NEW YORK – With more people receiving vaccines for the coronavirus in developed countries every day, Ed Bastian, CEO of Delta Air Lines, is confident the aviation industry has finally overcome the worst of the turmoil caused by the more than a year old pandemic that closed its borders and has grounded flights.
In a recent interview with Nikkei at Delta’s Atlanta headquarters, Bastian said that the demand for travel, at least at home, is recovering quickly and that the US travel industry could recover by the summer.
However, not all trips are expected to return anytime soon. Routes to Asia in particular are likely to be the “last part of our international business that returns,” he said, citing the region’s setbacks in vaccination efforts and the distance and costs associated with trans-Pacific flights.
The executive also discussed the importance of containing the environmental impact of the aviation industry, as well as the challenges American companies face in addressing political issues such as the controversial new electoral law in Georgia, Delta’s home state. Edited excerpts from the interview follow.
Q: The coronavirus pandemic has rocked the travel industry. What impact do you think this has had on the world and what do you think will be key to the recovery of the industry?
A: I think people took the opportunity for granted to travel the world as freely as industry allowed, and the pandemic has brought that to a standstill. As a result, I think everyone felt disconnected from the world, their friends, their families, and adventure.
Our domestic bookings in the US are almost exactly where they were before the pandemic. I was surprised at how quickly business – not “Business Travel” but “Leisure and Consumers” – got back on the road when they felt confident they were not at risk for the virus.
I believe recovery will be directly related to our ability to beat the virus. As vaccinations continue to rise in our country, the US – and currently half of all adults in the US age 16 and older who are eligible for the vaccine have received the vaccine and that number is growing every day – I assume out that this will be the case in the future. The US travel industry will recover significantly by the summer.
According to Ed Bastian, Delta CEO, Asia will be the last part of the airline’s international business to return. (Photo by Yumiko Oshima)
Q: Based on financial results so far, Delta should return to profitability in the July-September quarter.
A: This is our hope.
Q: What do you see as potential barriers to lasting recovery?
A: The international part of our business will still lag behind, and I see it may be a year before some international volumes return.
I think you will see some international improvements for very specific markets this summer, maybe for US travelers traveling to Greece. Greece wants to open. Or certain local markets for vaccinated US travelers. But until you get all of the international travel in both directions back, the US to the world and the world to the US, we will still be in a reduced state of overall activity.
Corporate demand is currently only around 20%. I think this number will gradually increase over the summer and hopefully it will really improve in the fall.
Q: How do you see your travel between the US and Asia?
A: I think Asia will be the last part of our international business to return.
Many of the countries in Asia have done a very good job of management through the pandemic – they haven’t been as exposed to the virus as we are here in the US. But because of this, they actually now have a much greater challenge to get all vaccinated before allowing foreigners within their borders.
Because of the distance, Asia is also the most expensive place to serve. So US airlines will not be able to afford to fly to Asia until we are confident that these routes will be in high demand for both business and leisure.
We are talking to all authorities around the world about the steps we need to take to reopen the borders.
But I think every country in the world is asking the same questions as trust that the virus will be contained before it opens its borders.
Q: Have you made any significant progress in negotiating with local authorities to reopen Asian routes?
A: It’s too early.
Question: “International spectators are not allowed to take part in the Olympic Games in Tokyo this summer.” Do you expect this to have an impact on sales?
A: It is unfortunate that COVID-19 affected the Tokyo Olympics. However, we have long anticipated that the trans-Pacific stretches will be among the last to fully recover, and the Olympics won’t change that forecast.
Q: What lessons has Delta learned from the pandemic?
A: We can learn a lot about health and wellness, as well as the resilience and cleanliness of the flight experience that we will promote and maintain.
We thought blocking the middle seat was very important for the well-being of our customers on the plane. They appreciated the extra distance and space they provided. But that was only one step.
And while we may have blocked our middle seats, we made as much revenue as our competitors with fewer seats. Customers rewarded us with a reward because Delta was their airline of choice.
We’ll be a different airline in the future that we’ve learned from the pandemic. And I think that will make us a better airline for customers.
Q: How will you balance environmental concerns and your drive to recovery?
A: The environmental risks and the planet’s risks are the same. The pandemic has shown us the weaknesses we have for the whole world.
The investments we make in a carbon neutral airline are critical to our ability to continue serving the world because if we are viewed as nothing more than a taker of the planet’s resources, we are not investing back in terms of the health of the planet Planet, our business will not have the same growth potential.
The only way the US aviation industry can afford to invest in cleaner energy supplies if the government offers commercial opportunities to invest in cleaner technologies. And we are working closely with many major energy producers to understand what investments they are making and which investments can be provided by the government so that airlines can afford to invest in clean energy.
Q: The U.S. government gave airlines significant financial relief during the pandemic. Do you think all existing airlines can survive?
A: The US population has to travel for many reasons – health, care, emergency. And if the US government couldn’t give us the support we needed, we would have had to cut US travel – aviation, industry – and many, many people would have lost their jobs.
I think the US government did the right thing in helping the airlines.
In the US, the aviation industry will be largely the same as it was before the pandemic, as the US government invested significant funds in the CARES Act to keep airlines afloat. Internationally, I think you will see some changes. There are many airlines going through a restructuring. There are recapitalizations, liquidations, bankruptcies.
The US market is a big market, so US airlines have a lot of market to serve. About 70% of our sales come from the US market in a normal year. Most international airlines rely on the world, not their local market, because their local markets are not that big. As a result, they were more affected.
Q: Delta recently faced a backlash for not immediately speaking out against Georgia’s new electoral law, which critics say will limit access to the polls. How do you think US companies should deal with political issues?
A: As a US company, getting involved in political affairs is always uncomfortable. What we are seeing are bipartisan solutions.
And that is our hope that we can find a bipartisan approach to solve the problems we have today.
