357 - Scott McCartney with Guest Co-Host Henry Harteveldt

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1:00Henry Harteveldt: Welcome to Airlines Confidential. I'm Scott McCartney wishing KLM Royal Dutch Airlines a happy 107th birthday. KLM is the oldest airline operating under its original name. So go felicit KLM. And in the what's old is new category, this Friday marks the 27th anniversary of the final flight of the SR-71 Blackbird. Why does that matter? Well, just this week we learned from Aviation Week that NASA is apparently contacting retired SR-71 engineers about a program to try and get one of the iconic airplanes back in the air. In fact, that particular airplane has disappeared mysteriously from its museum.

1:49Henry Harteveldt: So maybe it will be welcome back SR-71, but it will definitely be welcome back Henry Hardevel. You have been our airline's confidential spy plane of sorts, traveling the US and Europe to bring us the latest airline intelligence. I'm really looking forward to hearing more about your research, including any spy plane espionage. Welcome back, Henry. Thanks for joining us in person today in Dallas.

2:20Scott McCartney: That's right, here at Airlines Confidential Global Headquarters. Well, thanks for having me over, Scott. So yes, I have been hither, thither and yon, as they say. I was on the American Airlines 777-300 flagship suite introduction flight. I was at One World Loyalty Summit here in Dallas, as well as Future Travel Experience, where I got to interview American's chief commercial officer, Nat Pieper, at both of those events. I was in London at the T2RL airline tech and distribution conference recently. I was in Seattle this past Tuesday for Alaska's Media and Investor Day, and I'm getting ready to head to the World Aviation Forum, and One World's Innovation Summit in Lisbon, starting next week, the week of October 12th.

3:10Henry Harteveldt: That really is a crazy itinerary.

3:12Scott McCartney: It is. I think a lot of people know that the fall tends to be conference season for airlines, certainly other industries. And there have been some very interesting takeaways about the state of the industry that we can discuss, but it's been exceptionally busy.

3:30Henry Harteveldt: Okay, we have to start with some just gut-wrenching awful news of the past week. The first officer on Fly Dubai flight 1073 to Tel Aviv, Israel, attacked the captain with the cockpit emergency axe and sent the Boeing 737 MAX 8 into a steep dive. The wounded captain managed to open the cockpit door with what he described as a, quote, last push, quote, knowing the airplane was going down. It's not clear whether he opened the door with the cockpit door toggle switch that is on the center pedestal of the 737 or by reaching the door handle. Some heroic passengers pulled the co-pilot out and subdued him.

4:14Henry Harteveldt: Apparently, one quick-thinking passenger, an Israeli plumber, pulled the airplane out of its dive, later crediting a TV show with familiarity on pulling the yoke back to get the nose pointed up. A dentist treated the wounded captain and two deadheading fly Dubai pilots aboard took over and landed the airplane in Saudi Arabia. More than 180 lives were saved. It appears the airplane came close to suffering catastrophic structural failure. It plunged from 34 ,000 feet to about 17 ,000 feet in less than a minute and reached near supersonic speeds. Part of the rudder was ripped off. Many questions on this.

5:00Henry Harteveldt: Motive is becoming clear. Both the United Arab Emirates investigators and Israeli officials have labeled the incident as an attempted terrorist attack. Investigators are now telling journalists that the man apparently planned this for years and planned to fly the airplane into a terminal at Ben Gurion Airport in Tel Aviv. Current assessment seems to be that he acted alone, but investigators continue to see if he had any help or any training. And the question of, are there others out there planning similar attacks? There are also questions about how this first officer ended up in the right seat of flight Dubai, flight 1073 to Tel Aviv.

5:46Henry Harteveldt: He apparently had a history of radicalism and a sketchy track record with other airlines. Was there important information about him that wasn't shared with flight Dubai? or ignored by Fly Dubai in his hiring? Was the screening not sufficient? And what about his schedule? Israel doesn't allow pilots to fly commercial airliners into the country if they are from countries that don't have diplomatic ties with Israel, such as Oman. The co-pilot is from Oman. Reports in Israel suggest this security requirement isn't closely monitored and enforced and pilots with passports from countries without diplomatic ties to Israel routinely, apparently, operate trips into and out of Tel Aviv.

6:35Henry Harteveldt: Reports say that the passenger and crew lists of Flight 1073 were shared with Israel before the flight, and there's already finger-pointing in Israel as to which government office was responsible for checking names and policing flight crews. And two other major questions are raised by this terrifying episode. First, do we have the right safeguards for cabin crew to get access to the cockpit? My understanding is that crews have a code, typically, to open the cockpit door. But the code has a countdown delay, and pilots inside can block entry if they know an attack is underway in the cabin, for example.

7:16Henry Harteveldt: I suspect in this instance, a countdown delay would have meant certain death for everyone on board. This is a difficult problem. You don't want bad guys to have access to the cockpit by, say, threatening to kill flight attendants, or you don't want rogue flight attendants to attack pilots, for that matter. But we have seen several cases where one pilot overpowers the other or overpowers a flight attendant sitting in when a pilot leaves the cockpit to use the bathroom. This idea of a radical pilot getting a job on an airline to conduct a terrorist attack, you know, after 9-11, we secured cockpits and thought that dealt with the problem.

7:59Henry Harteveldt: But here's more of an insider problem. Let's hope investigations are thorough, honest, and conclusive.

8:07Scott McCartney: You know, Scott, you made some very important points there. There's a lot of speculation taking place as we record this episode of the podcast. I think we know that speculation does not always mean that we know the facts. It is fortunate that the two pilots are alive. I do hope, as you said, that the investigations will be thorough, honest, and reach a good conclusion. But the point that you made about cockpit access is very, very important. And in this case, it seems like the captain knew he needed to proactively somehow get that door open because potentially of that delay in the code to open the door from the cabin.

8:52Scott McCartney: And again, I hope that this will come out. And obviously, an incident like this, like what happened on Flight Dubai is thankfully extremely rare. But I'm sure there are a lot of pilots and a lot of flight attendants and a lot of corporate security people who are sitting there looking at this and thinking, do we have the right security mechanisms in place for the right reasons? what do we need to do in case something as extraordinary as this should happen? Again, I think that the investigation will be critical to understanding, obviously, the state of the co-pilot and what happened, but I do hope we will get some good learning out of this and whatever action is needed, whether it's strengthening cockpit access or creating intelligent workarounds comes out of it.

9:47Scott McCartney: In happier news, United Airlines CEO Scott Kirby was once again in the news talking big about his airline's future at Chicago International Airport. And, you know, Scott, here we are in Dallas, but even this is almost Texan in bravado. It almost makes Texas look shy. Scott Kirby said his vision is for 1 ,000, that's right, 1 ,000 United Airlines and United Express flights at O 'Hare a day. And remember that right now I believe the largest hub is here at DFW with American roughly 900 flights a day. So Scott wants 100 more flights a day at O 'Hare than American is operating here at DFW. Currently, United has approximately 650 flights a day.

10:37Scott McCartney: rival American Airlines has about 470 flights a day at O 'Hare during the peak season. So do the math. This is Kirby again saying Americans should not have a hub in Chicago. And by the way, there's still a lot of construction going on at O 'Hare. Once that is completed, including new terminal construction, which is going to take some time, you know, it'll be great. But right now, the construction has been very disruptive to airplane movements, and the FAA has capped O 'Hare takeoffs and landings while that construction continues. Once it's done, there's no doubt there'll be room for more flights, at least as far as runway capacity is concerned.

11:19Scott McCartney: O 'Hare has eight runways, six parallels, and two crosswind runways. And just for reference, DFW has seven runways, Atlanta five. So once construction is over, O 'Hare should be able to pack in more flights. So is Kirby positioning United for allocation of additional flights once that construction is done? Is he poking at American and trying to show how Chicago would benefit from being a one-carrier fortress hub like Atlanta? Is he just trying to make headlines? I mean, this is Chicago. Chicago has a history with some colorful characters like Al Capone. Is Kirby channeling his inner Al Capone with some of this towards American.

12:00Scott McCartney: What do you think, Scott?

12:02Henry Harteveldt: I think he's more channeling his mayor daily. It's a great analogy. You raised several possibilities, and my answer is yes to all of that. I think Kirby is positioning United for allocation of additional flights, right? When FAA wants, you say you want 1 ,000 flights, You've got 650 if you end up with 800 or whatever, just as long as he has more than American when additional flights are allowed. Is he poking at American and trying to make it look weak? Yeah, absolutely. Is he trying to show how Chicago would benefit from being a fortress hub like Atlanta? And part of this tout was 15 additional international destinations and all of that.

12:55Henry Harteveldt: So, yes, I think he's trying to continue what he started with speech in front of a Chicago business group saying, you'd have a lot more destination choice if we were bigger here and American was smaller. Or is he just making headwinds? Yes. Yes to that, too. You know, like a lot of Scott's pronouncements, I think there's a lot of genius in this from from his point of view in the in the competitive marketplace. And, you know, he picked a number that would get attention and it did. And, you know.

13:37Scott McCartney: You know, there's one thing, though, about this, which is obviously O 'Hare is no longer slot controlled. Right. And, you know, it's gate limitations. And so there's been this skirmish between American and United about gates at the existing terminal. And obviously there's construction plan for new terminals with more gates. So it will come down to who gets however many more gates that, you know, and will American, frankly, fight back? Will American make its case to Chicago, to the Department of Aviation there, about how and why they should get more gates? And then where do they get the airplanes, right?

14:16Scott McCartney: American has a smaller new order book than United does. So will we see American place additional orders and how quickly would they get those aircraft? And if American can get more gates at O 'Hare, how quickly can they spool up and where do those aircraft come from? Do they come from Charlotte, from Philadelphia, Phoenix, Dallas, Fort Worth, or some other, Miami, or another American Airlines hub? And, you know, it is going to be interesting. But what I also see beyond the announcement of just the thousand at O 'Hare is this. By growing O 'Hare, in particular with long haul, is United quietly saying, we recognize we can't push Newark any further than we already have.

15:05Scott McCartney: Yeah. And we realized that Dulles probably can't, you know, just doesn't justify any further investment for the time being in terms of aircraft and additional routes. And in this new world, do O 'Hare and Washington, Dulles and San Francisco become United's prime long haul gateway airports?

15:29Henry Harteveldt: Yeah.

15:30Scott McCartney: You know?

15:30Henry Harteveldt: Yeah, no, it's a great point. What happens with Houston, you know? Right. Well, you have longer range aircraft, so you can hit everywhere from Chicago that you might have been restricted to hitting from the East Coast. Washington and Dulles doesn't have as big a local native market, right? So harder to operate a huge hub from there.

15:52Scott McCartney: Yeah, it's much more dependent on connecting traffic. Yeah.

15:55Henry Harteveldt: So Chicago makes a lot of sense if you can diminish American in Chicago. Right. If you're 50-50 with American, it gets a whole lot harder. But yeah, no, it's a fascinating thing for United. Will United eventually have more in JFK somehow, some way? I mean, I think they're going to start JFK as a trans-con marketplace and not international, right? Yeah. That's going to be a really competitive marketplace, American, British Air, Delta, everybody else at JFK.

16:33Scott McCartney: Yeah. I mean, United may have some focused long-haul route plans at Kennedy that they've not yet publicly discussed. I could see United, for example, potentially launching a flight to Heathrow if they've got the slots, and to Frankfurt, their major European gateway with partner Lufthansa. Yeah, but does that just diminish Newark? Well, it all depends, right? Because you could argue Kennedy and Newark serve different markets. And by adding those flights out of JFK, if they're able to, you free up more seats at Newark, both for local and connecting traffic. We'll see, obviously.

17:12Henry Harteveldt: Yeah, yeah. No, all fascinating. So speaking of United, a few other aggressive Scott Kirby moves. Man is busy. First, United launched sale of Base First, not First Base, but Base First for domestic trips. That's a first class fair stripped of extras. You have to pay extra for a seat assignment on a base first fare. You only get one free check bag. No changes, refunds or flight credits on that fare. It's pretty restrictive. But I suspect for leisure travelers who know they are going and aren't worried about changes and refunds, it may be pretty attractive. By the way, United will have three fare categories for domestic flights in first class, base, standard, and flexible.

18:09Henry Harteveldt: And another interesting move, United is offering some generous status match deals for Delta and American elite tier frequent flyers. Here's another punch to the nose, right? The reason, United wants to highlight its Starlink Wi-Fi service, now available on 40, 45 % of the fleet. Yeah, yeah.

18:33Scott McCartney: They're starting it on the main line. They've got it on regional.

18:36Henry Harteveldt: Yeah. You have to apply for the status match by October 15th. So not long-lived, coming up quickly. United will match your status for a 90-day challenge period during which you have to spend a certain amount with United to retain the status. Those amounts vary from$1 ,500 for silver status to$7 ,000 over 90 days for Premier 1K. The quote from United's announcement about this, don't keep buffering, switch to United and get the fastest Wi-Fi in the sky. Delta has rejected adopting SpaceX Starlink. American has committed only to installing satellite-based Starlink on its narrowbody Airbus fleet starting next year.

19:21Henry Harteveldt: That could certainly change at American. It wouldn't surprise me at all to see them adopted throughout the whole fleet. Just if I may, a point of American

19:32Scott McCartney: has told me that they do intend to eventually install Starlink on the widebody fleet. They're starting with Airbus because I think of the contracts and the timing of that. It works out better for the Airbus fleet. And then they will go to the Boeings, both domestic and long haul. Timing on that has not been discussed. Yeah.

19:54Henry Harteveldt: Yeah. We can talk more about American and timing and all. But Delta, by the way, says it has opted for other Wi-Fi service because of branding and portal issues and true reluctance to rely on Elon Musk. That may prove to be prudent in the long run. But for now, Starlink really does seem to be a game changer. And it's super fast, reliable, easy to use. I had it on my last United flight. Absolutely loved it. We heard Frontier CEO Jimmy Dempsey talk about what a game changer he thought Starlink will be for Frontier. Frontier, for crying out loud. Seems like American and even Delta may not have much choice if this really does move customers.

20:44Henry Harteveldt: So, Henry, question to you. Can it move customers?

20:47Scott McCartney: You know, it can. But there's a marketing guy in me is saying United is being premature with this promotion. When you have a product that's not available even on half your fleet, you are probably being overly aggressive. You're jumping the gun by doing a promotion to woo people away from other carriers. If I were at United, I would have said, this is a great promotion, but let's wait until we have it on 55 % of the fleet, in particular, more of the mainline domestic fleet, so that you can tell people you have a better, a good chance of getting Starlink. I have used Starlink on United and a couple of other airlines.

21:25Scott McCartney: It is remarkable. But what I just read today in your alma mater, the Wall Street Journal, an article by Ali Sider, is that apparently Elon Musk is saying that not putting Starlink on Delta's planes will cost Ed Bastian his job. You know, you talk about ego and arrogance, and that really defines it. I don't think not putting Starlink on Delta's planes will cost Mr. Bastion his job. However, I do think that Delta's decision of going with Amazon, not necessarily because it is markedly better, but because of some issues with Delta Sync, the onboard Wi-Fi platform and branding, is a little more than a little arrogant on Delta's part.

22:16Scott McCartney: It's short-sighted. However, from United's standpoint, and to your question, Scott, about moving customers, if Airline One has Starlink, Airline Two has Starlink, Airline Three has Starlink, the one that doesn't have it and is tangibly inferior, you know, yeah, they could suffer. But when you've got a bunch of other airlines going, it's tougher for one to stand out from the crowd. So I give United credit for this promotion. It's certainly attractive. I I understand, however, that a lot of United Mileage Plus members, in particular at the platinum and 1K level, who have earned their status are furious.

22:55Scott McCartney: Yeah. Because they're worried a lot of people will sign up for this and will somehow qualify. And then, of course, that will make it more difficult in 2027 for all the 1Ks, all the Platinums, everybody to get the upgrades, the award travel, etc. that they all want from these loyalty programs.

23:16Henry Harteveldt: Yeah, yeah. Upgrades and award travel. I mean, it's interesting, you know, as we've talked about before. That's not really what elite status is about anymore.

23:26Scott McCartney: No, it's all about how much you spend. And I know we'll cover some of that later. But what we're seeing here is United is, well, as I said in one interview, this is war airline style. United is, by targeting American and Delta specifically, United is being very precise. And I just wonder what's going to happen. Look, American does have free Wi-Fi on most of its flights. However, you know, on some of the planes, including the 777-200 I flew from Barcelona to Dallas a week ago, does not have that. The Panasonic Wi-Fi on my flight worked intermittently, and I had to pay$35 for it. And, you know, an American let me know that it was going to be paid for Wi-Fi.

24:12Scott McCartney: But if you're paying for something, you really do expect it to work. So I do give, you know, Starlink a lot of credit for bringing fast, reliable Wi-Fi. But moving on, you had Alaska Airlines CEO Ben Minacucci on the podcast last week. He talked about some of the announcements that they would be making at their Investor in Media Day. I was there. Alaska announced a new long-haul business class product, Aurora on the Alaska 787s, Leihoku on the Hawaiian A330s. These will be the long-haul business class cabins with privacy doors, improved life seats, better bedding, improved catering, all of that, new lounges.

24:55Scott McCartney: But what was really noteworthy is Alaska is going to create a sub-fleet of, according to them, quote, at least, unquote, 25 737 MAX 10 aircraft, should that plane ever get certified. That will include lifelight, Aurora suites, a premium economy section, extra legroom coach, and standard coach. So a four-cabin, configuration on the 737 MAX 10. Those aircraft will fly premium transcon routes, including from Seattle, Portland, San Francisco, LA, and San Diego to the Northeast. New York City was mentioned, but the airports were not. And there were also some changes to the frequent flyer program. They're going to introduce a debit card, which by the way, will have six design choices.

25:44Scott McCartney: They didn't announce that for the regular cards. I think they should. And I give Atmos Rewards, which is the name of the Alaska program, credit for something really creative. On October 1st, they introduced, I think it was five, maybe six communities within the program. And you can join whichever you want. But they've got one for food and wine, for families, outdoor travel, as well as two programs, one each specifically for residents of the states of Alaska and Hawaii. And that to me is really novel. I was in Seattle. I got the chance to talk to people at Alaska. They're very excited about it.

26:23Scott McCartney: They all acknowledge that this is going to help them catch up with Delta and other airlines. And importantly, from a one-world standpoint, I think it makes Alaska a much stronger member of the alliance. However, let's talk about Alaska because sometimes Alaska is just Alaska. And they did announce that in the extra legroom coach and standard coach seats, there would be no in-seat video. There will be in-seat video in the Aurora business class suites and the premium economy seats. Now, someone I know and trust at Alaska told me that this is because they were having some engineering issues with the installing the screens in certain rows of the economy cabin.

27:11Scott McCartney: And so to avoid delaying the rollout of this any further, they're going to go with a no screen cabin, at least at first. But there was an audible gasp in the room when they said this. yeah and you know right now alaska does not have screens on its domestic narrow body fleet and you know i say this to alaska with you know from the perspective of somebody who flies a lot i paid for my own ticket by the way to get to seattle i did not accept alaska's offer of a ticket and i bought a round trip first class ticket from dallas to seattle the alaska product is not at all compelling. So if you don't live in Seattle or Portland, there's probably very little reason for you to choose Alaska over Delta, United, or American, because there's really no great point of differentiation.

28:06Henry Harteveldt: Interesting.

28:07Scott McCartney: You know, if you live in Seattle, if you live in Alaska, if you live in Portland, yes, the airline offers a lot of utility. If you live in certain cities in the Pacific Northwest, Alaska is a competitor. But guess what? So is American, so is United, and so is Delta. So Alaska, up your game. You know, the gauntlets have been dropped. American has announced that they're going with screens. You cannot be screenless because you will eventually lose.

28:35Henry Harteveldt: Interesting, interesting, interesting. You know, it matters in Seattle, And they're talking now about making Portland more of a long haul hub.

28:46Scott McCartney: No, they're going to make Portland a connecting hub. A connecting hub. Which I think is brilliant, by the way, because it frees. Yes. Yes. Look, Seattle Airport, you know, don't call it SeaTac. The airport gets mad at you. They won't let you get coffee. The Seattle Airport or SEA is space constrained. They can't add any more runways. They can't add too many more gates.

29:10Henry Harteveldt: Yeah. Yeah.

29:10Scott McCartney: So what Alaska is going to do is turn Portland into more of a North America connecting hub to free up seats in and out of Seattle for higher value, higher yielding local traffic and for connecting passengers connecting on routes that simply don't make sense to serve out of Portland. For example, the long haul routes and potentially some other domestic routes. And I think that's smart.

29:36Henry Harteveldt: So as a connecting hub, geographically, you're going to fly Sacramento, Portland, Newark?

29:44Scott McCartney: Potentially, or you might fly Sacramento, Portland, Hawaii, or Sacramento, Portland, Alaska, or Idaho, or whatever. Now, not every route may make sense. And some people will say, well, why should I go from wherever I live to the Pacific Northwest when there's another hub that's more geographically convenient. That's logical. But for the Alaska loyalists, of which there are plenty, and if the price is right for people who are brand neutral, they may not care if you're connecting. And in some ways, connecting in Portland could be easier than Seattle.

30:21Henry Harteveldt: Right, right. But it seems to me there is the danger of you just don't want to split your hub in two. And that's, you know, are you going to have two flights to Tokyo? No, no, no, no, no.

30:35Scott McCartney: So Seattle is the long haul hub. And at least for the time being, Seattle will remain the long haul hub in the Pacific Northwest for Alaska. They did not announce that they would add any long haul flights at Portland, at least for now. And look, Alaska is a relatively small long haul fleet, so it makes sense to concentrate long haul flights in Seattle and, of course, in Honolulu. But what I would say is that, and by the way, Alaska announced new lounges, including premium lounge, a premium business class lounge in Seattle, a new lounge in Honolulu, new check-in terminal in Honolulu as well. So they're making a lot of improvements to the passenger experience.

31:16Scott McCartney: But what I think is really interesting with Alaska is in a way similar to what United said they wanted to do with Washington-Dulles versus Newark and use Dulles more for connecting traffic and leaving more seats available for local traffic in and out of Newark. And I see that as the same thing with Alaska in Portland and in Seattle. Interesting.

31:38Henry Harteveldt: So back to screens for a second. It seems to me you've got one issue of competition in Seattle, and then you've got the issue of competition in the places you want to grow, like San Diego. Does it put them at a disadvantage for becoming number one in San Diego?

31:59Scott McCartney: Well, you know, in San Diego, Alaska's primary competitor is Southwest, which, of course, right now not only doesn't have screens, they've said they don't want screens, they don't intend to put them on, and they don't have a first-class cabin. Yeah. And, of course, Southwest is strictly a North American airline. They have no long-haul flights for now. They do have long-haul partners. You know, I think that their ability to grow in San Diego certainly is compelling, and I believe they will be successful. They're opening a new lounge there. They've got new facilities and want to grow there. And I think that that will help them.

32:32Scott McCartney: But again, depending on where you're traveling to, there may be stiff competition, not just from Southwest, but from other airlines, whether it's Delta, United, or American.

32:44Henry Harteveldt: Yeah.

32:45Scott McCartney: You know, and so, you know, I certainly understand if Alaska is saying, look, we're going to be making enormous capital investments in these new cabins, in these lounges. and other aspects, new digital experiences. And we want to manage that CapEx. And that's OK. But Alaska announced a lot of stuff that won't start showing up before 2027. So one, they just gave their competitors a lot of lead time to start responding before Alaska gets to the finish line. And two, Alaska should, I think, have at least said, we are contemplating additional improvements to the domestic experience but we got to get through this first part first.

33:30Scott McCartney: Right, right.

33:31Henry Harteveldt: They could have announced phase two. Yeah, or at least said we'll be looking at phase two.

33:37Scott McCartney: Fear not. Yeah. We're going to get there. Yeah. And they didn't.

33:41Henry Harteveldt: Yeah. Yeah. Interesting. Great stuff, Henry. Great stuff. I wanted to mention that I was at a very interesting AI Connects conference called Co-Brand and Travel Rewards. It was a meeting in New York last week. I had a fascinating chat on stage with Bob Daly, a really bright, bright guy who used to run United's loyalty program. We talked about the convergence of banks, airlines, loyalty programs, and technology. It was really quite fascinating. Talk about how banks are moving into the travel space from opening lounges on their own to creating their own booking portals, investing in dining platforms and dynamically pricing awards the way airlines do.

34:24Henry Harteveldt: We have talked about airlines essentially being loyalty programs that happen to fly airplanes, exaggerating that, but making the point of how important loyalty programs are. I kind of think banks are becoming airlines that happen to have ATMs. Again, exaggerating it, but it is fascinating how this all shows how powerful travel is to the consumer. And I think it's far more powerful than it was 10 years ago. But it really is driving consumer habits.

35:00Scott McCartney: Yeah, I mean, Scott, I've worked on the marketing launch of the first airline co-brand cart at Continental Airlines in the 1980s. We actually beat American Airlines to market by, I think it was somewhere between four and six weeks. and you know none of us who worked on that at that time had any inkling how powerful these co-brand cards would be both for the airlines and the banks and you know you talk about the banks and the travel programs well American Express of course has a legacy of being in the travel business they used to have the American Express travel retail travel agencies in the American Express locations, especially internationally.

35:41Scott McCartney: Yeah, and everybody had the green card for their corporate travel. Right, and travelers' checks and all of that. Yeah. But some people may not know or remember is that Chase Bank actually bought a travel agency. And they now own that travel agency, and it is the portal behind Chase Travel. Yeah. But the Chase Sapphire, you know, rewards, all of that, it's heavily based on travel. Yeah. And, you know, B of A, Capital One, all of these guys, the major banks have a major, major travel component as part of their award program. And of course, many of these banks are issuing the credit cards with airlines.

36:21Scott McCartney: Yeah. Bank of America, for example, is Alaska's banking partner. And so, you know, when you talk about airline loyalty programs, the discussion, and I was at the One World Loyalty Summit a couple of weeks ago here in Dallas, the discussion is overwhelmingly about credit card. And what's fascinating is people from outside the U.S. look at us in awe because our banking regulations and merchant agreements and commercial agreements, all that, give banks the financial cushion to buy those points and award them. And that doesn't always exist to the same degree outside the United States.

37:01Henry Harteveldt: No, it's the swipe fee, which is not allowed in Europe. Right. So they can't. But even with the swipe fee, and I know that's adding up to trillions of dollars, right? But it just seems crazy how much banks are now spending on all these different avenues to attract travelers to their card. and, you know, it means$7 billion a year from American Express to Delta. And yet that is still profitable for American Express, right? Right. And that's what's crazy that you could spend all that. I asked Bob when we were talking about it, you know, wouldn't the bank rather have consumers using their own in-house card or some other card where they don't have to spend all that much.

38:03And, you know, the answer clearly is no,

38:07Henry Harteveldt: they're still making so much off of travel.

38:10Scott McCartney: Right. They've made peace with it. I do understand that within Chase, there's been discussion about that very point, Scott, about, you know, all these people who are using third-party loyalty cards versus carrying a Chase card. And, you know, I'm sure they've done or are doing all the analysis about this. And it will be interesting to see what happens. Chase issues multiple credit cards with Southwest, United, others. And I would be fascinated to know the actual crossover between cardholders who have one airline card, regardless of airline, and one Chase card. Right. Especially at the premium level.

38:53Scott McCartney: And which comes out of the wallet first. Right, right. Because that's the real key to it, right? Absolutely. Absolutely. And speaking of Chase, I was in London for the T2RL technology conference. And at one of the tube stops, Chase Bank had done a takeover in part of the ticketing area for the Oyster cards, promoting the use of Chase cards and getting a promotion for buying the tube tickets. So Chase is clearly starting to make a push into other countries with its own branded card products, which you haven't seen too many US banks at least do that. The T2RL technology conference really focused a lot on AI.

39:37I felt AI was this ghost in the room.

39:42Scott McCartney: It was, I think, well, certainly was discussed on every panel in the sessions where I was chairing. And I believe it was on almost everything in the other tracks as well. What I shared was more commercial, like the retailing evolution. And airlines are very clear. They believe in this evolution to become retailers, but it's a catalyst for rethinking organizations, processes, everything. But there was an enormous amount of frustration expressed with IATA. Interesting. You know, IATA is creating these standards and the airlines say that it's taking too long to get them published. They feel that, you know, not future proofing these standards and making them reliant on XML rather than thinking about what can AI do is holding them back.

40:31Scott McCartney: And I think it's going to be very, very interesting to see what happens. The theme is of this year's tutorial conference was the journey to value. I think next year's is going to be this stuff is hard. and they may use a four-letter word in place of stuff yeah but just in case you know yeah i don't get my mouth washed out with soap but you know you you can say it on the podcast i know i'm not going to because my mother in heaven would come down you know not be happy but you know i think that it is really really difficult and that is probably going to be some of the things we will hear in the next week uh at world aviation festival that's that's so interesting iata

41:09Henry Harteveldt: undergoing a leadership change. Yes.

41:12Scott McCartney: And there are a lot of people who want to see IATA become less of an events company and go back to being more of an airline lobbying and representation group.

41:21Henry Harteveldt: Interesting. Yeah. Yeah. Yeah. That's fascinating. All right. One other mention out of the news bin. Our friend Dave Harvey, who was on the podcast in April, was named president and CEO of cargo hauler Ameriflight. So congrats to Dave. Dave was the chief sales officer at Southwest Airlines, where he spent 25 years. He was chief commercial officer at Delta's Wheel Up subsidiary as well. Time now to thank our sponsors for making this podcast possible. We want to thank RTX for its support of Airlines Confidential. At RTX, a century of aerospace and defense innovation shapes a unique perspective. It takes more than technology alone to rapidly advance the future of flight and strengthen global security.

42:11Henry Harteveldt: It takes a vision to see what's next, adapting expertise and scaling manufacturing capability to deliver where and when it matters most. Perspective is everything. RTX, visit rtx.com to learn more. And thanks to Infinity Flight Academy. Infinity Flight Academy is helping build the next generation of professional pilots. Airline hiring may move in cycles, but developing skilled professional pilots takes years. Infinity provides structured airline-focused training designed to develop pilots with the skills, discipline, and professionalism needed for today's flight deck. From individual career pilots to large-scale cadet and university programs, Infinity is helping build the aviation workforce of tomorrow.

43:00Henry Harteveldt: Learn more at infinityflight.com. Infinity Flight, where future airline pilots take off.

43:07Scott McCartney: We'd also like to thank Serium as well. Serium offers the most accurate and precise data and analytics to enable airlines to optimize planning, operations, and passenger services. The right intelligence drives operational efficiencies, enables you to predict market shifts, and helps airlines respond quickly to maximize revenue, manage costs, and seize commercial opportunities. Visit Sirium.com for more.

43:33Henry Harteveldt: And thanks to Ontario International Airport for its support of Airlines Confidential. Ontario International Airport is wrapping up major upgrades in both terminals with additional TSA screening lanes, welcoming exit corridors, and modern family restrooms to make your journey smoother and more accessible than ever. Getting from parking to your gate quickly and back again at the end of your journey is part of what makes ONT SoCal so easy. Visit flyontario.com to learn how the airport is keeping wait times low and creating a better travel experience, even as more passengers choose to fly through ONT.

44:14Henry Harteveldt: Back with the mailbag in a moment. Promotional support provided by the ultimate avgeek website, the archive.net, a vast collection of airline memorabilia, timetables, route maps, rare cabin and airport photos, special flights, and more, all at the archive.net, the hub of air transport history.

44:32Scott McCartney: Scott, it's now time to move to the mailbag. This week, Alex from Detroit offers this, quote, Scott, love the show. In episode 354, in your wonderful discussion with Andrew Levy, you said that the E-195-E2 couldn't fly in the United States due to pilot scope agreements. That statement continues to be incorrect. All U.S. airlines can fly any size plane they want. The issue is the limits on the use of subcontractors, which most or all of the U.S. major airlines have apparently reached. And I believe he means by subcontractors, regional airlines. A small airliner like the Embraer E195E2 could be flown at the mainline carrier just fine.

45:17Scott McCartney: For example, Delta has limits on the maximum size and number of their regional fleet, but operates the Airbus A220-100 and 300, which is a similar sized airplane, at mainline for markets where they need a bit more feed, but not enough to justify an A319. United purchased some 737 700s for the same reason. American could buy the E195 E2 and do the same, but keeps trying to be cheap, and their financial results show the result. Makes one wonder when airlines like American and JetBlue are going to start making decisions to improve their financial results, unquote. Whoa. Yeah.

45:58Henry Harteveldt: When you say that. Well, it's interesting. In my understanding, the E-195, E-2, the issue is not the seats, it's the weight of the airplane. And because of the engines, it's a heavy airplane. So it's heavier than would be allowed in regional airplane scope clauses. That changes the economics. And so for American and others which want airplanes under 100 seats or close to 100 seats at their regional partners where pilots are paid less, where flight attendants are paid less, where it is cheaper to provide lift. It's not possible. Now, bringing into the mainline fleet, as Alex suggests, that's a different economic equation.

46:43Henry Harteveldt: You know, it's really interesting. Delta, I think, has done it successfully, right? And that was a customer experience issue for Delta. And I think it's working for them. So would it work at others? Interesting question. I'm not sure. But what do you think?

47:03Scott McCartney: Well, look, I think that whether it's the E-195 E-2 or the A-220 aircraft, I think both could serve a lot more airlines in the US very, very well in the mainline. And as you said, Delta is using the A220 extremely effectively throughout its network. They fly a lot of them in and out of DFW into New York and elsewhere. And JetBlue is operating the A220. I think JetBlue did make the right decision on that. KLM uses the E195E2, or maybe it's the 190E2, and it's KLM Cityhopper, which is their regional division. You know, so I think there is a place for this airplane. I think that the airlines just need to figure out what the, you know, with their pilots unions and flight attendants unions, you know, how to make the economics work.

47:59Scott McCartney: Right. And again, whether it's the E-2 or the A-220, hopefully they can find ways to make it work. Because very clearly JetBlue and Delta are showing A-220s can be deployed effectively and profitably. KLM is using the E-195 or the E-2. Let's just leave it at that. And other airlines are doing so as well. Where there's a will, maybe there's a way.

48:25Henry Harteveldt: Yeah, yeah, it's interesting. And Americans are going to go into contract negotiations. Yeah. And maybe that will be part of it. I'm sure the mainline pilots, at the right pay rates, would love to bring more flying in. On the other hand, they don't want their starting pay and their starting captain pay to be lowered significantly because there are 30 fewer seats on the airplane. Right.

48:50Scott McCartney: My understanding from the source within the APA is that a lot of the negotiations will focus on smaller mainline or larger regional type of aircraft as part of that, along with how to allow the use of regional aircraft and mainline aircraft maybe on the same routes or in and out of certain cities beyond hubs and so on. Right.

49:16Henry Harteveldt: And I talked about this before. There's a restriction on regional flying outside of the legacy AA hubs. And that's really restricted what American can do in places like Austin. Right. Right. They'd like to develop new routes. Yeah. OK. Ed from Atlanta, not the Ed from Atlanta who we talked about before, but Ed from Atlanta has this. Hey, Scott, really enjoyed the show. Haven't missed an episode. Well, maybe there's an exception or two, Ed says. A comment on United's new route announcements and the introduction of A321XLRs. Patrick Quayle and team certainly are due a lot of credit for what they're doing at UA.

49:59Henry Harteveldt: but listeners might be interested to know or be reminded Delta was the first to begin flying from New York JFK to Catania, Sicily, and Obia, Sardinia. UA is being creative in a lot of ways, but to some degree, the motivation with these two new markets is, hey, we don't want Delta to own the market, so let's also serve them. Original route announcements show Delta started serving Catania, Sicily in May 2025, seasonally, and Olbia, Sardinia in May 2026. Listeners might also be interested in the route race vote Delta took of its SkyMiles members and employees when they were asked in 2025 which of Sardinia, Malta, and Ibiza they would like the carrier to begin serving in 2026.

50:53Henry Harteveldt: SkyMiles members chose Olbia, Sardinia, but employees favored Malta, so Delta began serving both from JFK this past summer. Note that while Ibiza isn't served by Delta, it's another of the new ones United will begin in 2027. To be sure any of these are low risk for United on the new, smaller, efficient 8.321XLRs, Delta has been using 7.67300s. Keep up the great work. The podcast gets more informative and interesting all the time. Great guests and great hosts. Thanks. Well, thank you, Ed. Henry, thoughts on new international service?

51:34Scott McCartney: Well, yeah, I mean, I think that Ed makes a very valid point. Listener, Ed. Yeah, listen. Well, I hope the Ed is also a listener. Yes, indeed. Okay, so both Eds, both Eds of Atlanta, all the Eds of Atlanta, we hope, listen here. But I think that the use of the 321XLR or eventually maybe some of the 737 MAX 10s maybe, you know, on long-haul routes, shows a lot of creativity on the part of airlines. And Ed makes a very valid point. You know, no airline wants to let another airline have a monopoly where they, you know, where adding service is possible. So Delta may have been the first to launch service to some of those cities.

52:18Scott McCartney: United quickly responded. And look, we are seeing American announcing flights on certain routes for 2027 that other airlines have begun serving because American doesn't want to be left out either, nor should it. So, you know, I think it's just very, very interesting. But I think where United definitely has the advantage right now is their A321XLRs are configured for long-haul operation. Deltas are not. Americans are. And American has said that the A321XLR is going to be a key to helping it grow long-haul, in particular across the North Atlantic. So I think it's going to be a very, very, very exciting period for the next few years as we watch these airlines skirmish, frankly, with one another.

53:04Scott McCartney: And I agree, by the way, with the compliment given to Patrick Quayle and the network planning team at United. They're doing some of the most incredibly creative things when it comes to finding out new routes, new destinations to serve and how to serve them. And taking advantage of all of United's existing and legacy route authorities, things like, in a small way, reactivating the Narita Hub in Tokyo to do certain things. You know, so United really is doing a lot of smart things, you know, and when young people ask me which airline they should go to if they want to create network planning, it's very clear right now that's United Airlines.

53:48Scott McCartney: Yeah.

53:49Henry Harteveldt: So interesting. So interesting. And great for travelers, too. Absolutely. to have nonstop flights to all these really interesting, cool places to explore. Yeah. I think it actually circles back a little bit to our discussion about how powerful travel is and credit cards and all that, because I think younger, I'm going to go stereotypical here with younger people, but people want new adventures. And Malta may be more interesting to a lot of people than going to Paris or London because they've been and don't want to go back. Yeah, I mean. Or do want to go back, but also want to explore new places.

54:28Scott McCartney: Yeah, I mean, the mindset of a lot of the Gen Z people I know is that, while there may be certain cities they do love, you know, that they've been to, perhaps with their parents, perhaps studying abroad or perhaps on their own, they want to see as much of the world while they can. Yeah. And so, again, as we've discussed, as you've discussed with other hosts and guests, prioritizing travel within their discretionary income is a big thing. And that may be domestic travel. It may be long haul. It may be road trips versus flying, whatever will fit their budgets. But what I think is great is people realize that there's a big world out there, and a lot of them want to see as much as they're able to to the extent their budgets allow.

55:14Yeah, yeah.

55:14Henry Harteveldt: All right, before we dig further into the mailbag, I want to thank the Executive MBA in Aviation at the University of Colorado Denver for making the podcast possible. The Executive MBA in Aviation at CU Denver is the first degree of its kind in the world, taught by industry experts and designed for ambitious leaders from across the aviation ecosystem. With classes located at Denver International Airport and week-long residencies in Washington, D.C. and at airports around the world, students experience a hybrid flexible course structure that balances in-person and online classes without career interruption.

55:53Henry Harteveldt: Go to business.ucdenver.edu to learn more. OK, one more out of the mailbag. Mike from Grapevine, Texas, asked something I suspect you have an opinion on, Henry. Mike says, hey, Scott, in your discussion regarding American this week in response to a listener question, you talked about how United and Delta and even Southwest invested quickly to adapt to the new paradigm. My question for you is, now that Southwest has announced clubs, when do you think Southwest will announce some kind of competitive first class product? And then Mike asks in parentheses, including food? Correct me if I'm wrong, Mike says, but now that Allegiant and Frontier have announced first class, aren't Southwest and Avello the only remaining U.S.

56:50Henry Harteveldt: carriers that don't have first class and haven't announced an intention to offer one in the next year or so? Thanks for continuing Ben's legacy and exploring this business for us. What do you think?

57:04Scott McCartney: Well, yeah, I mean, remember, JetBlue's announced its domestic first product as well. I will tell you this, in my previous job at Forrester. We did some research for Southwest and we concluded back then that there was demand for first class as well as assigned seats. And leadership at Southwest did not want to do it. Herb said, nope, it was too much of a change. And we pointed out that Southwest would actually be stronger and more competitive, able to entice more customers over from other airlines. They chose not to do it, that's fine. That was then. Southwest has been doing research on first class.

57:43Scott McCartney: I know people who have received the surveys and who've participated in focus groups, and they've shared with me all of that. So they are studying it. But again, we all have to remember that it's one thing to talk about stuff. It's another thing to do things. Let's remember that Delta Airlines has had trouble getting seats delivered from its vendors. They even fired a vendor because of problems getting long-haul Delta-1 seats for the A321 long-haul fleet. Ben Minacucci has said that a seat project is a three-year project. Other airlines, including American with the flagship suites and others, have talked about bottlenecks in the supply chain.

58:22Scott McCartney: And it's a slow process. I will not be surprised if Southwest decides to announce it will offer first class. I have no insight they have a media day planned uh here in dallas on october 15th by the way southwest you did not invite me to that shame on you and uh but i will be at world aviation festival in lisbon so yeah yeah um and and but they're not doing it fear not listeners i will be at southwest media but they're not doing this at southwest headquarters they're holding it off site which tells me that you know i don't think there's a lot of show and tell that's going to happen interesting so you know at least with this one what i will say though is that i think southwest knows intuitively they have to add a premium cabin what that cabin will be what it will offer in terms of amenities to be determined but if this is an airline that has concluded they don't need screens to be competitive they could say you know what we're just not going to go with first class or they could say we will do a sub fleet of aircraft with first class but then that becomes a scheduling an operational problem.

59:31Henry Harteveldt: Or do you do the European block the middle seat on the first few rows? They could.

59:35Scott McCartney: Airlines have tried that in the U.S. in the past. Republic, second version of Braniff, and others have had that block middle seat. And extra legroom at the time, things like that. So who knows? There are options that are available to Southwest.

59:50Henry Harteveldt: Do you think the seat bottlenecks are... My assumption, I guess, I thought was it was more the lie flat business class type product, not so much a, I mean, you could do a domestic first class seat that just is basically a coach seat that's wider.

1:00:14Scott McCartney: It, well, it, you, again, all depends on what kind of a seat you want, how much customization. And yes, you're right. In Delta's case, they had problems with the lie flat seats. Americans flagship suites are live flat seats. But apparently there are even some challenges with traditional type of recliner seats, depending on the maker. And again, how much customization is required by the airline and modifications required by safety agencies. Southwest may just be waiting. You know, it's announced an awful lot of stuff. It's making an awful lot of change. I also can't blame the airline if they want to say, you know what, we need to digest some of this.

1:00:52Scott McCartney: We need to make sure we're operating the kind of airline we need to and want to operate, that we're delivering on the expectations our customers have, that we have the level of reliability we need, etc.

1:01:04Henry Harteveldt: Right, right. No, and yes, all of that. But they've also said that business bookings are off the charts, I think, exceeding what they expected.

1:01:17Scott McCartney: Because they went to assigned seats and they've got extra legroom seats.

1:01:20Henry Harteveldt: Yes, exactly what your research showed so many years ago.

1:01:23Scott McCartney: A long time ago. Right.

1:01:24Henry Harteveldt: And I think if you're going to open lounges and you're really making a good hard push for corporate customers, you're going to have to have a first class product.

1:01:36Scott McCartney: They do. And look, people like the big seats. And right now, Southwest, without a first class cabin, even with lounges, cannot be truly competitive with American, with Delta, with United ones. It has it. Jeff Liu. With Frontier. Well, you know, I don't know how much of a first-class cabin Frontier is going to have versus first-class seats. Right. And same with Allegiant. But you're right. I mean, even in Denver, if Frontier has first big seats, you know, Southwest is going to be out there saying, well, we've got pistachios in our extra legroom seats. Woo-hoo.

1:02:08Henry Harteveldt: Yeah, the pistachios. I mean, the pistachios. Mike did ask about food. I have a hard time seeing Southwest put galleys in for hot food, but I think you can do a lot with a box or a package. Okay, let me just say this.

1:02:25Scott McCartney: A boxed meal is not first class. JetBlue is going with the bento box. It's been met by consumers with a gigantic thud. KLM uses boxed meals on intra-European flights. They're terrible. People don't like it. Sister airline Air France uses a traditional tray. It's much nicer. So Southwest is going to have to do something. They don't necessarily have to do hot food, though. They can do a tray service with cold food, and that'll be just fine, perhaps even better. You know, hot food isn't necessarily better food on an airplane. Do you have to reconfigure galleys to do that? Yeah, probably not, because if it's cold food, it goes in the carts anyway.

1:03:04Scott McCartney: So it's not like I've studied Southwest galleys in intricate detail. So sorry. Yeah.

1:03:10Henry Harteveldt: All right. Well, stay tuned for all of that.

1:03:14Scott McCartney: I'm sure we will be discussing it more. Well, listen, Scott, thank you for including me this week. Thank you for inviting me over to Global Headquarters. Global Headquarters. Yes.

1:03:24Henry Harteveldt: Great to have you here in person. Really, this has been wonderful, enlightening and informative. And your globetrotting travels are amazing. It's such a great thing to bring to listeners of Airlines Confidential. Thank you so much. I'll be back next week with Charles Duncan, another globetrotting traveler. And we will have a conversation from down under with Dave Emerson, the CEO of Virgin Australia. Thanks again, Henry. And thank you all for listening. This podcast is produced by Mass Media. Info at massmedia.net.