Bankruptcy is not something for the faint of heart. It's a declaration, a public declaration of failure, of defeat, but it's an avenue. It's a legal process that is afforded to you to get a second chance.
I'm here in an airplane hangar at Atlanta Hartsfield Jackson airport with the CEO of Delta Airlines, Ed Bastian. Ed, great to see you.
Alan, good to be with you.
Quite a spread you have here.
Yeah, this is a little noisy. Hopefully it'll come across well on the podcast, but this is our largest maintenance hangar that we have in our system. Candidly, it's the largest maintenance hangar in all of North America. And at Delta, we do as many engines for other airlines as we do for ourselves. So, it's a big source of third party growth, a big over a billion dollars a year of revenue for Delta.
Well, hopefully the engines won't be revving too much while we're talking. The other reason you and I are talking today, of course, is that Delta and the Wall Street Journal have a new partnership that I want to talk about, but I'd like to talk about you first, if you're okay with that. You and I have known each other for a while. I've watched your career for a long time. You have weathered more challenges and crises than almost anyone I can think of. I mean, you were here when 9/11 hit, which was a disaster for the airline industry. You were here for the big merger. Bankruptcy. COVID was a huge crisis. You had a massive computer outage a couple of years ago. I'm just curious of all of those things, you're now 10 years in as CEO, right? What do you see as the biggest leadership challenge you faced?
You know, reflecting on the close to 30 years I've been in this business, I think the biggest lesson, I'll start there is humility is you understand this is a tough business.
And this is a business that you continue to have to get better at and you can never say that you've got it mastered. So there's something we say at Delta, we say for many years, our motto is to keep climbing. And to always keep growing and keep learning and keep aspiring and keep focused on where we're going. Obviously those crises and those points of differentiation, you know, kind of the crisis that we've seen with fuel prices just in the last number of months. Either they can make you stronger or they can make you fall back to the pack. And we've always tried through our learning, through humility to try to take from whatever we've encountered become more resilient, become more differentiated, become more distinctive in how we deliver our service.
Well, let's talk about the specifics of some of those crises. I mean, starting with 9/11, you were in the finance department at the time. You left the airlines.
I wasn't confident that the company Delta was going to be true to its values. Delta at that point in time when 9/11 happened had an investment grade balance sheet. It was seen as a stalwart. It was one of the most admired companies in Fortune's listing, your old employer. And the leadership team around 9/11, several years heading into 9/11, had changed at Delta and they brought in a lot of new talent because Delta was very much a homegrown culture. Actually, I was one of the first vice presidents ever hired from outside the company, but there were a number of people there in leadership roles that candidly had never seen anything like this and actually started to isolate rather than run towards the fire.
And as a result of that, the company had lost touch with its people, was losing touch with its values and was headed in a pretty dark place.
And so you left and what got you back?
Well, my CEO who I left, Jerry Grinstein, who had come in to make changes at the company, but I wasn't confident he was making changes fast enough, reached out to me personally, assured me that he was going to give me an opportunity to have my voice heard, to lean into what made this company great, meaning leaning it back into the people, the culture, the values of the company, and start to focus on operational excellence, the return to service that Delta was known for.
I read that one of the things you said in that conversation is we have to declare bankruptcy.
We had to get past it. Bankruptcy is not something for the faint of heart. It's a declaration, a public declaration of failure of defeat, but it's an avenue. It's a legal process that is afforded to you to get a second chance. And the company deserved a second chance. At that point, the company was 75 years old, had been through a lot of crises. I felt that if we were just going to continue on the path we were on, Delta would have liquidated. Most airlines over time, sure, Pan Am, the whole list, and we needed to get out ahead of it and use the tools available to us, make changes, make the hard decisions, but come out the other end stronger.
I want to fast forward a little bit to 2016, 10 years ago, when you became CEO. What was your theory of the case at that time? What did you think you wanted to do as CEO of Delta?
We were on a good path at that point, a path of breaking out of the pack. You know, the airlines historically were a commodity business. When I joined the company 30 years ago, if you were to ask consumers why did you pick a specific airline for your travel, over 80% of the people would say it was whoever had the lowest price. That was the only differentiator. There was no other real, loyalty wasn't a big factor. Even convenience, the schedule wasn't a major factor. It was price. And if price was going to be the long-term reason why consumers chose Delta, we had no business model. We were doomed to failure. We had to be different. We're a big global airline. Our people do more. We're a premium brand, but not recognized in the eyes of consumer as such. We got out of bankruptcy. We acquired Northwest Airlines. We merged the company. We were the biggest airline in the world at that point and still are by most measures. And we had to change the game. We had to ensure that the reliability and the quality of the experience on board allowed customers to say, 'Hey, I'm choosing Delta because it's Delta. I'm willing to pay a premium for that service excellence.'
That was an unproven thesis at the airline over many years.
We did it by a return to basics, by being in this shop with having the best mechanics in the world at Delta, being able to give them the tools, the technology, the support they needed to do a better job to make sure our reliability, our cancellation rates were the lowest, that our mechanical reliability is the best. And then over time, through the integration also of Northwest, which also brought us great skill, we were starting to separate. We were starting to rise above. People were starting to see Delta as the on-time machine, as an airline that actually met its promises. Business travelers started to adopt to it because business travelers care about schedule. They care about time less so about price. And as a result of that, that was all starting to happen during that period. So my objective then was to ensure that we maintain that overall level of service excellence and be able to separate as a premium brand to start to get paid for it.
Part of what happened during that period, and you and I have talked about this before, was your focus on people, the people at Delta. And I should point out that the Wall Street Journal published its best companies for the future list recently. And while the overall top companies tended to be tech companies, number one in talent, Delta Airlines. So you clearly that's out of 500 S&P 500 companies. You're a finance guy. You came from the other side of the equation. When did it occur to you that the success of your airline depended more on how you treated people than on how you treated finances?
Well, we knew we're a relational business. We're a business with 100,000 employees today. Our people need to feel like the leadership has their back because our people make decisions all day long, every day, all around the world. We have 5,000 flights we operate every single day. And leaders in our business are not present. There's an operation center, there's controls, there's training, but we put our frontline leaders out in position to lead their crews, to lead their customers, to be leaders in their community. And as a result of that, when people feel that you've got that support, that we put people first, that people really believe in, it takes time. These are not words. This is a 24/7 operation.
Was there a moment though that it kind of hit you that wow this is what we have to do?
When we started focusing on what it was going to take to be a highly reliable airline, we needed to put, and I felt it in my heart even before I left Delta, they talk about the values and the purpose about making certain that this is a people-led organization. People make the difference. I believe in all businesses, even in technology businesses, it's people that matter. In fact, I think that's what you're seeing in the world today with AI and the lack of trust and the confidence of what the tech's going to do when people are removed from the equation or at least removed from leading the equation. Putting keeping people at the center was key. So, I learned it many years over my path. I learned it at PepsiCo where I was before I came to Delta and I started to be able to reinforce that with the investments we made in profit sharing. Our people earn 15% of our profits and we've paid many billions of dollars just in the last decade to our frontline people who deserve that reward and it's allowed us to continue to grow faster than the industry.
Well, I can tell you it pays off. I mean, you see it when you get on a plane.
I hear from customers all day long. Sorry to cut you off. All day long about all sorts of things, right? Sometimes things go wrong and I'm always on it and we're always putting people in charge to make it better. I receive many compliments about our airline. And it's never about the seat or the technology or the food or the airports as much. They always have the people at the center of it.
I thought it was because of your southern culture. But you're not a southerner.
And a finance guy. It's proven that invest in the people who make the difference that they will then take care of your customers. And our founder over a hundred years ago, Mr. Woolman said this. That was his saying that we have on the walls of our offices to this day. Take care of your people first who will then take care of your customers. We're in a customer obsessed society. If you're obsessed on customers, you're losing sight of the people and the processes that are going to take care of them. I'm obsessed on our people. So that frees them to obsess on our customers.
So let's move on to COVID because that was another shock to the system. You start to build this notion of a premium airline and then all of a sudden people stopped flying.
What was your reaction to that event?
