Delta CEO: Bringing Chinese travelers back home
Delta Air Lines is committed to working more closely with its Chinese partners and the Civil Aviation Administration of China to get travelers to the US using Chinese carriers, said its top executive.
“China should not give its aviation industry away to the rest of the world,” said Richard Anderson, CEO of Delta.
The US airline is ready to help fix the “unusual and unique ( problem)” through deeper cooperation with its Skyteam partners China Southern and China Eastern Airlines, he said.
“Over time, China has allowed carriers other than Chinese airlines to transport many of its citizens to locations outside the country. That’s unusual,” Anderson told China Daily in an exclusive interview during a brief trip to China last week.
“What we are working on in China is to return Chinese traffic to domestic carriers,” said the CEO.
He met Xia Xinghua, deputy minister of the CAAC, to exchange views on advancing tourism and traffic to and from China. Xia attended the inauguration ceremony for Delta’s Shanghai-Seattle route in June.
Delta now operates 28 daily non-stop flights from Beijing and Shanghai to Detroit and Seattle.
“Our goal is to work with Chinese authorities and partners to recapture with the traffic and put that traffic on our airlines,” he said.
Chinese and US airlines should have 95 percent of all the traffic to and from the US, he said.
“If you look at London, 95 percent of the traffic between the US and UK is on carriers from the two nations. The only exception is China to the US,” he added.
The Asiana Airlines accident in July illustrates that point Anderson said. Half of the passengers were from China.
The US-China route is considered one of the most profitable in the global aviation industry, Li Xiaojin, a professor with China Aviation University told the media recently.
The average profit margin of a single flight between China and the US is three times that of a domestic flight in the US, he said.
Lack of internationally competitive hubs leads to passenger outflows from China’s second and third-tier cities to South Korean market, industry observers said.
Statistics show that by July 2012, Beijing Capital International Airport had 105 overseas destinations and 1,016 international flights every week. Shanghai Pudong Airport had 77 overseas and 999 international flights every week.
Much of the competition is coming from South Korean carriers that have access to more than 30 Chinese inland cities where they grab a large number of residents to flying to the US.
Inchon Airport had 94 overseas destinations last year and 1,521 international flights a week.
A 30-day visa-free entry to South Korea for US visa holders is a big attraction to Chinese travelers. Cheaper fares, comfortable service and easy transit have all made Korean carriers a top choice.
Compared with world’s leading air transport hubs, the airports in Beijing and Shanghai need more advanced facilities, scheduling and connecting complex, said Anderson.
He said Delta is ready to offer practical experience as operator of one of the world’s largest hubs in Atlanta, Georgia that has landings and takeoffs every 45 seconds. “We can show how to make this complex work,” he said.
History of hubs
Delta has hubs in London, Paris, Amsterdam, Rome, Atlanta, New York, Minneapolis, Detroit, Cincinnati, Salt Lake City, Seattle, Los Angles and Tokyo.
“When we look at the totality of the relationships we have around the world, we are proud of being associated with so many fine airlines,” he said.
Delta already has management training programs for China Southern and China Eastern Airlines.
“Our goal is to closely integrate our operations and systems with the two Chinese carriers. We have played a leading role in acquiring gates and slots for the two airlines to have services from China to the US,” Anderson said.
With 25 years of aviation industry experience, the 58-year-old knows how to collaborate to win.
Delta’s purchase of Virgin Atlantic, a leading transAtlantic carrier, last year brought “phenomenal results”, he said.
It enabled the US carrier to gain a significant share and slot position on the London-New York route, the most lucrative and largest in the world.
Building Terminal 4 at JFK has enhanced Delta’s leading position at the busiest air hub on the East Coast of the US. The carrier’s annual passenger flow through the terminal at JFK has now hit 26 million.
It also built a hub at LaGuardia, New York’s domestic airport, which is profitable through 280 flights every day. Delta has a little bit more than 50 percent of the traffic at LaGuardia, the top position among airlines.
“Delta also makes creative and unusual investments in business opportunities,” Anderson said, referring to the acquisition of an oil refinery in Philadelphia last year, a move doubted by many observers.
“Our refinery is a real commitment. It has been a big improvement for our cost controls and a meaningful contribution to push down the cost of refining a barrel of oil into jet fuel in the US,” he said.
The cost reduction to Delta is estimated at about $300 million a year out of the $12 billion it spends on jet fuel. It paid about $150 million for the acquisition.
Delta has also extended its reach through a range of partnerships. It collaborates with Alaska Airlines Group to enlarge its share on the West Coast of the US and has equity investments in GOL and Aeromexico to consolidate its market presence in South America.
Profitability and values
For the first half of this year, Delta posted profits of nearly $1 billion. Anderson vows that “2013 will be the most profitable year in our history”.
In 2012, its profits approached $1.6 billion.
“We have a culture that is very collaborative, where people share ideas,” he said. “We live by what we call the ‘Rules of the Road’ — the company’s values of openness, honesty and encouraging intellectual freedom and creation of new ideas.”
Also elected chairman of the International Air Transport Association, Anderson said he believes in being a responsible corporate citizen and giving back to the community.
“In my capacity at IATA, in 2014 I will further advance efforts in mitigating greenhouse emissions and contributing to a healthier environment,” he said.
Attending Catholic schools in childhood, Anderson said he has cultivated stringent and disciplined work habits.
“I’m very neat, so I never have clutter on my desk. I only touch paper one time and I stay at work until all my messages are returned and my inbox at work has all been completed,” said the CEO originally from Texas.
And he prefers paper and pen to email. “May handwriting is faster than typing,” he said.
Mandy Zhou, general manager of Delta China, said that Anderson’s work style is “very down to the details”, and he “listens to employees’ feedback and take it seriously”.