Ed Bastian said: "Simply claiming to go premium doesn't make an airline a premium carrier." Delta Air Lines CEO Ed Bastian.

Summary: Impacted by a $6 billion increase in fuel costs, Delta Air Lines lowered its full-year guidance.

Fuel is eating into Delta Air Lines' profits. The carrier sharply cut its full-year guidance on Friday due to a $6 billion increase in fuel costs. But even as oil prices rise again, the CEO of America's most profitable airline, Delta Air Lines (NYSE: DAL), Ed Bastian, said the company is prepared to withstand severe oil price fluctuations.

Amid rising oil prices, airlines have raised ticket prices and increased baggage fees. So far, consumers have largely been willing to accept the increases, and travel demand remains resilient. But some airlines may fall into losses this year, though Delta Air Lines is not among them.

The Wall Street Journal conducted an exclusive interview with Bastian to discuss how the aviation industry is coping with industry turmoil, the persistently strong demand for various premium travel services, and why this premium market leader still insists on not adopting Starlink in-flight Wi-Fi.

The Wall Street Journal: When we last spoke, the market was generally more optimistic that oil prices would fall. How do you see the situation now?

Bastian: Obviously, the decline in oil prices didn't materialize. Oil price movements are really hard to predict. So we focus on what we can control. Oil prices rose 60%, but the company still achieved profit levels close to the same period last year, which is quite remarkable. Looking back at past cycles of sharp oil price spikes, such performance is very rare across the industry.

The Wall Street Journal: Is there any consumer group showing resistance to higher ticket prices? Are some consumers already giving up travel?

Bastian: It's not about giving up travel entirely, but lower-income groups are the most price-sensitive, which is why we reduced capacity supply in that segment. Holiday travel booking data is strong, and we expect fourth-quarter revenue to rise 20% year-over-year.

The Wall Street Journal: Spirit Airlines went bankrupt earlier this year. If high oil prices persist, do you expect more companies in the industry to collapse?

Bastian: I can't predict what next year will look like. But if current oil prices remain high for an extended period, the industry will inevitably see various types of shakeouts and exits. The reality is that only three airlines in the entire United States were profitable this year; since the COVID-19 pandemic, basically only these three have been able to sustain profitability. Many other airlines are continuing to lose money. Therefore, shareholders of these airlines will inevitably demand that management deliver improved performance.

Photo caption: Rising fuel costs push airlines to cut flights and raise ticket prices | Brandon Bell / Getty Images.

The Wall Street Journal: Is there a ceiling for premium travel demand? Could the premium segment become overcrowded?

Bastian: I don't think the segment is crowded yet. But simply claiming to go premium doesn't make an airline a premium carrier. We have been deeply committed to premium travel for 15 years. Premium travel is a complete experience, not just installing new seats or connecting to the Starlink network. As for the overall supply and demand dynamics of premium travel, I judge that we are still in the early-to-mid stages of development. Market demand for premium products remains very strong.

The Wall Street Journal: Speaking of Starlink. Elon Musk publicly criticized you. Does that bother you?

Bastian: I don't read those comments. Jokes aside, we know our position in the in-flight connectivity space. We are the industry pioneer in in-flight Wi-Fi. We were the first to launch free high-speed in-flight Wi-Fi, setting the industry standard and pushing the entire industry to follow suit. Starlink itself is an excellent product, and we know it very well. In the early days, we participated in early integration evaluations of Starlink's aviation version, but their business model doesn't match ours. We are satisfied with our current choice.

The Wall Street Journal: Your competitors are heavily promoting the advantages Starlink brings. Don't you think this could become a competitive disadvantage for you?

Bastian: Advertising and promotion are easy, but the key is actually delivering the corresponding service quality.