david: why is it that wall street doesn't value airlines as much as you think they should? ed: our largest investor is warren buffett. he said you guys are the chicago cubs of the business world. you not only had a bad decade, you had a bad century. david: initially, you went to frito-lay? ed: i consider that my training at pepsico as my postgraduate work. david: what percentage of people actually lose their luggage? ed: we never lose. we call it mishandled. david: mishandled. >> [laughter] >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪

david: i don't consider myself a journalist. and nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? ♪ people say that running an airline is not an easy thing to do. you have weather to deal with, energy prices to deal with, lots of employees and so forth, but you grew up in a family of nine children. so what is easier? growing up in a family of nine children or running an airline? ed: running an airline, certainly. our family was great. i am the oldest of nine. and i was sharing with david earlier that when i was five years old, my mom -- we already six kids in the house, so nine kids sharing three bedrooms.

one and a half baths. my dad was a dentist and had his practice inside our house. my mom worked for him. and so it was -- david: wasn't that busy a practice at times, i guess? ed: he must have had some gaps in his schedule. the interesting thing about it was that growing up, i didn't travel -- i didn't board an airplane until i was 25. david: really? ed: we could not afford it. too many of us and it was not who we were. and i always recall one of my most stark visuals of my childhood is we went on one family trip a year. my dad would get us all in the station wagon. apologies to our safety friends and regulators in the audience, but there were no seat belts, no car seats. there were nine of us, my dad, my mom, my grandmother in a station wagon all piled in. we were allowed to put whatever we could fit in our pillowcase. and brought it for two weeks. and that was our family trip. so i must have figured somewhere in my unconscious that there has to be a better way to travel. >> [laughter]

ed: i am still pursuing that mission to this day. david: your mother must be proud that her son, her first child, oldest child is the ceo of delta airlines, which is the largest u.s. air carrier. ed: the largest in the world. david: though she ever call you with ideas or complaints? or not that much? ed: all the time. all the time. she gives me her ideas. i always ask her, please when , she is traveling not to tell anybody who she is. that never lasts. i have caught her, people have told me she applauds the end of the little safety announcement that i do on the front-end of the plane. it is kind of cute. david: you travel on delta yourself. david: most of the time. david: so you fly coach? ed: often. i fly coach. i find it more interesting back there. david: what about the legroom? ed: the legroom is fine. >> [laughter] ed: what you find when you're flying coach is that it's more entertaining so you don't worry about legroom. you see what else is going on. that is where the real people are. that is where the party is.

david: ok, so let's talk about running an airline generally. to be honest, a lot of people say if you want to run an airline or a business, go to a good business school or work your way up and be a management expert, but you were trained as an accountant, which is a great profession, but some people would say the best managers of the world are not cpa's. david: one of the things about accountants that i think they get a bad rap is that they are all about the numbers, very introverted, into their analysis. is that, what you learn as an accountant is the numbers are actually the language and the vocabulary of business. david: for some reason, wall street does not value airline companies as much as you would say they should. why is it that wall street does not value airlines as much as you think they should? david: well we are moving in , that direction. we are still not there. our largest investor is warren buffett. he now owns 11% of delta. and warren after years of having , sworn off the industry, he had

a saying, which i love. he said you guys are the chicago cubs of the business world. you not only had a bad decade, you had a bad century. >> [laughter] ed: we got our bad century out of the way. we are now in a place where we have really fixed the business. david: he changed his mind, because he used to say if a capitalist had been at kitty hawk seeing the wright brothers take off, he would've shot them down. because there was no profits made in the airline industry for 100 years when you compare the profits versus the losses. but that has changed a bit now. ed: it has changed. he wouldn't say that today. if you were to ask him. this year will be the fifth year in a row our profits have been in excess of $5 billion. david: and your revenues are what percentage in the united states, and what percent outside? lisa l: sheryl: -- ed: our revenue is about two thirds u.s., one third international. david: international, is that more profitable than u.s. generally because of longer flights? ed: it is the opposite. international is more difficult to get to. the planes are bigger, the fuel costs more, the service levels probably are substantially higher. and ticket prices, because there

is a lot of competition internationally, are more suppressed. we actually make 80% of our profits in the u.s. closer to home. david: 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 other people to get gasoline to you? ed: we do. 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 oil prices -- crude prices were north of $100, we saw our cost of jet fuel was escalating. we were in fact paying another $25 a barrel on top of the crude prices just to get jet fuel. we are the most price insensitive consumers of that product. we don't decide each day whether we fuel up planes or not. we tell them six months out, we are coming, so any of the costs are being pushed onto the airlines, so we needed to get more supply in the market. we have got a great refinery outside of philadelphia. trainer, that we acquired. we opened it. it was closed for about a year.

we put a whole community back to work. and it was a great story. and to this day, it has been very profitable. we have earned our returns on that many fold. david: now in the 1970's, there was a big push for airline deregulation. prices had been set by the icc. ed: that is right. david: we then probably had 10 or 12 major domestic airlines. now we have more or less three or four. has deregulation really worked for the american people or not? ed: it has absolutely worked. one of the changes that has happened in the industry that caused problems for years is we were seeing nothing but just a commodity. price was the sole determinant of what airline you took. we have changed that paradigm where we are now competing on quality, service, and people. david: suppose i say i want a cheap price but i want some good food. is food a big deal to people who fly these days? ed: food is important. and we've brought a lot of food back. you know, the industry 15 years

ago wound up getting rid of food, getting rid of basically anything, and charging fees galore. we have come full circle. we have reintroduced main cabin food services on a significant number of our aircraft. in international improving the overall quality. david: suppose i say i wanted cheap fare, i don't care about food. i will bring my own food. can you bring your own food on? ed: you can bring your own food on. david: i just want to make sure my luggage is not lost. so what percentage of people actually lose their luggage? ed: we never lose. we call it mishandled. david: mishandled. >> [laughter] [applause] ed: we always know where it is. it just takes us a little longer to get to sometimes. david: when you are an airline executive, you basically have two companies you can buy planes from, more or less. ed: two, not more or less. david: mixture -- yeah, not more or less. you have boeing and you have airbus.

you fly a lot of boeings. your longest flight is from atlanta to johannesburg, 17 hours? ed: that is right. david: 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. and 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 we never -- safety was never a part of the consideration in making that decision. david: while you are in bankruptcy, u.s. air said we want 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 they said that is not going to happen. ♪

david: you grew up in poughkeepsie? ed: dixie, new york. david: 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. and that point in that profession, that was the pinnacle of success. i said if i am at a company where my pinnacle of success 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 down to dallas at frito-lay. 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, somebody called you and said how about delta airlines? ed: yeah, yeah. i was an active business traveler. i was traveling probably 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 actually make it better. of course, i get there, and you

actually 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 eventually then you became the , chief financial officer. ed: chief financial officer. david: 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. ed: that is right. david: 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, it kept pushing prices 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. u.s. air came in and offered $10 billion to buy delta, for a company that is not worth anything. everyone assumed, well, that is going to be a foregone conclusion. the people of the company stood and they said that is not going , to happen. we have a better idea. we have a better business plan. we were able to convince the creditors through the restructuring process to stay with delta and as a result of that, you see what we have been able to do. david: as a part of that you , said to the employees and your colleagues we will give you 10% of the profits, to the employees. 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. and we made a commitment to the employees at that that once we point 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

let's say last year for employees? ed: last year, we paid $1.3 billion to our people in profit-sharing. 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: ok. 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? or not? ed: we do, but not for a good reason. i'm a firm believer we need to make wi-fi free across all of our services 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 have heard me a hundred times to include gogo which is our service provider. i always tease them and call them no go. they had made some progress, and slow go, they will eventually 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 get that if we made it for free the system , would crash. once it gets about 10% take rate on board, performance starts to erode. if you turned it on for free -- which we tested many times 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. as well as -- david: we can fly to the moon and back, and we can't have everybody using internet on the plane at the same time? ed: you sound like me. one of the things i tell people, we are closer to the satellites in the sky, why shouldn't it move? be faster? but as they remind me, we are not traveling 500 miles per hour as we are sitting at home with our wi-fi broadband access. david: there was a proposal to let people talk on their cell phones on the airplanes, but that was voted down by the fcc. a lot of people did not like it. ed: that was voted down by me. i would never allow that on delta. whether they allow it or not, we are not allowing it and delta.

[applause] david: we haven't built a new airport in this country of any size since i think 22 or 23 years, in 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 that are out there, they are 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: but 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 is going to take a few years. airport construction is the most difficult construction that is done because you have got 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 a new airport 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. and 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. in terms of -- at least freezing where it is at. david: are they doing anything about it or what is going to happen? ed: yeah, i absolutely think they are being responsive to the administration. today in the persian gulf, there is 30 airplanes a day that fly between the persian gulf and the united states. not one of those fly 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: the air traffic control system, 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: that is true. absolutely. david: what are you doing about that? ed: it is absolutely safe, but unfortunately, it is radar based. many cars have better gps than what we access in our airplanes. and the opportunities to improve the air traffic control system are not only speed for 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 actually 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 call it a velvet program. ed: when we went through hard times, we did not have a lot of cash. we decided the only way we would

ever be successful again is we are going to 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. you know, what we do we do , serious work. we do hard work. i think it is important to remind myself that while i do serious things, to not 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 my feet as well. david: two hours and -- ed: that was the first few miles. >> [laughter] david: but you finished. ed: i finished. i'm here. david: did you have the delta ceo -- ed: i wore my delta colors loud and proud. raised $2 million for cancer research for children -- [applause] thank you. i can't -- 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 maybe 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 actually taking pay cuts. we decided the only way we were ever going to 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. so our people were downtrodden. years of pay cuts, job losses, and all of the difficult things we remember from almost 20 years ago. and 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 am not sure we ever 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 power points. we had no slides. we deliberately kept it as uncorporate as possible. we had coaches, we had chairs, we had curtains. we had low lights. as people were working -- walking in they would come into , our room and see people dancing around. no wonder they are bankrupt, they probably thought. we got a crisis on our hands and these people are dancing in an abandoned macy's building.

but 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. i think 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. and we do these meetings to this day. we can afford to actually 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, or can you make 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. so global expansion is certainly something that is very 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. and 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, and pictures, people want to go and explore and see for themselves something that they may have read about. now they feel that is affordable. opportunities not only for the millennials and the young generation that want experience, but also baby boomers and old people. david: i would focus more on the baby boomers bucket list because they are going to 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 watched 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 am not sure -- i got my work cut out for me. david: suppose i college am a 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. right? 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. and every day, your work environment is different, and you have got different people coming through and you have to adapt. you think about why people travel. people travel for all reasons. on an airplane for happy , reasons, sad reasons, for business, for pleasure, to go explore, to go meet their grandchild for the first time, and there is all this emotion in this tube of roughly 200 people all sitting within 40 yards of

one another. so it is a social experience, as well. and people that want to actually make the world better get into travel. ♪

♪ francine: minouche shafik knows the worlds of economics and finance well. she was the youngest ever vice president at the world bank before becoming director of the imf. at the bank of england, she was responsible for balance sheets of nearly 500 billion pounds. forbes even named her one of the most powerful women on the globe. now, she is back to the world of academia as the director of the world-renowned london school of economics. in september, i spoke with minouche shafik for "leaders with lacqua." there is a htr