Finding windows of opportunity

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ED BASTIAN: During the pandemic, not many companies were impacted as deeply as the airlines were.

And the determination it took to pick up the pieces, it felt like you put the company on your back, and you got to start marching. And you didn’t quite know where you’re going, but you knew enough to put one foot ahead of the other, and you start building momentum and start gaining renewed followership. And sooner or later people say, “I want to go there. I’m not quite sure where you’re going, but will you take me with you?” 

We got through. We’re just starting again. It’s the new Delta. We’re just starting to soar. We have a lot of new people at the company ’cause we had a very large early retirement offer. We hired, over the last year, 25,000 new people.

One in four employees of Delta are new within the year. And bringing the new employees into the culture to create a more resilient culture, a culture that takes even greater care of each other. That’s what’s next. 

BOB SAFIAN: That’s Ed Bastian, CEO of Delta Air Lines. Following the turbulence of the pandemic, Delta has managed to navigate its way out of the storm clouds, generating 50% of the airline industry’s total profits in 2022 — enough to disperse $563 million in profit sharing to its employees, as announced last week. 

I’m Bob Safian, former editor of Fast Company, founder of the Flux Group, and host of Masters of Scale: Rapid Response. We’ve chronicled Ed Bastian’s leadership journey through two prior interviews since Covid hit, the last time in 2021, when the world was still very much in the grip of the virus. 

Now, we revisit Delta in a very different moment — for the economy and the travel business. With new initiatives like free Wifi onboard every flight and the hiring of 25,000 new employees over the past year, Delta is poised for yet another new chapter. 

If you haven’t heard our two previous episodes with Ed, I encourage you to go back and listen. In this episode and across all three moments, Ed provides meaningful lessons about leading people and making hard decisions. It’s an inspiring roadmap for working through uncertainty to unlock opportunity.

[THEME MUSIC]

SAFIAN: I’m Bob Safian and I’m here with Ed Bastian, the CEO of Delta. This is Ed’s third time on Rapid Response. Ed, thanks for joining us.

BASTIAN: Always good to be with you, Bob.

Copy LinkEd Bastian reflects on his — and Delta’s — “most difficult 3 years”

SAFIAN: So you first came on this show in the early days of the pandemic, planes were mostly empty of passengers. Your second appearance in 2021, we talked about the pressure on business leaders to take stands on social and political issues. It was pretty chaotic. Since then, things haven’t calmed down all that much. You’ve had low demand to high demand, staffing and workforce challenges, weather disruptions, inflation pressures, rising fuel prices. As you look back, as you think about this journey, do you think about business differently because of this experience? Do you find yourself waiting for things to calm down? Or that we all have to accept a new pace, a new kind of metabolism?

BASTIAN: I don’t want to go back, I want to go forward. And it’s, without question, been the most difficult three years of our history, of my professional career, my personal life. But there’s so much that we’ve learned during this period of time as to who we need to be to be better in the future. And you ask yourself some of the reasons why you went through the pandemic.

One of the reasons I do believe it was to get our attention on a few things. Wellness, taking care of people, ensuring that you really appreciate travel and the experience of being together like never before. Things that we took for granted for way too long have now come around and there’s a newfound joy in it, and it’s one of the reasons you’ve seen this tremendous amount of demand that I think is going to stay around for a very long period of time.

SAFIAN: I went back through our earlier conversations, and you’ve made some amazing predictions about air travel bouncing back, about investing in airport improvements. You literally told me we’re going to accelerate investing in WiFi to be sure we’re stronger relative to our competitors when we come out of this. And now you’re rolling out free WiFi. These high impact decisions that you made at really acute moments, have they become a model in some ways for business decisions in any environment?

BASTIAN: I never lost faith that we were going to get through this. And because I knew how important travel is to the world, when the moment came to make big decisions, retiring large numbers of planes, but buying brand new planes in very large quantities, about accelerating the development of airports, about moving our technology to the cloud, about bringing WiFi free to all of our customers today, but also increasingly international over the next year, those were massive decisions on our part that we could not have moved as quickly pre-pandemic because we were busy operating. And so we said, if we’re going to go through this down period, let’s take advantage of the window. And as a result, we’ve come out of this pandemic with even greater momentum than we were pre-pandemic. Last month, we reported our results for the 2022 year, and Delta generated a full 50% of the entire industry’s profits in ’22, despite the fact that we only fly about 20% of the capacity in the industry.

Copy LinkWhy Delta shares profits with their employees

SAFIAN: You’ve just had your annual employee appreciation day, announced profit sharing to the team of like $500 million, not the 1.7 billion of 2019, but a sure signal of this turnaround. I know sometimes you get some heat from Wall Street for sharing this much wealth, but it’s something you’ve defended. Why is that important?

BASTIAN: Well, our people are our most important asset, and we live in an industry that’s complex, that you have to trust your employees as much, if not more, than many other industries. This past profit-sharing day was so rewarding because we went through a couple of years without it. And it really puts a bow tie on the year for us where we generate value for our shareholders, we generate great value for our customers, and we can give proper thanks to our employees. It equates to about 15% of the profits of the company that we distribute, and it was over $550 million.

And to your point on Wall Street, Wall Street understands that this model works at Delta. You’ve seen more and more companies adopting these profit-sharing models because the ultimate alignment of an employee to take care of a good customer and that the profits reward them for the good job they’ve done is stakeholder capitalism, and what’s the reason why we do what we do? Well, that gives you a great reason when you can align all those motivations together.

SAFIAN: Your workforce has changed dramatically over the last year, grown a lot …

BASTIAN: We have a lot of new people at the company ‘cause we had a very large early retirement offer. We hired, over the last year, 25,000 new people.

One in 4 employees of Delta are new within the year, and bringing the new employees into the culture to create a more resilient culture, a culture that takes even greater care of each other. That’s what’s next. 

Copy LinkDelta’s diversity in 2023

SAFIAN: With all that hiring, I know you’re working with OneTen to improve diversity. Despite many businesses committing to new diversity initiatives, a lot of people are frustrated that things haven’t improved faster. Do you feel that way?  

BASTIAN: I would never say that I’m satisfied because we always can do more and be better, but it is a silver lining that the pandemic created with so many of our more experienced talent retiring, and many new leaders getting opportunities to step forward, who look different, who think different. I went public in 2020 with what our current diversity picture looked like from the top to the bottom, and how many Black employees we had at the frontline levels and how many Black leaders. And there was a big gap between those two numbers and same thing for women, same thing for other minorities.

I’m not going to be satisfied, Bob, until the face of our leadership team reflects both the face of our customer mix and the face of our frontline employees. And so that means we’ve got a long way to go. But the way you continue to propel progress is being accountable, being public on your commitments, and accountable in reporting how you’re doing along that journey. And every year we give our most current stats. We’ve made some great progress. For example, with women, five years ago, only 15% of our top leaders, the top 100 officers of the company, were women. Today, that number is closer to 40% in five years. You can’t do these overnight.

OneTen has been a critical enabler for us to help us think differently. One thing that they’ve helped us with is changing the job specs, taking four-year college degree requirements off most of our job specs, including our pilots by the way. And hiring people for the skills for who they are and what they’ve accomplished in life, not necessarily what diploma they’ve received, because we know so many diverse work groups never had an opportunity to get in that classroom. And we’re finding marvelous new talent that we’re open to now.

The other thing we’re doing a lot of is working with a local university here, Georgia State, to have apprenticeship programs, training academies, and our frontline employees that want to move into higher knowledge level positions. And you see the impact you’re having on not just individuals, but families. Their children will have opportunities they didn’t have because of the decisions that we’re taking today, and that’s really rewarding.

SAFIAN: In the pandemic, you had to personally be more front and center for the brand, internally and externally. You told me, as a CEO, you’re thrust into being the face and voice like never before. It’s almost like you’ve become a celebrity. What are the repercussions of that? Has that let up at all?

BASTIAN: Yeah, no, it hasn’t because the expectations just continue to mount. The only celebrity I want to be is a celebrity amongst our own, amongst our own employees, and be able to reward them and thank them. Because if it wasn’t for them, there would be no me. I think Delta has been seen as transcending a bit of the airline space to a company that navigated the pandemic period that people looked to because the airlines were pretty much gutted. We’re down to about 5% of our revenue base in a very short order. And not many companies were impacted as deeply as the airlines were.

And the determination it took to pick up the pieces — it felt like you put the company on your back, and you got to start marching. And you didn’t quite know where you’re going, but you knew enough to put one foot ahead of the other, and you start building momentum and start gaining renewed followership. And sooner or later people say, “I want to go there. I’m not quite sure where you’re going, but will you take me with you?” And that happened around the company. Because there were so many unknowns.

So, people needed a reason to believe, and they needed someone that was going to be marching forward. And that’s what we did. And so they got engaged in these airport projects. They got engaged in the conversion to WiFi. They got engaged in creating new health experiences for our customers to keep them safer than ever before.

We’re blocking the middle seat all through the pandemic, a decision that we took that garnered a tremendous amount of goodwill from our customers.

SAFIAN: These big high impact decisions that you made… are there parallels now of things that you’re doing that are going to have this kind of major impact two to three years from now? What is the rapid response that you’re focused on now?

BASTIAN: It was a real adrenaline rush; on the other hand, it was a real panic, to get through the pandemic, but I can tell you that we’re using a lot of the same tools to move forward. We’ve got, largely, our U.S. travel patterns back. The next thing for us to do is implement some of those same opportunities on a global scale. You’ve seen a lot of growth that we’ve announced in different parts of the world for that reason, working very closely with the airlines that we are partners and investors in from Virgin Atlantic to Korean Air to Air France because ultimately, the real value we get to create is on a global scale, not just a local scale. And so the next step of our continued emergence is reclaiming the international skies, not just the U.S. skies.

Copy LinkThe current state of business travel

SAFIAN: One of the wild cards we discussed in 2021 was business travel, the future of work and how that would sort of impact Delta’s business and impact culture overall. Do you have a sense about what that evolution looks like from here?

BASTIAN: When we spoke, I mentioned I thought traditional business travel may never recover beyond 70 to 80% of what it was, and I think that’s turning out to be the case. In fact, today, traditional business travel for us is right in that 75 to 80% mark. But what the pandemic has created is more mobility because people aren’t going to the office as much. They’re going on trips, they’re taking long weekends, they’re working from different locales. And all of that benefits our industry.

People were prognosticating that the pandemic particularly would be the death of an airline like Delta, which relied heavily on business travel on a premium experience, and the low-fare airlines were the ones that were going to have a heyday at our expense. And it’s actually turned out to be just the opposite. The low-fare airlines are all pretty challenged right now, whereas the premium airlines, which Delta is at the top of that heap, are doing as good, if not better, the best demands that we’ve ever seen. Because people value their health, they value the care that they receive.

So, we have today, far more of our revenues come outside of the main cabin, which is the most price sensitive part of our business, than when you measure that against all the revenues we get on premium services and our loyalty programs and our cargo and our MRO. We have a whole host of businesses in a very diversified light, and the pandemic tested that, and our business model passed that test.

[AD BREAK]

SAFIAN: Before the break we heard Delta CEO Ed Bastian talk about remaking the business coming out of the pandemic, as he looks to the future. 

Now he shares leadership insights about pursuing technology that truly fits your business plan, when it’s wise to speak publicly about political issues, and why he thinks sleep could be the secret weapon for improved performance. 

Copy LinkHow Delta’s Ed Bastian approaches new tech & AI

We’ve seen some tech meltdowns at some other airlines, and we’ve certainly heard about challenges with the air traffic control systems being outdated. The move to WiFi, as complicated as it’s been, is simple compared to the whole systemic tech that is embedded all across the industry. How do you make sure the airline is on the right tech curve in the right places? And managing the financial and organizational resistance to new things, whether that’s AI related… Everyone’s obsessed with ChatGPT today. How do you balance those things?

BASTIAN: In our business, it’s easy to chase shiny objects. We want to make certain that the investments that we are making in technology are going to be sustainable and be of real value. Technology is second only to our people. Our technology is the lifeblood, even through a pandemic. We didn’t stop our technology investment. In fact, we accelerated it as we’re going to the cloud with AWS. And now the majority of our technology is really resilient and much more agile and flexible and cheaper to operate.

Technology is something that you also have to make certain that you understand your business model, what you want for the future, so the technology you’re building isn’t technology for technology’s sake.

We spend well over a billion dollars a year in technology, both in capital and operating cost. It’s something that you always have to try to stay ahead of, because you can’t let the technology get ahead of you. As a leader, you need to make sure that you’re pointing the company in a direction and letting the technology push you there rather than us try to be pulled by the technology.

There’s an enormous amount of new technology that’s out there. I’m sure the AI and the chat-bots will all be a part of our future, but they don’t have to be a part of our present.

Copy LinkDeciding what public issues to weigh-in on

SAFIAN: Over the last three years, CEOs have been called to take positions on social, political issues in a way that they weren’t before. Delta has taken certain positions on voting rights and other things. How do you decide now what things to weigh in on public issues?

BASTIAN: The bias is not to wade in ever. It’s never comfortable to see your name bandied about by our political leaders or headlines for reasons other than running a great airline. So, I think you always look to avoid that if you can. Sometimes you can’t. You have to ask yourself, how does it affect your people? How does it affect your business? And is this something that Delta has a relevant voice in? When you are the largest private employer in the state of Georgia, as we are, or city of Atlanta, as we are, and you’ve got a lot of people that are depending on this airline. And a lot of consumers want to know how companies feel about some of the political divisiveness that we all experience. In today’s world, inevitably 50% are going to agree with you. 50% are not going to agree with you. You just have to accept that. And if it still passes the test that it’s important to say something, well, try to make your point and get out. You don’t want to get stuck in it.

Copy LinkBusiness lessons from the last 3 years

SAFIAN: Do you have any advice for the other business leaders about the lessons to take from where we’ve been over the last three years and about the phase of change that we’re in now?

BASTIAN: I was always someone that likes to move. I tend to be impatient. I tend to want to get things done quickly. And I’ve learned in the pandemic, and I’m still that way. I haven’t changed that about me, but how you do it and having a little more patience and a little more grace for each other maybe goes further than pushing yourself harder than you otherwise could.

One of the things that I encourage all leaders to look at, especially taking care of large groups of employees, is about their wellbeing. I think we all came through this feeling like we were vulnerable. We were vulnerable to a physical disease, but it led to vulnerabilities emotionally, it led to vulnerabilities financially, it led to vulnerabilities socially. Historically, we would’ve thought that was more the employee’s responsibility to take care of those other aspects. At Delta, I don’t think that way anymore. We’ve hired mental and emotional health counselors to help our people work through issues that they may be dealing with.

We’ve got a financial safety net that we’ve created, a financial wellbeing program that I’m struck by the fact that the surveys say 50% of all Americans would not have $500 in cash they could lay hands on in time of crisis. That’s just an awful, scary place to be. You’re just one step away from a real challenge and how you’re going to find that cash. I don’t want any of those people to be Delta employees, and so we’ve created bank accounts for each one of our employees and put $1000 in each of them to hold as an emergency safety net in case that need ever arises. They’ll know it’s theirs and their decision to take.

But the only thing I ask in turn is that they take a financial literacy course that we offer online and set an appointment with a financial counselor that we offer for free, to learn about how to manage maybe their budget or their credit score a little better and get better at it. We offered it on the 1st of January. We had over 20,000 people sign up in the first month alone. So if anyone thinks the need’s not there, it’s there. It’s there in abundance.

You want your employees more than ever to be their best self to help drive your business forward, because if they’re not their best self, they’re not going to be able to take the best care of you, our customer. And then the strength of our brand promise.

Copy LinkDelta’s Ed Bastian on the feature length documentary The Steepest Climb

SAFIAN: Delta has created a feature length documentary about navigating the pandemic. You appear in the film, you’re involved in the production. Why did you decide to do a film? These podcasts weren’t enough for you?

BASTIAN: Oh, they could have been, I guess. Before the pandemic hit, Delta was a company that went through 9/11. It was a company that had been through bankruptcy. Through major recession, political and geopolitical crises, fuel price spikes, you name it. And we survived through all those. And in the years leading up to 2020, I would always speak to our younger employees, and let them know that this is not an easy industry. It’s not always for the faint of heart.

So, we set out making a documentary pre-pandemic, and I brought my former board members together and people that were around to help us navigate the bankruptcy period and the 9/11 period. So, I would memorialize those remarks for all time and show our people what it took to get here, and have a newfound appreciation for what we do.

Well, lo and behold, we filmed it, and then two weeks later, the pandemic hit. So we put that on ice because there’s another chapter to write. And sure enough, the pandemic created a lot of chapters. And so we captured a lot of the footage that we went through the last three years.

We’ve now created a documentary called The Steepest Climb, to let people know how we navigate and what we had to do. I’ve watched it a couple times and, candidly, I don’t enjoy watching it that much ’cause it’s painful to have to relive it, but it’s helpful.

SAFIAN: I mean, it has been hard. Are you tired? Are you tired from all of this?

BASTIAN: I am not tired. I am excited. Every day when I get up, I know my value. And when I look about what we’ve been through, it’s been a real honor to lead this company through the three hardest years of its history.

One of the things I’ve learned from Dr. Henry Chang, our chief wellness officer, is the importance of sleep. And I encourage everyone to focus on their sleep. The quality matters even more than the quantity. I may not always get a high quantity of sleep, but I get good quality.

There’s this product called Oura, this ring I wear at night to sleep to measure that. I tell you, that more than anything has gotten my head in a good place. I wake up in the morning, know that I’m rested and ready to tackle today, because when you deal with as many things as I find myself dealing with, I process them overnight. And I think I’m up tossing and turning and wrestling and trying to make decisions in my sleep. Well, it’s actually quite therapeutic because it’s your REM, it’s your memory consolidation, and your mind’s finding a way to push through all that stuff.

But sleep is a huge underrated part, particularly for busy professionals. Everybody knows to work out and watch what you eat and friends around you giving good advice. Sleep’s really, really important.

SAFIAN: I often end by asking the guest, what’s at stake now? And in 2021 when I asked you that, you said, “Holding onto everything we’ve gained during the pandemic, making sure the investments we made translate to the other side.” You seem to have succeeded there. So, what’s at stake from here?

BASTIAN: For our company not to feel like, “Well, wow, we made it. We got through.” We can kind of start to coast. No, we’re just starting again. It’s the new Delta. You’ll see this company continue to soar because we know our customers want what we provide. They want to travel. The world needs to be brought closer together, not further apart. And we’re the means by which the world comes together. We truly are, and that’s a noble mission.

SAFIAN: Ed, this has been great. Thank you for doing this with me again.

BASTIAN: Bob, it’s always fun to talk to you.

SAFIAN: All I can say is sleep well. Thank you.