With all the consolidation among airlines, where does that leave us, your customers?
The industry is incredibly competitive, probably one of the most competitive industries in our country or in the world. And consumers have good transparency through the Internet on fares. So there’s plenty of contestability in the marketplace with four big carriers. If you analyze airfares since deregulation, they’re down on an inflation-adjusted basis, including fees—probably down a third from where they were [before] deregulation. And they’re down about 10 percent from where they would have been right before 9/11. So we still offer tremendous value.
Are you interested in buying Dreamliners?
When I was CEO at Northwest in 2003, I shook hands with Alan Mulally to buy the first 18 of them, and we made a decision in 2009 to defer that. They’ll get it right. Boeing’s (BA) a great company.
Having said that, you have no order for Dreamliners.
We have an order, but it’s out in 2022. Eventually we’ll get there.
Is your new terminal at JFK a big deal for Delta (DAL)?
Very big deal for Delta. New York is the No. 1 international market in the United States—22 million, 23 million passengers a year. Delta’s the largest carrier at JFK. And now we’ll have 17 international gates with our new partner, Virgin Atlantic, in the same terminal. And we’re going to be kicking off phase II and building an additional nine gates after we dedicate the facility.
Jet fuel is a huge factor in your costs, so Delta actually got into the oil-refining business.
We did. We bought the Trainer refinery from ConocoPhillips (COP) just south of Philadelphia, on the Delaware River.
Will that provide all the fuel you need?
It won’t, because we buy $12 billion of jet fuel a year. It will provide about 25 percent of our domestic usage. … Even though we bought a quarter of all the jet fuel in the U.S., we didn’t participate in the pricing function of the market. Now we do.
What’s the biggest threat to Delta’s success?
We don’t have a strong national airline policy. And travel and tourism is the No. 3 driver of GDP in this country. One, we’ve got to have a modernized air traffic control system. No. 2, we are the highest-taxed industry in the U.S. If you look at the details, there’s 20 to 22 percent sales tax on every domestic ticket sold. No. 3, we need to make sure that the commercial regulations that affect our industry aren’t burdensome. Four, we need a level playing field [with] state-owned and state-subsidized enterprises around the world to be certain that we can compete on an equal basis. If you look at countries like China, and the Middle East, and Latin America, they view aviation as one of the most important strategic assets for their country in terms of economic development. In the U.S., I think we may take that a bit for granted.
Do smartphones really do anything that affects a plane?
Our position is that we should do the science and allow people to use their portable electronic device through taxi, takeoff, and landing. And we’re going to go down the process together with the FAA to put the testing protocols in place to allow airlines to do that. We think it’s feasible.