Name: Delta CEO: Economy is Strong and Travel Demand is the 'Highest We've Seen in Our History'
Uploaded: 2019-12-18
Duration: 5 min 10 s
Description: Despite soaring jet fuel prices, airline profits are taking off.

[MUSIC PLAYING] Let's start by talking a little bit about travel demand. How's it going, if it's for vacation or if it's for business? Demand is the strongest we've ever seen in our history. Year to date, our revenues are up about 9%. Around the world-- it's not just a US phenomena-- around the globe, our planes are full. Our load factors for the summer are looking the highest in our history. Do you see that trend continuing? What's your outlook? I do. I do. I think that travel has become such a increased part of our lifestyle, especially our younger generation, our new travelers to the system. They don't want to own things, they want to explore things. They want to experience life. Ticket prices on an inflation-adjusted basis are the lowest in history. It's one of the great bargains. The fact that actually travel now is affordable, there's many, many, hundreds of millions of people around the world that are like me that had never traveled before that are starting to experience it, particularly in Asia and other parts of the world. So I think it's great. Well, as you know, jet fuel prices have been surging. I guess this means Delta's going to have to raise its airfares, right? Well, we have to cover all of the cost of our business, and fuel prices are one of our highest costs, second only to our labor cost. And so as that price increases, we're required to pass it along to our customers to be able to continue to recover that cost input. How much and how soon is this going to happen? Well, it takes time. Typically in our business, it's anywhere between 6 and 12 months from when fuel prices rise to you'll see that reflected in the price to serve. But it's modest. I think our ticket prices this year are up maybe 3% or 4%, so it's not a significant, as compared to fuel prices, which are up 50% on a year over year basis. Those higher fuel costs are coming at a time when you're buying a new fleet of planes, you're putting billions of dollars into LAX, the airport in Los Angeles. So what does this mean for Delta earnings for the rest of the year? Well, this year, we're going to generate over $5 billion of earnings. It'll be the fifth year in a row we've generated over $5 billion in earnings. No airline group has ever done that before. And our outlook for the future continues to be very promising. Remember, when we bring in a new airplane, they're coming in 20% more cheaper on fuel efficiency than the plane we've retired. Let's talk a little bit about trade. How concerned are you about all the risks with trade issues, especially with China? I think the respect that we have between our two countries, there's mutual respect on both sides that we all operate in the same global world, in the same global economy. And I think over time, that rational thought and human experience is going to counteract any short term political challenges one faces. I think the administration's goal to give American workers the best shot at a level playing field is an admirable goal, and it's one I support. On the other hand, I think you got to be very careful about how that's applied. I understand that you met with President Trump recently in the White House. Did you ask him about trade? And did he say anything about how the trade situation could impact American businesses like Delta? We did talk about it, and we talked about it as to its impact on us in terms of, again, these Middle Eastern governments that control these airlines-- these airlines are state-sponsored by their governments-- and how they have taken away thousands of jobs out of our, not just Delta, but American, United, the major US airlines, and we're forced to compete in an unfair manner. He actually did something about it. What did President Trump do that made it easier for you? It wasn't just President Trump, it was the Secretary of State and the Secretary of Transportation, they called the Middle Eastern airlines in, they laid out the issues, and they said, if you don't stop providing subsidies to take jobs away from US carriers, that we're going to have to actually start to reduce the access you have to our markets. And so while it wasn't a typical tariff or trade situation where they slapped a fine on them, they put them on notice. And those subsidies cannot be used to compete against American workers any longer, and I was very pleased with the decision they took. I want to talk to you a little bit about just your outlook on the economy because the sell-offs that we've been seeing in the markets and the message of the market seems to be saying that they're worried about trade tensions, immigration issues, rising interest rates, and that these are going to be risks for American companies. From how you see things on the CEO level and the information that you're getting, what's your outlook for the economy? It's strong. I think business is a bit disconnected from all the political rhetoric that you see going on coming out of Washington or coming out of other political circles. I think for a while there, I think business over time had been paralyzed for a little bit waiting to see what was going to happen. What I hear, what I see in the marketplace is we can't wait any longer. So we're stepping out, and we're growing our businesses. We're investing in our future. And the economy has been actually rather robust, internationally as well as domestically. 

Delta CEO: Economy is Strong and Travel Demand is the "Highest We've Seen in Our History"

Leadership

Despite soaring jet fuel prices, airline profits are taking off.

Let's start by talking a little bit about travel demand. How's it going if it's for vacation or if it's a business, demand is strongest we've ever seen on our history. Year to date, our revenues are up about 9% around the world. It's not just the US phenomenon around the around the globe are planes are full. Our planes have, You know, our load factors for the summer are looking the highest in our history. Do you see that trend continuing? What's your outlook? I do. I do. I think, that travel is become such a increased part of our lifestyle, especially our younger generation, our new travelers to the system that they don't want own things they wanted. They want, explore things they want experience. Life ticket prices on in inflation adjusted basis are the lowest in history. It's one of the great bargains. The fact that actually travel now is is affordable. There's many, many hundreds of millions of people around the world that are like me that never traveled before that are starting to experience it, particularly in Asia and other parts of the world. So I think it's great. Well, as you know, Jet fuel prices have been surging. I guess this means Delta is gonna have to raise its airfares right. Well, we have to cover all of the cost of of our business and fuel prices or one of our highest clock, second only to our tour labor costs. And so, at that price, increases were required to pass it along to our customers. To be able to continue to recover that cluster, put how much and how soon it takes time. Typically in our business, it's anywhere between six and 12 months from when fuel prices rise to, you'll see that reflected in the price to serve. But it's modest. You know, I think our ticket prices this year or up maybe three or 4%. So it's it's not. It's not a signature. As compared to fuel prices, which were up 50% on a year over year basis. Those higher fuel costs are coming at a time when you're buying a new fleet of planes you're putting billions of dollars into L. A X, the airport in Los Angeles. So what does this mean for Delta earnings for the rest of the year? Well, this year we're going to generate over $5 billion of earnings will be the fifth year in a row we've generated over $5 billion in earnings. No airline group has ever done that before, and our outlook for the future continues to be very promising. Remember when we bring in a new airplane, they're coming in 20% more cheaper on fuel efficiency. Then the plane. We've retired. Let's talk a little bit about trade. How concerned are you about all the risks with trade issues, especially with China? I think they respect that we have between our two countries. There's there's, there's mutual respect on both sides that this is a way all operate in the same global world in the same global economy. And I think over time that rational, rational thought and human experience is going to counter act any short term political challenges. One places, I think the administration's goal to give American workers the best shot at a level playing field is an admirable goal. It's when I support on the. On the other hand, I think you've got to be very careful about how that supplied. I understand that you met with President Trump recently in the White House. Did you ask him about trade? And did he say anything about how the trade situation could impact American businesses? Like we did talk about it and we talked about it. Its impact on us in terms of again these Middle Eastern governments that control these airlines. These airlines are state sponsored by there by there by their governments and how they had taken away. Thousands of jobs out of are not just Delta but American United the major U. S. Airlines and were forced to compete in an unfair manner. He actually did something about what did President Trump do that made it any different? It wasn't just President Trump of the secretary of state and the secretary of Transportation. They called the Middle Eastern Airlines in. They laid out the issues. And they said, if you don't stop providing subsidies to take jobs away from the U. S. Carriers that we're gonna have to actually start to reduce the access you have toe our markets. And so while it wasn't a typical tariff or trade situation where they slapped the fine on them, they put them on notice, and those subsidies cannot be used to compete against American workers any longer, and I was very pleased with the decision. They talk to you a little bit about just your outlook on the economy, because the sell off have you been seeing in the markets and the message of the market seems to be saying that they're worried about trade tensions, immigration issues, rising interest rates and that these are gonna be risks for American companies. From how you see things on the CEO level, in the information that you're getting, what's your outlook for the economy? It's strong. I think business is a bit disconnected from all the political rhetoric that you see going on coming out of Washington or coming out of other political circles. I think for a while there I think business over time has been, have been paralyzed for a little bit, waiting to see what was going to happen. I would. I hear what I see in the marketplace is we can't wait any longer, so we're stepping out and we're growing. Our businesses were investing in our future, and the economy has been, has been actually rather robust internationally as well. It's domestically