The $8+ Billion Partnership: How Delta and Amex Redefined the Business of Flying | Titans and Disruptors

0:00Delta is not a low cost airline. We can't win by trying to provide the cheapest. We have to be able to win by providing the best. In many respects, Delta Airlines owns the skies. It leads in global airline market cap, domestic market share and premium customer satisfaction rankings. This is the same company that was bankrupt just two decades ago. Delta CEO Ed Bastian played a central role in the airline's turnaround to become the most profitable airline in the U.S. When you're at the bottom and you're looking up, you don't know how deep you have to go. Bastion has been with Delta for almost 30 years and as the CEO for almost 10, which makes him the longest serving active CEO among major U.S.

0:41airlines. Within the turbulent airline industry, one that's sensitive to everything from passing TikTok trends to international war, Bastion is steered with a steady hand. He's led Delta to expansive growth in premium travel fueled in part by a lucrative Amex partnership and significant investment in branding and experiences. Only one in five people in the world have ever been on an airplane. We have to find ways to make it affordable, available, accessible, sustainable. Internally, Bastion prioritizes his people. The company has shared billions with its employees during an annual profit sharing celebration and Delta regularly ranks on Fortune's 100 best companies to work for list.

1:20with Ed at Delta's home base in Atlanta to learn how he leads and where he plans on taking the company in the future. I'm Alison Chantel, and this is Fortune 500, Titans and Disruptors of Industry. We'll be back with Ed after a message from our sponsor.

1:41Fortune spoke with Deloitte U.S. CEO Jason Gersadis on maximizing AI agents and what CEOs should consider as they assess and prioritize use cases for AI. This is on the topic of every CXO conversation I'm a part of. And I think the thought process has to be looking for high impact areas that may not be necessarily the most glamorous or high profile functional areas, but are ripe for automation and use of this technology to create efficiencies as well as innovation. And over time, AI agents will be also in customer facing and growth oriented domains. In our case, Deloitte, we're using it within our finance organization, looking at very mundane processes like expense management and working capital management.

2:29We're seeing other organizations using it in call centers and with software development that can be automated. What are the key elements for successfully implementing AI agents? It comes down to intentionality. And so I think that intentionality in going functional area by functional area in concert with business and IT leadership in an enterprise, it needs to be a mainstream business planning effort that's budgeted, that KPIs are developed, and there's real accountability for actual business outcomes and impact because of agentic capabilities. Ed, thank you so much for being with us today. Yeah.

3:08It's a pleasure, as always. You're a bit of an unlikely CEO on paper in terms of running an airline because you hadn't even stepped foot on an airplane until you were 25. That has changed quite a bit, I am sure. And you are the oldest of nine children. Yep. You grew up in a house with 12 people, one and a half bathrooms, fighting your sisters for the bathroom slot for two minutes at a time. How did that prepare you for leadership, for everything you're doing today? First of all, thanks for having us. Well, it wasn't as crazy as that might sound. You know, it felt normal. That's all we knew. But, yeah, I think as the oldest of nine in a large family, and my parents' set of expectations as standards for all of us, and as the oldest, you're intended to set the bar and keep the bar high for your siblings.

3:56People are looking at you, people are looking up to you, and you're the first to go through, you know, whether it's going to high school, going to college, getting a job. Fortunately, all nine of us are still around, until we still have our pecking order, sort of. You always jokingly refer we could field our own baseball team with nine of us. So you get involved in organization, you get involved in kind of trying to push others to make things happen and keep people together. Before you got to Delta, I know you went to Pepsi, which is a bit of a finishing school for CEOs, it seems. There's actually 12 Fortune 500 CEOs that went through Pepsi.

4:31We were in an article a few years ago about just what's in the water at Pepsi. I'm curious how that experience shaped you and got you prepared to step into a C-suite role when you finally arrived at Delta. Well, I got an undergraduate in accounting, a small school, St. Bonaventure in upstate New York. I think you went to Syracuse, if I'm not mistaken. So rivals in basketball, at least. I went right to work. I didn't have the money or the patience to get any postgraduate education and started working at Pricewaterhouse. And I realized that I wanted to move further in my career. I would need to get some additional education, and I didn't have the means to pay for it or the time to reallocate to it.

5:12So when Pepsi came calling, I found it interesting. And so I decided to jump on it. Pepsi is a fascinating culture. It's about speed. It's about decision-making. It's a street business up and down the street, the products that they sell, whether it's beverage or snacks. I was pretty much in the international space, So I was traveling all the time around the world. You're surrounded by great talent. They understood that talent is going to win in the marketplace. And so they were always out recruiting, constantly recruiting, bringing talent in. It's one of the only places I've ever been to where they tell you when you start, you're probably not going to retire here because it's a talent factory.

5:49So you learn what you can. You grow. And some people stay, but many people take what they have. And they go test their wares in another industry. And since I was in travel, someone told me at one point I should consider working for an airline because I'm on a plane all the time. And so that kind of made sense. And coincidentally enough, six months later, I got a call from Delta and here I am today. But it's a fascinating company. You work with great people. You had found a huge amount of fraud at a client when you were PricewaterhouseCoopers with J. Walter Thompson. You were just 24 years old.

6:21People went to jail over this. I mean, so very numbers focused. I'm curious how that numbers background has served you, even when you think about when you arrived at Delta, the company was in a very different state. I think I grew up with a lot of curiosity. My parents always taught us that we should be able to aspire to greatness and trying to figure out how to do that. And as a result, curiosity and learning was something that was really important to me. And when I got to that accounting task at the advertising company, they had something there that was kind of large that I couldn't figure it out, and I didn't know if it was just me, and I just kept digging in and digging in and digging in, and eventually it was like, it wasn't what it was supposed to be.

7:04And you're right, a lot of people got in trouble, and I, at a very early age, learned that you can never put something down until you really understand it, and so there's value in that. I look back on it now, it's a long time ago. There's no question it got me to a different place in my mind as to what I could do. Delta struggled in the early 2000s. The company was over$20 billion in debt, weighed down by high fuel costs and decreasing travel following the 9-11 terrorist attacks. Frustrated with company leadership, Bastion briefly quit Delta in 2004, but he returned as CFO only months later at the request of then-Delta CEO Jerry Grinstein.

7:43That same year, at Bastion's urging, Delta filed for bankruptcy. It was one of the largest bankruptcies in U.S. history. But the airline industry is often volatile. More than 160 airlines have declared bankruptcy in the past few decades. And when Delta filed in 2005, it was the third major airline to enter Chapter 11 after the 2001 attacks. When you arrived at Delta, you were here for a bit, and then you left for six months and you came back. I think you returned at like half your salary, but one of the things you said to the CEO who was bringing you back was, we have to file for bankruptcy. I'm curious, why come back at half your salary and why come back to a company that you felt needed to go bankrupt?

8:25Well, it was a company that I knew had a lot of potential. And I saw that there were a lot of strategies that weren't playing out well, that the employees of the company were great, the front line. but they weren't being led with the type of confidence and the values-driven goals that I thought were appropriate for a company in terms of what we do. And so I left because my voice wasn't being heard at the leadership levels of the company. There was just chaos, candidly. It was after 9-11. There was a lot of confusion. A lot of airlines were having trouble, so it wasn't as if it was only Delta. Sometimes your voice is actually louder when you leave than when you stay.

9:03and that woke up the board, woke up the CEO, and he came after me a few times and I wouldn't come back until they made the decisions that they were going to actually take bankruptcy, which was not a statement of failure, was a statement that the law gives you to get a second shot at life and try to utilize the application of it to revive our company. And fortunately, they finally agreed with me and when they decided to do it, they brought me back. I led the restructuring as the CFO and 20 years later, you know, top airline in the world. So it gave you a second chance. And it was something that was a tool that we needed to avail ourselves to.

9:42I want to ask you about that turnaround playbook. It's really remarkable to take a company in the CFO position and eventually the CEO position to take one that was so distressed to now America's most profitable airline. It's such a swing. And yes, it was 20 years in the making. But when you look back on that period, what were the key decision points and things that happened in your turnaround playbook? The two most important things. One was that we needed to get out of being seen as a commodity. Back then, when you ask people, why did they choose an airline for their specific flight? 80 % of the time, it would be whoever had the lowest price.

10:19And then another 20 % would, because it got me faster to my destination. And brand was almost nothing. Loyalty plans were kind of an afterthought. Today, if you ask people why they choose Delta, 80 % would say because it's Delta, because the experience, the brand, the confidence I have in that company, that's my airline, and 20 % are other things. So just a total flip. And so that was the most important thing, getting paid for the great service that our people do. And secondly, giving our people reason to believe and giving them the responsibility to go make it work. It's a complicated business.

10:55There's a lot of decisions, a lot of changes that are always we're confronted with. You have to let your people know that you're behind them, that you're supporting them. You're giving the tools. You're putting them out front. Rather than the management being out front, we want our people to be out front. And that's the one thing I've tried with our leadership team to be, that we're serving our people. We're not they're serving us. We're serving their people. We're not obsessing on customers per se at the leadership levels because we want to obsess on our own people so that they can obsess on you as a customer.

11:27And when your people know that you've got their back, amazing things can happen. That had been lost. And bringing that back and getting the confidence and trust back was really key. I have to congratulate you because you've been on our World's Most Admired list as a company and also on our Great Places to Work ranking for a number of years. and it's a testament to the culture that you've built here at Delta and the people-first nature of which you do it. I think there's about 100 ,000 employees who now work for Delta. When I look back at that period and your turnaround playbook, I think definitely putting the culture and people first has been key.

12:01The move into luxury, getting more dollars per seat is key. But there's also two big programs that came out of that kind of distressed period. One is a remarkable Amex partnership. They were really integral in that moment where you needed a partner and they helped. And the other is this profit sharing program that you created for employees that I think you devised and executed as a CFO. That still stands today. And for people to understand the size and scale of it, over$11 billion have been paid to your employees over the last decade. That's pretty unheard of in the Fortune 500. There are other smaller profit sharing, but nothing like that.

12:36So can you walk me through the genesis of that profit sharing? I understand why you needed to get the people on your team now, but you're also working with shareholders, they probably want to see some of that money come back to the company, not necessarily to your employees. So how? Well, when we went through the restructuring, we had to make a lot of hard decisions. It resulted in large amounts of pay cuts, loss of jobs, loss of benefits, loss of pensions in certain cases. And when you're at the bottom and you're looking up, you don't know how deep you have to go. And there was always concern with our people saying, yeah, we understand we have to make sacrifices, but how do we know what you're going to do with the money that we're going to give you the concessions, that they're going to be deployed effectively because they're making an investment in the company and in terms of your turnaround.

13:23And I said to them, well, the great fail-safe measure is when we are profitable, and we were far from it at the time, you'll get the first returns on that. You'll get a 15 % effective return on profits for as long as we're around. I mean, this is not like a short-term because they created a 15 % investment return, I thought was a pretty good idea to get people excited about it. And at the time, people didn't think too much about it because it wasn't paying anything. And maybe the first year,$100 million distributed across large, still wasn't a whole lot of money. But eventually, it became real dollars.

14:04And I think the first time that we paid a billion dollars was maybe 12, 14 years ago. and when you're distributing a billion dollars to your people, that's life-changing money for a lot of people. They got anywhere between four to eight weeks at different times of pay that they never knew to count on year to year. And it's a great alignment with your shareholders because our customers win because our employees are doing a great job for them. And the better job they do serving our customers, the better job our shareholders are going to do in terms of the returns into Delta. and it's paid back to the employees through the profit sharing scheme.

14:41So years ago, I used to get a lot of pushback when we started getting into some big numbers from shareholders. Why are you doing this? This is now, this is our money you're giving away. I would tell you if I was to announce, and I'm not, that we were going to end the profit sharing or change the profit sharing formula, the shareholders would be the first people that would come after me because they see that the sharing of success is just core to the culture, core to the competitive advantage that Delta has in the culture and the people, the numbers you mentioned are with that profit sharing already included.

15:15The most profitable airline that pays more profit sharing than all of the other airlines put together and still has the highest profits as a result of that. So that circle, the virtuous circle we talk about, taking care of the people so they can take care of the customers who then reward our shareholders with their loyalty is kind of right out in front of them to see. Do you feel like other CEOs grasp that? It does seem like you're a bit on an island here. I haven't seen other CEOs saying that. In fact, they're saying, well, I can get more efficiency. I can keep more to the company and maybe not spread out the wealth.

15:49Well, we're a people business. We're an experienced business. We're a business where we do hard things. It's a technically challenging business. We have a lot of seniority in the company. I'm here 30 years, but I'm actually not one of the more senior people in the company of many people in 40, 50, up to 60 years of service. And the reason why is they love the company. And you always want to inspire love for your brand, for your customers, but you can never get it if your people don't love who they work for and they don't love that brand even more. During his tenure as CEO, Bastion has established himself as a devoted employee first leader.

16:27He refused to make furloughs during the COVID-19 pandemic, and despite industry-wide shifts towards AI, he frequently reinforces Delta's commitment to always put people first. In a Fortune cover story on Bastion last year, our senior editor-at-large, Sean Tully, described him as the least stressed CEO he had covered and said no CEO seemed to be having more fun. I think the first time you ever heard that you could be the CEO was a surprise. I gather your predecessor mentioned in a newspaper article, yeah, Ed Bastian could be my successor. And you were like, wait, what? You forgot to tell me. I forgot to tell you when you told the public.

17:05So I'm curious what that moment was like for you. And was that your first time thinking, huh, maybe the CEO thing could be in my future? Not everybody knows when or if they want to be a CEO. I wasn't aspiring to be the CEO. I was happy with the job I had. I was challenged by the role. I was candidly probably intimidated by the thought of all the extra things that I have to do. Doing things like this, for example, that was not necessarily my nature growing up. And the more I thought about it, I understood the responsibility it carried, the accountability, the privilege. It's a privilege. That pressure is a privilege.

17:44And I wanted to make a difference. And did you find there was any skills gap you had to overcome between going from a CFO to CEO? Sometimes CFOs can make great CEOs and it's an easy transition. And sometimes, whether it's the numbers focus and they haven't learned leadership or empathy or some sorts of things, it cannot be a great fit. What was the skill gap that you had to overcome? What was the hardest part? I think there's a lot that has to overcome. I don't think there's any such thing as an easy transition into the CEO chair, no matter where you've been. Because I was the president of the company for eight years prior to becoming the CEO.

18:18So I've been pretty close to this for almost 20 years. But even as president, sitting in the CEO chair, it's different. There's a lot of things that feel different. Whether you're dealing with DC, whether you're the last line of defense in terms of having to make a decision, and people look to you, all eyes are on you in terms of what's happening. Whether it's the media, people don't want to hear from the number two or three person, they want to hear from the person, whether it's your international relationships, dealing with dignitaries and the like. And then being in front of so many, For us, 100 ,000 people constantly and being willing to put your face on your brand, it's a very different feel.

18:56And it takes a few years to get comfortable, I'll be honest with you. I know it did for me. And I talked to a number of younger CEOs and folks. They'll call looking for insight and help and some mentorship from time to time. You've got to get comfortable in the chair. You've got to make sure it's your chair. And a lot of times you're in the chair, you're still not certain that you've earned it. So you still have imposter syndrome? You can't possibly still. No, no, but when you're in the first handful of years, you're still not certain. You're trying to prove yourself that you actually deserve the seat you're sitting in.

19:30Because stakeholder management is different today, too. I've been at this now 10 years. 10 years ago, it was complicated. Now I think it's much more complicated. And so how do you deal with so many different constituencies that always want your time, your attention? And how do you balance that? And how has your communication style evolved? I love one thing you said about your predecessor, too, was he recommended, like, get a private phone, get a private email, don't go out in public, just, like, bunker down. And you've done the opposite. I can attest that you will respond to an email in minutes.

20:01And that's not just me. It's for all of your employees, for your customers, for anyone, a very public email. What has your style been in communicating externally but also really internally? Well, I want people to feel like we care. I want our people to know that I care about them. Our leadership cares about them. Certainly want our customers to feel that. I want our community to feel that. I want our investors to feel that. And it would always frustrate me when people would say, I just can't get through to a customer service line. I can't do this. I can't do that. And I finally at one point, this was during COVID, I said, well, if people are having a hard time, just contact me.

20:37Here's my email. And people said, really? I said, yeah. And people have been using it for years. It always allows me to stay in touch. and I yes I see every email that comes to me I can't personally respond every single one of them I've got a whole team of people that sit behind me that I know I feel like sometimes I'm more a point guard and I'm receiving it and I'm giving it to someone who's more subject matter expert whether someone in our executive care department whether someone in our maintenance team whether it's dealing with a pilot matter or whatnot I have a team of people that when they receive it from me they know to take care of it quickly and efficiently and effectively just as I would, because I can't possibly deal with the thousands and thousands I get every single day.

21:19But I see them all. And by the way, I do respond to a fair number of them as well. By seeing everything, I think I have developed a sense of peace with my role. It's a fast-moving industry. It's hard. People talk about it as one of the more challenging industries to operate in. People say, how do you stay calm when you have so much swirling around you at all times. I know what's happening. There's nothing in my business that's happening that I don't hear about from somebody. Because people know I want to hear. It's not just they can tell me, they choose to tell me. And as a result of that, I feel like there's a pace and a rhythm I'm always constantly in sync with.

21:56And I don't ever need to worry about I'm missing something or having to look for something. It finds me. And it gives me the freedom to continue to stay ahead of me. It's a weird use of technology that people would say either it's something that would drive you crazy or something that actually is liberating. I find it somewhat liberating. I mean, you've gotten Delta through some hard times in terms of any 100-year-old company. And congratulations, you had to start 100 last year, a huge milestone. There's going to be near-death moments, really scary moments. And one of them, you dug yourself out financially in the early 2000s.

22:31But COVID was a huge moment, difficult for you as a leader, very scary for the employees. I know you have said you felt like Job in the Bible, like it was a tough time for you personally. Your mother, I'm so sorry, had passed. All revenue basically seemed like it was evaporating overnight. We had to refund a bunch of customers for trips they'd never go on. And you really didn't want to furlough your employees. and you somehow got half of your team to willingly go without pay for over a year, I think, to get through that period. How are you corralling this team to be selfless to their peers, to help Delta in times of need?

23:11What is your internal communication to people to get them to do these hard things? Well, you know, we talk a lot in business about culture. We're talking a lot about strategy. and people always think the strategy is the harder thing. It's the more brilliant thing. It's the more scientific thing. It's the only the very best are strategists. I'll tell you, that's not true. The very best are people that have a great culture and that invest in their culture. And yeah, we can do strategy as well as anybody. Our progress shows that. But investing in your culture and your people is by far a harder thing, the more important thing.

23:47And I think the longer lead time that you have and the alignment of that culture from the top of the company down to the front line. Everybody knows what we're doing, how we're doing it, and what that strategy is. And that culture is really strong, and the DNA within our company is really strong. So when COVID hit, it was a shock. We had no idea to prepare for it. We had built such a reservoir of confidence and trust that our people had in the company that they were leaning into us. And they were saying, whatever decision you take, we're behind you. Just tell us where to go. which was hard because you're trying to figure out where to go.

24:23But when I knew that we needed to find a way to reduce the cost because we had no revenue, you can't possibly run a business with all your people and no revenue coming in. Even in my leadership team, I said, we're going to try to do this without furloughing people. People told me I was crazy. And I was very visible when I was talking because we did a lot of these video chats to my own people. I said, I have a vision of doing this without furloughing, Which would be incredible. We've furloughed plenty of times in the past with bankruptcy and other events that happened. And I said, well, you've got to stay with us in order to do it.