- REUTERS/Clodagh Kilcoyne
- Delta CEO Ed Bastian attributes the recent spate of computer network failures at major airlines to the lack of investment over the past decade.
- Bastian believes technology is best used as a means to improve the customer experience at Delta.
The airline industry is not known for making money. There’s a long-held belief that all airlines are either working their way towards bankruptcy or working their way out of one.
Hence the old saying, “If you want to make a small fortune in airlines start with a big one.”
Yet, Delta is managing to buck that trend.
Over the past few years, the Atlanta-based carrier has become the most profitable airline in the world while upgrading its product offerings and boosting employee pay. In 2016, the airline reported more than $4.4 billion in net income while returning $1.1 billion to its employees through profit sharing.
Leading the way for Delta is CEO Ed Bastian. The Poughkeepsie, New York native joined Delta in 1998 before becoming its president in 2007. Bastian ascended to the top job in May 2016 upon the retirement of former CEO Richard Anderson.
Over the past year and a half, Bastian has worked to maintain Delta’s profitability while investing heavily in new aircraft and technology.
Recently, I had the opportunity to sit down with Bastian in his office at Delta’s headquarters in Atlanta where we discussed a myriad of different topics including the airline industry’s struggle to adopt new technologies and how Delta is actually embracing them to grow its business.
Delta’s lost decade of tech
In the early morning hours of August 8, 2016, Delta’s computer network went down, effectively grounding the airline’s thousand aircraft fleet for six hours. For days, the cascading effects of the data center failure caused chaos for the airline and its passengers. In total, the outage cost Delta more than $150 million.
But Delta is far from alone.
In recent years, computer outages have plagued the entire industry; American, United, Southwest, and British Airways, just to name a few, have all suffered through their share technology related troubles.
According to Bastian, one of the major issues behind these outages is the archaic technology platforms that power the airline industry. These systems are still around because, for much of the past 15 years, airlines simply didn’t have the money to invest in new technology. After all, the years following 9/11 and the financial crisis were not kind to the airline industry.
“Many of us went through a Chapter 11 bankruptcy and restructuring,” Bastian said. ” The only money we had to spend on technology was just to keep the lights on.”
“It was all about ‘break’ ‘fix’ which means if something breaks you fix it. There was no innovation,” he added.
Bastian called the 10-year period after 9/11 a “lost decade where (Delta) was under-invested in a lot of areas with technology probably being the largest.”
But when Delta finally did make money again there were much more pressing needs that required funds ahead of the computer systems.
“We had a number of things we had to invest in and the most important thing was our people,” Bastian said. “People had taken pay cuts. There were job losses and we needed to restore some of their faith in our company.”
Bastian said the overall pay at Delta, including profit sharing, is up 80% since 2008.
“Our people get the first fruits, and then we had to invest in airplanes, airport experience, and maintenance, so technology tended to lag in that cycle,” he added.
Delta and technology making up for lost time
Things are different these days. Delta has the cash to buy pretty much whatever it wants.
Now, it’s just a matter of having enough personnel and bandwidth to get to all of the projects and upgrades the company wants to make, Bastian said.
Over the past year, Delta has built a new data center to shore up stability issues within its computer network while launching experimental projects featuring biometrics and facial recognition technology at airport terminals.
With resources in hand, Delta has the opportunity to do some incredible things in terms of technology beyond just reinforcing its data centers and computer networks.
Some airlines see technology as a potential money maker by turning their planes into flying e-commerce platforms with hundreds of captive customers.
Bastian said he isn’t interested in going down that route. Instead, he wants technology to help his airline better understand and interact with its customers. In turn, improving the flying experience and strengthening Delta’s core business.
“I’ve told our people that next to them, technology has to be our competitive advantage,” the Delta CEO said. “We are in the business of building relationships and our technology allows us to build intimate relationships with 180 million customers a year and you can only do that through technology.”
Bastian’s big tech goal in 2018 is what he calls “building a single view of the customer.” That means unifying all of Delta’s various customer databases to create a more holistic view of and a better understanding of the people who fly with the airline.
“The real opportunity for us is to get a better view of who you are so that we can better serve you,” he said. “We can get you what you need before you even realize you need it and be able to better take care of your needs not just from a sales standpoint, but more importantly, from an experience standpoint.”