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ROBERT SIEGEL, HOST:
There are many uncertainties about U.S. economic policy these days. Questions about monetary policy at the Fed and fiscal policy in Congress, not to mention the rollout of a major new entitlement program, Obamacare. We’ve been wondering how top business executives make decisions in that uncertain environment, what they make of it.
Yesterday, we asked the CEO of Pella, the Iowa company that makes glass windows and doors. Today, the view from a bigger company. Richard Anderson is the CEO of Delta Airlines. Thanks for joining us again, Mr. Anderson.
RICHARD ANDERSON: Thank you. Thank you, Mr. Siegel.
SIEGEL: And over the past year, Delta stock has gone up by 174 percent, I gather. Is it fair to say that the economy is OK for you guys?
ANDERSON: The economy has been good for us. And in fact, it’s been good for us in the U.S. and around the world. And so we’ve been very pleased with our bookings over the last year and what we’re looking forward to as we move into the winter season.
SIEGEL: But given all the pending issues in Washington, whether it’s a Fed policy or a budget deal or implementation of the health care or regulations, what strikes you at Delta as the most important step that needs to be taken here?
ANDERSON: The government needs to solve the sequester issue and the debt ceiling issue permanently. And regardless of whether you’re a Republican or a Democrat, if you’re in the leadership of the most powerful, wealthiest nation in the world, it’s just not acceptable that we lurch from event to event every 90 days. And that’s what’s causing a lot of the angst in the economy. 2012, our economy in the U.S. grew at 2.8 percent, and it’s 1.5 percent in 2013. And one of the factors, I believe, is that we need stability in the underlying funding of government and the debt ceiling issue.
SIEGEL: So the fiscal stalemate in Washington, in your view, translates to slower growth, and slower growth can’t be good for an airline. On the other hand, we’ve had stalemate for the past year and you’ve had a pretty good year.
ANDERSON: We have had a good year but we are still economically dependent. So our business is dependent upon what the GDP does in the U.S., Europe, Asia Pacific and Latin America. So we have made the most of it. I think there is underlying strength in the economy, particularly given the fact that, you know, U.S. saving rates are very high. Corporations in the U.S. are doing very well. They have all-time high cash balances and they’re making a fair amount of investment around the world. So we’ve taken advantage of that. But I do think we would all be much better off from an employment standpoint if we had stability in our government, in Washington, D.C.
SIEGEL: Are you worried about inflation?
ANDERSON: No. I was worried about inflation two years ago, but it hasn’t demonstrated itself. I think there’s still extra capacity in our economy. And while we do see some pockets of inflation in different suppliers to Delta, you know, overall, it just hasn’t materialized the way some economic forecasters have thought it would over the last couple of years.
SIEGEL: You’re saying the pessimists have been proved wrong on that score, on inflation.
ANDERSON: They have. I mean, the reality is – and by the way, I don’t think we should count at the way the Fed does because the Fed, you know, excludes some things like, you know, fuel and the like. I mean, but when you look at it all in – energy, food, total inflation – it’s not been unreasonable.
SIEGEL: Do you track business travel and personal travel separately at Delta or try to and figure out which one is going where?
ANDERSON: We do.
SIEGEL: And which one is going where?
ANDERSON: We see double-digit increases in corporate travel over the course of the past year, so corporate travel has been quite strong. You know, as markets open up around the world, the airline industry in the U.S. ends up being a critical component of corporate growth in economies outside the U.S.
SIEGEL: And can growth in the corporate sector compensate for less travel by families just going on personal business or vacations?
ANDERSON: Well, consumers are still traveling a lot on personal business and vacation. We’re going to have a gangbuster December. But we see very strong bookings on both the consumer and the corporate side. And, of course, we match our capacity to demand. You know, this year, we will only be up 1 percent in capacity year on year. And we keep our capacity below GDP growth, and we will keep our unit cost below inflation growth.
SIEGEL: Mr. Anderson, thanks for talking with us once again.
ANDERSON: Always good, Mr. Siegel. I love to hear your voice when I’m driving to and from work on my local public radio station.
SIEGEL: That’s Richard Anderson, who is the CEO of Delta Airlines.
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