Delta’s CEO on Preventing Cockiness, Arriving On Time More, and Viral Videos (Across the Aisle)

Grab some coffee (or a beer) and get comfy. This is the longest chunk of my interview with Delta CEO Ed Bastian. If you missed part one on Los Angeles and the Pacific, you can find it here. Part three focusing on the Middle East carriers will follow later this week.

Today, we start off at a high level looking at the corporate culture. Specifically, I wanted to know how Ed plans on keeping the airline from getting too cocky. The conversation ranged from there into a variety of topics, including a look at the role of social media and viral videos. This conversation happened before Delta’s Maui incident, so keep that in mind as you read the transcript. When he’s talking about recent events, he’s primarily talking about Dr Dao and United.

Brett Snyder, Cranky Flier: I want to bring it back toward the corporate culture side of things. You’ve been at the top for a year but you’ve obviously been with Delta much longer. You’ve seen highs and lows. How do you approach managing the airline to help keep people from getting too cocky? You guys are at a point where you’re leading the industry, and you’ve been a leader for quite some time. People are proud of that, of course, but how do you keep people from getting too proud and keep them hungry?

Ed Bastian, CEO, Delta Air Lines: That’s a great question because that’s been one of my themes with our leadership team. We just have to look at the events of the last couple of weeks to see just how humbling this business is. You need to show up every single day and earn your customers’ business and loyalty and confidence. We have to show up every single day to make sure our employees know how much we care about them, and we’ve got their back, and we’re investing in them. It’s a people business. That’s the only way I can say it, Brett. This is a business that people think about airplanes and technology and exotic destinations. I don’t think about any of that stuff. I think about people. That’s all I think about really. About how we can better serve them. How we can continue to make certain that they feel like they are empowered to make a difference for our customers.

We’ll figure out the technical aspects of the business, and we’ve got plenty of people who know that really well. But it’s the culture that gives us our biggest competitive advantage, and keeping that culture vibrant is really important to us. You don’t do that by being arrogant. You do that by people respecting who you are, by reinforcing the pride through rewards and accolades. We’re doing a Velvet [employee meeting] tomorrow, and there will be 500 of our frontline, which I love doing, and we do a lot of those all over the system. But it’s about people and keeping them motivated and hungry.

We have the perfect tagline: “keep climbing.” We know we’re not there yet. We’ll never get there. We’re always going to get better. There’s a great story a few years ago some of the marketing guys came to me and wanted to change the tagline away from “keep climbing” because they thought it inferred we weren’t as good as we really are. And that we should have a message that’s more that we’ve arrived now. And I said no. It’s never gonna happen.

Cranky: I’d love to have seen this conversation.

Ed: It was a good one. And “keep climbing” will be a part of the fabric of who we are for as long as I’m around, and I hope to be around quite a long time. Because I think it’s a perfect description of exactly what you’re saying. It keeps you hungry, it keeps you humble, it keeps you looking for new destinations to take the airline to. And realizing that every single day you have to show up and make it better. Said differently, I think we’re a good company, arguably a very good company. I don’t think we’re a great company yet. I think we have a lot of things to do yet before we can consider ourselves a great company. We’re gonna work on continuing to do that.

Cranky: So it seems like you have a couple of issues in that you want to set these pie-in-the-sky goals, you know we want to run every flight on time and everything’s perfect, but you’ll never get there. So you can’t do that. You have to have two sets of goals, I guess. This is where we’d love to be, but let’s be honest, this is where we think we can get next. Is that how you approach that?

Ed: We can always get better. You’re right. We’re never gonna be perfect. Weather happens. We don’t own the weather, but we own our response to the weather and our recovery. On-time: we had our all-time high on-time this last year. I think we were 87 percent on-time systemwide which is really good. But you know what on-time means. It means you’re up to 14 minutes late. On-time, true on-time, we’re only 70 percent on-time, and we can do a lot better than 70 percent. Now 70 percent, by the way, is the best in the industry by a lot, but we can do a lot better. We’ve seen the highest correlation between customer satisfaction and [Net Promoter Score] and a specific reliability measure which is A0, arriving [exactly] on time. When I show up 14 minutes late… if I was 14 minutes late to this interview, you’d be sitting around wondering “where is he”? You wouldn’t say I was on-time. And our customers deserve to be on-time.

Now there’s a cost to that. There’s friction attached to that that’s not free. On the network there are some asset utilization that we gotta work through and there are some processes that we can improve, but we need to continue to raise the bar to higher and higher levels.

Ed: I’ll give you another illustration. Wifi. I talk very openly about our wifi product not being as good as it needs to be. It’s not good. It’s not good period. It’s reasonable compared to the airline industry, but it’s not good.

Cranky: That’s a low bar.

Ed: Yeah, exactly. And I told the Gogo guys that in my mind they’re “no go.” We’ve gotta get them to Gogo.

Cranky: I’m sure they loved that.

Ed: They’ve heard me say it many times. They’re accustomed to it. But I’ll say to their credit, they’re making significant investments and improvement in our product. Today we’ve got over 100 of our mainline aircraft in the new 2Ku [satellite wifi]. We’ve been at it for a couple of years, but we just passed the 100 plane threshold the other day. And this time next year the vast majority of our mainline fleet is gonna be in the 2Ku. Not 100 percent, the MD-80s I’m not sure if we’re putting it on but virtually ever other aircraft type we will.

Cranky: As a Long Beach guy, you’re killin’ me. Let’s keep those flying forever.

Ed: They’re not gonna be around for long. We’ve got the MD-90s though.

Cranky: And the 717s…. I was on a 2Ku airplane in February.

Ed: And how’d it work?

Cranky: It was great. It was fast.

Ed: And by the way it’s also gate-to-gate. So you’ve got gate-to-gate, full bandwidth across the entire plane. The product we’ve had in the past, you can’t get more than 10 percent acceptance in terms of users. Their model that they’ve had is they make prices more and more expensive so the more attraction there is to the product, the higher they raise the price to keep people from using it. It’s a terrible business model. And I’ve told them that. But that’s something that Delta has to own.

We’ve gotta own that relationship with the customer and we’re working, we’re not letting them intermediate anymore, we’re getting much more active. We’re managing our certifications and we’re managing the supply chain with them, on the ground, and we’re taking responsibility for the communications to the customers more and more. At some point, we’re going to have to figure out how to get Gogo at the same price-point customers expect the value is, which is free. Maybe there will be a two-tier, free and a premium service. I don’t know what we’ll do, but if we figure that out we’ll be the only airline of scale to have done something like that, and it’ll be a big deal.

Cranky: I want to go back to the operation a little and talk about A0. You mention that’s the important metric, but of course there are a lot of ways to do that. You could have 100 percent A0 if you really wanted to have double the number of aircraft and schedule 5 flights a day out of JFK.

Ed: Yeah, it would be a high cost.

Cranky: So how do you look at that and make that decision? You have other airlines that maybe look at different metrics like D0. You’ve set on A0 as being the most important for the customer, but how do you determine how far you can push this before it’s too costly?

Ed: I don’t know how far we can push it. I know we can push it a lot more than we are. I know we can get a lot better than 70 percent on-time. Maybe it’s 80 percent. Maybe it’s 82 percent. I don’t know. This year we’ve set a goal to ratchet it up to 75 percent which is big. And we’ll see how we do. And we’ll be monitoring the cost of that as we go. And of course we look at the scattergram of flights and we have a lot of A5, A6, A8 as we go at and attack this surgically, that we can go after at a systemwide scale. So we’re going at it smartly and we’re going at it strategically. It’s one of those things you’ll know it when you get there, but now I know we’re not good enough.

Cranky: I want to talk a little about what’s been going on lately in the news with cell phone cameras being everywhere in capturing things and people reacting quickly. I don’t have any interest in getting into specifics about any specific event or anything, but how do you look at this? I was writing about this the other day that there’s this need for a knee-jerk reaction. Do it quickly. Whether it’s right or not, you kind of have to play to what the public is requiring of you to have a swift response. How do you balance that as an airline when you’re trying to do your due diligence and understand what’s happening but you’re also trying to make sure it doesn’t spiral out of control?

Ed: I think you use common sense. When you have a video, you can see what’s happened. You need to respond to it. You can’t say well, we’re going to investigate or we’re going to withhold judgment until we get all the facts, which is historically what the response has been without the pictures, without the video and you can get away with that. Video changes it all. And you have to do it in a way that you certainly have your employees’ back at all times, but as I tell our people, more than ever, we’re on stage 24/7. And we need to always be cognizant of that. And we do the right thing. As I’ve told all of our people, if you do the right thing for our customers, you never have anything to worry about. It’s a value-based judgment that we make within our company.

We had our own situation with the Trump guy 6 months ago. It was that video where our employees did not see what he did, but the camera was there. Once we saw the cameras, we said our employees did not make the right decision. And you look at the video. I saw it, I said we’re not gonna let this guy fly on our airline. And you can do that by not throwing your employees under the bus. If we had the benefit of the video, our employees on the scene would have made a different decision. I think a lot of is that the rules of engagement are changing. You’ve gotta think hard about… you can’t hide from it, you’ve got to embrace it. I don’t know what all that means. We’re learning as we go. But I think one of the more important takeaways for all of us is that we’re all on stage all the time.

Cranky: Which is somewhat different than it used to be. Technically you were on stage, but now it’s just a smaller audience. It’s now the world.

Ed: 200 people vs 200 million, right?

Cranky: Do you think that takes a toll on employees at all when they’re feeling that pressure more? Do you think there’s an issue there?

Ed: I don’t know that anyone is consciously thinking about it, but I do think it will permeate in terms of hopefully greater, I’m not talking about, not our employees but just in terms of on the aircraft, hopefully better civility and people realizing they aren’t going to be able to get away with stuff. Customers particularly. And I’m proud of our people, and I have the utmost respect for what they do and the job they do. I’m not concerned about that.

Cranky: When you see a lot of this backlash which maybe started in the last couple of weeks at one airline but became this general rallying cry about “airlines are doing horrible things to me,” do you take anything from that? Do you think there’s something different about what’s going on today when you see people reacting the way they have?

Ed: I think people react largely to a single event which you don’t want to talk about and that’s fine.

Cranky: Well you can talk about it *laughing*…

Ed: No as I said that’s fine. But it unleashed emotions. People feel like the airline or airlines have not been as customer-oriented and service-oriented as they need to be. At Delta our goal is to be a customer-oriented, service-oriented, employee-driven culture. And I see no reason why we shouldn’t embrace trying to get better. But I can understand the emotions.

Cranky: The emotions are there, but does something like that cause you to pause and say, “let’s step back a little bit,” because the business model has changed significantly in the last few years. It’s been almost non-stop going from this one-size-fits-all to a more a la-carte style for people. It’s a lot, I think, for customers to digest. I’m a believer in that business model, because you have choice you never had before and you can pick and choose what you want, but it’s been almost a breakneck pace for people. Do you ever take this as an opportunity to say you know, let’s kind of pause, let’s back up, let’s review what’s going on. Or do you see it as always continuous improvement and there’s no time to pause?

Ed: Again, this one incident was about involuntary denial of boarding. What it did was gave us a chance to once again review how we’re doing on that. We’re doing great. We have 1 out of 100,000 people that we involuntarily deny. We’ve got the tools in our people’s hands that reinforces the message as I’ve done with our people, in the days following that event, to let them know that we have full trust and confidence in their ability to take care of customers and the first point of contact is always the best way to take care of an incident before it escalates. And as long as they are doing their very best to take care of customers, they will always be supported. And that’s what our people do. That’s what we hire to, that’s what we train to, that’s what we reinforce.

Our crews don’t work in a vacuum. They work as part of teams. They’re not individuals alone, individuals out making decisions. So when you had a breakdown like you had at United, there’s a broader issue, and I think they’ve acknowledged that as much. It’ll be up to them to figure out what they do about it. But it also to me gave us a chance to reflect that… just the power of our culture, how I know that couldn’t happen on Delta. We really work hard to make sure our people have what they need to take care of that situation. And our people I know would have gone above $800, whatever, whatever the situation was. There are many, many things that could have avoided that from occurring. Our people are empowered to do those kinds of things.

[Corp comm chimes in that it’s time to wrap-up]

Ed: You’re not going to ask me about the Middle Eastern carriers?

Cranky: Oh you want to talk about them?

Ed: Any of the fun stuff?

Cranky: Well, I was going to ask you about Alitalia. Are they going to be around tomorrow?

Ed: I think they will be around tomorrow.

Cranky: Ok, well we can talk about the Middle East carriers for sure if you’ve got the time…

I’m sure you’re all shocked to hear that the corp comm team said that we did have a few more minutes. (If the CEO says they have time, then they have time.) I’ll be back on Thursday with that in the final part of the interview. If you missed the first part where we spoke about Los Angeles and the Pacific, you can find that here.