Yesterday I expanded on a few points Jeff Smisek, United’s CEO, made to a group of investors at the JP Morgan Aviation, Transportation & Defense Conference in New York. In due diligence & out of interest in hearing what American Airlines and Delta Air Lines had to say, here is my summary of their presentations below:
American Airlines – Beverly Goulet, VP of Corporate Development & Treasurer: Beverly ran through her presentation with scripted precision, and it was focused exclusively on operating performance, fleet efficiencies, capacity issues, fuel hedging, and alliance building. One of the five goals for 2011 was stated as “Earn Customer Loyalty,” but I didn’t hear anything in her speech that touched on improving the customer experience onboard or hints at frequent flyer program enhancements. She did mention the “Your Choice” program, whereby customers can purchase preferred seating, early boarding, and other individual or packaged products, but nothing related to its success or future developments. I have to keep in mind, though, that this was a presentation to investors, although Jeff Smisek provided a lot more in terms of customer experience for United Airlines.
The “big headwinds” for the carrier, as she termed it, are rising fuel prices, having the highest labor costs in the industry, capacity discipline, fuel efficiency, and reduction in distribution costs.
On the positive side, she mentioned the alliances with British Airways and Ibera, and particularly the near “shuttle-like” frequency American has in tandem with British Airways on the lucrative New York JFK to London Heathrow market. Their alliance with Japan Airlines is slated to begin April 1st even in light of earthquake, tsunami and other events the country is facing. She also brought focus to their 5 domestic cornerstone markets of New York, Los Angeles, Chicago, Dallas and Miami.
Delta Air Lines – Ed Bastian, President: Ed built his speech around the slides instead of a scripted version a la Beverly, which I found refreshing. Much of his talk focused on the financials, and in particular the impact Delta has experienced in Japan as a result of being the largest U.S. carrier into the country. Anticipating a $50 million revenue hit as a result of the events there, Delta is being proactive in cutting capacity in the market, but is committed to quickly responding once the demand picks up.
The audience seemed impressed with the capacity cuts Delta has made, including in the Atlantic market where revenues are not keeping up with the increase in costs, particularly fuel. As United and American did, Ed mentioned the “unprecedented level of price discipline in the industry,” whereby fares have risen to nearly keep in line with the sharp rise in fuel. On that line, he also mentioned the retirement of 120 least fuel-efficient aircraft, including the DC-9-50s and Saab turbo-prop fleets.
On the customer experience side, Delta is targeting to earn incremental revenue of $1 billion by 2013 through technology enhancements, product investments and untapped revenue streams. Customer experience items include the soon-to-be rolled out Economy Comfort seating, the SkyPriority program for high-revenue flyers, and other ancillary products such as SkyClub passes and Wi-Fi. Additionally, he mentioned that more than 50% of the international fleet will have the lie-flat product by mid-year, and improvements are coming for JFK Terminal 4 and Atlanta.
Finally, during the Q&A portion, he did reveal that 35-38% of all ticket sales come through delta.com, with Online Travel Agencies (OTAs) representing 20-25% of total sales. Beverly at American was questioned for similar amounts, but was not forthcoming with their figures.
My final impression: From the subject & tone of the questions asked & subsequent answers given by each carrier, it sounds like United came out the winner, with Delta in second and American trailing behind in third. I didn’t listen to the other airlines in attendance, so this is an enormously subjective and unscientific ranking. From my customer-oriented perspective, United gave away the most juicy details for the future, which is why some of the blogs and postings on FlyerTalk & MilePoint came alive yesterday. Finally, my thanks for making the presentations & materials public!