Delta CEO: Airline's Pandemic Strategy Is 'Putting People Over Profits' | Connecticut Public Radio
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Delta CEO: Airline's Pandemic Strategy Is 'Putting People Over Profits'

Jul 27, 2020

In the history of commercial air travel, airlines have never had a stretch as bad as the last few months. Early in the pandemic, Delta Air Lines was losing $100 million each day. Now it's losing about $27 million a day.

While Delta is making "good headway" on reducing its cash burn, the most important factor for financial recovery is something that's largely out of the industry's control, says Ed Bastian, the company's CEO.

"The bottom line is we've got to restore confidence amongst our consumer base in air travel," he tells NPR.

In an interview on All Things Considered, Bastian describes Delta's strategy to prioritize customer safety over filling planes — with an eye toward long-term viability.

"We believe that taking care of safety of our customers, as well as our people, is more important than the profits that we forgo by filling up every seat on a plane," he says.

And more than bailout money, what the industry ultimately needs, Bastian says, is for the federal government to focus on finding a cure or vaccine for the coronavirus.

Here are excerpts from the interview.

Can you summarize what it takes to get from losing $27 million a day to breaking even?

To reduce the cash burn, to break even, requires the demand to continue to pick up.

We're flying today somewhere about 25% of the schedule that we did last summer. We'll need ... another 10 to 20 points of demand over the next six months to get closer to that break-even level on cash flow. It'll depend on the direction the virus takes, the direction that — both on therapeutics as well as vaccines — the ability for people to feel confident and the continued taking great care and safety of our customers over the journey. We have implemented so many changes in our safety protocols, our customer surveys tell us that this is the best travel experience on Delta they've ever seen.

In addition to the health concerns, is it partly a business consideration that by leaving middle seats open — by only booking 60% full — you will get more people to fly your airline than other airlines that are trying to save money by filling up the plane, for example?

We could do that if we chose to. But we feel that we'd rather take care and put safety at the top of the priority list. And when we get close to that 60% load factor that we've referenced, that'll be our trigger to add more planes and more flights into the schedule, because we have a lot of planes that we can add rather than trying to put more people into the existing [flights]. It's a decision we're taking about putting people over profits, absolutely.

Getting fast coronavirus test results is key, especially for flight attendants. ... Are you able to get real-time information on when someone tests positive for COVID-19?

The time it takes to get the results back for our people has extended up to a week, which is unacceptable. We now have it down to somewhere between two to four days. The good news is that the testing that we're doing on our people is verifying that the aircraft is a very safe enclosed space, because our flight attendants, our pilots, our ground workers, our airport workers ... some are positive, absolutely. But at much lower rates than any national average that I've seen. And those are for people that live in the airport environment.

Delta got more than $5 billion from the CARES Act, which Congress passed back in March. What about a second aid package from the federal government? Is that something that you would anticipate needing if the pandemic keeps going?

What we really need is instead of more government support, we need demand back. We need a medical cure. We need a vaccine. We need therapeutics. And I think that's probably where any government focus ought to go.

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ARI SHAPIRO, HOST:

In the history of commercial air travel, airlines have never had a stretch as bad as the last few months. Early in the pandemic, Delta was losing $100 million each day. Now it's losing about $27 million a day, an improvement but still not sustainable for any company. Ed Bastian is the CEO of Delta Air Lines, a company that, I should note, provides funding support for NPR.

Bastian joined us from Atlanta, and I started by asking whether an extended pandemic could put Delta out of business.

ED BASTIAN: No. It's not going to put Delta out of business. We are making good progress at continuing to reduce that cash burn. Our goal is to get our cash burn down to zero by the end of the year. We still have work to do, but we're making good headway. But the bottom line is we've got to restore confidence amongst our consumer base in air travel.

SHAPIRO: Can you summarize what it takes to get from losing $27 million a day to breaking even?

BASTIAN: To reduce the cash burn to break even requires customers to continue to - the demand to continue to pick up. We're flying today somewhere about 25% of the schedule that we did last summer. It'll depend on the direction the virus takes, the direction that - both on therapeutics as well as vaccines, the ability for people to feel confident and the continued taking great care and safety of our customers over the journey. You know, we have implemented so many changes in our protocols, our safety protocols. Our customer surveys tell us that this is the best travel experience on Delta they have ever seen.

SHAPIRO: And so in addition to the health concerns, is it partly a business consideration that by leaving middle seats open, by only booking 60% full you will get more people to fly your airline than other airlines that are trying to save money by filling up the plane, for example?

BASTIAN: We believe that taking good care of safety of our customers as well as our people is more important than the profits that we forego by filling up every seat on a plane. We could do that if we chose to. But we feel that we'd rather take care and put safety at the top of the priority list. And when we get close to that 60% load factor that we've referenced, that'll be our trigger to add more planes and more flights into the schedule because we have a lot of planes that we can add rather than trying to put more people into the existing plane. It's a decision we're taking about putting people over profits. Absolutely.

SHAPIRO: Getting fast coronavirus test results is key, especially for flight attendants who are interacting with hundreds of travelers on a regular basis. Are you able to get real-time information on when someone tests positive for COVID-19? Or are your employees seeing wait times for results that could leave them exposing other people to the disease?

BASTIAN: Well, we announced a month ago - and this is something that'd been in the works for several months with both the Mayo Clinic as well as Quest Diagnostics - a plan to test all of our employees, all 90,000, to get a solid baseline as to where every employee is, not just for the active virus but also the antibody, the serology test as well, to see if they've been exposed. And once we get through that baseline, we're going to put in follow-up testing as a matter of protocol for all of our people.

SHAPIRO: So just to get specific, if I board a Delta flight, what can you tell me about how long it will have been since everyone working on that flight has had a COVID-19 test? Can you say within the last 48 hours, within the last week, within the last month? What is it?

BASTIAN: No, as you can appreciate, the demand for testing has far exceeded the supply base that was available. So two months ago when we set the protocol up and we made the commitment, testing - the demand wasn't that high in our country. And now it's through the ceiling. And as a result of that, the time it takes to get the results back for our people has extended up to a week, which is unacceptable. We now have it down to somewhere between two to four days. The good news is that our flight attendants, our pilots, our ground workers, our airport workers, some are positive, absolutely, but at much lower rates than any national average that I've seen. And those are for people that live in the airport environment.

SHAPIRO: Delta got more than $5 billion from the CARES Act, which Congress passed back in March. And at that point, people widely expected the U.S. to handle the pandemic more successfully as many European countries did. What about a second entirely new aid package from the federal government? Is that something that you would anticipate needing if the pandemic keeps going as it has been?

BASTIAN: I know there's conversation going on right now. I don't know the likelihood of that. I don't know the appetite. What we really need is instead of more government support, we need demand back. We need a medical cure. We need a vaccine. We need therapeutics. And I think that's probably where any government focus ought to go.

SHAPIRO: The CARES Act came with a requirement that airlines would not implement voluntary furloughs or layoffs until October 1. Do you anticipate that there will be furloughs and layoffs starting in October?

BASTIAN: I think in the industry, there absolutely will be furloughs. You know, there's some - been some very large notices provided by the major carriers to their workers. I know both American and United did. At Delta, we've issued approximately 2,500 notices to our pilots. Hopefully, we will be able to get through that. We're working with the pilots union to find an alternative. But, you know, we're down now. You know, we're still only flying maybe 25% of our schedule. And at some point in time, we have to address the hard questions, that we can't keep all of the employees within the industry employed without seeing demand start to pick up.

SHAPIRO: Do you think some of these changes are permanent? Will it ever be back to 100%?

BASTIAN: I think it will get back to 100%, speaking for Delta. But I think it's going to take some time. I think the leisure travel will come back sooner than business travel. I think business travel will be impacted. You know, video conferencing, that's been a forced adaptation as I think - will be seen as a substitute. But the reality is people need to be together to conduct business. You can work through a video conference for a period of time, but I don't think it's going to replace the need for humans to be together, to transact business, build relationships and collaborate and innovate together.

SHAPIRO: Ed Bastian, CEO of Delta Air Lines, thank you for speaking with us today.

BASTIAN: Thank you, Ari; good to be with you.

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