Thu April 3, 2014
Transatlantic Duo Looks Into The Future Of Flight
Originally published on Thu April 3, 2014 5:34 pm
ROBERT SIEGEL, HOST:
This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.
And now, Delta Airlines and Virgin Air go together like Ford and Jaguar? That one didn't go so well. But in the case of these two very different airlines, which are global partners, marriage appears to be working out. So say our next two guests, Delta CEO Richard Anderson and Virgin founder Sir Richard Branson, they're both in Washington attending the U.S. Chamber of Commerce Aviation Summit this week.
And they've joined me in the studio. Welcome to both of you.
RICHARD BRANSON: Thank you.
RICHARD ANDERSON: Thank you for having us.
SIEGEL: I should explain. Delta owns 49 percent of Virgin Air. You're transatlantic global partners. First, I'd like both of you to explain what's in it for me as a customer. Shouldn't I assume, closer partnerships mean less competition for you, ultimately higher fares for me? Sir Richard, why don't you start?
BRANSON: Well, the reason that I was keen to have a relationship with a bigger brother was because British Airways and American Airlines got together. And I think if we hadn't got into bed with a bigger partner, I couldn't actually guarantee that future Virgin Atlantic. But together with Delta, we can be extremely strong and I think that would be in the interest of the traveling public.
SIEGEL: Richard Anderson, how is it, and I'm a member of the traveling public, how is it in my interest?
ANDERSON: Well, first of all, you now have a real competitor against British Airways and American in the U.S.-to-U.K. market. Those two carriers together have over 65 percent of the market. And with Virgin Atlantic and Delta Airlines together, you have with Virgin Atlantic the number one consumer brand in the U.K. and one of the leading brands in the world, coupled with the best performing, best branded airline in the U.S. So consumers are going to have more choices and a much more competitive product in the marketplace, against a single big alliance.
SIEGEL: I should explain. In late 2012, Delta bought that 49 percent share of Virgin Air from Singapore Airlines. The price is reported to be $360 million. Singapore Airlines had bought that 49 percent share in 1999 for almost a billion dollars, it's about three times as much. First, what do both of you figure that same chunk of Virgin Air is worth today? And what does that say about the state of the airline industry? Mr. Anderson?
ANDERSON: The value that we pay is actually a lot less than the value we are going to be able to create together. Because in essence, the way we are going to operate, is with antitrust immunity from EU authorities and the Department of Transportation in the U.S., we have the ability to operate as a single network and create huge synergies for consumers and very good returns for share owners.
SIEGEL: As I understand it, one reason that Delta doesn't own 49 percent, as opposed to the 51 percent, is that they can't own 51. Even if you wanted to sell it, you couldn't. British law actually and national law often protects airlines. We treat airlines differently than other kinds of businesses in that sense. Isn't that right?
ANDERSON: Well, if you're meaning foreign ownership and the restrictions on foreign ownership that typically apply, that is different than other businesses. But if you're hunting for cross-border mergers, and that's what the issue is, you can effectively obtain all the synergies of consolidation with a joint venture and antitrust immunity. So from a pure economic market base stand point, what we've been able to accomplish with Virgin doesn't require single ownership.
SIEGEL: When you say joint venture, I mean I think in terms of American businesses in China or in the old Soviet Union or something. Airlines, we just treat differently than other kinds of businesses. Why don't we have a really global world in which anybody can own an airliner?
BRANSON: My own feeling is I don't understand it. You know, it's an antiquated law to stop Hitler owning an airline. And you can have plenty of protections, you know, against North Korea owning an airline in America. But I think actually it would benefit the shareholders of American carriers and British carriers and Australian carriers if foreign carriers were allowed to invest.
SIEGEL: Sadly, the airline story that's on everyone's mind these days is Malaysia Airlines Flight 370. And the journalist Gregg Easterbrook wrote recently about having written on the aviation dimension of 9/11, of the hijackings, and just assuming that in short order transponders would be re-designed so that they could not be easily turned off, or wouldn't easily go off, and was kind of surprised to learn that they seem to be the same technology. Should something be radically changed about the equipment with which we track missing or fallen aircraft? And why wasn't it done 10 or 12 years ago, Mr. Anderson?
ANDERSON: Well, to the first point, absolutely. When you think of about modern technology, this is a solved technology. It's available. It's been available. And these kinds of modifications should be made, to be certain that the ELT has a long life and will endure whatever travails you may have on an airplane. So I don't know the history of the regulatory structure but I do endorse the idea.
SIEGEL: I think you should spell out ELT just for our listeners.
ANDERSON: Emergency locator transponder.
SIEGEL: Sir Richard, same view?
BRANSON: Of course. Of course, a hundred percent agree.
SIEGEL: Why didn't this happen? I mean this is just, of course, nobody - it's not the sort of thing we inquire about when we fly. Will you be able to find the plane should it disappear from the face of the Earth? No one advertises about our transponders (unintelligible).
BRANSON: Yeah, I mean look. I think it is worth stating that - I think it's only maybe in the airline industry loses maybe one in a million or one in a billion people. I mean, you know, it is so tiny. But and when there are incidents like this, the airline industry, I think, is good at making sure that a particular incident never happens again.
SIEGEL: I'm curious about what the wisdom in the airline business is about choice and preference for airline. That is, here in Washington, for example, we have two shuttles that run between New York City and Washington, D.C. It's most of the flying that I've done in the past couple of decades. One is Delta. One is US Air. And the choice for me is almost always based on what time I'm supposed to be somewhere, and how I can do this.
Do you find that flyers, passengers make choices to a great extent based on airline? Or is it you're being there and having the slot and being the most convenient airline for them to take?
BRANSON: If there only two airlines flying side-by-side, and if they're flying at roughly the same times, I would have thought as a passenger I would want to choose the airline that's got the friendliest staff, you know, that gets all the little things right on the plane, that has taken time and trouble over the seating, the lighting, the food, you know, and that differentiates itself from their rival.
SIEGEL: Mr. Anderson, does that square with your sense of the market and...
ANDERSON: It does. I think there are probably four or five important factors in choice. One is schedule, frequency, price, frequent flyer program, quality of the operation, friendliness of the staff, importance of the brand. These are all attributes that go into that decision-making process for the consumer. And at Delta, we have really stressed...
SIEGEL: You set records.
ANDERSON: We set records. And we intend to continue to break the records that we set in terms of being the most reliable, dependable and friendly airline.
SIEGEL: And let the record show that you arrived at NPR a full 10 minutes earlier than Sir Richard Branson did today.
ANDERSON: But he was on time.
SIEGEL: He was on time. He was spot on time.
BRANSON: I had a very important 10 minutes of, you know, business to do just before I came here on time.
ANDERSON: He was right on time.
SIEGEL: Well, Sir Richard Branson of Virgin Air and Richard Anderson, I gather you go as Richard B. and Richard A.
ANDERSON: No, he is - I am Dull Richard.
SIEGEL: I see. I see.
ANDERSON: He is Dashing Richard.
BRANSON: He's big brother.
SIEGEL: I wouldn't have gone there. But Richard Anderson and Richard Branson, thanks to both of you...
BRANSON: Thank you very much.
ANDERSON: Thank you.
SIEGEL: ...talking about the partnership between your airlines.
BRANSON: Thank you.
ANDERSON: Thank you. Transcript provided by NPR, Copyright NPR.