Delta says happy flyers give it a powerful profit ‘potion’

Dec 13, 2019

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Delta Air Lines is the U.S. market leader. From industry leading financials to some of the highest consumer satisfaction scores among the mainline carriers, Delta is at the top of the pack.

One thing that sets Delta apart, at least from most carriers, is the admiration and trust of its customers — something that its leaders see as a valuable, money-making asset.

“When you have scale and people like you, it really is a powerful potion,” Delta president Glen Hauenstein said during an investor day on Thursday. “All of our strength really comes off of that… We have relevance in major markets, and customers like flying with us.”

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That strength was on display throughout the investor day presentations. Delta anticipates 4-6% year-over-year growth in top-line revenues, to around $49 billion, in 2020 from its various revenue-generating initiatives. Initiatives that would not be possible if the airline did not continue to meet — and exceed — its customers’ expectations.

For example, when Delta rolled out an upgraded international long-haul economy meal service in November, it was not simply to give travelers another reason to fly them. Instead, executives cited higher net promoter scores — a measure of customers’ loyalty to a brand and willingness to recommend it to others — in test markets that directly correlated to a willingness to pay more for Delta flights.

Welcome cocktails are no longer reserved for business class (Photo courtesy of Delta Air Lines)
Delta now serves complimentary welcome cocktails in long-haul international economy. (Photo courtesy of Delta Air Lines)

Onboard service is just a piece of Delta’s successful “potion.” Other aspects include its expansive network of core and coastal hubs, equity and joint venture partners around the globe, strong brand and on-going fleet transition, according to Hauenstein.

Related: Delta is improving the economy experience to get passengers to pay more

Delta aims to buoy many of these strengths in 2020. The airline’s newest hub, Boston Logan (BOS), will gain two new routes to Europe, making it an even more attractive transatlantic gateway. A new partnership with Air France, KLM and Virgin Atlantic launches Jan. 1 while approval of a planned partnership with Canada’s WestJet is expected in the first half of the year. And Delta will take delivery of around 75 jets, including its first Airbus A321neos and more Airbus A220s, A330neos and A350s. The carrier also expects to retire its last McDonnell Douglas MD-88.

Joint ventures, or bilateral partnerships where airlines can coordinate and act as essentially one doe flights in a specific markets, are worth about $18 billion annually to Delta, according to a separate financial presentation. The pending WestJet and planned LATAM Airlines pacts are valued at another roughly $3 billion annually.

Delta Air Lines as seen in Amsterdam Schiphol International Airport. Delta uses Schiphol as one of the European hubs cooperating with KLM and AirFrance to distribute its passenger to the rest of the European Destinations. Delta Air Lines was founded in 1924 and today is the major American Airline, owning 850 aircrafts. Delta is member of SkyTeam aviation alliance. Delta is one of the last carriers who still uses the jumbo jet Boeing 747-400. (Photo by Nicolas Economou/NurPhoto via Getty Images)
Delta Air Lines joint venture with Air France and KLM is worth roughly $11 billion annually to the U.S. carrier. (Photo by Nicolas Economou/NurPhoto via Getty Images)

“Strong guide, growing and sustainable competitive advantages, [and] multi-year opportunities to monetize passenger personalization,” was how J.P. Morgan analysts summarized Delta’s investor deck in a Thursday report.

For all of the revenue opportunities presented Thursday, Delta’s CEO Ed Bastian did not forget the airline’s raison d’etre — travel.

“People are enticed and they want to travel. They want to experience,” he said, adding that the airline is focused on making this accessible while turning a profit at the same time.

Featured image by Alberto Riva/TPG.

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