(Miss this week’s The Leadership Brief? This interview above was delivered to the inbox of Leadership Brief subscribers on Sunday morning, July 26; to receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.)
Delta CEO Ed Bastian earned his wings in the industry after 9/11, when as chief restructuring officer he helped lead the airline out of bankruptcy. “At the time, 9/11 seemed like the industry existential event,” says Bastian, who was named Delta’s CEO in 2016. “This is far worse. It’s 9/11 on steroids.”
Airline travel is an important indicator of overall economic activity, and after a brief uptick, air traffic has stalled again as COVID-19 infections have risen in recent weeks. Under Bastian, 63, Delta is working hard to establish itself as a leader in safety; the airline recently announced that passengers who can’t wear masks will be required to undergo medical screenings before boarding. “We encourage customers who are prevented from wearing a mask due to a health condition to reconsider travel,” Delta said on its website.
Delta, one of the world’s largest airlines with $47 billion in revenues in 2019, has instituted more than 200 separate safety protocols, including electrostatic fogging of each plane before each flight, and established a new vice-president position responsible for global cleanliness. Delta is also one of a handful of airlines that have capped flight capacity. That decision ensures that every Delta flight operates at a loss: the airline is burning through $27 million a day in cash.
Bastian joined TIME for a video conversation last week, from his home office, to make his case for flying, even during a pandemic; to share his response to now contrite customers who’ve been banned from flying Delta for refusing to wear a mask; and to discuss why he’s leaving the middle seat open on Delta flights.
Subscribe to The Leadership Brief by clicking here.
This interview with Delta CEO Ed Bastian has been edited and condensed for clarity.
Delta is taking a hard line on mask wearing.
Masks work. We’ve heard from the medical community that if we were all compliant about wearing masks as part of our regular activities every single day in our country, that the virus could be contained in a relatively short period of time. And we’re doing our part in the industry to help enforce that.
What does enforcement look like?
We’re getting somewhere between 10 to 20 customers a day that have concerns about wearing the mask. We let the people know that they’re going to need to. First of all, you can’t get on the plane without wearing the mask. And then, to the extent customers take them off and refuse to put them back on, we’ve been very clear they’re going to lose their rights to fly Delta if they don’t comply with the flight attendant’s request.
And those who refuse?
If after a second or third reminder the customer refuses to put it back on, what our flight attendants are doing is handing out a little card to the customer outlining for them that they’re going to lose their privileges to fly Delta in the future because of their decision, and do you really want that? Because if you do, we will have someone meet you at the end of the flight, when you disembark, and let you know that you’re no longer welcome on Delta. And that’s serving to be a really good deterrent.
Have people ended up on the no-fly list?
Oh yeah. We currently have probably about a hundred people we’ve put on that no-fly list.
That’s tough love.
I’ve had a number of customers email me back after going on the list, saying they’re sorry and they won’t do it again, asking to be reinstated. And the answer is no.
I want to come back to safety protocols, but first talk about the industry’s economic outlook. Are you more or less optimistic than you were last month?
I’m more cautious now. In June, we were seeing some good momentum as states and cities, resorts, businesses were starting to open, particularly in the South. As we’ve seen, the virus was also spreading at the same time, and that certainly has caused us to have a more cautious view of what the next few months look like.
Would you say that nascent rebound for both the industry and the economy has stalled somewhat?
Stalled is a good word for it.
What is your daily cash burn, and how does it compare with earlier this year?
In the month of June we were burning $27 million a day. That’s down from March when the pandemic started. It was almost $100 million a day.
TIME for Learning partnered with Columbia Business School to offer a series of online, on-demand classes on topics like effective leadership, negotiation and customer-centric marketing. To sign up or learn more, click here.
You’ve eliminated 50% of your operating cost. Can you walk me through a few of the steps you took to get there?
We put a lot of airplanes on the ground. We had on average about 40,000 of our employees, starting in April, who took voluntary unpaid leaves of absence throughout this entire period for the last four months. Almost half our company went out on unpaid leave. Labor cost is our biggest cost factor. We closed concourses, we closed Sky Clubs.
What about staffing levels going forward?
In the last month, we’ve had results back from our early-retirement offer, and we’ve had over 17,000 Delta people elect to permanently retire on Aug. 1. And we’re going to implement job-sharing arrangements. We’ve put all of our airport and ground people on a 25% reduced schedule, so they only come in four days a week vs. five and the pay is still reflected at four days vs. five.
Seventeen thousand, have you seen a response to an earlier retirement offer like that? That’s a very robust number.
No, never. It was a generous offer. We offered a nice retiree medical [benefit]. We don’t have retiree medical today at the company.
Subscribe to The Leadership Brief by clicking here.
It’s very telling, given the nationwide policy discussion on health insurance and should it be linked to your job, that the ultimate early-retirement carrot turns out to be medical insurance.
In the face of a lot of uncertainty and economic instability it’s one of the things people really look to, their physical health. One of the reasons why people delay retirement in our business is they don’t have a retiree medical option. So we knew immediately that was going to be the most important benefit our people valued in making that decision. And we are pleased to be able to do that for people. It’s not cheap. The total size of the package that we offered based on the number of people taking it, it’s in the $3 billion range.
Let’s talk about the decision to leave the middle seat open. Why is that so important?
Our No. 1 mission is restoring confidence in consumers in air travel again in the face of the pandemic. And we know space and distance is one of the key attributes to containing the virus and keeping people confident and safe, psychologically as well as physically. And having that middle seat open, and having that commitment that every single flight on Delta our customers will have the seat next to them open, is huge in their minds. I would add planes rather than passengers.
You’ve capped capacity at 60%. What percent of the seats are filled on average on a Delta flight?
It’s about 40% of the total seats on board the planes that are scheduled. We’ve been higher. In June we got to 50%.
What is your forecast for business travel?
I don’t think it’ll come back to the 2019 levels for a long time, if ever. We’re anticipating a world where probably 25% of that does not return over the next two to three years, and we’re sizing our airline accordingly. We’ve all seen the forced adaptation of techniques like Zoom calls that’s going to eliminate some inefficient business travel, where people fly across country just for an hour meeting and back, and stuff that’s really unproductive and inefficient that people have gotten into the habit of doing.
Are people getting cabin fever?
People are going to want to go see family, business colleagues, get a break for themselves. And there’s going to be a lot of bargains. The resorts, international travel’s gonna be—the countries are going to be seeking U.S.—not just business, U.S. travelers to come. Tourism is a huge part of our economy, it’s a huge part of many international economies. Once people feel safe in the next couple of years, I wouldn’t say it’s going to surge, but the demand growth’s going to be pretty significant.
Make the case that flying is safe, particularly to the people who are weighing a drive-or-fly decision.
Well, roadways are a lot more dangerous than the skyways, we all know that. If you do a cross-country trip you’re going to be in hotels. You’re going to have a lot more touch points because your total length of travel is significant. We’re talking about several days vs. several hours. Secondly, we have re-examined every part of the travel experience to put safety and hygiene and health at the forefront with our customers in mind. We’ve had over 200 safety-protocol changes that we’ve made to the experience since the pandemic began. And we continue to do more the more we find.
There’s a lot of unease and lack of clarity about air quality on planes.
The filtration systems on board completely change out the cabin air every two to four minutes across the entire journey using high-grade HEPA filters. It’s the same quality of air that you have in hospital rooms and emergency rooms. Fifty percent of the air that gets brought into the cabin every couple of minutes is coming from outside the airplane, so it’s fresh air, not just recirculated filtrated air.
So the air is not a concern?
We’ve put sensors out there, we tested the air quality. We’ve not found an environment anywhere in the world that’s got cleaner air than on board the air-travel experience.
I understand that a new boarding procedure was suggested by a flight attendant.
I’m very accessible to our team, and I get emails every day and evening and overnight from our people, questions and thoughts and observations. In late March, one of our flight attendants said, “Wouldn’t it make more sense to board the planes from the back to the front?” Typically we would board all the first class first, and everybody marches by the lucky few people sitting in first class. How about if we board the first-class people last and board people from the back to the front? People would avoid contact. I thought about it for about five minutes, and I said, “Well, I’m not sure how our higher-value customers would really feel about that because we know getting on board first is a privilege that people see, for overhead space and the like.”
But in this environment it makes an awful lot of sense. So I had our team meeting, I said that I got this suggestion, what do you think? And we all immediately said, “Yes, that’s a brilliant idea.” And so we implemented it starting the next week. And now the entire industry has followed our lead, everyone’s doing it like this.
What else are you doing to make people feel safe on planes?
We’ve substantially improved the investment we’ve made in hygiene on board the plane. We electrostatically fog every single plane before it takes off, every single flight. Pull all the tray tables down, wipe the seats down, the seat backs. When you get on a plane—I’ve been traveling right through this pandemic, every week—when you get on a plane today, every plane looks like it’s brand new. And we need to maintain that going forward. This can’t be just in response to the pandemic. This is a new standard of clean that we need, just like TSA put a new standard of security screen following 9/11.
I see that you added a new position, the vice president of global cleanliness.
The reason for it is in the environment in which we’re operating. When customers say what’s it going to take to get people traveling again, the primary concern is the safety of the experience, the health of the experience. And we do a lot of work today, whether it’s in the airports or office environment or the investments we’re making in our maintenance bases, to stay clean and safe. So we thought it would make good sense to consolidate all those activities and create an officer position. And it’s a big deal for us. It’s going to be one of the critical factors to get travelers back.
Any compelling data points that should reassure people?
If airplanes were unsafe and airports were unsafe, you’d expect Delta employees would be getting sick at very high levels. In fact, the number of Delta employees picking up COVID is substantially below any national average, of any region, of any state.
So it’s safe to fly?
There’s not any one safety protocol that is the silver bullet, but collectively it’s incredibly safe to fly and we’ve got zero documented evidence of any transmission of COVID aboard a single Delta plane through the pandemic. So I would tell you it’s incredibly safe. And by the way, if it wasn’t safe we wouldn’t be operating.
As a CEO, would it be helpful to you if there were a more robust federal coordinated response to controlling the pandemic?
Of course. I think we all are frustrated across the country that there’s a patchwork of regulations. In particular when you’re in the travel business where you go from one state to another state, your customers are going from one set of standards to another set of standards. The more coordinated the messaging is—whether it’s mask compliance, which I feel strongly about, whether it’s having a set of standards around reopening the cities and the states—I think it would be helpful. But candidly, it’s gotten quite political. We’re in an election year. So I’m not surprised that it’s become politicized, but frustration is the right word.
When the pandemic hit, was there a particular day where you’re at your command center and just watched the revenue and traffic evaporate? Does one day stick out?
It was the month of March, which in some ways felt like just one long day. In other ways, it felt like one long year. It wasn’t until we got to the end of the month that we really started to appreciate the depth of what we were experiencing.
What really turns you off in the workplace?
Pocket vetoes turn me off, where people will kind of nod and kind of go do something else. That’s not uncommon in corporate life. People will publicly express that they’re there, and they’ll leave the meeting and they’ll go do something differently if they don’t agree.
I don’t like people that aren’t out in front of our employees or out in our marketplace and really understanding the business. I’m not an office-type executive. Which has been hard for me because of the pandemic I’ve had to be contained a bit. But I like being out and around our people. People that spend too much of their time in the office or not traveling, those are the people that I get sideways with at times.
Is there really a best day to buy airline tickets? There’s so much mythology around Tuesdays.
That’s pretty dated. That used to be true, years ago, But with technology and innovation, these revenue-management systems and algorithms—a lot of the original artificial intelligence came from airline black boxes as we used to call them, revenue-management techniques—I’d say that the systems are fine-tuned to a point where it’s pretty agnostic, whatever day. It’s just based on demand flows.
Which Delta snack do like—cookies, pretzels or peanuts?
I go for the Biscoff. the Delta Biscoff. We invented Biscoff. Unfortunately we didn’t patent it, so everybody copied it.
BUSINESS BOOK: I love Jim Collins’ Good to Great.
AUTHOR: You know the one problem I’ll tell you from being CEO is I’ve had to put my pleasure reading down. I might get through only one or two books a year, which kills me because I love to read.
NON-DELTA APP: CNBC, to keep close to what’s going on in the business world.
EXERCISE/STRESS RELIEVER: I’m a big Peloton guy. I get on there three, four times a week. A couple of weeks ago, ESPN did a thing with, they had eight athletes, they did a 20-minute race. And then right after that I went on and you can do the same race, and I was able to beat three of the eight athletes. So at 63 years of age that’s pretty good.
PELOTON INSTRUCTOR: Emma. I like her music. And she’s not too tough on you.
Subscribe to The Leadership Brief by clicking here.
- The Inside Story of Princeton's Cinderella Run at March Madness
- The Case for Betting on Succession's Tom Wambsgans
- For Both Donald Trump and Alvin Bragg, the Central Park Jogger Case Was a Turning Point
- If Donald Trump Is Indicted, Here's What Would Happen Next in the Process
- Alison Roman Won't Sugarcoat It
- Why Not All Observant Muslims Fast During Ramadan
- It's Time to Say a Loving Goodbye to John Wick
- Who Should Be on the 2023 TIME100? Vote Now
- Column: Ozempic Exposed the Cracks in the Body Positivity Movement