AI is not trusted and for good reason. Probably the hype is far greater than the actual value that's ultimately going to be derived. There's a conscience that needs to be deployed with AI. And I think that's where people in the technology sphere just don't get it. They're out there selling. This world is moving faster. Staying resilient also means staying humble.
That's Ed Bastian, CEO of Delta and one of the most trusted leaders in corporate America. Ed makes a return visit to Rapid Response today to talk about the key business challenges of 2026. From rising energy prices and the Strait of Hormuz to evolving consumer preferences and AI hype versus AI opportunity. He shares what Delta's booking data is telling him about the economy that the headlines aren't, what it takes to stay optimistic when the world keeps throwing curveballs, and more. So, let's get to it. I'm Bob Safian and this is Rapid Response.
I'm Bob Safian. I'm here with Ed Bastian, the CEO of Delta. Ed, great to see you.
Bob, good to see you again. This is your fourth time on this show on Rapid Response. We talked in the depths of the pandemic, in the heights of the recovery, and now 2026 has brought a different kind of environment. You know, military activity in Iran and spiking energy cost. Do you get frustrated by it all, or is it just like okay, another day, another crisis? In this industry, we're very exposed to what happens in the world. There are things that influence travel across the board. So my constant refrain to my team is in times that are good to just get ready, because the next thing that's going to happen probably isn't good. And when times are bad, don't get into despair, because we know we've got the resilience gene and the capability and the experience set to power through, and that's indeed what we've done this year.
I mean, so much isn't in your control. We thought the Strait of Hormuz was opening and now maybe not. How do you plan in that situation? Are there things you can do to influence these sort of geopolitical choices? Like, you talk to the White House, does it matter?
I don't think you have a lot of influence in those types of affairs. But we control a lot more than we don't. We control our response. We control by trying to run the very best operation we can. And if fuel prices are up, we do our best to see the degree to which we can include that in pricing for our customers. This past quarter we were reasonably successful at that. We didn't cover all of the cost, but probably about 60% of the cost, which given the significance of the fuel spike is a pretty strong statement of the value that customers see in the Delta product. You can't worry about things you don't control. You just drive yourself crazy. You did have to raise prices a bit due to fuel cost, which you said recently that consumers can afford it, and there's a little blowback on that, but there are no easy choices in this. Our consumers have a tremendous amount of discretionary income and wealth that they've accumulated over the last number of years. Employment is at pretty close to all-time highs. Labor engagement is strong. And we sit at the upper end of the K. So when you have a product that people are very interested in securing, such as travel, and you look at an incremental 12 to 15% range to which cost of travel has increased, is that making a difference for most people? Travel is not the biggest cost item on the budget when you travel many times, and I think most people say no, that's Delta, I'm not going to change from Delta. Delta is the airline that when prices go up, I'm even more confident in flying because I know the value I'm going to get is reliable.
You just announced these new basic option for some of the higher class travel, same seats and meals, but a few less perks. Does that reflect sort of cost concerns though at the top end of customers too?
Not at all, Bob. We have talked about this over the last several years. So, this is not a new strategy. We're just finally coming around this year, starting to roll out. We've only introduced a handful of those product options. When you look back in airline history, we basically had two products that we'd sell. We'd sell a first class product and a main cabin product. We may have been good transportation providers, but we weren't very good merchandisers or retailers. People want to have more options of choice from us. To the extent you can take the shelf that you've created and put different brackets on the shelf, if you want the classic standard product that you've been buying all along, it's there on the shelf. If you want a little more or a little less, you give customers options. I think there's a lot of interest in that and we'll see where it goes. Yeah, this is a roller, and to the extent that consumers have and will have a lot of input to us, we'll take that into account and continue to refine and get better at it.
And I guess keep your eye on, is there confusion over the new options, or is it something that drives more engagement?
The reason why it's taken us some time to develop this. Yeah, segmentation creates some misunderstanding at times, and we'll do our best to try to learn from that and get better at it. I've already heard from customers that I selected this box but I didn't realize, and we'll make adjustments for people. We'll be very understanding as we go. But I think this is the next level of commercial strategy for an airline that is a great consumer brand but doesn't necessarily operate in the merchandising world the way we could.
You have access obviously to all the booking data that comes through your app and your website. Are there things that you see in that that are different than the headlines? Like, does your data tend to lead the headlines or respond to it, or is it different at different times?
Our data is usually ahead of the headlines. So we just reported our second quarter results. We gave guidance for our third quarter which ends at the end of September, and we already have about 70% of the revenue on hand for that third quarter through advanced bookings. So our bookings run anywhere from 60 to 120 days out. International runs longer, domestic runs a little shorter. And so we have a pretty good sense for how people are already thinking about the fall, how people are thinking about the upcoming holiday season. So economists and members of the Fed and others are always quite curious talking to us because we have a pretty good pulse on how the consumer, at least our consumer, is viewing the current environment but then translating that in terms of confidence to a future purchase commitment.
Your customer tends to be at the top end of the K-shaped economy. You get, I don't know, 20% more revenue per seat than competitors. Your premium cabin revenue almost on the verge of overtaking the main cabin. That decision, that lean into that customer. Does anything about today's environment make you rethink that strategy or double down on that strategy? I mean, it sounds like that is still where and the customer that you feel like is most healthy for you to focus on.
Absolutely. This is a decision that we took not recently, we took this 15 years ago. It was shortly after we acquired Northwest Airlines, and as a result we were the largest airline in the world clearly, and we still are but it's closer now. We had a commitment to ourselves that we weren't going to do the merger and start to introduce that level of scale unless we could actually differentiate in the marketplace and not be seen any longer as a commodity. Because if you're a commodity and you just get chosen, whoever has the lowest price, we lose. In fact, we lost back 20 years ago when we had to file for bankruptcy for that very reason. Delta offered a lot of things but didn't get paid for it, and as a result the business model didn't work as it did for issues that a number of the big legacy carriers had. So we spent many years figuring out what we called back then decommoditization. Today we call premium. Tomorrow we'll probably find a more elegant term for it. And it starts with reliability, building your trust with your consumer, deploying technology to assist along the way, to develop more partnerships whether it's with American Express or Uber or YouTube TV on board our planes, Paramount, and we wanted to be there to make certain that we're getting the first call for the best dollar. Recently it seems like the more sort of bargain-priced airlines seem to be the ones that are struggling. I mean Spirit is gone, right?
And even you, we talk about prices have gone up, but on the lower end of the market, by our estimate, those carriers still have to increase their pricing at least another 5% just to break even. And if that happens, guess what, it's going to help the top end too. There's some concern that with the rise of AI, agent-based buying will make price first more prevalent, right? I'm curious how you think about that, that AI agents may not favor brands the way humans do.
Unless the AI agents are going to be flying on the airplanes and actually providing surveys, I don't think it changes our equation any. At the end of the day, a relationship with an airline is fairly personal. It's human. You're not going to let an agent tell you how you should feel about a brand in the same way. That's the hallmark of a great brand. It's how it makes you feel. You deploy AI in your own operations. I know Delta tested AI for individualized ticket prices. Using AI for this, does it create a different kind of reputational risk because of the way people are emotionally reacting to what AI is driving? AI is not trusted and for good reason, probably with all the hype that's been attached to it. We talked a year ago about the fact that we started to utilize some AI in the pricing algorithms, and people extrapolated about surveillance pricing and individual. We're doing none of that and we never intended to do any of that. The only thing we're using AI in the pricing tool is to help our revenue managers be able to offer better pricing and more pricing to more markets around the world. At Delta, we have hundreds of thousands of price points out for sale at any given time of any day. We can only manage a select number of those with human eyes. And we set on auto match the vast majority of those price points. Auto match basically is to make sure you don't get too far in or too far above or below where the market is coming in at. Through AI, we can bring more intelligence in setting those signals. Then AI works around the clock. It's 24/7. It's always monitoring and seeing what's happening in the marketplace and if our product should be higher, should it be lower, trying to give the customer the very best opportunity. We can only do that on our highest volume routes, but we still have a massive amount of routes, but we don't deploy it. So, you think about it as really it's a knowledge tool, a learning tool, and an efficiency tool. You've been known for your people-first leadership, and I know a lot of people are worried about how AI is going to impact their jobs. How do you think about that? How do you talk to your team about? Delta I've been very clear that AI is, first of all, I don't call it artificial intelligence. I refer to it as augmented intelligence. It's going to enable our teams to do a better job of what they do. We are a highly analytical business. We have 5,000 flights a day every day. As a result, there's a tremendous amount of data, tremendous amount of intelligence in terms of monitoring and making decisions, whether it's in flight patterns, pricing the product, mechanical reliability, predictive engineering. There are many disciplines that use that data. AI helps you make those decisions quicker, absorbs the amount of data that's out there far faster than anything we can do. We wound up making a lot of decisions based on judgment, which sometimes is seat of the pants, sometimes instinct. And these are going to be better data decisions. That doesn't mean that we're going to need less people. It frees people up. They have more time to serve. And if we do a great job of that, that's going to grow our business.
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