August 7 - Abandoned And Humiliated


INDUSTRY ANALYSIS

By Kevin Mitchell

 

What’s next for American and United after Delta no-shows for long-sought Oval Office Open Skies meeting?

Do you remember National Geographic videos of lemmings obediently following their leader over a cliff? For the last four-and-a-half years, the aviation version has been American Airlines and United Airlines submissively following the leader of Delta Air Lines (collectively the “Big 3”) in a multi-million dollar, anti-consumer lobbying campaign against Open Skies and the much-needed competitive choice Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers) provide travelers.

Given the Big 3’s squandering of tens of millions of dollars of shareholder money, and even greater amounts of political capital, it was a disastrous cliff of Himalayan magnitude, especially for Delta.

On July 18, things took a bizarre twist in this lemminglike journey. After more than 1,600 days of spending lavishly on lobbyists and public relations spin masters, and harassing any politician in sight, the Big 3 finally got what they had been seeking all along - a face-to-face meeting with the President of the United States to make their case.

Remarkably, and quite bizarrely, the leader of the slice (who knew, a group of lemmings is called a slice), Ed Bastian, the CEO of Delta, was a no-show for that Oval Office meeting that included both President Trump and Vice President Pence. When is the last time you’ve heard of a CEO spurning an Oval Office invitation, much less one extended by a President like the current one who is well known for taking perceived slights personally, and having a long and unforgiving memory!?

After incessantly claiming Gulf Carrier competition is an existential threat to Delta’s very existence, Mr. Bastian skipped the opportunity to make his case directly to President Trump. After spending lavishly on the ominous-sounding “Our Future, Our Fight” campaign to try to whip Delta employees into a lobbying frenzy by misleading and scaring them into believing Gulf Carrier competition puts their jobs and their families’ livelihoods at risk, Mr. Bastian turned his back on his nearly 90,000 employees choosing not to advocate directly to the President on their behalf.  

That wasn’t the full extent of Mr. Bastian’s abandonment. Mr. Bastian also deserted Doug Parker, the CEO of American, and Oscar Munoz, the CEO of United, who were left holding the bag in the Oval Office. It was a bag that contained no provable facts but, rather, just the same old tired and disproven political talking points the Big 3 have been repeating for years. Not surprisingly, by all accounts, the Oval Office meeting was a colossal disaster for the Big 3, or more accurately the Big 3, less one conspicuously absent ringleader.

According to reports, President Trump repeatedly belittled Mr. Parker for American’s lagging stock price. If that wasn’t humiliating enough, to add insult to injury, during the meeting the President apparently repeatedly asked who Mr. Parker was, something to which the CEO of the largest airline in the world is not accustomed. As for Mr. Munoz, it sounds like he did little more than occupy a chair. Having publicly crowed about United’s record second-quarter earnings just a couple of days before, Mr. Munoz hardly was a sympathetic or believable advocate alleging unfair competition is afoot, and that the Big 3 are suffering grievous commercial harm as a result.

However, thanks to Mr. Bastian’s absence, Mr. Parker and Mr. Munoz’s day was substantially worse than it otherwise would have been. They had a front-row seat to the President seething, then erupting, about Mr. Bastian’s absence. They had the best seats in the Oval Office to watch their over four-year-old anti-Open Skies lobbying campaign incinerate before their very eyes.

Did Mr. Bastian’s absence really matter that much, and did the volcanic eruption it caused in the Oval Office help seal the fate of the disastrous meeting? Unquestionably it did. Business Insider headlined its article “Trump Furious after Delta’s CEO skipped meeting with US airline CEOs.” According to NBC News, relying on sources who attended the meeting, the President “repeatedly harped on Bastian’s absence, questioning how he could be a no-show after his airline - more than any other - had been fanning the flames of the fight,” and there was “a lot of yelling.” A blogger at Live and Let’s Fly summed it up as “Trump’s Anger Over Delta CEO Torpedoes Protectionist Cause.”

Despite that humiliation, Mr. Parker and Mr. Munoz had the consolation that their leader, Mr. Bastian, had a good and legitimate business reason to put them in such an untenable position, right? Actually no.

According to a video explanation prepared for Delta employees, Mr. Bastian chose to start a family vacation instead of attending the Oval Office meeting. Of course, family is important. So too are legal, fiduciary duties such as capitalizing on the unique opportunity to personally explain to the President of the United States a threat you claim puts the continued existence of your company at risk, not to mention the purported livelihood of your nearly 90,000 employees.

As Mr. Bastian reportedly told employees in his video explanation, the Oval Office meeting with President Trump and Vice President Trump clashed with the beginning of his vacation - “as I was heading out of the country.” Not the middle of the holiday, the beginning. It isn’t as though the Bastian family would have to pay Delta’s over-the-top exorbitant change fees and be gouged for the fare difference too if they needed to delay the start of their trip by a day or two.

Last year Delta shareholders paid Mr. Bastian some $15 million in total compensation to fully and vigorously represent their best interests. Mr. Bastian told his shareholders Gulf Carrier competition is an existential threat to Delta, so much so it needed to spend tens of millions of dollars of their money to lobby against it. This wasn’t just some Washington meeting on a tertiary, non-material issue. It was an invitation from the President to an Oval Office meeting on an issue that Delta, for over four years, has said is its number one government and regulatory affairs priority.

Yet, it was inconvenient for Mr. Bastian to attend. Six other CEOs, including Mr. Parker and Mr. Munoz, hastily rearranged their schedules and traveled thousands of miles to attend but it was too bothersome for Mr. Bastian. I wonder if the Delta Board agrees with this decision, especially given the fallout for Delta and its shareholders that no doubt will result from it as Mr. Bastian has placed a no-show albatross around his and Delta’s neck as long as President Trump occupies the Oval Office.

What about Mr. Parker and Mr. Munoz regarding the Oval Office no-show by their leader, Mr. Bastian? What do they think of Mr. Bastian choosing to go on vacation and leave them holding the bag in what reportedly was a humiliating and embarrassing meeting that sunk their anti-Open Skies lobbying campaign? Have they become introspective wondering if it was such a good idea for all these years to have American and United run full speed toward the cliff only to see their ringleader, Mr. Bastian, choose instead to go on vacation while they dutifully charged over the edge into the abyss?

The bigger question, in the wake of the Oval Office fiasco, is what’s next for American and United? President Trump made very clear to Mr. Parker and Mr. Munoz that there is only one course of action available to the Big 3 with his Administration and that is to file an International Air Transportation Fair Competitive Practices Act (IATFCPA) complaint with the US Department of Transportation (DOT). For over four years the Big 3 have refused to file an IATFCPA complaint. Why? According to NBC News, “career officials at DOT previously ran an internal analysis of what would happen if the airlines did pursue a complaint through that IATFCPA process and determined it would almost certainly be dismissed.” That is widely known, including by the Big 3. NBC News also quoted a Trump Administration official as saying “[t]hey’re going to lose the [IATFCPA] complaint” and “everybody knows that.”

In other words, the result of the Oval Office meeting was unexpectedly terrible for the Big 3. The only pathway President Trump left available to them was to pursue a losing IATFCPA complaint. Mr. Parker and Mr. Munoz no doubt understand this.

Abandoned and humiliated, let’s hope American and United finally muster up the courage to tell Delta that it’s no more. It is over. Our protectionist, anti-Open Skies lobbying campaign has failed. Our companies will no longer waste shareholder money, employee time and finite political capital denying the obvious - we’ve lost. It is time to move on and away from the cliff.

©2001 to 2018 Business Travel Coalition, Inc..