(MENAFN- Khaleej Times) The US should have visa waiver programmes with more nations to spur economy, and India needs restructuring to resuscitate the ailing aviation sector, Richard Anderson tells Khaleej Times Night Editor Suresh Pattali
Richard H Anderson is no stranger to the travelling community in the US and outside as the screen in front of your seat on all Delta flights springs to life with the airline's CEO personally welcoming you on board. His mission, he says, is not to develop the world's biggest airline, but to build the best welcoming airline for cultures and people from all around the world.
"Each year Delta serves over 160 million passengers, by far the largest in the world. And we want every one of those 160 million to have a very good experience on our airline," Anderson says, taking us on a trip to the philosophy on which he has been building the company for the past five years.
"One of the most important things we do at Delta is we invest in our people. We think the most important attribute we have as an enterprise is the importance of taking care of our employees so our employees will take care of our customers. So our success, in large measures, at Delta has been the success of our people."
In a recent face-to-face in Atlanta, the hometown of Delta Air Lines, Anderson came down hard on the US administration's inept aviation policy and visa regime. Questioning the logic behind loading the airline ticket with taxes higher than on alcohol and cigarettes, he says the US visa regime must be liberalised to make it easier for people to visit, so that the industry could be a major component of America's growth engine.
He also feels that restructuring is needed to resuscitate the ailing aviation sector in India.
Anderson says Delta is poised to continue successful revenue growth for decades to come as it is building a very strong foundation with significant investments in its business.
Taking pride in who he says are the best airline employees - 80,000 globally, the CEO says the airline has major investments in wide-body airplanes, especially in their interiors. "We have a new terminal in JFK, a substantial renovation in Los Angeles, and a significant investment in facilities throughout the world. On the narrow-body side, we have the new 737-900ERs placed last year. And we continue investments like in Wi-Fi, new clubs and more importantly, we continue very significant investments in the reliability of Delta Air Lines. So we typically operate with a 99-100 per cent completion factor on a consistent basis day in, day out, which is at the top of the worldwide industry."
Here are excerpts of the interview with the man whose vision and leadership helped Delta build an unparalleled global network on strong financial fundamentals:
As the airline industry continues to bleed due to high fuel prices, Delta came out with the business innovation of buying its own refinery. Sceptics say a smarter hedging would have been a safer bet than investing millions in a refinery purchase and making it industry-specific. Your comments please.
We have a broad strategy to manage our fuel costs. It includes a strategic hedging programme, the purchase of an oil refinery to help us control the refining costs of jet fuel, the elimination of most of the least fuel-efficient aircraft from our fleet, and many conservation initiatives such as installing winglets that bring three-four per cent fuel efficiency on every flight. We have many talented employees who are extremely focused on all aspects of our fuel strategy.
Delta subsidiary Monroe Energy will manage the oil refinery in Trainer, Philadelphia, and Monroe's management team has an average of 25 years of experience turning around properties such as Trainer. Our partners in the refinery project - BP and Phillips 66 - will find us the crude oil we need and take all the refined products that we do not need, making the refinery a very low-risk venture for Monroe and for Delta. We expect to save $300 million a year with Trainer, and we feel extremely confident in our ability to execute the strategy we have laid out for the refinery. The refinery acquisition is a pretty simple vertical integration of our controlling of the supply chain on an incredible part of our cost structure.
What is your outlook on fuel prices and do you think owning refineries would be the way forward?
Given the commodity bubble that we are facing, commodities are now an important investment vehicle for capital markets around the world. Ten years ago, they were not, but in the last decade, they are like any stock market where money flows around. So I think that will continue to put upward pressure on fuel prices, but the industry model must evolve to be profitable despite the high costs.
Fuel prices have been extremely volatile for the past several years. We have a broad strategy to manage our fuel costs. As detailed previously, we expect to save $300 million a year through the Trainer acquisition, and our analysis showed we would have saved $300 million to $500 million in each of the last five years had we owned the refinery. Delta continues to look at new and innovative ways to ensure we operate the best airline in the world for our customers, our employees and our investors.
What is Delta's global strategy and how do the Gulf and the Middle East fit into it? Dubai is Delta's only window to the region after closing down operations to Kuwait, Amman and Cairo. How important is Dubai for Delta and are there plans to increase frequencies to Dubai?
Delta is a leading global carrier that operates services to 350 destinations in 70 countries, with a large US network serving nearly 250 domestic destinations. Specifically across the Atlantic, Delta operates over 1,100 weekly flights to 24 countries in Europe, the Middle East, India and Africa.
Dubai is an integral part of Delta's international strategy and ensures that Delta has a presence in the important Gulf region. Delta launched its service to Dubai in 2006 as part of its international expansion across the transatlantic. Since that date Delta's international network has grown and now accounts for 40 per cent of our network with Dubai being a key part of it.
Despite the global economic climate, Dubai - which is a long-standing centre for trade - continues to be a strong commercial centre in the Middle East and natural entry point to the region. Demand for Delta's non-stop service to Dubai remains strong and sees consistently high load factors. We also offer options via our joint venture partners Air France-KLM and Alitalia.
There is not much branding of Delta in the Gulf. How do you plan to raise brand awareness in the UAE?
Delta's team in Dubai is focused on raising awareness of Delta through the corporate and travel agency community as well as by communicating directly with our frequent flyers. This activity is supported by advertising in Dubai.
Is Delta planning to acquire more long-haul, wide-body aircraft? Will it go for the Boeing 777, 787 or the Airbus Superjumbo and what are purchase preferences?
Delta continues to diversify its international fleet to have aircraft that are capable of any mission and we operate a range of Boeing and Airbus aircraft throughout our network. We have 18 Boeing 777 aircraft which we deploy on our long-haul routes such as Dubai and Johannesburg, and have found that this aircraft can do everything that Delta currently needs at this time.
Our experience at Delta with newly launched airplanes is poor. Typically with a newly launched airplane, being the very first customer generally means though they receive some discounts in prices, there are significant technical difficulties. So our experience has been that we are better off taking a mature airplane where the fuselage has been stretched, the research and development cost has been allowed to be depreciated, all the technical bugs are out of the airplane and the airplane is operating soundly. And it has proven performance and proven economics. We think that is much more important than trying to chase the next piece of technology.
And the reason for that point of view is having been involved in the launch of a number of airplanes, and I have never participated in the successful launch of a new aircraft equipment - ever. So we decided at Delta we are better off not being experimental, but waiting for the technology to be proven. And I think the best example of that is the 787. We were supposed to have 18 of those planes in regular scheduled services a year ago. Look at the problem it causes in not having a predictable stream of airplanes coming. If we did that to our customers, we would not have business.
Eventually the 787 would be a fine airplane, but it is Delta's view that we need a good offering from Airbus, a 350 that can compete effectively with the 787.
On the A380, that airplane is not economic for the Delta fleet. It has poor engines, it is very large, it is very expensive and we can't figure out a place where we can possibly fly that aeroplane.
What is your outlook on the cargo sector?
The year 2011 was a very strong period for Delta Cargo, with the division generating revenue of $560 million which had a positive impact on the overall bottom line for Delta. So far, our performance in 2012 remains strong but we're watching global economic performance.
Asia still does not follow an open-skies policy. How much has this affected your expansion plans in the continent, especially the high-potential Indian market? Does Delta plan to operate out of Mumbai?
Delta operates non-stop flights from nine US gateways to its Asian hub, the Tokyo-Narita International Airport, where passengers can connect to nine major cities in Asia. It also incorporates direct flights connecting US gateways with key cities in Australia, Korea, mainland China and Hong Kong, as well as resort flights connecting the Narita hub to Hawaii, Guam, Saipan and Palau.
This year, Delta celebrates its 65th anniversary of operations in Asia. Northwest Airlines began serving the Japan market in 1947, after developing the "great circle" route to the Asia-Pacific region. Delta's 65 years of heritage, experience and history in the Asia-Pacific region keep the airline's network growing under the consolidated Delta brand.
Delta operates a daily service from Mumbai to Amsterdam and from there passengers can connect to the seven Delta non-stop services to the United States, including Atlanta, Boston, Detroit, New York-JFK and Minneapolis. Passengers in Amsterdam can also take advantage of our joint venture partner KLM's extensive network to the USA. India is an important part of Delta's international network and we work closely with Air France and KLM who operate services from their European hubs to Delhi, Mumbai and Bangalore.
At this stage there are no plans to operate a non-stop service between Mumbai and the United States.
In your opinion, what afflicts the Indian aviation industry? A few years ago, there was much hype about an Indian middle class that is poised to jet around, and airlines mushroomed and placed record plane orders to capitalise on this phenomenon. India has since witnessed consolidation and luxury brands like Kingfisher have gone bust. Is it because the middle class didn't fly as high as the industry expected; or lack of strategy; or mismanagement?
It is good for the Indian customer to be connected and it is also good for the airlines - such as Delta - to have access to India. However, the market is in flux, with loss-making airlines. Restructuring will be needed. When and how that happens remains to be seen.
Will Delta consider investing in troubled Indian carriers?
As a matter of policy, we do not comment on industry rumours or speculation about potential airline partnerships.
Now that American Airlines has agreed with creditors to consider mergers while it is still under bankruptcy protection, is Delta considering competing with US Airways as a potential suitor? What are the challenges in mergers?
Again, as a matter of policy, we do not comment on industry rumours or speculation about potential airline partnerships. There are two big challenges in having a successful merger. The first in that is technology. Technology integration is an incredibly important part of a successful merger. And the second part is labour and cultural integration.
There are many important intangibles in an organisation, but first we have to value different people and the diversity in the culture of the people we work with and serve. So priority is to keep people first and foremost in our value system as the most important contributor to our success. The second thing is we have to get the big ideas right, so big strategies have to be correct. And third, we have to be able to admit our mistakes when we make mistakes and make sure that we listen to our customers and employees, and when need to make corrections, make sure we make corrections.
What are your suggestions to make aviation a major contributor to the US economy like the Chinese are trying to do?
The Chinese government is quite strategic in making the airline system a generator for economic activity. In the US we do not have such an airline policy. First, we are the highest taxed enterprise in the US. The tax on airline tickets in the US is more than the tax on alcohol and cigarettes.
The second thing is our air traffic system is outdated and it needs to be overhauled because we burn a lot of extra oil and use lots of our customers' time due to delays. So we need the next-generation air traffic control system.
The third point is we need to make it easier to get a visa in important countries and we should have visa waiver programmes with more nations to make it much easier for people to come into the US. You should not have to wait for an hour to clear customs and immigration to enter the US.
I have travelled to countries where their systems work so efficiently and so easily to let people move in and out. Our treatment of people of important countries coming into the US should be more open because this is the country that is based up on the diversity in immigration.
Do you see a time when pilots will drop their bulky check bag and instead have it all on an iPad?
We're always looking at ways we can use technology to improve our business processes.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.