Delta CEO Remarks on Points & Data

What did Delta CEO Ed Bastian say when I asked him about revenue-based redemptions & data generation in the cabin?

On Pall Mall at the heart of London’s clubland is the Royal Automobile Club, a smart social club for well-healed petrolheads. Their impressive clubhouse (pictured) contains among other things a fabulous bar and dining room, an art deco swimming pool and a collection of motoring-themed murals. It is also the venue for the London-based Aviation Club’s regular lunches.

Ed Bastian and Shai Weiss, the CEOs of US major carrier Delta and groovy British airline Virgin Atlantic, were at the most recent lunch. As the author of this blog the good folks at Delta kindly invited me to the press conference held in the morning.

All the big travel journalists were there, asking everything you would want to know about the closure of Russian airspace, the price of fuel and other airline industry headlines. You can read what they learnt on other sites.

Watching the two CEOs interact with each other and the audience was most interesting – they are clearly good personal friends. I did not get the impression that Ed is the senior partner and Shai the junior, which you might have expected since Delta is much larger than Virgin Atlantic.

Delta and Virgin Atlantic are close partners – Delta holds a 49% stake in Richard Branson’s carrier, which it bought from Singapore Airlines in 2012.

Delta passengers can use the funky Clubhouse lounge at Heathrow Terminal 3, arguably one of the best airline lounges in the world. Although Delta is a Skyteam member and Virgin Atlantic is not, points earned in the Skymiles or Flying Club programmes can be redeemed at favourable rates on the other.

I asked Ed and Shai one question in the press conference and another to Ed after lunch. They were both kind enough to give me detailed and informative answers. Read on to find out what they said…

QUESTION ONE

[This question was asked in the press conference before lunch and just before I asked it Ed had been speaking about Delta delivering services]

You mention the importance of services, which is something Airbus has been talking about a lot. It is well-known that Airbus’s ‘Skywise’ platform is generating data that airlines are using to improve maintenance and aircraft performance.

But Airbus are now talking about using Skywise data to understand how passengers experience products like seats, service and entertainment in the cabin, like we see with the Airspace Cabin Vision 2030 which recently won a Crystal Cabin Award.

Do you believe in this model and what services do you think we will see Delta and Virgin Atlantic introduce in the cabin as a result?

Long-term readers of this blog may remember that I wrote an article a while back on this topic called Revenue Generating Seats, Galleys and Lighting (or how watching James Bond movies helps airlines monetise aircraft) – check it out here.

Ed gave a chuckle when he heard this question – a friendly chuckle I think. His answer was most interesting and it came in three parts:

1. Yes, Delta loves to look at new sources of data and the Skywise platform is well integrated into the operational side of the business in engineering, maintenance and so on

2. Yes, there is huge potential to use data to understand how passengers use the products in the cabin and translate that into revenue growth – Shai agreed on this

3. But no, Delta will not be using Skywise to do it – they will build their own data collection platform into their seats and galleys.

I think that this is really interesting. Delta clearly value the data that will be generated in the cabin so much that they are going to build their own proprietary technology to do it. As a result they will certainly not be sharing it with other airlines and suppliers, which is part of the Skywise ethos. It is nice to know they share my vision.

QUESTION TWO

[This question was asked in the public round of questions after lunch]

Since Delta Skymiles went revenue-based a few years ago we started seeing multi-million mile business class redemptions. But these multi-million mile fares are based on cash fares that nobody pays because almost everyone booking seats priced under these high fares gets a corporate discount of some kind.

So the reward seats priced in points are arguably priced higher than the market rate for cash. What is the impact of this on your best customers?

Regular readers will remember I am generally sceptical of revenue-based redemptions (see article) so I was interested to hear what Ed would have to say.

This question generated a ripple of muttering across the room. Normally airline CEOs get quite a few questions about aircraft, international relations and industry trends. One chap asked an interesting question about commercial systems. Loyalty economics (see article) is a bit new down Pall Mall-way.

Ed’s answer this time came in two parts:

1. Business class cash fares used to be much higher than they are now and among the American carriers Delta have led the way in introducing fares that address the mass affluent market segment

2. Building and generating a currency that belongs to Delta is an important part of the airline’s strategy. It is important for airlines to experiment with new business models – Delta once bought an oil refinery for example – and issuing mileage currency is an important part of Delta’s business model.

You will notice that Ed did not actually answer the question. That does not matter – I did not expect him to.

But what was interesting was less what he said but rather the way in which he answered the question. His eyes lit up and he became quite animated when giving his response. I got the impression that Delta’s management team have had some interesting and no-doubt heated discussions on this topic. I felt that I had caught a fleeting glimpse inside a private meeting of Delta’s board.

Thanks Ed!

Apparently Shai from Virgin Atlantic will be delivering the speech at a lunch later in the year. Is there a question that you would like me to ask him? Let me know:

oliver AT ransonpricing DOT com