Delta CEO Ed Bastian Talks Premium Travel
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What is the main topic discussed in this episode?
Bloomberg Audio Studios. Podcasts. Radio. News. I am here in Atlanta, Georgia, with the CEO of Delta, Ed Bastian, here alongside me after that earnings report yesterday and that projection of 20% earnings per share growth in 2026. Now that you've had a day to digest, have you been surprised by the market's reaction and, frankly, by the lines of inquiry that you got yesterday?
Yeah.
What insights did Ed Bastian share about Delta's recent earnings report?
Not really. First of all, thank you for coming down. It's great to have you on our campus down here in Atlanta. There were a lot of expectations. We have a lot of momentum in our business. And as we're going into the year, we've seen the first part of the year, the momentum picked up yet again in the early days of January. And so as a result of that, I think our investor base was curious as to whether they see that momentum continuing to build, continue to flatline, to bop around a little bit. And we just finished a year where We saw some pretty significant challenges, whether it was the Liberation Day impact on consumer sentiment, shutdown of the government and the airspace in the latter part of the year.
So we wanted to make certain we had a little bit of wiggle room, some caution as to how we thought about projecting the year out. And so I think there was more inquiries as to just how much caution is there and what could great look like, right? And so I think that's more of what we saw.
So we'll get into what great could look like. Let's get into the caution and some of the things that are less foreseeable, including a proposed 10% cap on credit card rates. And it raises this question about the loyalty program at Delta, considering the fact that American Express and the partnership there contributed something like 14%, according to my calculations, of the revenue growth over the past year. I'm just wondering, how big of a hit is this? Have you started to map that out at all?
I think it's early. I think it's premature. Listen, that's not our business. That's the financial services world the banking climate. I think the banks that have already come out and spoken about it are expressing a tremendous amount of concern. So I understand it would require legislation, is what I'm told. And we know the challenges of getting anything through Congress these days. I also think the knock-on effects are pretty significant when you think about what seems to be maybe a good idea to help the lower income strata, give them some interest rate relief The reality is it's going to eliminate their ability for credit, and it's going to freeze up a tremendous amount of credit lines that the banks aren't going to be able to afford to provide.
So it's not my business. Of course, we're going to work closely with American Express. The second factor is that Amex is a premium card provider. So that's really not the income level that we focus on in our business.
At the same time, there is a sense that that's a growing part of the revenues. We saw an 11% increase in the contribution that this particular aspect made to Delta's revenue. So I just wonder, how much do you expect that to grow, all things being equal?
We're expecting high single-digit growth in the current year.
How is Delta managing the momentum in business travel growth?
We've been seeing double-digit growth for the last several years, and it's a really important part of our business model. But I don't think it's something that we look back and start getting. I think this idea has a lot of roadblocks and obstacles ahead of it.
One thing that you said in an interview with a colleague talking about what could great look like is that effectively all the growth that you've seen so far has been from the premium cabin, not from the main cabin. Why do you think that is? Is it because of just incredible strength at the premium end or is it because of weakness in the main cabin?
I think the main reason is the demand set for the premium seats and the premium product that we offer continues to be at a record high. The more we look at the health of the consumer, we talk about the K, we're at the top end of that K in terms of who our consumer is.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:02–0:26
2
What insights did Ed Bastian share about Delta's recent earnings report?
0:26–3:05
3
How is Delta managing the momentum in business travel growth?
3:05–6:24
4
What challenges does Delta face with the proposed credit card rate cap?
6:24–8:00
Speakers
2 identifiedMore from Bloomberg Talks
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