EventsDelta Air Lines CEO Discusses Pandemic Travel Lessons During Patterson Lecture
Edward Bastian spoke as part of the Northwestern University Transportation Center’s Patterson Lecture on May 4
Perhaps no industry has been impacted more by the COVID-19 pandemic than air travel. In 2019, Delta Air Lines’ revenues and customer satisfaction were at record highs. Then 30 days into March 2020, their revenue plummeted to less than 5 percent of previous year's earnings.
But even as the COVID-19 pandemic spread, the airlines were kept in operation and Delta avoided laying off any of its 75,000 workers. Two years later, demand for flights is spiking to historic levels, businesses are back, and most of Delta’s workforce was given a 4 percent pay raise in March.
Delta CEO Edward Bastian discussed that path during the 40th Annual William A. Patterson Distinguished Transportation Lecture, presented by the Northwestern University Transportation Center (NUTC). Held May 4 at the Walter Athletics Center Auditorium, Bastian spoke with Medill School of Journalism, Media, Integrated Marketing Communications professor Danielle Robinson Bell in the fireside chat “Leadership and Air Travel Through the Pandemic and Beyond.”
The event’s speakers were introduced by Hani Mahmassani, the director of the NUTC, William A. Patterson Distinguished Chair in Transportation, and professor of civil and environmental engineering.
In his talk, Bastian shared lessons from how one of the world’s biggest airlines weathered the industry’s greatest challenge since the Great Recession, and how it’s gearing up to overcome another major obstacle.
A learning experience
Over the past two years, Bastian and Delta have learned numerous lessons.
Bastian recalled that, around two weeks into the pandemic, he was having breakfast with Francis F. Blake, the non-executive chairman of Delta's Board of Directors. Blake told him that the pandemic would test and display the character of the company and its people like never before.
“’People think that out of crisis, character is formed, strength is formed,” Bastian said Blake relayed to him. “’The reality is if you don’t have character and you don’t know your values going into a crisis, you’re not going to make it.’”
Bastian said Blake knew the company’s character, leadership, and employees were strong. Blake was confident that would be highlighted in how every decision was made, and in the early days of COVID-19, there were hundreds of those weekly.
“Every morning I woke up and remembered that inspiration in my ear, that today’s decisions are going to reveal the character of this company and how we want to be reflected on the other side of that,” Bastian said.
Another thing that became clear to Bastian was the importance of absorbing the company’s pressure and uncertainty.
Leaders during a crisis, Bastian said, can’t display their own anxiety. Sure, uncertainty must be acknowledged, but the top brass has to find ways to be optimistic and confident, instilling hope that the situation will be survived even when there’s no logical understanding of how that will happen.
In March 2020, Bastian shared with the Delta board a plan with seven bullet points. The core of the plan was to focus on what the company could control – example, example, and example – and not stress over what they couldn’t.
Business travel isn’t dead
In November 2020, Bill Gates predicted that 50 percent of business travel would disappear after the COVID-19 pandemic. Gates certainly wasn’t alone in thinking that, as Zoom and other video software programs have changed how people work and conduct meetings.
To put it mildly, Bastian disagrees with that sentiment.
“Business travel is already back,” Bastian said.
The numbers bear that out.
Per an April 2022 report from Business Travel News, Delta’s domestic business travel sales are around 70 percent of where they were in the first quarter of 2019. In terms of actual revenue, Bastian said the levels are already back to where they were pre-pandemic.
That doesn’t mean habits will be the same. Video meetings have taken away the need for long one-day trips that are expensive, physically and mentally draining, and inefficient. The quick jaunts to Europe are probably gone for good, replaced by video conferences, nixing around 20-30 percent of trips.
Remote working, however, isn’t having the effect one might think on Delta. Bastian even thinks remote work could lead to more business travel than before the pandemic.
“Think about all the new forms of travel that are being prompted,” Bastian said. “Think about companies, they’re hiring people all over the country, all over the world, actually. They’re telling them they don’t care where you live, and they’re having to commute into the office from other parts of the country or the world regularly. That’s new travel.”
Sustainability is a tall task
The COVID-19 pandemic was a massive challenge for Delta. Sustainability, Bastian said, might be an even bigger obstacle.
“It’s that significant,” Bastian said.
The reason for that is 98 percent of all airlines’ carbon footprint is jet fuel, and currently there isn’t a feasible substitute in the industry. There are sustainable aviation fuels, but Bastian said they’re so nascent that if Delta acquired every drop produced in this country, it would be enough for them to fuel its planes only one day of the year.
As I said, it’s a bigger challenge than COVID in terms of navigating sustainability because we have to get there. Delta CEO
“It’s that dramatic in terms of the gap,” Bastian said. “The reason there’s a gap is not for lack of ideas, it’s not for a lack of technology or capability, it’s for a lack of capital. The energy companies aren’t willing to invest the billions of dollars in unknown technologies at scale that it’s going to take to convert resources to produce sustainable aviation fuels.”
If Delta were to buy those fuels at the scale it requires, it would cost 3-5 times what it costs for a gallon of jet fuel, a price that is simply not affordable. Bastian challenged the government – which is currently sympathetic to this issue – to provide tax credits for energy companies to invest in sustainable fuels.
Delta, though, isn’t giving up.
The company has pledged that 10 percent of its fuel stock will be sustainable by the end of the decade, up from 1 percent now. Delta is committed to a net-zero aviation impact by 2050, and is buying new planes that are 25 percent more fuel efficient than their predecessors. Over time, hydrogen will have a significant impact on propulsion technology, though that’s probably around 15-20 years away from being produced at scale. Fifty percent of Delta’s ground-service equipment at airports will be electrified by the end of next year, and 100 percent will be in five years. Even the amenity kits on planes are 100 percent organic.
“We’re doing everything (we can) and it’s going to take a lot more things,” Bastian said. “As I said, it’s a bigger challenge than COVID in terms of navigating sustainability because we have to get there.”
Unprecedented events
Earlier on May 4, NUTC hosted “Rethinking Revenue Management Post-Pandemic in the Travel and Transportation Industries,” a technical workshop featuring five industry experts. The event highlighted how organizations have rethought travel and transportation strategies, particularly in the area of revenue management.
Laurie Garrow (PhD ‘04), professor of civil and environmental engineering at the Georgia Institute of Technology and president of the Airline Group of the International Federation of Operational Research Societies (AGIFORS), said post-2020 recovery is happening at different rates. Travel to Mexico is above where it was pre-pandemic, US domestic travel is only down 6 percent, and demand for European trips is rising sharply. Conversely, travel to Asia is significantly slumping as countries there are still locked down.
Garrow, who earned her PhD in civil engineering with an emphasis on travel demand modeling and airline passenger behavior at Northwestern Engineering, has documented the industry’s response to the pandemic. For AGIFORS, she published an overview article that captured the ideas and thoughts of multiple airlines around the globe.
She found there have been changes in demand that are reshaping the industry, including shrinking lead times that have resulted in airlines getting rid of exchange fees. And where borders re-open, demand surges. Where borders closed, there would be an influx of cancellations.
“From a data perspective, we were seeing patterns that we had not really seen before,” Garrow said.
Airlines then had to re-examine where to fly, whether their historical forecasts were still worth using, and how to address staffing issues to meet fluctuating demand. By May 2020, Garrow said, US airlines had parked about half of their fleets.
“Never before has the airline industry ripped out 50 percent of the capacity,” Garrow said, “and then never before has the airline industry ramped up half of that the following year and then half of that the following year.”
Airlines responded by breaking down their forecasts into resilient and volatile components. Resilient components include seasonal travel for the holidays that remained the same as pre-pandemic patterns. The volatile components relate to when trips were booked.
Garrow also saw how airlines found new data sources to forecast demand. They used government statistics for vaccination rates, the number of COVID-19 cases in a given area, the percent of WiFi purchases to indicate the business/leisure mix, and shopping data, which Garrow said was the key to increasing forecasting accuracy.
The other panelists at the workshop were Michael Klein, Hyatt Corporation vice president of global revenue management; Eric Ruhlin, United Airlines managing director of revenue decision support; Sergey Shebalov, Sabre Corporation vice president and head of research; and Zeke Ziliak, transportation and logistics digitization evangelist.