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Containing COVID-19 is ‘the most important thing we need’ to get business back: Delta Air Lines CEO

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Ed Bastian, Delta Air Lines CEO, joined Yahoo Finance Live to discuss COVID-19's impact on the airline industry and his business outlook for 2021.

Video Transcript

[MUSIC PLAYING]

ADAM SHAPIRO: Welcome back to Yahoo Finance Live. 30 minutes roughly to the closing bell. We want to talk about what's happening with the airlines. And to do that, we invite into the stream Delta Airlines CEO Ed Bastian for an exclusive interview. Ed, it is always good to see you. Thank you for joining us.

ED BASTIAN: It's good to be with you, Adam.

ADAM SHAPIRO: I want to put it in perspective because we know it's been a tough year for all the airlines. But I want to put in perspective in a different way what's happened at Delta. In 2019, you made history when you awarded $1.3 billion in profit sharing to your 90,000 employees. Then, 2020 happened. I'm curious-- you can't learn how to deal with this in a business school. As a CEO, what are the lessons you've learned that you want the people who will one day replace you in the C-suite, what are the lessons you've learned that you want to share with them?

ED BASTIAN: Well, you're right, Adam. It's been a remarkable year-- unfortunately, for a lot of the wrong reasons. We went from our highest highs in 2019-- in fact, we started at $1.6 billion on Valentine's Day in 2020, only to find us a month later, where we're down to probably about 5% of our revenue base. I'd say the number one lesson I learned and leaned into was the purpose of values, reflecting on what you do every day, and ensuring that you're living by, you know, our rules of the road, the values by which we stand by.

At the start of the pandemic, Frank Blake, who's our chairman at Delta, told me that something I already knew, but it was good to be reminded of-- that crises don't build character, crises reveal character. And it's a statement I listen to and think about every single day in managing through this. The decisions I take are going to be a reflection on the character and the values of Delta. And I want people to know how well-- you know, the job we're doing to protect everyone in that same way.

ADAM SHAPIRO: So when you talk about the values to manage through this crisis, Savi Syth over at Raymond James, after your fourth quarter earnings report last month, said that Delta's cost execution remains impressive. And we should point out no layoffs. You did have 40,000 of your then 90,000 employees, at some point last year, taking leaves of absence to help the airline get through this, the unpaid leaves of absence. I'm curious what the airline will look like after the pandemic. It's going to be small, or will it be on the global scale it was heading into the pandemic?

ED BASTIAN: It's going to take some time to get back there. I think domestically, we're going to come back first before international will return. I think international is probably a year away from seeing how that's going to shake up. But it's all going to be about the virus. It's going to be about the success we have as a world in containing the virus and putting it into a position where it's not inhibiting people's desire and ability to travel.

I think, again, that it's going to be first and foremost in the US the vaccinations are a key determinant as to how it's going to come back. But over time-- and it may take two years, it may take three years-- I see us getting back pretty close to where we were back in 2019. It's going to have a different mix. It might be a little more domestic, a little less international, a little less business, a little more leisure. I don't know.

And by the way, our business always changes. The mix is always-- it's a pretty dynamic world we live in. So I think, you know, I like the hand we're holding. I like the cost execution. As you said, our costs are substantially better than what our peers have been able to do. And that's why our cash burn is the best in the industry.

SEANA SMITH: Hey, Ed, it's Seana. As we talk about getting to the other side of the virus, we still have a very long road ahead. We heard from American last night talking about that they could potentially have to lay off more workers. We heard that from United last week. I'm curious, just from your perspective, what you think is needed right now, whether or not another round of funding is needed from the government. And if that was presented, whether or not Delta would accept more funding if it was available.

ED BASTIAN: The number one thing we got to do is contain the virus. And I would encourage our government to do everything within their power to commit whatever resources they have to containing the virus. That's the most important thing we need to get our business back.

I'm not going to comment on a third round of stimulus. I'm not sure if that's the answer. At Delta, we did not-- have not furloughed employees all year. We're not going to furlough employees this year either. So it's not about for Delta saving jobs. It's about containing the virus and having people feel safe getting back out into public life.

ADAM SHAPIRO: Want to look at what the recovery looks like, as far as scheduled for Delta. And I realize there's still some unknowns. But Helane Becker over at Cowen pointed out that, quote, "The recovery in demand in bookings has yet to materialize for the industry." I realize January might be a bit of a slow month traditionally. But you've said in past interviews that you expect end of March, Delta is cash burn neutral and that revenue starts to pick up. As we get to the halfway point in the first quarter, what do the bookings look like, and are you headed still on that trajectory?

ED BASTIAN: The second quarter is still a long ways away, as you can appreciate, Adam, with the vaccine just starting to roll out. I think when I looked this morning, we've got about 8% of the population of the United States has at least one shot of the vaccination. It's going to be dependent upon that.

By the time we get to the spring-- March, April, May, into June-- I think you're going to find the vaccination starting to build some real critical mass. And when you couple that with what we already know about the numbers of people that have the antibodies that have already been infected with the disease, we easily could see at the start of the summer our country starting to approach an early form of herd immunity.

And that's what we need. We need confidence back. We need people feeling safe in travel. And it's going to build. I do think the spring is when we're going to see the bookings start to build in anticipation. And that's why I think we're going to get to that cash breakeven level, as soon as we're talking about it.

I know some of my competitors have said I'm optimistic. I'm always happy to be accused of being an optimist. And this is a serious business. We're very realistic in terms of how we're thinking about it. But we took our cash burn from $100 million a day in March down to about $12 million a day in the fourth quarter. So with a little help of revenue-- not a huge help-- I think we can get there.

And remember, Delta is still blocking 30% of our seats. So that's another factor for you to think about as to when we eventually decide to unblock the seats. We have made that decision yet. But when we do, there's going to be a pretty significant amount of new revenue Delta is going to receive.

SEANA SMITH: Ed, another thing that you need to consider at this point, we heard reports that the CDC is now considering mandatory COVID testing for domestic flights. Some of your peers have been outspoken, saying that they don't think it's feasible. I'm curious just to get your thoughts on this.

ED BASTIAN: I don't think it's practical at all for lots of reasons. First of all, we're carrying millions of people as an industry domestically already safely and reliably-- safest form of transportation there is. Secondly, testing resources, while they're growing, are still very precious. It still takes, in many parts of the country, two, three, four days to get results back from testing.

To divert those resources to cover the millions of people that are traveling domestically, I don't think would be a wise tradeoff. It would significantly harm the US airline industry and push us back, not just by the way the airlines, transporta-- travel and hospitality, more broadly, would take a big hit. So as the government, on the one hand, is considering whether we need another grant for PSP, I certainly think we should have a do no harm policy and ensure that we at least keep the revenue streams we've got coming in.

ADAM SHAPIRO: When you call yourself an optimist, the airline is bringing back 400 pilots in anticipation of an upturn this spring. Still planning to do that, correct?

ED BASTIAN: Yes, we have called back 400 of our pilots, which would bring us down to about 1,300 left. And we're looking at our plan over the next 6 to 12 months as to how to get those 1,300 people back, too.

ADAM SHAPIRO: And Ed, you also started with us talking about character and managing through a crisis like this. And I want to shift to something that you've been involved with at Delta before, some of the terrifically horrible experiences the country witnessed this year regarding race.

But you said on MLK Day of this year to your employees, "The global reckoning over racial inequity and injustice spurred us to take a deeper look at our own record on diversity, equity, and inclusion." And you've got concrete steps at Delta that you've taken in the hiring process to reduce bias. Can you tell us a little bit more about how that's going and some of the deadlines you've set for the airline?

ED BASTIAN: Well, we're looking across the entire spectrum of our people, both for the hiring standards, as you indicate, Adam, what the skills that are required, the qualifications, ensuring that there's no implicit bias in any of those standards. And we've redesigned them. And I've gotten a lot of support from people like Ginni Rometty at IBM, who's done it quite successfully there to learn from.

One of the things I've learned this year is that in order to reach the underserved, you've got to give them a hand up and give them the opportunity to and realize they may not come through the normal channels-- one of the reasons we joined 110, which is the organization founded by Ken Frazier for Merck to create new jobs for Black Americans. So it's starting at the entry level, all the way up through the senior most levels of management.

We currently have about 7% of our officers, the top 100 people in the company, who are Black. That's not good enough. I expect to double that over the next three to five years in terms of on percentage terms, in terms of closing the gap. And then, it's a continuing journey to continue to get better.

ADAM SHAPIRO: And we should point out to folk that for five years in a row, Delta has ranked among Glassdoor's best places in the United States to work. And this year, you are number 7 on a list of 100 large companies. So congratulations on that. We wish you the best. And a lot of us want to get aboard a plane and go somewhere warm just to get out of where we've been locked down. Ed Bastian, Delta Airlines CEO, always good to see you. Thank you.

ED BASTIAN: Thank you, Adam.