It may sound like something straight out of a science fiction movie, but Delta Air Lines is working to create a seamless experience on all of its partners to take customer satisfaction to a new level. The US major hopes to mature its many airline relationships and ultimately blur the lines between operators in the customer’s eyes.
Delta has JVs with Air France-KLM, Aeromexico, Virgin Atlantic and Korean Air and holds equity stakes in all those carriers. It also has a JV with Virgin Australia and is awaiting approval for new US transborder JV with WestJet. Delta does not hold equity stakes in Virgin Australia or WestJet.
The airline’s president Glen Hauenstein recently explained to analysts and investors the company has a project called ACES, which is a “technical version of saying we know who are customers are, and we know who you are not only when you’re on Delta”.
Mr Hauenstein explained that “you can envision” a world fiver or ten years from now where consumers can board an Air France flight, and the Air France flight attendant will thank them for being a million mile members. “Sounds far fetched”, said Mr Hauenstein. “But that’s the quest. Know your customers know what they want and recognise them.”
Delta views its quest to get inside of the minds of its consumers as a “super important feature to think about because we don’t think our competitors are really thinking about it”, according to Mr Hauenstein. It is an ambitious goal for Delta, which along with the companies it has investments in will transport roughly 500 million passengers in 2019.
Delta’s CEO waxes poetic about the desire to travel
Airlines often get mired in strategy, data mining and ensuring a strong financial performance. But Delta’s CEO Ed Bastian took a moment at the airline’s recent investor day to take a step back and talk about why people across all age sectors travel – for experience.
“I know we focused a lot on the next generation of travellers in terms of how they’re coming up travelling, how they’ve had a chance to explore to see and they’d rather that experience rather than owning the car or owning the home, or investing in somewhere else. They invest in themselves, that’s true. Also for boomers like me. It’s true for all demographics across our landscape,” Mr Bastian stated.
He explained that people are enticed and want to travel, and there are lots of reasons driving that desire. Technology and social media are big drivers of the urge to travel. “People have more awareness. They have more curiosity. They have more adventure,” Mr Bastian concluded.
Unreachable, far-off lands, today “this stuff just comes to you”, Delta’s CEO remarked. “It comes in streaming high-quality with your friends and your families and your pictures and your opportunity. So there’s an excitement and enthusiasm by travel, that I think is just going to continue to grow.”
Delta is making travel more accessible to consumers, said Mr Bastian, and the trend line will continue to grow. The airline transports roughly 200 million passengers per year, and through Nov-2019 it had posted +5.8% growth in its passenger numbers.
Delta remains upbeat about its prospects heading into 2020
Delta has a solidly positive view heading into 2020, but the two largest unknowns for the US aviation industry are the timing for the Boeing 737 MAX to return to service and the country’s presidential election in 2020. The recent drone attack on Iran and its short-, medium- and long-term impact is another major unknown.
The US major has projected +4% to +6% topline revenue growth for 2020, “and all signs are the US consumer continues to be well”, company CEO Ed Bastian stated at the airline’s last investor day.
However, he did highlight that 2020 is an election year, and the 2016 US presidential election did press on consumer sentiment a bit; that it “certainly weighed on business decisions as people were waiting to see with some clarity, what direction are the politics and our nation and our government was going”.
There are positive signs that, for now, consumer sentiment is holding steady. In Nov-2019 the US’ University of Michigan’s consumer sentiment index had been higher than 95 in 30 of the past 35 months, which was second only to the index’s reading of 100 or above for 34 out of 36 months from Jan-98 to Dec-2000.
Markets were not spooked when the US House of Representatives impeached US President Donald Trump in mid-Dec-2019. That is likely driven in part by the US reaching an interim trade deal with China that would be a step towards ending the nearly two years of tariff tit for tat between the two countries. But it is unpredictable how the trade relationship will ultimately evolve in 2020.