Delta Chief Executive Officer Ed Bastian has spent much of 2021’s first quarter talking about the “year of recovery” to come.
Buoyed by the hope that vaccinations will restore consumer confidence in aviation and give fuel to the fire of pent-up demand, he is preparing to turn a profit by midyear-something that’s sorely needed after record losses of $12.39 billion in 2020. The company saw improvement at the end of last year: It slashed its cash drain in half from the third to fourth quarter, and fourth-quarter net losses of $755 million paled in comparison to those of American and United-both around $2 billion.
But Delta and its competitors still expect a bumpy road ahead. “It’s always darkest before the dawn, and that’s exactly where we are,” says Bastian.
He expects the U.S. to reach some initial stage of herd immunity in the early summer, barring the emergence of vaccine-resistant mutations of covid-19. “That will be the key to getting travel going — though it will just be one stage, one meaningful step, as we build back to a new normal.” The same milestone, he says, may be the trigger that allows Delta to reopen bookings for middle seats, which it has blocked for social distancing throughout the pandemic.
Another meaningful step, he says, will be the reopening of international borders. “Specifically in Asia, they will be very conservative ,” says Bastian. “But in 12 to 18 months, I believe international travel will be back.”
That’s a while to wait. But the upside, he explains, is that travelers will return to find the aviation industry improved in many ways. The pandemic and the events of 2020 have led companies and their leaders to reinvent themselves with an eye toward sustainability, resiliency, and inclusivity-inspiring industry-wide improvements that will far outlast covid-19.
Last February, Delta made a commitment to spend $1 billion on greening its operations over the next decade, with the goal of becoming the world’s first carbon-neutral airline through the use of alternative fuels, carbon offsets, and improved recycling and waste-reduction efforts.
“We have to set the stage for the next generations that will follow me and follow us,” says Bastian, framing sustainability efforts as both moral and economic imperatives. “You can’t have a business opportunity and platform for growth if the world does not see your product and service contributing to society.”
Certainly, it would be easier for many to accept the socioeconomic benefits of the $1.7 trillion travel industry if massive quantities of jet fuels were not required. “We know, within our industry, the footprint we create is somewhere around 2 percent to 3 percent of the world’s carbon footprint,” says Bastian. “Left unattended, that number will double in the next 10 to 20 years-so the more that join us on this mission, the better.”
Counterintuitively, sustainability is also a lynchpin to restoring business travel after the pandemic.
With ESG (environmental, social, and corporate governance) investments taking a more important role than ever, many companies that use Delta for business travel needs are reevaluating their carbon footprints-particularly in the tech sector. “We don’t want them to get to net zero by eliminating air travel,” explains Bastian, “so we have to ensure that the work that Delta is doing to save its own footprint can relate to strategies.”
The same can be said about the company’s diversity and inclusivity efforts, which have been a personal focus for Bastian since the 2020 protests surrounding George Floyd’s death. Delta committed to doubling Black leadership roles within the company by 2025, doubling its spending with Black-owned businesses, and overhauling its talent acquisition strategies to create a better pipeline for Black professional development. (The company is also tracking its progress on those goals in a public way, for accountability.)
Like the greening plays, these inclusivity goals are also good for Delta’s bottom line. “We will best serve our customers and connect the world if we reflect the world,” Bastian says. “We’re stronger when we have more points of view expressed around the table, and we can better anticipate our customers’ needs-better relate to them when they get onboard our planes-if they are being served by people that look like them.”
In an environment in which traditional loyalty-the points and miles kind-has been increasingly devalued, these efforts may also serve as an important way to attract and retain customers. “The younger generations of today are demanding this,” explains Bastian. “Consumers are demanding it in increasing numbers and giving their loyalty to companies that reflect their own values.”
Waiting for government to fix the big problems of our day is not an option either, says Bastian, especially as many are so politically fractured. With such topics as sustainability and diversity wielding global impact, it’s important that global companies shoulder some responsibility in designing solutions.
“We all have our roles to play. In as divided a time as I can ever recall, we can’t leave it all to government. The business world has to step up and be accountable,” he says.
That focus on sustainability and diversity has earned Bastian plenty of praise, as well as critics who say he’s become too political. But Bastian believes that 2020 rewrote the rulebook for a lot of things, including how to be a good leader.
“As a corporate CEO, you’re trained to stay out of the firing line of any topic that generally is not specific to your exact business mission and purpose,” he says. “But that’s maybe more broadly defined than ever these days-and I think our customers, our society, and our leaders throughout the world have a voice when they see inequity. Or else, silence speaks as well.”
Delta’s commitment to blocking middle seats during the pandemic has been a public relations triumph for the company-one that is currently slated to last through April. Pressed as to whether that expiration date would stick, Bastian concedes that the popular policy is likely to be extended until summer.
“We know it’s safe to sit there,” says Bastian, “but we’re going to follow the confidence and comfort of our customers. When we see demand for those middle seats start to pick up, that’ll be the signal to us to start selling them.”
While Bastian is bearish on international travel in 2021, he feels strongly that domestic air travel will make a strong return this summer, in step with the U.S. vaccination program. What won’t change are all the new protocols put into place around cleanliness and safety. Antimicrobial bins at TSA, mask-wearing rules, and state-of-the-art air filtration systems are here to stay.
Bastian also sees a new version of business travel supplanting the traditional two-meetings, in-and-out, road warrior style of years past. It’s one in which a new generation of digital nomads will benefit from cultural exchange wherever they can connect to the internet. “People will travel because they can remotely work, and companies will find it helps with retention and costs,” he says.
This version of business travel, says Bastian, “will be similar in scale from what we know, but the purpose and form will be different.”
That, along with a continued emphasis on private space for leisure travelers, will keep demand strong for seats at the front of the plane, he expects, resulting in a more resilient business model that’s not as strongly dependent on steady business from large corporations.
The bottom line, says Bastian, is that once the pandemic ends, “the real value for travel will be clear-and people will place a higher premium on that.”
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