Delta Airlines CEO, Ed Bastian, was calm as he spoke in front of an audience of business journalists at CUNY J-School for the Society of American Business Editors and Writers’ conference.
Dressed in a grey suit paired with a turquoise tie, Bastian wore fancy glasses that gave him a charming appearance and his deep voice transmitted a sense of reassurance. Unusual for an American, Bastian’s socks matched the color of the tie, perhaps a sign that Delta’s chief leaves nothing to chance.
During his address to the participants Bastian spoke with confidence about the company’s efforts in providing a better service to customers even in a tight market as the air transportation is.
“I think we are going to be the airline of choice for the next generation,” said Bastian who described Delta as a “leader in customer segmentation,” and expressed optimism about the future of the industry.
The CEO didn’t lose his aplomb not even when he was asked about last summer’s incident: in August a meltdown in Delta’s reservation computing system grounded thousands of passengers across the world.
Bastian described the episode as a challenging experience and a “learning opportunity” stressing that the way Delta’s employees dealt with the crisis got him as many letter of compliments as complaints. “They were the real heroes,” Bastian said talking about his employees.
But looking at the market is difficult to find the same confidence that Bastian flaunts; among the so-called “Big Three” – the three main American airlines companies, which include United and American – Delta had the most disappointing Q1 report in 2016.
Investors don’t seem to share the same expectation expressed by Bastian as Delta’s stock has slumped in the last year losing 25% of their value: in October 2015 Delta’s shares were traded at a peak of $51 while last Friday they reached $38 at market closing.
After years of high profits – consequence of the collapse in oil – airlines are facing shrinking margins as they lose the advantage of low fuel prices. “Over the last 8 years we lost about $4 billion cumulatively” because of oil volatility, said Bastian who claims that – despite losses – the acquisition of a refinery complex in Pennsylvania back in 2012 was a fortunate investment.
But the rosy picture presented by Bastian got strained when the moderator, the journalist Annalyn Kurtz asked about the issue of what the Big Three claim to be an unfair competition: that of the airlines from the Persian Gulf, Emirates, Qatar and Etihad.
In 2015 the top three US Airlines have openly accused the Gulf Carriers of unfair competition in violation of the Open Sky treaty for being heavily subsidized by their governments: the Big Three asked the Departments of Transportation, State and Commerce to intervene and take action against the Gulf competitors.
But, last June, Politico reported that the Administration decided neither to formally open any consultations nor to freeze any flight as requested by Delta, American and United.
For the first time the CEO composure was broken: “they are breaking the law and if you don’t uphold your treaties […] you are gonna have an industry in distress,” said Bastian. Answering further questions Bastian added that “the profession in an industry that was created in this country is going to be dominated by outside forces, by government forces. And I don’t think that’s fair.”
A vision not shared by John Byerly, who as a former assistant secretary of state for Transportation Affairs from 2001 to 2010 was the main aviation negotiation for the government. “Mr. Bastian is simply repeating the tired charges that the Big 3 airlines have been pushing for two years without gaining any traction. His real goal is to undermine Open Skies, bolster the already record-breaking profits at Delta, and deny American consumers a competitive choice,” said Byerly who currently works as an aviation consultant for Emirates among other clients.
The declaration of war by the Big Three against their competitors received bitter criticism by consumers associations such as the US Travel Association: “Time and again, the Big Three have wrongly claimed that the Gulf carriers steal their business and sideline American jobs. However, research proves that is simply untrue,” reads a statement published on the organization’s website.
The customers’ suspicion was further fuelled in June when the Justice Department launched a federal investigation: the federal authorities put Delta, American, and United under scrutiny for a suspect unlawful collusion aiming at reducing seat supply to inflate airfares.