Delta Air Lines CEO Richard Anderson addressed the company’s decision to put out a statement supporting immigration reform following President Obama’s speech on Thursday night, saying that he believes the airline “needs to reflect the diversity and values and differences of all the people that we carry around the world,” in an interview which was broadcast live today, Nov. 25, 2014 on CBS THIS MORNING (7:00-9:00 AM).
Anderson said that from a business perspective, “having freedom to move across the border and to attract high-quality talent” is important to Delta’s long-term goals.
Anderson also discussed rising ticket prices, saying that fares reflect predicted fuels costs over the next year, which he called “a bit of a thumb in the wind.” He added that Delta plans to unveil a new segment in the cabin that will be “a no-frills fare that will reflect a lower price for the price-conscious consumer.”
A transcript of the interview is below.
CHARLIE ROSE: AAA says it will be the busiest Thanksgiving for travel in seven years. 46 million Americans are expected to be on the move this holiday week, weather permitting. More than 3.5 million will fly. But even with a dramatic drop in gas and oil prices, airfares are up about 1%. They now average about $372 a ticket. Richard Anderson is the CEO of Delta Air Lines. We’re pleased to have him back here in Studio 57. Welcome.
RICHARD ANDERSON: Thank you, Charlie. Don’t ask me!
NORAH O’DONNELL: So, about holiday travel…
ROSE: Why are prices going up?
ANDERSON: Well, I think we should be careful about how we think about fuel prices long-term. We’ve had different points in time over the last five years where we’ve seen fuel go down $20. Next year, we’re still looking at $100 a barrel when we talk about refining costs, taxes, movement of the crew and movement of jet fuel into airport.
GAYLE KING: But if the prices go down, does it translate to better prices for us?
ANDERSON: Ultimately, an economist will tell you that lower input costs will equal lower consumer costs, and I think if you take a look at real airfares in the last 15 years, real airfares are still down, 2000 compared to 2014 if you look at the DOT data, so it’s still a tremendous bargain.
O’DONNELL: But Richard, we always hear that when ticket prices are up, people say it’s because fuel costs are up. So then why isn’t it also true that when fuel costs go down, ticket prices go down?
ANDERSON: I think you will see in the course of 2015, Delta is going to introduce a value fare. In other words, we’re going to segment a cabin of the airplane and have a basic economy fare that is a no-frills fare that will reflect a lower price for the price-conscious consumer.
ROSE: And you hope that means you will have full planes too, don’t you? Well, capacity planes.
ANDERSON: When you think about it, the industry has really only been profitable the last three or four years, and the last time it was this profitable, fuel prices were about 50 to 60 cents a gallon. And next year, all-in, fuel prices will be – Delta’s budgeting about $2.80. And one figure that’s important: a one-penny increase in a gallon of jet fuel for Delta is $40 million a year. So as we plan our business, we have to be very careful about being certain we get all the pricing right.
ROSE: For future reference, what is your assumption about gas prices, oil prices for 2015? From your budget planning.
ANDERSON: Budget planning, we’re going to average around $2.80 a gallon.
O’DONNELL: So it will remain low?
ANDERSON: If you take the forward curve today, what you can buy the full year for and put all the costs of putting it into an airplane, it’s going to be, we estimate, about $2.80. But remember all this is a bit of a thumb in the wind.
KING: But two days out from Thanksgiving, people are looking at you saying, “I’m trying to get to Grandma’s house. There’s a storm coming. What is Delta going to do to make sure that I get there on time and safely?”
ANDERSON: The one thing we have done at Delta is we have fun an incredibly reliable airline in terms of completion factor and on-time performance. The most important thing to tell people I think on the East Coast is that there could be some difficult weather here in the Northeast Wednesday evening. Rain turning to ice. There’s weather waivers out there. Delta has a weather waiver out, but our goal is get everyone to Grandma’s on time for turkey.
ROSE: Have mergers been good for the consumer?
ANDERSON: I believe they have been good for the consumer, and let me tell you why. You still have an incredibly competitive marketplace, and more than any other consumer product, airfares are perfectly transparent to consumers. So you can go to any number of websites that are available 24/7 and get perfect transparency in pricing. And those websites are run by independent organizations that do a good job for consumers. We have very contestable markets. We have three big global carriers, three big national carriers, and then a number of deep discount carriers.
O’DONNELL: Can I ask you about Delta’s position on immigration? Because I understand that after the President gave his speech on Thursday night, Delta issued a statement that said, “Delta Air Lines applauds the steps to enact much-needed reforms to the nation’s immigration system.” Why speak out about this? It’s controversial.
ANDERSON: Well, if you’ve seen some of the emails I’ve gotten, you would sort of wonder why did I speak out about this.
ROSE: But why did you?
ANDERSON: Because this problem needs to be solved. I can’t speak about the legality of what the President says, but if you think about it, we are a nation of immigrants.
KING: It means something personal to you?
ANDERSON: Well, you don’t make those statements on a personal basis, but yes, my grandmother and grandfather were immigrants. And we are a country that was built by immigrants over decades, and to have six or seven million people living and working in our society and not have a solution to that problem, seems to me one that ought to be solved.
O’DONNELL: But why, from a business perspective, is it important?
ANDERSON: Look, we’re an airline – this year we helped carry 175 million people. We have thousands of employees in countries all around the world. And immigration reform and having freedom to move across the border and to attract high-quality talent, because our company needs to reflect the diversity and values and differences of all the people that we carry around the world.
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