Very few companies have a better real-time read on the American economy than Delta, and even fewer CEOs are more willing to say what they actually think than Ed Bastian. True to form, he shares what Delta’s booking data is telling him that the headlines aren’t, why he’s not convinced by AI until it moves his top line, and how he decided to yank congressional travel perks during the government shutdown.
This is an abridged transcript of an interview from Rapid Response, hosted by former Fast Company editor-in-chief Robert Safian. From the team behind the Masters of Scale podcast, Rapid Response features candid conversations with today’s top business leaders navigating real-time challenges. Subscribe to Rapid Response wherever you get your podcasts to ensure you never miss an episode.
You have access, obviously, to all the booking data that comes through the Delta app and website. Are there things that you see in that data that are different from the headlines? Does your data tend to lead the headlines or respond to them, or is it different at different times?
Our data is usually ahead of the headlines. We just reported our second-quarter results. We gave guidance for our third quarter, which ends at the end of September, but we already have about 70% of the revenue on hand for that third quarter through advance bookings. Our bookings run anywhere from 60 to 120 days out. International runs longer, domestic runs a little shorter. So we have a pretty good sense for how people are already thinking about the fall and how people are thinking about the upcoming holiday season. Economists and members of the Fed and others are always quite curious about talking to us because we have a pretty good pulse on how the consumer, at least our consumer, is viewing the current environment, and then translating that into confidence to make a future purchase commitment.
Your customer tends to be at the top end of the K in the K-shaped economy. You get, I don’t know, 20% more revenue per seat than competitors. Your premium-cabin revenue is almost on the verge of overtaking the main cabin. That decision, that lean into that customer, does anything about today’s environment make you rethink that strategy or double down on it? It sounds like that is still where, and the customer you feel, is healthiest for you to focus on.
Oh, absolutely. And this is a decision we took not recently. We took it 15 years ago, shortly after we acquired Northwest Airlines. As a result, we were clearly the largest airline in the world. We still are, but it’s closer now. And we made a commitment to ourselves that we weren’t going to do the merger and introduce that level of scale unless we could actually differentiate in the marketplace and no longer be seen as a commodity. Because if you’re a commodity and you just get chosen by whoever has the lowest price, we lose. In fact, we lost 20 years ago when we had to file for bankruptcy for that very reason. Delta offered a lot of things but didn’t get paid for them, and as a result, the business model didn’t work, as it didn’t for a number of the big legacy carriers.
We spent many, many years figuring out what we called back then decommoditization. Today we call it premium. Tomorrow we’ll probably find a more elegant term for it. And it starts with reliability, building trust with your consumer, deploying technology to assist along the way, and developing more partnerships, whether it’s with American Express, Uber, or YouTube TV onboard airplanes, Paramount. We want to be there to make certain that we’re getting the first call for the best dollar.
There’s some concern that with the rise of AI, agent-based buying will make price-first shopping more prevalent. I’m curious how you think about that, that AI agents may not favor brands the way humans do.
Unless the AI agents are going to be flying on the airplanes and actually providing surveys, I don’t think it changes our equation. At the end of the day, a relationship with an airline is fairly personal. It’s human. You’re not going to let an agent tell you how you should feel about a brand in the same way. And that’s the hallmark of a great brand: how it makes you feel.
You deploy AI in your own operations. I know Delta tested AI for individualized ticket prices. Does using AI for this create a different kind of reputational risk because of the way people are emotionally reacting to what AI is driving?
Yeah, AI is not trusted, and for good reason, probably, with all the hype that’s been attached to it. We talked a year ago about the fact that we started to use some AI in the pricing algorithms, and people extrapolated that into surveillance pricing and individualized pricing. We’re doing none of that, and we never intended to do any of that. The only thing we’re using AI for in the pricing tool is to help our revenue managers offer better pricing, and more pricing, in more markets around the world. At Delta, we have hundreds of thousands of price points out for sale at any given time on any day. We can only manage a select number of those with human eyes, and we automatch the vast majority of those price points. Automatch basically means making sure you don’t get too far above or below where the market is coming in at.
Through AI, we can bring more intelligence to setting those signals. And AI works around the clock. It’s 24/7. It’s always monitoring and seeing what’s happening in the marketplace, and whether our product should be higher or lower, trying to give the customer the very best opportunity. We can only do that on our highest-volume routes, but we still have a massive number of routes where we don’t deploy it. So when you think about it, it’s really a knowledge tool, a learning tool, and an efficiency tool.
You’ve been known for your people-first leadership, and I know a lot of people are worried about how AI is going to impact their jobs. How do you think about that? How do you talk to your team about that?
Well, at Delta, I’ve been very clear that AI is just . . . First of all, I don’t call it artificial intelligence. I refer to it as augmented intelligence. It’s going to enable our teams to do a better job of what they do. We are a highly analytical business. We have 5,000 flights a day, every day. As a result, there is a tremendous amount of data, a tremendous amount of intelligence in terms of monitoring and making decisions, whether it’s in-flight patterns, pricing the product, mechanical reliability, predictive engineering. There are many disciplines that use that data.
AI helps you make those decisions quicker. It absorbs the amount of data that’s out there far faster than anything we can do. We wind up making a lot of decisions based on judgment, which sometimes is seat of the pants, sometimes it’s instinct, and these are going to be better data decisions. Now, that doesn’t mean that we’re going to need fewer people. It frees people up to have more time to serve, and if we do a great job of that, that’s going to grow our business.
Some CEOs got boos for mentioning AI at school commencements. You asked AI to write your commencement speech for Emory, then scrapped it, and warned graduates against pushing the easy button.
And guess what? People stood and cheered when I said that.
So what’s the easy button? And did going through that impact how you think about using AI yourself and for your team?
I’ll admit I’m not a big user of AI. It’s pretty hard to teach old dogs new tricks at times. I’m curious about it. I was impressed with how quickly a speech is produced, within a matter of seconds, and it’s produced in words that I would be associated with. I talk in lots of public forums, so there’s a lot of data out there as to how Ed Bastian would deliver a commencement address. But at the end of the day, it didn’t have any soul. It had no spirit. I felt like I was cheating. To be given an opportunity to come to a commencement is an honor, and then am I going to potentially use technology just to try to get it done quickly and check that box? It wasn’t right. So there’s a conscience that needs to be deployed with AI. I think that’s where people in the technology sphere just don’t get it. They’re out there selling, selling, selling.