LONDON - In a wide-ranging conversation with reporters, Delta executives from each side of the Atlantic talked candidly about the airline’s financial rebound, fare strategy and partnership with Virgin Atlantic Airways.
Many of the Delta duo’s answers came back to the same theme: Investing in the customer.
Nat Pieper, Senior Vice President – Europe, Middle East and Africa, and Gail Grimmett, Senior Vice President – New York, spoke with reporters recently at the Four Seasons Hotel at London’s Canary Wharf. Here’s a transcript of the discussion, edited for length:
Travel Weekly: Give me the headlines – what has turned the business around? Where have the profits come from? How are you making profits while investing?Grimmett – We are obsessed with our customers and the customer experience, and this drives everything we do. We would not have profits without the changes we have made in improving customer service, implementing innovative mobile technology and introducing new products.
Pieper – On the cost side, we’ve improved our efficiency: replacing high-cost small airplanes with bigger more economic ones that offer a better customer experience. But nothing works without the (customer-focused) culture at Delta – it is ingrained in everyone.
Travel Weekly: Where was the money going back when Delta was only getting 85 cents for each dollar?
Pieper – It was going to the balance sheet to service debt, and to cover high costs. It takes a long time to reverse transactions you’ve entered into. We had (widebody) B777s flying between NYC and Florida, using 10 percent of that aircraft’s range, using tons of fuel. We needed to right-size and do the right thing.
Grimmett – With cash flow we’ve reinvested in product and customers, and also in employees with profit sharing of almost 20 percent. We can now invest where we should be investing. There was no silver bullet that turned us around; there were too many things that needed to be fixed. Now we know where to get the return on investment.
Airline Business: You focus a lot on quality. What are your plans for low cost (fares) on the trans-Atlantic?
Pieper – Every market is dynamic with capacity that’s in play. Delta can compete by offering product that (low cost airlines) don’t. The seminal change for me was when we started to do flat-bed (seat) investments and see returns and take market share away from other carriers.
Grimmett – And we’re investing in our Main Cabin product, too. It’s not shiny seats in the front and shabby in the back. All business is important to us. You need both.
Pieper – The main cabin today vis à vis before the investment is terrific.
Airline Business: Isn’t the world changing from what you were competing with? With Norwegian and WestJet coming in with the next generation of narrowbodies (aircraft), will it change the trans-Atlantic? Isn’t investment in products only to compete with old network carriers?Grimmett – We are not going to stop investing in product. We have to do what is right for Delta. We look at other carriers, but our solution is the Delta solution. We are always going to make sure we have a product we are proud to sell.
Pieper – We will never have costs on par with low-cost carriers. If low-cost carriers have pricing power, you will have problems. What we see and will continue to see is that our investments are letting us generate higher yields and compete with low-cost carriers as our revenues are higher.
Business Travel Magazine: Is there product parity with (joint venture partner) Virgin? How important is this to Delta corporate customers?
Pieper – You need a product that is consistent. We’re not going to have same seats, uniforms or cabin design. But we will have an offer corporate customers can count on. Whether that’s 10 daily flights to New York, good customer service from Delta and Virgin Atlantic, consistent amenities, there’s [a good level of] reliability.
Business Travel – Are you happy with that level?
Pieper – We continue to invest.
Grimmett – We did stop investing in the customer, and the lesson learned in bankruptcy was that we needed to invest.
Pieper – Virgin is investing in A330s and the 787 product is fantastic. We need to be part of the consideration set too and the only way to do this is ensure we continue to invest in our customers.
Business Traveller: So are you confident of your on-time performance promise to give cash back to customers? Will this go international?
Pieper – We’re studying it. Our competitors are mimicking what we are doing. United is redoing schedules to generate reliability. American is mimicking metrics. It is easy for us to make that commitment based on the gap.
In big business markets like New York, customer feedback is striking. Reliability is given as a factor in terms of booking Delta. Customers say, “I will fly on Monday morning rather than on Sunday night because I know you will get me there on time.”