EDWARD BASTIAN, CFO OF DELTA AIR LINES
Interview by Lori Calabro

Delta Air Lines has encountered its fair share of turbulence this year. America’s third-largest carrier not only spent the first quarter of 2007 in Chapter 11, it also had to thwart a US$9.5 billion hostile-takeover bid from US Airways Group and convince creditors and shareholders that its new international business model is viable. For CFO Edward Bastian, who oversaw the bankruptcy process, the best reward must have been the impressive profits the airline racked up after emerging on April 30. The rub, however, was that the board opted to name Richard Anderson, the former CEO of Northwest Airlines, to the top spot, instead of Bastian, who was named president in late August. But, as the 50-year old Bastian recently said, “This is not a business for the faint of heart.”

You’ve just been through some turmoil in the management ranks at Delta. How distracting was the protracted CEO search?

It’s impossible not to be a little distracted at a time like that, but with the benefit of the strong business plan with which Delta emerged from Chapter 11 protection, the company continued to execute its sound business strategy. We have a very strong management team leading this company, and I am glad we have retained the significant majority of that team through this process.

For the first six months of this year, Delta recorded net income of US$1.64 billion compared with a loss of US$4.28 billion during the same period last year. What made the difference?

We are rebalancing our network. [Previously,] Delta was really a domestic carrier with an international business. We’re now an international business. And that move into the international market doesn’t mean just traditional transatlantic routes. It means going into India direct, going into Dubai, going into Africa, going into economies that are growing at a double-digit pace with metal that we already own.... We’re also pulling the big widebodies out of the U.S. and sending them internationally, where they’re more profitable. And we’re downsizing—or right sizing, depending on your perspective—domestic aircraft.

When you look back at the whole bankruptcy process, what lessons did you learn?

This is a process that can overtake you with the number of creditors, lawyers, and advisers, and when you’re trying to run a business and also manage all these constituencies it can become very distracting. So first, make certain that you’ve got a strong plan going in, not just a strong plan going out. Second, attack the business model. While our focus was primarily on securing the financial foundation of the company during bankruptcy, we also reinvested the savings in tools like airports and ground equipment. As we told our creditors and our employees, at the end of the day it’s the customers, not a bankruptcy judge, who will decide whether this airline is successful. Finally, you have to have open and honest communication with everyone. I can’t tell you how many sessions—we called them velvet-rope sessions—we held in which we took our employees, a couple hundred at a time, behind the scenes to look at where the business is going.

What effect did US Airways’s hostile bid have on your efforts?

We had worked darn hard for well over a year to fix the business. Then, it was as if you were on the football field and you got the ball down to the five-yard line and someone runs in from the bench saying, “Here, hand me the ball, I can take it from here!” And you say, “No, no, we’re going to finish this play ourselves.” It was personal because we had put so much of our heart and soul into saving the place, but in hindsight it was a real blessing because it got everybody on the same page.

One of the most interesting aspects of the bid was that you never showed US Airways your financials. How did you get away with that?

The deal was a nonstarter right out of the box. [Had we been] willing to even enter into due diligence it [would have been] an explicit implication that we thought that the deal had some possibility of going forward…. Of course, we had to convince the creditors not to force us to open the books. We made the case that by staying the course and giving the company the ability to get out of bankruptcy on an expedited basis, [the creditors] were going to get a much better return and get real currency in their hands [as opposed to] the promise of a deal that we believed could never get done.

There are still plenty of obstacles to growing this business. What are the biggest ones?

The price of fuel is a big one. There is the constant impact of geopolitical forces. As a deregulated industry, we are still heavily taxed and regulated. Getting the airspace fixed is another obstacle; the current airspace is still working on 1950s technology.

What about airport congestion?

Airlines can act responsibly by doing things like making changes to schedules and equipping aircraft with next-generation technology. But [the U.S.] Congress must address the very real need for air traffic control modernization that is fairly funded and does not unduly burden commercial air travel customers, who are currently paying more than their fair share and subsidizing business jets that use the same airspace.

Since you are moving into a new role, Delta will obviously need a new CFO. What are the top three things you are looking for in a successor?

Keys for me in the new CFO, in addition to the obvious technical qualifications, will be an individual of the highest character, who is able to quickly integrate and have impact within a strong leadership team while working in a very dynamic—and sometimes volatile—environment. I am also looking for someone who is competitive. We are in a tough industry and we fight hard to win our customers’ loyalty.