Aviation Leader Interview with Delta VP Asia Pacific Jeff Moomaw

Transcript

Peter Doherty:Welcome to the stage.

Jeff Moomaw:Thanks. I've got the whole couch.

Peter Doherty:Take this one here.

Jeff Moomaw:I could lounge, you know, I could, I could do one of these.

Peter Doherty:Yeah. 20 years with Delta.

Jeff Moomaw:Yeah.

Peter Doherty:How many airline launches, new route launches would you have done during that time?

Jeff Moomaw:Well, I think we've done 10 this year alone, but in that much time, honestly, I couldn't count, Peter. Yeah, go on.

Peter Doherty:So I imagine you might— you arrive in a city that's a new route and you might think, wow, what a great route, I'm glad we're going here. And you might arrive at others and think, why are we going there? You've been in Brisbane 24 hours. Where do we fit in that continuum?

Jeff Moomaw:Brisbane is front and centre. You may not have heard this, Peter, but we're planning to announce new service— or not announce, fly new service to Brisbane from LA in December. Got a little bit nervous there. There's a lot of reasons why we're doing that. One of those reasons is that Brisbane itself is a city that is on the growth path, right? It has one of the fastest growing populations of any city in Australia. From an economic standpoint, there's also growth happening as well, whether that's in the industrials, whether that's in commercial segments, whether that's in tourism. All of these things are contributing to that growth. And it's not just the growth that's happening now, But the forecast for the future shows that that growth is going to increase by 60% over the next 15 years. It's incredible growth. You know, the other thing that's been growing during this time is Delta's presence in Los Angeles. It wasn't more than 5, 6 years ago when Delta was just one of many at that airport. And we spent a lot of time growing our capacity to get to the point now where we are the leading airline in Los Angeles. That capability allows us to connect to 40 different markets in the US, right, once that flight starts coming into Brisbane. But beyond that, we've also invested an incredible amount in Los Angeles. Gert-Jan was just talking about all the incredible transformation that's coming soon to Brisbane. We've just gone through that journey in Los Angeles, and the Terminal 3 there is brand new. It's beautiful. We've got one of the best sky clubs in all of North America in Los Angeles. And in the 4th quarter of this year, we're going to open up something new. This is our Delta One Premium Lounge that's going to open in the 4th quarter of this year. So all of these things coupled together make it a perfect time for us to begin serving this market. We're very excited to do so.

Peter Doherty:You've touched on passenger. Talk to me about freight. The biggest market in and out of Brisbane is to the US. How significant is that part of the equation?

Jeff Moomaw:Absolutely part of the equation. Belly cargo is a very important piece of the equation for Delta. And you're right, the US is the number one trade partner with Brisbane for that type of a service. This is one of the reasons we've chosen to fly our A350-900 on this route. This is our flagship aircraft, not just from a passenger standpoint, which I'll talk about in a moment, but from the belly cargo side. It's our most capacity that we offer. You know, we were talking about growth in Brisbane. The other reason this market is really unique— there's two. actually. One is the demand set, you know, coming from an airline that's based in the US, most of our flying to Asia Pacific tends to favor the US point of sale, right? That's where our strength is. You've got a bunch of different currency fluctuations that factor into that, but generally speaking, you could see 70% US point of sale. For the Brisbane market, we're actually seeing that mix almost 50/50. Wow. Which is a real testament to the amount of demand from Australia wanting to get back into the US. But it's also the type of demand, right? This is not just leisure cabin tourist type demand. We see a really strong appetite for premium experiences, and that's why we're very excited about the 350-900, because on this aircraft we've got 300 seats that are going to fly. 80 of those seats are premium seats. Right? 32 are Delta One suites. These things are wonderful if you've ever had the chance to fly them. They all have their own privacy door, direct aisle access, of course the flatbed and the beautiful IFE. But the other piece is the premium economy. We're going to have 48 premium economy seats on this flight. These seats have 75% more recline than a main cabin seat. They've got the same type of premium food and beverage you'd get in our business class cabin.

Peter Doherty:Wow.

Jeff Moomaw:And from a customer experience standpoint, the scores actually rival our business class. So our revenue management team won't like me saying that, but please try that product. And the reason we're putting it in there is because we see that the demand is for that product.

Peter Doherty:So stepping back out then from Brisbane at a wider level, how does Brisbane then fit into your wider Asia-Pacific network?

Jeff Moomaw:Yeah, so Asia-Pacific has been very dynamic. If you— you probably know this better than anyone else, Peter. These were some of the first countries to go into the pandemic. They were some of the last countries to emerge from the pandemic. And what you have seen is very similar to what we saw across the rest of the world, where once countries started to emerge from COVID you saw a big spike in the amount of travel. Generally speaking, we saw the US open first and we saw that big boom. Europe, Latin America came very shortly after. And the jury was out what was going to happen in Asia. Well, we've seen the exact same. The one— one of the many things we learned during COVID was there is a huge appetite for experiences and interpersonal interaction that you cannot get from a Zoom screen, right? And that's really good for us. So we've seen a lot of growth. Last year we grew 40% to Asia Pacific. This year we've grown almost another 40%. And the South Pacific is a I'm intrigued.

Peter Doherty:You're an Olympic partner. You've got a gorgeous LA-28 plane. You flew the Olympic flag from Paris back to LA only a couple of weeks ago, and we're an Olympic city here. So that doesn't come cheap. Delta spent $400 million US on that partnership. What has that meant for the airline, and has it been worth it?

Jeff Moomaw:Yeah, of course it's been, it's been worth it. And for a number of reasons, you're right. It's a very expensive partnership, but it's one that we are deeply passionate about for a number of reasons. The Olympics, like like no other venue out there, really brings the world together through sport. You know, and our mission statement at Delta is no one better connects the world. So there's this strong correlation of bringing together different people and different cultures, and whether that's through sport or through travel, it's the same, right, the same end goal that you're trying to accomplish. But beyond that too, there's this correlation between what happens with these athletes who are absolutely world-class and have gone through so much training and effort to be where they are, and the coaches that help them to get there. You know, at Delta, we have this philosophy that to be a leader, you have to be a servant leader, right? And that means that you are there to enable your team to be successful, and it's not the other way around. And it is so true of what coaches do for their athletes, right, in terms of putting together these training plans, the discipline and the dedication, making sure that safety is paramount to everything. Those correlations come straight back into how we operate ourselves as an airline. So when we saw the opportunity to sponsor Team USA, we jumped at it. These athletes are world-class, and it's because of the way that they train and that discipline and that focus on safety that get them there. And the end result, of course, is being on the world stage, which is where we like to compete.

Peter Doherty:A quick plug, if you've got a question, we're keen to take questions from the floor. You can do it the modern way, but if you want to do it the old school way, pop up your hand and the team up the back will get a microphone for you and we'll rock and roll from there. So if on-time performance was a gold medal sport, you guys would be standing up at the top of the podium. How have you got to that point?

Jeff Moomaw:Yeah, we're very proud to be at that point. For Delta, it's really not an option to be anywhere else. If you put into consideration, at Delta we had 190 million passengers last year. 100 million of those connected, right? That's about 140,000 passengers connecting every day each way, each day in our 8 hubs in the US. It's an incredible amount of volume that we have. 80,000 of those connect per day in Atlanta, right? Looking at 14 different banks that flow across that airport. And one little blip can cause all sorts of operational challenges down the stream. So it's really important for us. The other thing that we also know is we study NPS as closely as anyone else. And the first 25% of that NPS is what we call SCOT+BAGS— safe, clean, on time, and with bags. If you cannot get that basic right, You can forget about the rest of the experience because you've already lost it. So the way that we get there is through investment, not so much just in technology, but it's actually in people, right? We are, we are in the people leadership game. And like many other airlines that went through COVID, we experienced something very similar, right? We didn't know if we were going to come out. We didn't know what was going to happen. During COVID we didn't furlough a single employee. But we offered voluntary packages, and as a result of that, we got 25% smaller during the pandemic. When that demand came back, we had to grow like everyone else, and we boosted our employment by 30%. That then required an incredible amount of training to get these teams back up to where they are, and that's where our focus has been. So the technology, of course, it's been advancing, and we use AI and things like this to help us. But it's on the people side that get us to win. And you're right, one of the results is we have been named by Cirium, who tracks pretty much every metric you could ever imagine on the planet, about a million calculations a day. And for 3 years in a row, we've been named the number 1 operator in North America. And that's by a 2.5-point advantage over number 2, who's not even another US airline. So very proud of that.

Peter Doherty:You based in Seoul. You head up Delta's trans-Pacific joint venture with Korean Air. How important is that joint venture model going forward, do you think?

Jeff Moomaw:Yeah, so partnerships and particularly joint ventures are critical and foundational to Delta, and I'll tell you why, Peter. You know, partnerships in aviation date back to the beginning of time, basically, and the way they all started out, we're all very familiar. You had interline and code sharing, share capabilities, which basically allowed customers to put together an itinerary and expand the reach of where they can go. And that worked for a long time. The problem with that was is that the customer experience lagged very far behind. Yes, it was a great commercial move, but if you really want to be successful long-term, you had to be able to solve the customer experience side. And let me tell you why this is so important for us. We studied it at Delta and we took a look at some of our customers who just fly on Delta domestic in the US. We then did a study of those customers who fly Delta internationally, but just on Delta, and then those who connect on Delta's partners internationally. And it was a really eye-opening result for us. For one, we found that the highest concentration of our highest level loyalty members are the ones who are flying on Delta and connecting to partners internationally. The amount of revenue that they provide to Delta was a 2 to 3 to 4-fold magnitude versus those who just fly domestic. And the customer experience scores were a good healthy 20 to 30 points worse, right? And it's all because of that connecting experience. So we had to challenge ourselves and think, how can we actually affect this change? We all know airlines are incredibly complicated. We have a number of different systems that are out there that we have to change in order to drive customer experience to make it better. It's very difficult to prioritize international just alone as an airline. How on earth do you do this with another airline who has very different competing things that they want to try to get done? So we found the equation, right? The equation is through joint venture partnerships. Not just by sharing what we earn in those markets, but also the ability to invest in these partners. And then we co-invest in these customer experiences. And I can tell you the results have been fantastic. It stretches the entire spectrum. If you think about it, even before you start to travel, your customer experience is starting, right? You're trying to buy an airline ticket. Well, if you're buying an airline ticket on delta.com, And you're flying on Korean Air, you should be able to buy a seat and select a seat and see what kind of amenities they have, right? You should be able to check in for that flight on your app because if you can't, your whole experience starts in a really bad place. When you get to the airport, you should be able to go to either check-in counter and be able to do that. And you should know that someone behind the scenes has your back. All of these things are live and real. All of these things came online within the last 5 years because we have the ability to co-invest with our partner. And it's not to say that codeshare and interline aren't great. They are. They immediately provide connectivity. But if you really want to affect the customer experience and have it seamless, which we think is the path, you've got to be in a partnership where you can do this together. So they're incredibly important for us. And I'll give you one other example if I can, Peter. The power of partnerships goes beyond just the airline. It's with all partners together. And we'll give you an example. Anyone in this room who's traveled to the US and connected realizes that that connecting experience doesn't start off great. If you've got a checked bag, first thing you have to do is grab that checked bag and then put that back in. You have to check it back in so it can go through security. You as a traveler also get the privilege of going through security again in the US. Yeah. It's complicated, it's painstaking, but a great example of this is airlines coming together, working with airports and together with government bodies to try to change that for the better. And you're going to start to see that come online later this year, and it's going to be transformative for, for travel. None of that happens without these deep-rooted partnerships who can all work together to benefit customers.

Peter Doherty:I saw you watching the previous session very closely on sustainability. What's your take if you were to give us more a North American lens?

Jeff Moomaw:So sustainability, I think one of my takeaways from, from that session is it is critically important. There's no question it's the number one issue in aviation, and unfortunately there is no silver bullet. If there was a silver bullet, we would have all spent a ton of money and we wouldn't be talking about it. But it's not. So at Delta, what we've done is take a twofold approach to sustainability. First step is you have to embed sustainability into everything that you do, right? And for us, it even starts with our headquarters where we're actually— we're beekeepers now. We're very proud of that. But we've got bees on our campus and they service not only us but the surrounding community. We've got edible gardens, right? So when you walk in, you can select a fruit or a veg on your way in. It also comes down to food waste, where in many of our Sky Clubs, we have a goal of reducing the food waste by 90% in order to be better in that regard. We also have expanded our pre-select meals in flight. So Delta One customers have been able to do this for a long time. Premium economy customers now can too. The amount of food waste that is saved saved by doing that alone is absolutely incredible. And of course, it also benefits the customer. We've tried to eliminate a lot of single-use plastics, right? Alone in 2023, we reduced 2,000 tons of single-use plastics, which have multiple, obviously, carry-on effects. We've also tried to electrify as many ground service equipment as we can. At the end of '22, we were 25% electric. Some of our stations like Salt Lake City and Boston have gone 100%, and we're trying to expand that even more. And we've also started to invest in some other companies who are performing this. An example is Joby Aviation, who creates electronic vertical takeoff and landing vehicles, right? These can take you from downtown to the airports without burning any fuel. So you have to have a very broad net, right, to capture it. And of course, the other pillar is carbon, right? We have a goal to be carbon neutral by 2050. During COVID we were able to proactively retire our entire 777 fleet. That came at a cost from a commercial standpoint because those had the best range and the best capacity that we had, but they were also our most inefficient aircraft. And so we decided to make that change, and now we fly next-gen aircraft that are 25— 20% more efficient than 777s, and we're going to continue to do more of those activities as we move forward.

Peter Doherty:Let's hit some quick questions. How is your New Zealand operation going and how does not having a feeder partner impact performance?

Jeff Moomaw:Well, we have partners, you know, in the South Pacific. We don't have a joint venture partner, you know, like we do in Korea or in Europe or in Latin America, but we have a number of carriers that we do connect to from a codeshare and airline basis. We just launched this route a year ago and it immediately had a lot of success. Candidly, this route does quite a bit better during the southern summer because there's a lot of demand from the US coming in, but we want to be here for the long term. You know, the New Zealand market, the Auckland market was a new one for us. We're also in Tahiti, right? We've also continuously served Sydney for about 15 years, and we're excited to have Brisbane. So we're invested in the South Pacific. We think this is a an area of growth, and New Zealand is an important piece of that.

Peter Doherty:Another question, what's your recommendations to achieve better on-time performance in Australia after seeing this morning's on-time performance statistics?

Jeff Moomaw:Okay, so—

Peter Doherty:They want solutions.

Jeff Moomaw:Yeah, yeah, on time, very clear. On-time performance is a complicated task. It starts with Having a dedicated target for that, not just at the individual team level, but everyone in the company needs to be supporting that same goal. And in fact, in Delta we do, right? We have all of our incentive compensation schemes start with on-time reliability as the number one topic because it takes an absolute collective effort to improve that. There always needs to be a focus on MRO, right? I think a lot of folks throughout the day have talked about some of the challenges with supply chain. Being able to predict some of those further out is a key enabler to be able to have that on-time reliability. Those are just a couple. I can't get into any more specifics than that, but it takes an awful lot to do, but it starts off with dedication from the top.

Peter Doherty:I'm intrigued that Delta has a very big program of Returning profits to employees. I understand that happens on Valentine's Day. Tell me about Valentine's Day in your household when that bonus lands.

Jeff Moomaw:It is our— it's the favorite day of the year. So at Delta, we have this philosophy. We call it the virtuous circle. And this is something that has governed us for decades and decades. And we hold it to be very near and dear to us. It's not a secret, but it's very difficult to actually do. And it's very simply this. You start off by treating your employees incredibly well. Give them every tool, training, everything that they need to perform well. They then in turn will take great care of the customers, and the customers and their returning business will take care of the stakeholders. And it goes around and around and around. And one of the best ways that we celebrate this is on Valentine's Day every year. That's the day that we do profit sharing. And we have an incredible program. Basically, the first, I think, $2 billion that we make in profit, 10% of that goes into the tank, and anything more than that, 20% goes into the tank. And last year on Valentine's Day, we got to pay out $1.4 billion to the employees of Delta, which for any Delta employee meant about a 10% bump on top of their annual salary. So it's an incredibly exciting day. It's really exciting for me because I get to participate in that, and my wife also works for Delta, so we both get to participate. We have a great day. I don't tell her what mine is, she doesn't tell me hers. We just go to the shops and, and we go from there, but it's a great day for us.

Peter Doherty:Okay, so there's takeaway happening in your house on that night. I just want to— time's running out— I want to fast forward to the end of this year. In Brisbane, we're going to have a very unique situation where there's going to be 5 carriers flying between Brisbane and North America. We've never had that before. We've never had this much capacity before. How will your airline be standing out and differentiating yourself in what will become a pretty busy market?

Jeff Moomaw:Sure, yeah, we think there's a number of ways. For one, there, there has been quite a lot of growth to Brisbane. I think 40% versus before the pandemic. But the number one market to Brisbane from the US is Los Angeles, and that market is only about 50% recovered. So Delta's going to step in and help fill some of that gap. The other piece of this, which we think is going to make Delta very successful, is Delta has an incredibly strong focus on our partnership with corporations in the US. It is our bread and butter, and we're very passionate about that, and we're confident that the amount of incremental corporate traffic coming from the US to Brisbane and back and forth is gonna benefit us. And it's also that demand set, right? Like I said, after emerging from COVID one of the things that has been very consistent is not just wanting to travel for the experience, but the premium experience, right? And we've invested a lot of time and effort make sure that all of our wide-body aircraft have 4 different products, one of which is premium economy. So you've got something for everyone because we see a big amount of that demand set focusing on premium, and we think that's something that we're going to be able to benefit those customers in.

Peter Doherty:3 minutes left. Let's get through some questions really quickly. Many have observed in the US that post-COVID, the profitability of Traditionally large airlines versus low-cost airlines, the tables have turned a little bit. What's changed?

Jeff Moomaw:Yeah, it's an interesting dynamic. Quite a bit has changed and it hasn't changed overnight, I'd say. When you look at the US aviation industry, it's massive for one, and it's also relatively stable. Over time, what you have seen is a lot of the mainline full service carriers like Delta have adapted different products to those who would typically fly on an LCC, right? So for Delta, we call it basic economy. It gives you the same sort of entry point. The difference is it also comes with all the same service that you would get regardless of what class of service you choose to have. But the other significant change is this appetite for more premium experiences. Airlines like Delta have invested in this for quite a long time. The premium economy product is one example of that. The premium lounges is another. Just generally upgrading all of our lounge infrastructure to be sort of next generation contributes to this too. And those are products that the LCCs don't really have, right? And so it's a little bit challenging. The other piece that's very difficult is that the mainline carriers like Delta We know the future and the growth is international markets. The US market is fine and it's going to grow moderately, but a lot of the future growth is going to be in international, particularly in Asia Pacific. If you look at what the forward GDPs look like, and the LCCs generally don't participate much in that realm. So, you know, they're working to try to figure out what evolution they'll have, but If you follow the demand set, it all points towards more premium experiences, more international experiences, and that's where carriers like mainline carriers like Delta and the rest will thrive, and the LCCs are having to consider that a bit.

Peter Doherty:Inside the final 55 seconds, what sort of demand are you seeing for Brisbane, and why do you think people are travelling to Australia via Delta? What are they chasing?

Jeff Moomaw:It's like I was saying before, it's very interesting dynamic where you're seeing about an equal point-of-sale demand mix between the two. It's a really good combination of tourist-type business and commercial business and just premium leisure, which is another new line of business that we haven't seen quite a lot of before. One of the other things that we saw emerge after COVID was corporate travelers were choosing to extend their experiences abroad They're bringing the family, right? And this market is one of the best markets in the world to be able to facilitate that. I will do that with my family. I'm sure others will as well. It's a great opportunity to be able to expand that trip and to have others enjoy it too. So we think that's going to be a piece of it.

Peter Doherty:We look forward to seeing you touching down in Brisbane in December.

Jeff Moomaw:Thank you. Look forward to it.

Peter Doherty:Jeff Moomaw from Delta. Give him a round of applause.

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