>> why is it that wall street doesn't value airlines as much as you think they should? >> our largest investor is warren buffet. he said you guys are the cubs of the business world. not only did you have a bad decade, a bad century. i've always considered to this day my training at pepsi, my years there as my postgraduate work. >> what percentage of people lose their luggage? >> we never lose it, it's called mishandled. >> would you fix your tie, please? >> people wouldn't recognize me if my tie was straight. >> i don't consider myself a

journalist. nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i had a day company and was running a private equity firm. >> how do you define leadership? what is it that makes somebody tick? people say running an airline not an easy thing to do. you have weather to deal with, energy, lots of employees and so forth. but you grew up in a family of nine children, so which is easier, growing up in a family of nine children or running an airline? >> running an airline certainly. [laughter] >> our family was great. i'm the oldest of nine. i was sharing with david earlier that when i was 5 years old, we already had six kids in the house so nine kids sharing three bedrooms, 1 1/2 baths, my dad

was a dentist. he had his practice inside the house. my mom worked for him. >> was it a busy practice at times? you must have had some gaps, but the interesting thing about it was that growing up, i didn't travel -- i didn't board an airplane until i was 25 years old. >> really? >> we couldn't afford it. there were too many of us and it just isn't who we were and i always recall one of my most stark visuals of my childhood is we went on one family tripper trip per year. my dad would put us in the station wagon. my apologies to regulators, but there were no car seats. there were nine of us. my mom, my dad, and my grandmother in a station wagon. all piled in. we were allowed to put whatever we could get in our pillowcase and brought it for two weeks, and that was our family trip. i must have figured somewhere in my young consciousness there has

to be a better way to travel. [laughter] >> so i still remember that to this day. >> your mother must be proud that her first child is the c.e.o. of delta airlines which is the largest u.s. air carrier. >> largest in the world. >> does she have call you with ideas or complaints? >> at time. she gives me her ideas. i always tell her when she's traveling not to tell anybody who she is. that never lasts. it's kind of cute. >> you travel delta yourself from time to time. >> most of the time. >> so you're coach, is that right? >> i often fly coach, yeah. i find it more interesting. >> what about the leg room back there, though? >> the leg room is fine. [laughter] >> what you find when you're flying coach is it's more entertaining so you don't worry about your leg room. you see what else is going on.

that's where the real people are, the party is. >> let's talk about running an airline, generally. to be honest, there are a lot of people that say if you want to run an airline or run a big business go to a big business school or work your way up and be a management expert. you were trained as an accountant but some people would say the best managers in the world are not cpa's. >> one thing about accountants, that they get a bad rap is they are all about numbers and analyses, what you learn as an accountant is the numbers are the language and vocabulary of business. >> for some reason wall street does not value airline companies as much as you would say they should. why is it that wall street doesn't value airlines as much as you think they should? >> we're moving in that direction. we're still not there. our largest investor is warren buffet. he now owns 11% of delta and warren after years having sworn off the industry he has a

language i love. he says you guys are the chicago cubs of the business world. you not only had a bad decade. you had a bad century. [laughter] >> so you got your bad century out of the way and we're now in a place where we've fixed the business. >> he used to say -- seeing the if a capitalist had been at kitty hawk, seeing the right brothers take off, he would have shot them down. because there were no profits made in the airline industry for a hundred years, when you compare the profits versus the losses but that's changed. >> it's changed and he wouldn't say that if you asked him. this year will be the fifth year in a row our profits have been in excess of $5 billion. >> your revenues are what percentage of the united states and outside? >> our revenues are 2/3 united states and one third, international. >> international is that more profitable? >> no, it's just the opposite. international is a lot more

difficult to get to. the planes are bigger, the fuel costs more. the service level is substantially higher and the ticket prices because there is a lot of competition internationally are more. we have to make 80% of our profits in the u.s. closer to home. >> you make a lot of profits, some people say, by owning your own refinery. why do you need your own refinery, you don't trust people to get gasoline to you? >> we do and we certainly use a lot of refineries, but about six or seven years ago, as refineries up and down the east coast were being closed, when -- we saw that our costs of jet fuel was escalating rapidly. we were paying another $25 a barrel on top of the crude price just to get jet fuel because we're the most price sensitive consumers of that product. we don't decide each day whether to fuel our planes. so any of the costs that the refineries have are being pushed

on to the airlines so we needed to break that curve and get more supply into the market. we've got a great refinery outside of philadelphia. a trainer that we acquired. it was closed for about a year. we put it back to work and it was a great story and to this day, it's been very profitable. we've earned our returns on that many fold. >> price was the sole determinant. we have changed it so that we are competing on quality and service. >> suppose i say i want some good food. is that a big deal? >> food is important. we have brought a lot of food back.

the industry, 15 years ago wound up getting rid of food and charging fees galore. we have come full circle on that. to and introduced name are improving the overall quality. >> suppose i say i want a cheap food, can you bring your own food on? >> you can bring your own food on. people percentage of lose their luggage? >> we never lose it. we call it mishandled. [laughter] ed: we always know where it is. it just takes a little longer to get to sometimes. david: when you are an airline executive, you have two companies you can buy airplanes from, more or less. ed: two, not more or less. david: you have boeing and you have airbus. you fly a lot of boeings. your longest flight is from atlanta to johannesburg, 17

hours? that is a boeing 777? ed: boeing 777. that's right. david: you chose not to buy the 737 max. for reasons unrelated to what later became a problem. is that an advantage because you have the airbus 321 and you have more capacity than your competitors, and do you take credit for that decision or was that luck? ed: i put that solely in the rather be lucky than smart category. we are big fans of boeing and we are hoping to see the max fly quickly into the skies, but safety was never a part of the consideration in making that decision. david: while you are in bankruptcy, u.s. air wanted to take you over. was that a friendly offer? ed: everybody assumed that was going to be a foregone conclusion. the people of the company stood and said that is not going to happen. ♪

♪ david: you grew up in poughkeepsie? you went to college at? ed: saint bonaventure university. david: you got your accounting degree? so you were minding your own business, and you were an accountant at price waterhouse. what were you doing at frito-lay? ed: i was fortunate at waterhouse and i moved quickly through the ranks, made partner

and probably at too early an age. i think i was 32, 33 years old. at that point in the profession, that was the pinnacle of success. i said if my pinnacle is at 32, i need to go someplace to learn more and continue to develop. i got a call from a friend that said pepsi was hiring, and introduced me to a person in frito-lay. down in texas. i moved to dallas. i don't have a graduate degree. i just went to an undergrad at saint bonaventure. i've always considered to this day my seven years at pepsico as my postgraduate work, because it is a fascinating company. david: you are at frito-lay and then a headhunter called you and said how about delta airlines? ed: yeah, yeah. i was an active business traveler. i was traveling 80% of my time, a lot internationally. i already thought i knew how the airlines worked. i knew the things that needed to be fixed about the airlines to make it better.

of course, i get there, and you get there and take a peek behind the curtain and see how complex it is. i never understood what actually went into it. it was an industry that was fascinating to me because i was a big consumer of it. david: so you became a senior vice president for finance, then you became the chief financial officer. then you became the president, and then you became the ceo in may 2016, right? ed: that's correct. david: you had some problems before you became the ceo and ultimately delta filed for bankruptcy in 2005. why did you have to file for bankruptcy? ed: it was the aftermath of a series of events which 9/11 triggered. we lost our international business almost overnight. the competition in the u.s. was so competitive, so many airlines trying to take each other's share because prices were pushing lower and lower. almost all the airlines wound up filing. david: while you are in bankruptcy, usair said they want to take you over. was that a friendly offer? ed: doug parker will never live that down. no, we had a pretty hostile

takeover battle. i have an interesting story. we were bankrupt. we were not worth anything at the time. usair offered $10 billion to buy delta, for a company that is not worth anything. everybody assumed that will be a foregone conclusion. the people of the company stood and said that is not going to happen. we have a better idea. we have a better business plan. we convinced the creditors to stay with delta and as a result of that, you see what we have been able to do. david: you said to the employees and your colleagues we will give you 10% of the profits, is that more or less right? ed: when we went through the restructuring, people took a lot of pay cuts. benefit losses, a lot of change. we made a commitment that once we became profitable, 15% of the profits would go back to the people, which we honor to this day. we still do. david: how much did that produce

last year for employees? ed: last year, we paid $1.3 billion in profit-sharing to our people. david: does that mean your stock price would be higher if you did not pay it to them, or you would have happier employees? ed: i think our stock price would be lower if we didn't pay it. david: is internet available on all your planes? ed: it is available on almost all our planes. our smaller regional jets do not have them but wi-fi is on all of them. david: you charge for it? ed: we do, but not for a good reason. i'm a firm believer we need to make wi-fi free and we are working towards that. [applause] david: you are the ceo. you presumably have some influence on that. ed: i do have influence. they've heard me hundreds of times, including gogo which is our service provider. i always tease them and call them no go. they had made some progress, and they are now slow go, but eventually they will get to gogo. one of the reasons, you don't pay for internet practically anywhere else is that planes do not have the technical capacity and capability that we made it

for free, the system would crash. once it gets about 10% tick rate on board, performance starts to erode. if you turned it on for free -- which we tested, it is still not at the level it needs to be. we are investing heavily in the technical capacity in terms of the satellite spectrum. david: we can fly to the moon and back, and we can't have everybody using the internet on the plane at the same time? ed: you sound just like me. one of the things i tell people, we are closer to the satellites in the sky, why shouldn't it move? but as they remind me, we are not traveling 500 miles per hour as we are sitting at home with our wi-fi broadband. david: there was a proposal to let people talk on their cell phones on airplanes, but that was voted down by the fcc. ed: that was voted down by me. i would never allow that on delta. whether they allow it or not, we will not allow it. [applause]

david: we haven't built a new airport in this country of any size since i think 22 or 23 years, since denver. now, laguardia is being redone and so forth. why is the airline industry -- are you responsible for helping to build the airports or not? ed: we are actually building airports ourselves. we got tired of waiting for the government partnerships out there, trying to crack that code. we have massively improved the flight experience, the onboard experience. the next thing is the airports themselves. the airports in our country were built for the 1960's. david: you are building airports where? ed: we are building airports everywhere. we are building the new laguardia airport. delta on its own balance sheet, building that. it will take a few years. airport construction is the most difficult construction because you have to build it, live and operate it at the same time. building a new airport lax, we are building a new airport in salt lake city. we are building one in seattle. we've modernized atlanta. david: speaking of government

support, you have been an advocate for not allowing airlines that have government subsidies to compete against you. is that a big problem? ed: it is a big problem. i have to give the trump administration great credit for recognizing that and reaching agreements with the uae and qatar last year to try to draw attention to it and stop it. at least freezing where it is at. david: are they doing anything about it or what is going to happen? ed: absolutely. they are being responsive to the administration. today in the persian gulf, 30 airplanes a day that fly between the persian gulf and the united states. not one of them is a u.s. airline. they are all middle eastern airlines. if there was a fair playing field, which is what the open sky agreements require, there is no question that the u.s. airlines would be operating but we can't because the fares are subsidized. the costs are paid by the government.

david: what about the air traffic control systems? some people say it was invented in the 1950's and 1960's and we haven't really modernized much. is it really out of date? ed: absolutely. david: what do you do or what can you do? ed: it is absolutely safe, but unfortunately, it is radar based. many cars have better gps than what we access in our airplanes. the opportunities to improve the air traffic control system are not only speed for the customers, but it is the efficiency, sustainability of the environment, the opportunity to make a difference. government dysfunction has been one of the reasons why the air traffic control system -- because you have the faa on a five-year leash. you cannot change out the air traffic control systems with our current funding model. that is why we have been advocating for some different models to go after long-term technology project. most countries around the world have better air traffic control systems than the u.s. does. david: you have a pattern of meeting with employees fairly regularly. you called them velvet program. ed: when we went through hard times, we did not have a lot of cash. we decided the only way we would

be successful again is we have to reconnect with our people. ♪

♪ david: so today, what do you do for outside activities? this is a full-time job obviously, but do you have time for anything else? ed: i love to golf. i don't get much time and i'm not very good at it, but i do enjoy that. we do serious work. we do hard work. i think it is important to remind myself not to take myself too seriously. it is a reminder to stay light on my feet, to remember the importance of human interaction.

i did also run the new york marathon last year. that actually helped. david: two hours and -- ed: that was the first few miles. david: but you finished. ed: i finished. i'm here. david: did you have the delta ceo logo? ed: i wore my delta colors loud and proud. raised $2 million for cancer research for children -- [applause] ed: thank you. i don't think i would be doing another one of those. i am still feeling the effects. david: i have not done a marathon. i would fly a marathon. i would fly 26 miles. [laughter] david: you have a pattern of meeting with employees fairly regularly. you call it the velvet program. can you explain what that is? ed: when we went through our hard times back in the bankruptcy era, we did not have a lot of cash. we didn't have anything. people were taking pay cuts. we decided the only way we would ever be successful again -- delta has a proud history -- was that we would have to reconnect with our people and

get something to catch their attention. our people were downtrodden. years of pay cuts, job losses, and all the difficult things we remember from almost 20 years ago. so in downtown atlanta, there was an abandoned macy's building in downtown atlanta, and we decided to take out a couple of floors in this abandoned building. i'm not sure we even paid for it. i think we just squatted. i don't even know if they knew we were in there. we would bring our employees, we brought all our employees, 600 to 700 at a time for a day, a day and half, an opportunity to talk about the airline. we had no powerpoints, no slides. we deliberately kept it as uncorporate as possible. they would come into our room and see people dancing around. no wonder they are bankrupt, they probably thought.

we have a crisis on our hands and these people are dancing in an abandoned macy's building. what it did was it got their attention to focus on what was really important. our people wanted to know it wasn't their fault that we went through the hard times. so often when companies go through difficult times, employees are made to feel they are the reason. that they are too expensive, not productive enough. that they are a cost when really, they are the very best asset you have. we do these meetings to this day. we can pay for our own space and do nice hotel lobbies and other venues, but we have a dozen of them a year all around the u.s. where we bring people of different disciplines together and we talk about the future. i still lead every one of those, as i did 15 years ago because that engagement is so critical in what we do. david: how do you grow the value of your airline? you just make it more profitable by flying more miles, more acquisitions? anything left to buy in this business? ed: airlines are typically thought to be a mature industry. after all, there's not new places in the u.s. left to fly to. we are building bigger airports,

bigger airplanes, but not new destinations. global expansion is certainly important to us at delta, and we are doing that through our partnerships and delta flying many parts of the world. first of all, i think people are more aware of the world than ever before. people want to travel. they want to experience. again, it is interesting because we are living in as a divisive a time as we can recall for many years. you would think that would hurt airline travel, but technology and social media and instagram, pictures. people want to go and explore and see for themselves something they may have read about. now they feel that is affordable. opportunities not only for the millennials and young generation that want experience, but also baby boomers and old people. david: i would focus on the baby boomers bucket list because they will have to do those sooner than the millennials bucket list, right? [laughter] ed: we are investing in both. david: suppose the president of united states said i watch this interview, you are an impressive person.

you've done a great job. why don't you come in the government and help us in some way? what would you say? ed: i would say i am happy to advise, but i got my work cut out for me. david: suppose i'm a young college graduate or a young business school graduate, why should i want to work at an airline or delta? what is the advantage? ed: free travel. anybody like free travel? for not only themselves, but their partner. if you love people, it is a great business because you are out in the public eye every single day. we do not have desk jobs. our desk job's in the sky. every day, your work environment is different and you have different people coming through and you have to adapt. you think about why people travel. people travel for all reasons. for happy reasons, sad reasons, for business, for pleasure, to go explore, to meet their grandchild for the first time, and there is all this emotion in this tube of roughly 200 people sitting within 40 yards of one another, so it is a social

experience, as well. people that want to actually make the world better get into travel. ♪

scarlet: i'm scarlet fu, this is "etf iq," where we focus on access, risks and rewards offered by exchange traded funds. ♪ scarlet: should you stay or go? the s&p 500 is enjoying its best run in six years. that sets up a clash between investors in etf's and mutual funds looking to stay put or flee. exploring the ecosystem. the crucial role of authorized participants and how they grease the wheels of the etf industry. and let's make a deal. one etf wants to cash in on the