Delta CEO: Budget airlines need to raise prices to survive
About Ed
- CEO tenure made Delta the world's most awarded airline
- Led Delta through COVID while preserving jobs via voluntary leave, no furloughs
- Delta generated 50% of U.S. airline industry profits in 2022
- Distributed $563M in employee profit sharing in 2023
- Built Delta into a premium, trusted brand with industry-leading resilience
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Delta CEO Ed Bastian says budget carriers like Spirit failed because their prices were just too low. The other budget airlines would need to raise fares another 5% just to break even, which makes scaling a challenge. Bastian credits Delta’s 15-year pivot away from competing on price, a strategy he calls ‘decommoditization,’ for the airline’s dominance at the premium end of the K-shaped market. Ed talks with Rapid Response and Masters of Scale host Bob Safian.
Transcript
Note: Transcripts may be automatically generated and are not fully corrected for spelling, grammar, and formatting.
Recently, it seems like the more sort of bargain priced airlines seem to be the ones that are struggling. I mean, spirit is gone, right? The lower end of the of the market, by our estimate, those carriers, they still have to increase their pricing at least another 5% just to break even. And if that happens, guess what? It's going to help the top end too. You get, I don't know, 20% more revenue per seat than competitors, your premium cabin revenue almost on the verge of overtaking the main cabin. Your customer tends to be at the top end of the K on the K shaped economy that lean into that customer. That is still where you feel like is most healthy for you to focus on. Absolutely. And this is a decision that we took not recently. We took this 15 years ago. We spent many, many years figuring out what we called back then decommoditization. Today we call it premium because if you're a commodity and you just get chosen, whoever has the lowest price, we lose.
