Delta Air Lines Profit Sharing Day 2020
Delta Air Lines Profit Sharing Day 2020 Delta

In this exclusive Q and A with IBT’s Social Capital team Bastian, or “Ed” as he likes to be called, talks about people over profits, persevering during the pandemic, and the important lessons he learned from his mom. Plus a whole lot more about how to make a company successful “the right way,” that will absolutely make YOU love Delta and Ed Bastian too!

Last month it was our great pleasure at IBT’s Social Capital to recognize Delta Air Lines CEO and the whole Delta team as a shining and very active example of Social Capital on a grand scale.

Delta stepped up to the plate during these tough times by being even MORE attentive to the needs of their employees, their customers and the community, and they are using their messaging megaphone not to tout themselves but to express and bolster the value and importance of those customers and employees in very real and authentic ways.

This is the epitome of what our Social Capital section and our monthly TOP 10 honor is all about. Ed’s honest and straightforward explanations for how and why he leads his company go a long way to helping others see the value of Social Capital and to better understand how it really works not just to make the world a better place but as a better business model than strict bottom line thinking.

This is just the beginning of a very special relationship with Ed and Delta where he will be sharing many more of his amazing insights in different forms on how to do business right in today’s complicated and challenging environment.

Now with no further ado a candid conversation between Social Capital Editor Chris Benguhe, Assistant Editor Lauren Keller and Delta Air Lines CEO Ed Bastian.

Chris : Is it okay if I call you Ed?

Ed : Yes, please, if I can call you Chris.

Chris : Absolutely. That's fair enough, and it seems like so many people call you Ed, which is one of the reasons you stood out to us as well. The "personability" level is extraordinary with you and your employees. Just a little segue into this interview, you know, after we posted a LinkedIn announcement about you, and you were nice enough to thank us for the honor on that we had somewhere around, if I'm correct Lauren, it was 25, 26,000 views of that. And the number of your employees from every end of the spectrum, who chimed in and said, “Wow, Ed, is such a great guy,” or “This is so appropriate, we love Ed.” It really was overwhelming. And from our perspective it was certainly an affirmation that we were right to choose you.

The idea of Social Capital is this concept of CEOs and thought leaders who really believe in people and help people and see their company as an opportunity to do that. We talk about a lot of different things nowadays when we talk about the responsibility of companies, but sometimes we forget the whole concept of everyday people and the value of people helping people, whether it’s your customers or your employees, or just everyday people that you interact with. You are doing that in so many ways. So we are glad to have you on board and involved in this movement.

Ed: Oh, thank you. It's, it's an honor to hear those kind words. It's a team, it's not an individual. And we pride ourselves at Delta as having that focus on our team and taking the very best care of our people so that they can take the very best care of you.

Chris: Well, let's dive right into that concept. When it comes to your own career, it has not been easy to do that all the time, and you've seen that firsthand. How have you kept your purpose, and for sake of a better word, your moral compass strong throughout your career, especially this year with all the challenges, and the mounting pressure, that I am sure must have been coming from your board and other executives and competitors. That can push a lot of people to maximizing the bottom line at all costs. So, how do you stay focused and do things a little bit differently?

Ed: Well, I'll start with a quote that my boss, Frank Blake, who's the chairman here at Delta and the former CEO of Home Depot and a great mentor of mine told me at the start of the pandemic is that you've been through a lot of crises. He said to me, we all have been through our share of crises, and we know that crises don't build character, crises reveal character. The decisions we take through this pandemic will reveal the character of Delta, it will reveal the character of our leadership team, and it will reveal our values to our customers and our community at a level never before seen.

I think about that statement literally every single day. It’s one of the main things I wake up thinking because it's guided the decisions that we've taken through the pandemic. It's guided decisions for us here at Delta even far before the pandemic, but it's never become more clear to me that the importance of putting your values, your purpose, your people first is what will drive success. And even during a remarkably terrible climate for air travel, during a period, when the world seems more distant and more isolated than ever before, which cuts right against Delta's business purpose to connect the world, our people are as in tune as ever and focused on the mission of getting the world back together again. And we're getting ourselves ready so that when customers are ready to travel, we're going to be the airline of choice. So, that’s how I would sum it up, Chris.

Chris: I love that connectivity idea. And, and your awareness of that. I'll tell you right now, I've just seen so much respect for your company because of your dedication to that, even if it's going to cost you money. I think it's just so laudable in so many ways. That concept of purpose and staying true to your values is clearly what you have done in your career. And I love the fact that you talked about team and that you're not chalking it all up to your leadership. But it’s clear to me you have some very strong values and have showcased those throughout your career. Is there anything in your background earlier, in your upbringing for instance, that really cultivated that concept of values, taking care of others and treating others with respect?

Ed: Well, I grew up in a large family in upstate New York and my mom who unfortunately I lost earlier this year was always my hero in life. I was one of nine kids, and she taught us the importance of character, the importance of being true to one's word and taking good care of each other. And she was a role model in our family for doing that. As a result of that, the confidence that she instilled in me that by doing things the right way, by looking where you can bring value, will create value for you in ways you don't even begin to understand was something she always taught us at a very young age. I really attribute that to her.

And I always looked for that in the companies I worked for starting my career in New York as an accountant with Pricewaterhouse. It was one of the reasons I chose Pricewaterhouse at the time. This is over 40 years ago because they were outstanding, still are an outstanding company with a reputation for value and taking care of the very best clients. That's why I went to PepsiCo and Frito-Lay, and had a different experience from a consumer standpoint, learning what it takes to be a great company in that world. Then when I came to Delta, I wanted to apply the lessons I learned from both Pricewaterhouse as well as Pepsi into an industry that is a challenge. The airline industry is a difficult industry. It's historically been a commodity in many ways, it’s still coming out of the deregulation of the 1980s in our country. And no airline had really stood out amongst the pack. And that's what we're trying to do here at Delta.

We're trying to ensure that our service stands out amongst our competitors. And we understand that the most important element to service in our business is the people. In fact, it's the only thing that really uniquely identifies one airline from the next, because we all fly the same planes and go to the same destinations, but it's the service and hospitality and graciousness of our people and our culture that makes a difference for our customers and why they choose Delta. So you know, it's a little bit of a round way to get there, but you know, it really starts by, putting the people that you work with, that you affiliate with and the values that you care carry in common to work, and I'm seeing great things come from it.

Chris: Thank you for that very personal answer and my condolences about your mom. I lost my mom about the same time, by the way, and she was a similar woman. So many CEOs that I've interviewed have interestingly similar responses when it comes to where those values first came from. So many cite a family background similar to yours, where those were really integrated. So I love hearing that.

You talked about the customer and how that really is the only thing that differentiates the airlines that you all fly, having the same planes and whatnot. And you're very big on that concept of loyalty and ways to increase the loyalty and to encourage loyalty. That’s seems like a big buzzword for you. Can you tell me a little bit about, you know, where that comes from exactly and your conscious attempts that you make on a daily basis to promote that concept?

Ed: Well, loyalty in our business is really important, especially to the corporate business travelers who the industry considers their bread and butter. Those are the people that really pay our bills. We love all our customers, but our corporate customers, we really love, and they live on us. They're our road warriors, and some say they spend more time with us than they do with their own family. So we treat them as family and we want to make certain that we make it as easy for them to do a business, to get them to where they need to go on time and to eliminate stress and anxiety from the experience. We all know air travel has a component of it that can be stressful. Certainly in the last few years with the high volumes of travel and traffic we've seen around the world, the airports tend to be very crowded, the operational challenges that the airlines encounter, whether it's weather or mechanical challenges are a real frustration for travelers.

So, we set out Chris about 10 years ago after we bought Northwest that we were going to make reliability the hallmark of our company, because that was what's going to distinguish us and create the loyalty because our customers deserve it. And I have a favorite stat I like to use. In 2010, which was the first year following the merger of Delta and Northwest. It was the largest airline at the time ever put together. It was a difficult integration, you know, putting these two airlines together. We had in that year 6,000 cancellations due to mechanical reasons only, not even counting weather or any other reasons why a plane might get delayed or get canceled for, you know, items not within our control. We said we need to cancel cancellations and people looked at us and laughed.

Ha, well, how do you do that? Well, indeed, our team has done that. Last year in 2019, the total cancellations we had on the airline, were 60 for mechanical reasons, which means that we canceled and eliminated 99% of those mechanical cancellations. And if you think about stress and travel, that was the number one stressor, particularly for business travelers, when a plane gets canceled and by the way, it is for our own people as well. And that the movement we were investing heavily in, not just on the maintenance side and getting parts where they need to be and predictive technology in engineering, but also having a real mindset and a will to ensure that customers come first and then making it safe, reliable, and comfortable to be on Delta.

So I think that's where the loyalty in our business starts by providing customers what they really need - dependable, reliable service. And then when you put the graciousness and the smile of our flight crews and our gate agents on top of running a reliable airline, which by the way, running a reliable airline enables our crews to smile. There's nothing worse that flight crews having to explain to customers why their plane’s canceled.

So, you know, it's a full circle, but it took, it took years of work, hard work to get the quality of the operations, to the point where we were at today. And that was the hallmark of that loyalty. As a result of that, our customers reward us and we generate on average about 20% more revenue per seat in the U.S. than our competitors do on average because of that loyalty. So loyalty is the right thing to do to take care of customers. And they in turn do the right thing by rewarding us with their loyalty and their business. And you generate a revenue premium and we've won nine years in a row as the nation's top airline for business travel, which we're very proud of.

Chris: I love that answer on so many levels. You've pretty much summed up the entire purpose and way that capitalism is supposed to work in answering that question. That's so extraordinary, and I love that. Obviously that has a lot to do probably with why you were one of the first to commit to blocking of middle teens. I'm just curious, was that a tough decision for you guys to make right off the bat to do that?

Ed: It wasn't tough initially, Chris, because travel was down so low. We were down in April to only 5% of our normal revenue travel. So it disappeared overnight. We had just finished in 2019, our all time record year. Valentine's Day is the best day of the year for us. Valentine's Day is when we pay our profit sharing to our people and our people earn, and then get 15% of our profits as a company. They get paid before anybody else gets paid. On Valentine's Day this year, we paid our people $1.6 billion. So I take your compliments to heart, and I'm honored by them. But, you know, when you put money in people's pockets for what they're doing, that helps too.

So we went from that, and by the way, we never found a company that paid profit sharing at even a billion dollars on a broad-based scale like that to its people, but $1.6 billion. Then the fall from that in February to, in April, we're at only 5% of our revenues, it was just dramatic. So to get to your question, you know, we weren't carrying a lot of people at that point. And so we decided one of the first things we needed to do was to go through a thorough reexamination of our cleaning procedures, whether it's onboard the aircraft, our airports, our filtration systems, all the tools we've looked at to re-examine air travel from a public health perspective, and then blocking middle seats which was consistent with creating some distance on board. It's really impractical to think that you can create, you know, six feet of distance between each traveler, even though in April, we had that, since we had so few people traveling, but as a practical matter that wasn't going to happen, but still space matters.

And whether it's sitting right next to the person or sitting three feet away with a seat next to them, open, it matters in the customer's mind because we want it to regain and restore confidence in air travel. And so protect was the word I was using at that time and still use today. We wanted to protect our people through the pandemic, and we wanted to protect our customers through the pandemic, and the better job we did in protecting them the better job we would do in re-instilling confidence back into air travel, particularly on Delta. So we started blocking the middle seats and we've decided as a practical matter, we're going to continue blocking the middle seats through the end of the year, through the holidays into next year. We'll have to revisit that decision sometime in the early part of next year as the science and the medical community continues to develop new learnings about the quality of air onboard aircraft, which is phenomenally good by the way. So we're certain from a safety standpoint, a medical standpoint, it is safe to sit in the middle seat. We have no question about that. We’re just not sure customers are ready to sit in the middle seat yet, and we need to give them a little more time. So that's why we're continuing to block those middle seats.

But I want to tell you an interesting fact, two facts, one we are all about measuring. We're very analytical here, and measuring performance and net promoter score is the principle measure that we use for customer satisfaction. So that's one of the most important measures we have in the entire company. Our net promoter score at Delta this summer ended at 75, and that's on a score of zero to 100. For our industry, for our business on a global basis, it's unheard of. Last year we were doing very well, and our net promoter score was a 50 coming from our customers. Today it’s a 75. So that means, you know, virtually everyone on our planes, the definition of what a 75 means is virtually everyone on our planes is a raving fan of Delta because if you're not a raving fan of Delta, you don't get counted in the scoring.

It’s a simple metric and lots of, leading consumer brands use it. So when you see that and then translate it to profits, yes, it's been very expensive because we blocked 40% of our seats through the entire summer on board. So it's more than just the middle seats. It's 40% in total that we blocked. Yet, we actually generated in that third quarter, the summer activity on average, 3% more passenger revenue than our competitors did, the big ones, the three big ones, American United and Southwest. On average Delta had 3% more passenger revenue than they did in aggregate, despite the fact that we were selling 30% fewer seats.

So, you know what I like to say it's people an purpose over profits, but it's really people that deliver profits, and you focus on people that lead you to your purpose and that will then deliver the profits. And what we're seeing in the current quarter, our customers have rewarded us immediately, even in the face of a pandemic with their loyalty and thanks for blocking those seats.

Chris: That concept of people delivering profits, it seems so commonsensical, right. But it gets forgotten so often. Have you had instances in your career where you've had to kind of talk people into that who may have been coming from a different point of view or a different perspective?

Ed: Oh, sure. I mean what we just talked about, the blocking middle seats, it was to some of our people, particularly our revenue managers you know they thought I'd lost my mind. They were wondering whether I got impacted by the disease somehow, and they were initially not very happy with the decisions that I had taken. And it wasn't me, it was our leadership team, but I was certainly the driving force in there. But they now realize looking back on it just how important, that is from a brand. And, you know, the customers will remember that for the very long-term, and it all goes back to what I led the conversation with, what Frank told me is that these decisions will reveal the character at Delta and we are revealing every single day, how we operate and how we take care of people, the character and the character of Delta is to put our customer loyalty first and protect them. And by the way, it's not only the customers that are thankful for blocking the middle seats. Our own people are thankful because you can imagine how the flight attendants and the crews feel working those packed planes on some of the other airlines. So every plane I'm on, and I'm flying throughout the entire pandemic every week, it's without fail that customers will stop and thank me, but our own people stop and thank me because they realized we're looking after them by doing that too.

Chris: Yeah. And, that is such an important lesson, and I think it's awesome that you talked about your revenue people and what not, and it sounds like you're converting them little by little to a better understanding of this. That goes right to a question I would like my assistant editor Lauren to ask you because she has a great one for you about Social Capital being a movement, and people like you being part of that. Lauren, why don't you go ahead with, with that question about the movement in general?

Lauren (Social Capital Assistant Editor): Okay. I just want to say first, I think it's so interesting that we, you talk about how people need customers essentially rewards you with profit, which is a concept I honestly wish they would teach in business school because I think they really need to, and kind of to go off of that, how do you see social capital and like this way of doing business in the right way as kind of a part of a bigger movement about how to make American business better and like how corporations can actually be good.

Ed: Well, as you guys know, ESG [Environmental Social Governance] is really important in our society. Particularly in, and it's not just in the U.S. but around the world, but, you know, over the last number of years, we see investors are using ESG as one of the means by which they evaluate the companies that they're investing in. Whether it's on the sustainability front, where we made announcements this year on that, which we’re upholding to be a carbon neutral airline starting this year and investing in the offsets and the technologies, the clean technologies that will offset our footprint even in this year of a pandemic.

And to how you take care of people, to how you work well in the communities we serve. I mentioned our profit sharing program for our people. Well, a few years after that, we were thinking about it. We really needed to have profit sharing for our communities, not just for our people. The numbers started to grow, and we committed this about five years ago, that 1% of the profits of the company would go back into the communities in which we live in and serve as well. So it’s really completing that virtuous circle that we talk a lot about, and as a result, we're firm believers that companies that do good things, good things will happen to them. And it's not just, you know, important that these are the right things to do, these are the smart things to do because people affiliate with brands that reflect their values. We're seeing it in our younger customers, the younger demographics of the new loyal, makeup of Delta's customers. Medallions are increasingly brand loyal based on: Is it a brand that I feel represents me and it has values that I subscribe to? And so we were very proud to put our values on our sleeve and be held accountable for that.

Chris: Ed, thank you so much for that answer, because it really is the perfect punctuation on what we're talking about here. I mean if schools took Lauren's advice and had a class on this, you can most certainly teach it. The ideas that you're putting forward are so consistent with what we're trying to do with this section and what we're trying to inspire with this section. So I want to, first of all, thank you for your time. This is something very unusual and very different that we're doing here at IBT. And it goes to a lot of the ideas that you're talking about. We believe in this concept and we want to promote it in a lot of ways that are sort of very unusual for a media organization. We really see you as part of this movement and very special and important effort to really make the world a better place in a lot of ways. And I want to just thank you personally for doing what you're doing, because this is a lot bigger than just a company. It’s a lot bigger than just a job.

Ed: Well, thank you, Chris and Lauren, as I remind our team all the time that because of the pandemic, more than ever, it causes everyone to reflect on purpose and what we do and the importance of what we do. This is very difficult on all of us on so many different dimensions. But as I constantly remind them, our company and our world has never needed our leadership more than it does right now. And this is our moment to show up and to stand up for our company and be the force for change, the force for good in society, because people are paying attention. And because the world has slowed down a little bit, the world can hear and see more than they could in the past. It's our time to really let the values and the character of Delta shine through the darkness of these days. And we're going to come out of this in a much, much better, much more resilient way because of that.