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Welcome to Airlines Confidential. I'm Scott McCartney, and we have a lot to catch up on this week: a management shuffle at American Airlines, a winner in the bidding for easyJet, and I'm most excited to bring you a recent chat I had with Delta Airlines CEO Ed Bastian, who covers everything from how demand is shaping up for tickets this fall to how his management focus has changed over the past 10 years that he's been CEO of the most profitable airline. I think you're really going to enjoy this one. But maybe not as much as globe-trotting travel analyst, researcher, and overall savant Henry Harteveldt is enjoying France right now. Bonjour, Henry. Welcome back. Thanks for joining us.
Well, bonjour, Scott, and hello from Aix-en-Provence in France. I am here with some of my San Francisco friends, and we're spending a few weeks in France enjoying all of it. I started this trip in Iceland. I've got some stories for you about that when the time is appropriate, involving both United and Icelandair, and I'm looking forward to it. And I got to tell you, your conversation with Ed is indeed a winner. There's a lot here about what he had to say, and I'll add some thoughts to that, and I'll share some of my thoughts about the American Airlines changes as well.
Yes, let's start with that. You know, the American Airlines announcement reminded me of a bit that David Letterman used to do with his sidekick Paul Shaffer. Some silly act would come out—a woman with hula hoops, or a guy juggling plates, or a guy in a bee costume playing the Flight of the Bumblebee on the xylophone—and Dave and Paul, and sometimes there was a guest judge, but they would decide whether it was something or whether it was nothing. And I say that because the media coverage of the changes screamed management shake-up and changes to restore profitability, and yet I was left asking myself, is this anything? I think it's something, but there better be more to the act if real change is going to happen. That's my bottom line. But here are the changes:
Chief Communications Officer Ron DeFeo is out. Kevin Brickner, the Senior Vice President of Technical Operations Maintenance, is also out. In addition, Nate Gatten, the airline's Executive Vice President of American Eagle Corporate Real Estate and Government Affairs, is leaving American to become Apple's Vice President of Government Affairs. Brickner is being replaced by John Bendoraitis, former Chief Operating Officer at Spirit Airlines, and before that he was COO at Frontier Airlines. Before that, his experience was in operations at regional airlines. Other duties get spread around and reshuffled. For example, Caroline Clayton, American's Senior Vice President of Communications and Chief Marketing Officer, will oversee communications following DeFeo's departure, but she loses marketing. CEO Robert Isom says American is looking for a new marketing leader.
Chief Customer Officer Heather Garboden's role is expanding to include reservations, contact centers, service recovery, and catering. Listeners will recall we had Garboden on the podcast when she was new to her role. I think it's good news. She's a terrific young leader that's gaining additional responsibilities, and better news that her reporting path got a lot cleaner. Previously, she was reporting to both operations and the commercial side. Now, she'll only report to Nat Pieper, the Chief Commercial Officer. And maybe the most consequential change here is that JC Gulbranson, a flight operations exec, will expand his role to oversee airports, planning, flight, in-flight, and the integrated operations center. He's Senior Vice President of Flight Operations and the Operations Center. He's an experienced ops guy who was at Northwest previously, and then US Airways, and then American with the merger.
As listeners know, I think one of the biggest competitive issues American faces is becoming a more reliable airline. So, changes in both operations management and in maintenance are significant. Those are problem areas right now. But are these the right changes? Should there be more new blood coming in? There's some. Is this a shake-up or a tweaking? In other words, is this anything?
The big change I hope we will see this fall is a bold move to replace the retiring Steve Johnson with a strong number two, a president for American and likely a successor to Robert Isom. Will Isom do that? We don't know yet. Succession is a big issue at any airline, and actually we're going to talk to Ed Bastian about succession at Delta, but I think it's an especially important issue at American because the current CEO hasn't delivered good results and doesn't seem to have a bold plan for the future. I don't think there's anyone on the property right now at American who could step in as CEO. Maybe in a few years, as these folks are getting promoted and gaining more experience, more responsibilities, more seasoning, one of them or multiple will emerge as the future leader. Maybe it's Nat Pieper, maybe it's somebody else. We don't know, but I don't think there's anybody there right now who can step in.
The best management teams I've seen in this industry over time always have a strong number two: Crandall and Carty, Bethune and Brenneman, Bethune and Kellner, Parker and Kirby, Herb Kelleher and Gary Kelly, Richard Anderson and Ed Bastian at Delta, Ed Bastian and Glen Hauenstein at Delta. I think you need that strong number two. It's a big, big job, and there can be benefits from bringing in different perspectives—good cop, bad cop, just more vocalization, more getting out there, more rallying the troops. American needs to bring in the best executive out there as president, if not CEO. It needs fresh energy.
The big issues, I think, are not the little ones they've talked about. The big issues are rallying the workforce, fixing the operation, clawing back market share in Los Angeles, Chicago, and New York. Revamping business class seats isn't going to do it. American needs to urgently reconfigure its fleet. For example, it's way behind in this. It needs more wide-bodies for international service. It needs to rethink its product offering on every aircraft. That's what Delta and United and Southwest also have done.
Just look at the 737-800. American has 24 extra-legroom seats on its 737-800. United has twice as many, 48. Delta has 50% more, 36. Those are seats people are paying extra for. American has more cheap seats in the back, but even Southwest figured out that you need to have lots of extra-legroom rows for sale. A Southwest 737-800, by the way, has 48 extra-legroom seats, twice as many as American. And by the way, Southwest reconfigured its fleet in less than a year. There was obviously external pressure with Elliott Management to move quickly. That was a big benefit for Southwest in moving quickly: 800-plus airplanes got reconfigured in a year, and look at the difference it is making right now in Southwest's earnings.
Doing things the same way isn't going to do it. American needs fresh energy, and it has an opportunity for major change staring it in the face with the January retirement of its sort of de facto number two executive. Henry, what do you think? I've talked too much about this. What do you think of the management shake-up? Is this anything?
Well, Scott, you know, this is something, yes, but I don't think it's so much a shake-up as an evolution. I think there are some really smart changes that are happening. For example, I'm very happy to see Heather Garboden getting more responsibility. I think Heather has risen to the challenge as the Chief Customer Officer and is doing a terrific job with her team. And I'm glad to see that she is being handed more responsibility. She has earned that. I'm also happy for her that her reporting situation is streamlined. No one should have to have dual bosses. It's tough enough reporting to one person and trying to figure out what the mood of that one person is when you're walking in to meet with her or him. So, I think it's good for Heather that she has just one boss right now. And I think it's great for Nat, by the way, because he really, as Chief Commercial Officer, now has so much of what this airline is. And you want to talk about marketing, Nat really has that. If you think of marketing, the classic four Ps: product, pricing, placement/package, promotion. He's got pricing, he's got product network, he's got the actual product on the plane, he's getting catering, he's got marketing, which includes packaging—that's brand and what the airline's marketing position needs to be and so on—and he's got promotion, the advertising and everything that goes along with it. So, I'm very happy to see this.
The other changes all, again, make sense to me, but I'd like to talk about the letter itself that American sent to management and, I presume, the rest of the airline as well. And that is what was outlined in the letter. It says from Robert, quote, "I recognize that there is a meaningful gap between where we are today and where we know American can and should be," unquote. And then he outlines what they're going to do. There are four bullet points: improve the airline's performance, elevate the customer experience, grow American's global network, drive premium revenue, lead in loyalty. All of those make sense, but there's a conspicuous absence at the top of that list, which is improve on-time performance and overall reliability.
Scott, we have talked about this, you've spoken about this with other guest hosts and with other guests on the program. We all know a fundamental truth in the airline business is this: if you're not on time, very little else matters. The champagne doesn't matter, the brand doesn't matter, the lounge doesn't matter, the loyalty program doesn't matter. You've got to have the right network and the reliability behind the flights that operate on that network so that people can trust you. And Delta learned this a long time ago, United has learned it; the Cirium data shows that they're generally among the two top US airlines. American's on-time performance is improving, and it's not American's fault that DFW, which I've nicknamed "doesn't function wet," suffers from what I call the one-two-three problem: one cloud, two drops of rain, a three-hour ground stop. American doesn't choose the ground stop; they have to respond. But American seems to get hit with these problems a lot, and it affects their on-time performance. Now, American's on-time reliability and performance is better than Southwest and many other airlines, but it's not as good as it needs to be. And so I'm hoping that as this new team comes together and everybody gets into their new roles, that they will focus on the reliability and the on-time performance. I think that is truly job one for American, because when the airline is operating better, that helps improve the culture, that improves customer preference, that improves customers' willingness to buy the premium products, pay more for the main cabin products, and many other things.
Absolutely. Amen to that. You know, Richard Anderson years ago realized that you're going to win business travelers if you sold them reliability. And I think that's really key to everything. And to get there, it has to be a holistic solution, right? It has to be changes in maintenance so you can reduce mechanical breakdowns. It has to be changes in scheduling and the network and everything else. But it also, I think more than anything, has to be an effort to rally the employees to make this a priority to them, to really fight for this. And Delta has done that with profit sharing and convincing employees that they've got to really make the airline work. Scott Kirby has done that at United. I think American can do it, but Robert just hasn't been—maybe it's getting better more recently, but just hasn't been out there trying to rally the troops. And I think American has run late so much that employees get beaten down and day after day after day they have to deal with angry customers, and it's debilitating. And so I really think that holistic change has to include some effort to really get the employees realizing the threat that the airline is under. And you know, like Herb Kelleher used to put on the battle fatigues and say, "Hey, we are in a tough battle and we got to win." And I think they can do it.
Yeah, look, American is now an underdog brand, right? You've got Delta and United leading the US industry. There are a host of foreign-flag airlines that do a better job with the soft and hard product in all cabins on long-haul routes. So, American has to really think in a way that is very un-American Airlines. And that is stop looking at the cost on everything. Stop thinking about pennies and start focusing on dollars, ideally tens and hundreds and thousands of dollars, meaning the premium customers. And that means making some very bold decisions. One, they've got to get rid of the Oasis configuration on the 737-800s. Never has a product been worse named than Oasis. That is one of the most miserable, uncomfortable aircraft configurations on any mainline aircraft in terms of a network airline or a non-ULCC.
American has got to take a look at reliability. And if that means maybe flying the fleet less and padding scheduling time more, padding turn time more, then so be it. It has worked for Delta, it has worked for United, it could work for American. They have got to invest more in technology, not just the website, but the disruption management technology for the airline, for the ops center, for the crews, but also for the customer. I know they've started down this, but they've got to do things to make it easier for customers to manage the disruption and for employees to help customers when these things happen. Disruptions are marketing opportunities.
So, can American do it? Of course they can. They are intellectually capable of it. They have a lot of smart people working there. And I think the employees very much do want to do a good—and I bet many want to do a great job for their customers. They need the tools and they need the overall product in the form of reliability to do that. I don't think there are any American Airlines airport gate agents who are saying, "Oh, you know, I don't care that a plane is running late. I'm going to just let it sit out there another few minutes before I roll the jet bridge up" or something like that. I think they're very committed to doing what they can, but they can't obviously control the schedule. So, American needs to help those employees do that job better, and that means making some bold, brave, and potentially expensive in the near term, but highly profitable in the long term decisions.
Yeah, absolutely. Absolutely. And look at the whole customer service thing. I was in O'Hare on a stormy day, and the long lines for rebooking were just miserable for people—to not only have your flight canceled, but then be standing in line for a couple hours. And that's a technology issue, that's a staffing issue, there's a lot to that. But that just shouldn't be the case.
It shouldn't. But look, I want to be fair. I have seen those long lines when there's been bad weather at various airports with other airlines. And even though those airlines invest in technology to help their customers—United has virtual agents, Delta has really good rebooking capabilities through the Fly Delta mobile app, other airlines have invested as well, and foreign-flag carriers included—sometimes people have to or just want to talk to somebody, and that's a challenge. And airlines need to remember that as good as technology is and as pervasive as it may be in our lives, sometimes we feel better getting these problems resolved with a person. And that means they have to have the people there at the airport when these problems occur.
Storms are forecast in Chicago; you can't have two people at the rebooking desk. It's going to be more than that.
Right. And I'd like to build on your comment about Chicago, because Chicago and American were involved in a rather unsettling incident in the skies this week northeast of Phoenix early Friday morning. American Airlines flight 2482 was flying right at American Airlines flight... 2482. That's right. Same call sign, same airspace, two different airplanes. One was a flight coming from Chicago O'Hare to Phoenix; the other was the return flight from Phoenix to Chicago. Now, normally airlines will take the same plane and fly it to a destination and turn it around and send it back to the original hub. Because 2482 from O'Hare to Phoenix was running late, American got another aircraft to depart on time and keep the on-time performance out of Phoenix, which was certainly a good intention. But here's the problem: these two planes were in the same sky, and then the air traffic controller realized the problems—that instructions such as altitude assignments for American Airlines 2482 could be confused by both flights. So he began calling one American 2482 the arrival and the other American 2482 the departure. The two planes crossed paths, one at 9,000 feet, the other at 10,000 feet, but they were all communicating with the controller, the pilots were looking and had the other aircraft in sight. The controller did a phenomenal job with the communications. There was no panic; these pilots seemed to be very much in control. It was outstanding work by that air traffic controller, who remarked to the pilots that in 25 years of working air traffic, this had never happened to him before. What do you think of this?
Yeah, you know, it's a fascinating radio exchange to listen to. I imagine a lot of listeners have already heard it. If you haven't, go find it; it's well worth listening to the whole thing. This actually highlights a couple of issues facing air traffic these days. First, there's a shortage of flight numbers worldwide. Legacy IT systems, really on the reservation side, only allow four digits. An airline like American has something like 4,000 mainline flights a day, plus another 2,000 to 3,000 regional flights that are sold as AA in reservation systems, right? And then there's all the code-sharing that gobbles up flight numbers—a British Airways flight or a Qantas flight or you name the partner. They'll have a lot of flights that will carry AA flight numbers as well as their own. So poof, the 9,999 flight numbers that are available for American Airlines flights with the four-digit limitation gets gobbled up each day. So one thing American and other airlines have done is give a round-trip itinerary the same flight number.
As you mentioned, in this case American 2482 leaves Chicago, leaves about 9:00 p.m., arrives in Phoenix about 11:00 p.m., turns around, goes back to Chicago as a red-eye, departs kind of around midnight and arrives around 5:00 a.m. in Chicago. Not unusual. But usually there's only one plane that's 2482 at the same time, right? And in this case, because they replaced the aircraft to avoid the delay, there were two flights and they happened to be crossing each other in the same airspace at the same time. I agree it was great work by the controller to realize the potential for trouble and come up with a specific, logical way of instructing both planes clearly, right? The fact that the controller—by the way, I was fascinated by this as a pilot myself and being involved in a lot of air traffic control communications—the fact that the controller said "2482 the arrival, 2482 the departure." If you just said "2482 arrival," you could misconstrue that: "My arrival route? What do you mean?" In a sector like that, you're talking to somebody who's handling both arrivals and departures, obviously. The control tower says contact departure on 121.6 or whatever the frequency is, or the center turns you off and says contact Phoenix arrival on whatever—it's the same controller. So there can be confusion with that, but the fact that the controller inserted the word "the" I thought was really brilliant. So it's important to remember that there are a lot of safeguards in place. If it got to that stage, there are onboard collision avoidance systems that would have instructed both airplanes to avoid each other. I don't think there was a huge danger of a collision, but it was a fascinating situation and kudos to the quick-thinking controller.
Okay, a few other news notes before we get to Ed Bastian. Investment firm Castlelake dropped out of the bidding for easyJet, so it looks like Apollo Management Group will take easyJet private with a $7.7 billion US bid. There are a lot of issues and hoops to jump through in terms of a US-based investment firm taking control of a UK airline that also has inter-European traffic rights, but I'd assume Apollo knows what it's doing in terms of meeting the regulatory hurdles, both in the US and in the European Union.
Second, the FAA has started staggered arrivals at San Francisco International Airport. Good news; that should increase capacity some and reduce delays. SFO is not back to full capacity because of runway construction that's underway. Listeners will recall that the FAA ended the practice that had been in place for years of doing parallel approaches. There's a special radar that allows parallel approaches close together. The runways are not spaced far enough apart for the normal separation of parallel approaches, but with this faster radar, they had been doing this for years. It proved to be a problem that the FAA wasn't comfortable with: too many TCAS alerts, too many pilot deviations, pilot concerns. So it led to an end of the parallel approaches. The staggered approach system allows more flights, and I hope there will be improvement on that once the runway construction gets done.
Yeah, and as someone who lived in San Francisco for 35 years, I was very happy to see this announcement made because I think this will help SFO get back up to an arrival rate of roughly 46 or so flights per hour while the runway construction is underway, and I believe take it up once that construction is done. But again, as you said, not sure if it gets back to the full level it was before this restriction was announced.
Scott, there were two additions to the Southwest Airlines Board of Directors recently that I think are worth mentioning. There was also one at American Airlines that we haven't yet discussed. So let's start with the folks at Love Field. At Southwest Airlines, Jason Liberty, the Chairman and CEO of Royal Caribbean Group, joins the Southwest Board immediately, as does Varun Krishna, the CEO of Rocket Companies, the Rocket Mortgage folks. One has extensive experience in selling leisure travel; the other has extensive experience in e-commerce and digital finance. So these are both great leadership skills and knowledge to bring to the Southwest Board. Neither one of these execs has airline experience, but they do have that business experience that is relevant. And remember, there were two Elliott Management-appointed directors, David Cush and Gregg Saretsky, who resigned from Southwest's Board in February when the standstill agreement expired and Elliott sold some of its ownership stake in Southwest.
And then last month, American Airlines added John W. Dietrich to its Board of Directors. He'd been with FedEx and before that Atlas Air Worldwide, where he'd risen to President and CEO. Way back, he spent 10 years at United Airlines as an attorney. I know he knows air transportation, admittedly most recently on the cargo and logistics side, but he doesn't seem like someone who's going to rock the boat for change. One thing that does concern me about Mr. Dietrich's appointment is that the point American Airlines emphasized or at least communicated in the press release about his joining the board is that he cut $4 billion of spending from FedEx. Okay, that's fine, but the last thing American Airlines needs is another cost-cutter. American has already got way too many people, as we talked about earlier, who are focused far too much on cost, far too much on pennies, not enough on the dollars. We've seen American and United talk about how they're looking at the revenue picture, and that's what American has to focus on. So American needs—certainly I think Mr. Dietrich will benefit the airline, but I'm just concerned that he's going to have to bring different skills to the board.
It's kind of an interesting contrast, isn't it? I mean, these are each a couple of appointees on a larger board, but it was interesting that the Southwest guys are very customer-focused, right? And cargo and boxes—we're not in a box world anymore; it's about how to attract people to your airline. And so, just an interesting contrast.
Yeah, yeah. And then the Financial Times got some interesting data showing that the peak wait times at some major European airports have doubled since the EU began using a new border crossing system known as the Entry/Exit System, or EES for short. Wait times doubled at Frankfurt, Amsterdam, and Munich. Frankfurt went from 60 minutes average to 120 minutes average. Munich went from 31 minutes to 60 minutes, and Amsterdam from 80 minutes to 120 minutes. Now, let's just say one thing: even the pre-EES wait times are far too long, far too unacceptable for any airport, any government agency to say, "You know what? We got this. We should be happy with this." If you are a non-EU citizen traveling to these major gateway airports, whether you are going just to that city or making a connection to an intra-European flight within the EU, having to spend 31 minutes to 80 minutes in a queue to clear passport control is flat-out unacceptable. We should never allow that. And the longer waits are, of course, even worse, much, much worse.
So, what has been done is this biometric EES system, which requires non-EU travelers to register their fingerprints and facial scans, has basically been turned off. The kiosks were malfunctioning, travelers needed far too much assistance, the system had glitches. So, for now, a lot of these airports have turned it off. And I can just share my first-hand experience flying into Keflavik a week and a half ago. Arrived on the morning of August 5th on United from Newark, which was delayed, by the way. The flight was miscatered; it was not one of United's better flights. The Polaris experience was not good. But we land, and there's a long queue in the passport hall. All the kiosks have been turned off. There were only two passport control agents working the non-EU line. There were two working EU arrivals and two working connecting flights. Now, to the credit of the officers in the connecting flights, they would, as they could, bring over people from the non-EU line to their booths to help clear them and move the line. But we still waited more than half an hour after landing to clear passport control. Not the greatest welcome to a country. Not great for your tourism. Not great for business travelers. And especially with business travelers, business travelers looking at all the hassles and saying, "I don't need this. I can stay home. I can do my work remotely. We can have our meetings remotely. We can share the documents remotely." This is why I think the industry is struggling with some of the business travel activity to get as much business travel back and on the road.
Yeah, so interesting. So interesting. Well, I hope they get this worked out. And you're right about the original wait times. I went through Canada recently and it was easy-peasy—scan and go, basically.
Some of that comes from the sort of pre-registration work you had to do, and that's fine. I would much rather do that: load up my information, you can run me through the database, and then when I get there, all you have to do is verify I am who I am.
Right. You know, I give US Customs and Border Protection credit for Global Entry. It works brilliantly well. Singapore, brilliantly well. There are plenty of other countries where passport control generally takes 15 minutes or less. London Heathrow, even during peak rush hours, because they have e-gates that can scan the passport, generally is a quick process on arrival. The rest of Europe, they've got to figure this out.
Yeah, yeah. All right, before we get to Ed Bastian, time to thank some of our sponsors. I want to thank Ontario International Airport for its support of Airlines Confidential. ONT just launched the ONT BOLD Program, a proposed vision to transform the airport's facilities to streamline the passenger journey, while also creating jobs, growing the regional economy, and building on ONT's legacy as a global gateway. The program includes plans for a new terminal, multi-story parking garage, upgrades to existing terminals, enhanced roadways, and new utilities. The ONT BOLD Program is early in the planning phase. Visit flyontario.com/bold to learn more and join the journey to ONT's boldest chapter yet.
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At the risk of stating the obvious to Airlines Confidential listeners, I just want to note the confluence and coincidence of having Ed Bastian on the same week we are talking about a management shake-up and weakness at American Airlines, because Ed Bastian is responsible for some of that, maybe a lot of that. We often focus on how Scott Kirby and the team he took from American—people like Andrew Nocella and Patrick Quayle, some very smart executives who left a brain drain at American—how United has run circles around American the past couple years, but the decline goes back much further. I think Richard Anderson deciding way back that reliability was the way to win high-fare corporate travelers, that was kind of the start. Delta creating a hub at LaGuardia weakened American. Delta building fabulous facilities at LaGuardia, Kennedy, and LAX faster and better than American really hurt American. A lot of this war has been waged on the ground, and Delta's facilities have really come together much faster than American's improvements. Delta's deal with American Express has made a huge difference; American is only now catching up with a renegotiated deal with Citibank. So, Ed Bastian has been at the heart of a lot of that, so let's talk to him now.
Ed Bastian is celebrating his 10th year as CEO of Delta Airlines. He's been with Delta nearly 30 years and has led the airline to new heights in profitability and service and set new standards for what an airline can be. Ed joined Delta in 1998 as Vice President of Finance and Controller. He was named Chief Financial Officer in 2005, and in 2007 he was appointed to serve as Delta's President. Before joining Delta, Ed was at Frito-Lay International, PepsiCo, and he started his career at PricewaterhouseCoopers. He's a native of Poughkeepsie, New York, graduated from St. Bonaventure University with a bachelor's degree in business administration. Ed, I find it hard to believe this is your first time on Airlines Confidential, but welcome.
Well, we've known each other for a long time, Scott, so it's good to be on this platform as well.
Yeah, yeah, it's really fun. So, we always start with the Ben Baldanza question: How'd you get into this crazy business?
You know, I tell people I didn't grow up flying. I was 25 years old before I ever stepped foot on an airplane, so sometimes I have to scratch my head and wonder how I got here. But I was a road warrior in the early years of my career, both in the financial world with Pricewaterhouse in New York and then with Frito-Lay and Pepsi. A friend of mine at one point said, "You know, you travel so much, you might as well work for an airline. You probably could help them a bit because, as we know, this industry is a little complicated." And coincidentally enough, six months later I got a call from Delta asking if I'd be interested in considering an opportunity. And since I think probably because I was already thinking about it because someone mentioned it to me, I said, "Sure, why not?" And here I am.
Yeah, yeah, interesting. Okay, let's start with the current economy. I'm not sure I've ever seen costs be so unpredictable with all the swings in oil prices, but how's the summer gone for you? Has demand held up, or do you think demand's going to hold up for the remainder of the year?
Demand is holding up this summer. It's quite healthy. I'm sure you've heard that from virtually everyone you've talked to in our industry. And the more premium the product you're offering, the higher the demand is for that offering. We have an outlook, obviously, out into the fall. Early indications are that the fourth
quarter should continue more of the same in terms of strength of the demand set. Consumer expectations are mixed from a lot of different signals. I think a lot of it depends where you sit in the economy, where do you sit in the airline economy, what type of product offerings you have dictates the resilience of the demand. And at Delta, we know we are at the upper end of the threshold, and the quality of the service is certainly driving the price point.
Do you think there's a permanent change in demand for air travel? It's just a more important part of people's lives, or do you think it's still cyclical, and especially that premium demand, if you get into a weaker economy, do people save money by trading down?
It's too early to say, Scott, but I think we're in a secular shift. I think COVID helped prompt some of that when travel was taken away. The ability to experience life was limited, and people, you know, I think had a chance to reflect on what's important and how they wanted to spend. It's not just folks at the baby boomers and folks of our generation, but I think it's across all demographics and generations. We've seen that. The world is increasingly moving towards looking for places they can go and have an opportunity to learn, to explore, to enjoy, to spend time with friends. The world's more accessible, despite all the complexities of the world, than ever before. I think people feel more in touch in certain ways with wanting to go out into the world. And that's not just air travel, that's going to a high-end show on Broadway or a great dinner with friends. People are investing in themselves. I think the world of accumulating stuff is not as interesting as investing in experiences.
Yeah, yeah, yeah. So with that, let's talk about growth opportunities, domestic and international partnerships and alliances. I'm really fascinated by what you're doing in Austin, Texas, cuz it's close and I spent some time in Austin. Also really interested in what you may be thinking for Minneapolis with the Sun Country Allegiant merger. You've got Boston, Seattle focus cities. You just started Los Angeles-Hong Kong. Los Angeles has been fascinating, how Delta's become number one there. Now you've got the investment in WestJet. Where are the main growth opportunities for you?
I think the long-term opportunities for us are more on the international side than the domestic. And as you know, our domestic business is our bread and butter, and we're always going to be investing and looking to grow that. So whether it's the build-out in Austin or looking even further down the road from you in San Antonio, looking for places to continue to grow and expand into Texas—we're not as big in Texas as we'd like, and so those are two markets that we have found some really good reception. The growth of our coastal hubs, whether it's Boston, Seattle, New York, LA, has done really well for us, and we continue to invest there as well. But a lot of the opportunity for the future, though, is the fact that you're now big in so many of these markets—LA being one example of that—that gives us an even greater case to move internationally from those markets. So announcing LA to Hong Kong, which we're now flying, or LA to Manila, and other markets that we're looking at and considering. We're launching Atlanta to Riyadh coming up here in October, and thinking about ways in which the world can get a greater appreciation for the Delta brand. That is the future. I think we spend more of our time thinking about the longer-term opportunities, and those are markets that the brand is doing well already in. We've had a lot of growth in international in the last handful of years. We work well with partners. In almost all of our markets, we have a partner by our side. So in Riyadh, for example, we're partnering with Riyadh Air as we come into that market for the first time with a US carrier direct. And that is, I think, helping shape the brand, too. I like to think of Delta as a leader in the US travel industry, but when people talk about who are the global leaders, I want to make sure Delta is at the tip of their tongue. And that's different for a US carrier. That's been something that has often been the Middle Eastern carriers or the Asian carriers or Singapore or some higher-end premium brands. Delta should be considered in that category.
Asia's fascinating. You mentioned partnerships. I was reminded that you were really the point guy on trying to lure Japan Airlines away years ago, right?
Some of them I couldn't do. Yeah, that's one I couldn't get done.
But you did lure LATAM away from American. And I'm curious if there's more—if the partnerships, the alliances, is that all kind of set, or do you think there's more room for change? LA is a great example where you're now the number one feed carrier there, so that may make the world look differently to trans-Pacific carriers.
Yeah, I don't know that there's any big shifts coming. We're pretty well set. We've got a great group of partners around the world that we work very closely with. As you know, we're also investors in most of our partners as well.
