price Waterhouse. He was auditing the books of a large advertising agency, and found something that didn’t look right, he said. He burrowed in and discovered a multimillion financial fraud that others had missed.

“It taught me the importance of really understanding the complex issues,” he recalls. Partners were fired and he was deposed by the Securities and Exchange Commission. “A lot of people would have been happy if I didn’t speak up,” he recalled.

That doggedness and intellect brought him to the attention of higher-ups, and Mr. Bastian was made a partner there at the age of 32. He subsequently worked in finance at  PepsiCo Inc. ’s Frito-Lay unit for six years before looking around for other jobs.

“I thought the challenges would be much more sizable in the airline industry,” and he was eager to run his own plays.

The 6-foot, two-inch executive said his return to Delta offered many plays. The company filed for chapter 11 two months later, terminated its pilots’ pension plan and cut $5 billion in annual costs. It repelled a hostile takeover bid by US Airways Group Inc. and left court protection in 2007. At that point, the creditors selected a new board.

Mr. Bastian and another Delta executive were the then-CEO’s two top choices to succeed him. But the new board decided to widen the search and seized on  Richard Anderson, a former Northwest Airlines CEO and new board member. The other executive departed, but Mr. Anderson asked Mr. Bastian to stay and become president, a new role.

Mr. Anderson’s selection “was not a big disappointment,” Mr. Bastian said, because he “was a lot more qualified.” For the next nine years, they worked as a team and “there was never a rivalry between us,” Mr. Bastian said.

He and Mr. Anderson negotiated the 2008 acquisition of Northwest. Since then, they have expanded Delta’s international network, created hubs in New York and Seattle, drastically improved the company’s operational reliability and returned billions of dollars to shareholders.

When Mr. Bastian steps into his new job, Mr. Anderson, who turns 61 on Monday, will become executive chairman. The new CEO said there isn’t an immediate crisis to focus on. “When things are going well, we actually get a little uncomfortable,” he said. But he thinks he is ready. “I do like a challenge,” he said. “I have a competitive streak in me.”

After Delta purchased a 49% stake in Virgin Atlantic Airways Ltd. in late 2013, Messrs. Anderson and Bastian went to Necker Island, a Caribbean isle owned by  Richard Branson, who holds a 51% stake in the U.K. airline. Mr. Bastian and Virgin Atlantic’s new CEO,  Craig Kreeger, played a four-man basketball game with two young Virgin Atlantic executives. “Ed and I were a pretty good team,” Mr. Kreeger said. “The two old guys who could barely move managed to get the ball into the hoop often enough to win.”

Sometimes Mr. Bastian competes against himself. In 2008, he told his team he would run the New York marathon if the airline met its goals in that city. “Sure enough, in 2013, we hit it,” he said. So he hired a coach and started running. An avid golfer and skier, Mr. Bastian said he found the training “hard but manageable.”

Weather for the 2014 marathon was cold and windy and he said he doubts he would ever do it again. But he raised $400,000 for one of his favorite charities. Perhaps even better, Mr. Bastian said: “I beat Tiki Barber,” the former New York Giants running back.

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