Delta Airlines to Turn Profit Despite Soaring Fuel Bill

NEIL CAVUTO, HOST OF “YOUR WORLD”: All right, well, you would think, being an airline CEO, Delta boss Richard Anderson’s biggest worry would be fuel. For Delta, it is on track to pump out $1 billion more in fuel this year than the last, and could easily double that in short order, so, certainly a worry, but nothing like the battle he could be facing from unions, because it’s not just Boeing getting grief in South Carolina. It’s a big Boeing customer getting grief, well, pretty much everywhere.

Delta Airlines CEO Richard Anderson, my exclusive guest right now.

Very good to have you.

RICHARD ANDERSON, CEO, DELTA AIRLINES: Good to be here. And thank you for having me.

CAVUTO: You know, you and I were chatting briefly during the break. That fuel bill is eye-popping. You’ve got to pass a lot of that along, right?

ANDERSON: Well, we -- our fuel bill for the full year will be up almost $2 billion. We’ll probably have about $400 million in hedge gains, and we think that we’ll recapture about 75 percent of it in the cost of tickets.


How do you make up for the tickets? Do you say or try to explain to your customers? They see what’s going on with their own gas and fuel prices. Or are they just angry?

ANDERSON: I think people understand that, when the costs go up that way – it’s like your utility bill at home. You see that fuel cost adjustment on the bill every month. People understand when they see it go up at the pump that it -- that the ticket price has to go up at the airport.

CAVUTO: Now, does Delta do the fee thing as much as some other guys, where you’re charged where you sit, where you’re charged for your bag, where you’re charged for whether you look to the left or the right? You know what I’m saying. It gets...



Well, when you -- let’s think about consumers generally. Hotels, rent-a-cars, automobile manufacturers, buying a computer online from HP or Dell, you get a lot of optionality as a consumer to pick the package you want. And I just think the airline industry is really following what consumers have gotten used to over -- over decades of direct marketing.

CAVUTO: But do you ever think -- no, no, you raise a good point, Richard. But do you ever think it gets crazy?

ANDERSON: Well, when you look at how we do it, you have plenty of opportunities if you buy the -- if you use the Delta American Express card, your bags are free. And if you...

CAVUTO: If you fly commando, less of an issue.



ANDERSON: Well, no. We don’t want you to do that.

CAVUTO: No, you don’t want -- you don’t want me on that plane.

ANDERSON: We don’t want you on that plane.

CAVUTO: But that’s one way you can do it. And, obviously, all the airlines, your own included, have gotten up a lot of change doing that.

ANDERSON: The other way is, be an elite traveler on Delta. Be a gold, a platinum, a diamond elite, and your bags fly free. So -- and then a lot of consumers, a lot of travelers...

CAVUTO: Just that you don’t, right?

ANDERSON: Well, no, I -- I’m a coach traveler on Delta.


CAVUTO: No, I’m kidding.

But there are bigger worries for you down the horizon. They have nothing to do with fuel. But this whole union push -- you have a very happy work force. You judge the happiest workers, when they do those surveys. Delta is always in the top 10, et cetera.

And now there is a concerted push to unionize. So you must be looking with one eye over at South Carolina and Boeing. What’s going on in your case?

ANDERSON: Well, it’s really disappointing.

Delta has -- as you said, we’re very proud of the direct relationship we have with our employees. And we just went through nine different efforts to organize over 50,000 employees. And our employees resoundingly rejected union representation.

CAVUTO: Well, you know, now they have got a separate push where they can sign them up in 10 days.

ANDERSON: Well, the difference is, we’re under the Railway Labor Act. And the administration appointed two ex AFL-CIO union presidents to two of the three people on the board. And now they’re – they’ve changed the rules.

CAVUTO: But their rules are the rules, right?

ANDERSON: Well, the Railway Labor Act is governed by the National Mediation Board, different than the NLRB.

And the kind of problem that Boeing is having right now, Delta’s been having for a couple of years, where we beat all the union elections, and then two AFL-CIO appointees to the National Mediation Board decided to change the rules that were established for union elections in airlines 75 years ago.

And we think that, basically, the National Mediation Board is just essentially an arm of the AFL-CIO. And it’s disappointing, because...

CAVUTO: So, what happens to you if they get your way? In other words, you’ve beaten back union efforts, because you pay your people pretty well. They’re pretty happy. And in these times, that can be pretty tough.

But you always have dissatisfied workers, and you always have those who, when they see your numbers improving, say, I want more of that. Richard, you should give me more of that.

So, play this out for me then. If they were to unionize, what would it mean to Delta?

ANDERSON: Well, Delta -- first of all, they’re -- we’re going to win no matter what, because we have a 75-, 85-year history of a direct relationship.

So, we’re confident. And when you look at the last 10 years, we’ve won every union election that has ever been -- been tried on the property. So we’re pretty confident of our ability to continue to be the best employer in the industry.

And we have 15 percent profit-sharing plans. We have ESOP plans. We have very good health benefits.

(CROSSTALK) CAVUTO: Those are employee stock ownership plans...




CAVUTO: ... stock. But go ahead.

ANDERSON: So, we take good care of our employees. And we think that’s an important part...

CAVUTO: But what if it’s more than that?

I think this has gone beyond just taking care of employees. It’s the union push to maybe go after the employers. And the more union jobs you can count, the better off they are, and they might be promising a carrot, when, in the end, those workers are going to get a stick.

ANDERSON: Exactly right.

And when you look at the fact that you really don’t need a union in Delta Airlines or at many other companies, because if you look at union membership in the private sector, over the past several decades, it’s steadily declining. And it’s steadily declining because we have a well- educated, productive work force, and we have a lot of very responsible corporations in this country that value their employees.

CAVUTO: But what if Boeing loses a separate case, this whole NLRB thing in South Carolina, and they’re told you can’t expand to South Carolina?

ANDERSON: Well, that -- Boeing is probably the most important manufacturer -- in fact, is the most important manufacturer and innovator in our economy. And I...

CAVUTO: So, if they are shut down in South Carolina, what would that mean?

ANDERSON: It’s very significant, because I think every country in the world would welcome the opportunity to have a Boeing plant.

CAVUTO: So, in other words, a lot of CEOs -- and I have talked to many of your colleagues who say, well, off the record, I’ll just go offshore.

ANDERSON: Well, that’s happening. And I don’t think we fully comprehend that, when you take the regulatory climate that we’re in, the offshore tax climate vs. the onshore tax climate, and the fact that capital is perfectly mobile, we have free trade agreements around the world -- and, by the way, you can get anywhere in the world on Delta Airlines just like that – it’s very easy for capital and labor to be mobile. And...


CAVUTO: So it would be even more mobile if this were to come to pass?

ANDERSON: That’s exactly right, because it’s -- maybe 50 years ago, we had trade barriers. We don’t have trade barriers anymore.

And capital can move and labor can move. And when you look at where the growth is around the world, the economies of Brazil and China are growing at double our rate.

CAVUTO: Very good point.

Richard Anderson, very good seeing you.

ANDERSON: Good seeing you, Neil.

(CROSSTALK) CAVUTO: So you’re in coach.

(CROSSTALK) ANDERSON: Yes, come fly with us. Yes, I fly coach.

CAVUTO: All right.

ANDERSON: It’s a great product back there.

CAVUTO: Very good.

OK, thank you, Richard Anderson, the Delta Air Lines CEO.

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