Rapid Response: Wild summer travel tales from Boeing to CrowdStrike, with The Points Guy, Brian Kelly

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1:26That being said, I have so many friends who will ride to the airport in the back of an Uber without a seatbelt. And then they get scared to board the plane. You're on a plane with trained professionals. Tell me another mode of transportation. That's perfect. There is none.

1:46That's Brian Kelly, founder of travel media platform The Points Guy. I wanted to talk to Brian to better understand one of the wildest non-pandemic travel summers ever. More people are flying, airports are packed, planes are packed, and yet airline businesses are struggling. Southwest is doing away with its distinctive seat yourself system. Spirit is moving away from discounting. And of course, we had the massive crowd strike outage that hit all airlines, but particularly Delta. Plus, there's Boeing safety concerns, a whistleblower suicide, a new CEO coming in. So what is going on? Brian sheds light on how airlines and travelers are adjusting to this chaotic market.

2:28And along the way, he shares some of the travel industry's best kept secrets and insider perks. It's a journey worth taking. So let's get into it. I'm Bob Safian, and this is Rapid Response.

2:48I'm Bob Safian, and I'm here with Brian Kelly, founder of Travel Resource, The Points Guy. Brian, thanks for joining us. Thanks for having me. Good to be here and not in an airport. Yeah, I was wondering whether you'd be dialing in from a plane. I try to minimize it. Well, this summer travel season has been quite dramatic. And the first thing I wanted to ask you about was Boeing, you know, safety drama concerns. You hear from friends and family and certainly media about people wary to get on planes, some avoiding Boeing aircraft. And yet at the same time, air travel volume is like at record levels.

3:30Are people really nervous? Are there things to be nervous about? Like what's what's that disconnect? It's really interesting because I've researched the fear of flying and it's so fascinating. 2023 was the safest year on record. 29 million flights and not a single commercial jetliner crashed. So flying is so astronomically safe. It's mind boggling that it appears anxiety around flying has increased. And I think there's a number of factors. One key trend is, you know, social media and where every incident gets blown out of proportion, whereas there have probably been a lot worse incidents over time that have happened that didn't really get pickup because it wasn't filmed on camera.

4:12So I do think there's this sense like flying is more dangerous. Now, certainly Boeing's actions are extremely concerning from like a corporate governance perspective, from do they really have the safety protocols in place? And I did recommend people to avoid the 737-9 Max, not for safety reasons necessarily. early. Although if we do remember the Boeing 737 MAX crashes, there were several of them. I was doing it more out of consumer because the airlines are going to ground this for who knows how many months. So if you book this aircraft, it's probably going to get canceled. And some people were like, you're being over the top.

4:49But lo and behold, United, Alaska, people who were booked on MAX 9 flights, they got rebooked on alternate flights that were far less appealing. So that was my take on it. Overall, travel's safe, but certainly Boeing needs to get its act together. Statistically, then, even though it might seem like, oh, there's this Boeing problem and there's that Boeing problem, they still have a ton of planes up in the air and those planes are not having any trouble. I mean, that's the nature of transportation. Tell me another mode of transportation. That's perfect. There is none. And that's why I have so many friends who will ride to the airport in the back of an Uber without a seatbelt.

5:27And then they get scared to board the plane, which I think is just so fascinating. That in our heads, we built a narrative when, in fact, you're on a plane with trained professionals. They check each other. They make sure they're sober. I mean, you go on the LIE in New York or 95 in Miami. Jesus, take the wheel. I mean, there are people on the road that probably haven't slept in days. So I'm clearly an advocate for flying and I don't think people should be nervous necessarily. And it does appear that Boeing is in the process of a good overhauling of its leadership. And hopefully they put more engineers in positions of power because I think that's really where they lost course.

6:04They were trying to cut corners, sort of the corporate side of let's just get things to market. We're so behind. Stock price is going down. I'm getting pressure from all angles. and hopefully they put and listen to more engineers and certainly protect the whistleblowers who seem to be dropping like flies. But I guess that's a story for another podcast. Well, I mean, if you're prone to conspiracy theories, there is a Boeing whistleblower who committed suicide. So you just, you know. One had a random, what, MRSA infection that took him out in 24 hours. That was an interesting one. And, you know, this isn't just the 737 MAX 9.

6:41Boeing has had these issues. A couple of years ago, there was a New York Times expose on their Charleston factory with the 787 production wires that were not done correctly. So yeah, it definitely seems like there are more issues with Boeing than Airbus. That being said, as consumers, if you're only going to fly Airbus in the US, you're going to dramatically have to change your patterns. At the end of the day, most consumers care about money first, money and time. Right. Like you're not going to double connect to get to your location to fly, you know, Embraer or, you know, Airbus aircraft. That would be silly.

7:16I don't know a single person who would add hours of their life and more flights for a infinitesimal safety increase. Air travel is at really high levels. Do you have an understanding or an explanation about why we're at these record levels? Yeah. I mean, the first thing is fares have dropped. In 2022, we saw this insane spike. Month over month, 20 % increases in airfare. I remember trying to go to a last minute trip to Europe and it was like 7 ,500 in business class to every major capital. There were no deals to be had. And so over the next two years, airlines have added tons of European capacity, which has resulted actually in fares coming down quite a bit.

7:59When you peg to$2019, fares are cheaper today, even with record numbers of people traveling. You know, I'm going to Europe. I got an award ticket for 50 ,000 Air France miles one way, business class. Going to Spain later this summer, first class on British Airways,$4 ,000 first. You know, those were triple two summers ago. So it's a great time for consumers. And I will say, even though airports are more packed today than they've ever been, the airports are running pretty smoothly, barring one-off meltdowns. But the TSA in general, two summers ago, even last summer, there were meltdowns at Amsterdam.

8:37I remember 20 ,000 bags lost at Heathrow. Huge lines, missing back. Things are actually running pretty smoothly. It's a great time to be flying, in my opinion. The volumes of travelers is at these record high numbers. So why are the airline businesses struggling as businesses? They were actually making more money when they were, you know, gouging customers at double the rates. Even though the planes weren't as crowded then. The planes are more full today, right? That's how we hit the 3 million passengers screened on TSA. But they're filled at cheaper fares. The airlines are still making money, but not bank.

9:15And also, I would say, too, we don't have the full numbers about business travel. but fare pricing has completely changed versus pre-pandemic. First class business class used to have this premium that barring JetBlue coming onto a route and stabilizing fares, the major airlines were just charging$7 ,000 business class pretty much across the board. They were gouging last minute and business travelers. Now it's more leisure travelers. More people are buying business class, which is where airlines make money in general, but not at the rates that they used to have. And once you get consumers used to buying$4 ,000 round trip business class pretty easily all summer long, it's a lot harder to all of a sudden move that up to 7 ,000 where you were because consumers get locked in and then they'll say, well, I'm not going to go.

10:02So individuals are paying for business class. It's not mostly businesses or even points. Correct. That is the biggest trend that came out. As the pandemic was hitting, most airlines were also launching premium economy. So consumers got used to easing into premium economy versus just the cheapest fare. Because during the pandemic, you did not want to be jammed in like a sardine. And during the pandemic, flights in the beginning were really cheap. So consumers started to get a real good taste of the life in the front of the plane and realized, wait a minute, as economy has stagnated, economy hasn't changed really in 40 years.

10:36It's still a tiny seat. You might get free Wi-Fi if you're lucky, but economy sucks. you know and but where the real innovation has happened is in the front of the plane so and most people know the feeling of once you start flying first class it's really hard to go back a decade ago delta was upgrading 80 of its first class domestic cabins to elite travelers and 20 were paid now it's flipped 80 are paying and only 20 are given to those upgrading it does seem like business class keeps getting better a coach keeps getting worse and it's like it's confusing because there's economy light and economy classic and economy.

11:14It's like they're all these categories. Yeah. And it can be confusing to know what you're exactly buying. And I think consumers are realizing cheap is expensive. Buying that cheapest fare doesn't make sense, especially for those travelers who want frequent flyer miles. The evolution of all the major frequent flyer programs now, they're not frequent flyer programs. They're frequent buyer programs. You got to spend, baby. The airlines don't care how many flights you take. Who cares? How much money are you spending? But yeah, there's definitely been these tectonic shifts in behavior and travel. Loyalty is still as important as ever.

11:46And the credit card industry is really still fueling the growth in revenue and profits with airlines. If the airlines didn't have their co-branded credit cards, they would be in a really bad spot. They make more money on their cards than they make on their flights. Yeah. I mean, people joke airlines are really flying banks these days. 1 % of total US GDP is put on a Delta Amex card, which is pretty incredible to think about. And think about it, it's brilliant business because every time you spend a dollar at a grocery store, Delta is getting a cut of that. Let's talk about CrowdStrike. The CrowdStrike network outages really hammered the airlines, Delta worse than others.

12:24My recollection is that in previous kinds of crises, Delta systems generally held up better than some of the other airlines. Delta is sort of at the forefront of technology. United is also very good as well. It's sort of United and Delta have invested a lot. So it was very concerning to see this complete and utter meltdown. Delta had poor systems in place, did not have backups for their crew scheduling. So essentially for several days, their system that tracks, and think about it, I think they have 900 planes at all times pretty much flying globally and multiple crew members who have different timeouts, right?

13:00I mean, it's an insane mathematical problem. So anyway, they lost the computing power to decide all that. I think we're doing it manually. And that's just a math problem even the smartest mathematicians can't do in real time. You certainly scratch your head and think like, how was there not plans in place for this? The other airlines had backup systems? Apparently, well, and not every airline uses CrowdStrike, but certainly it was a mega failure. and one that you cannot place on CrowdStrike. It was Delta's response to a vendor issue or lack thereof that caused their mistake. It's interesting. Delta was so, I felt during the pandemic in some ways ahead of other airlines, more, you know, better communication.

13:46And they just kind of slipped here. Consumers are so willing and love when companies can just own their mistake. I mean, when people had weddings canceled, People couldn't see sick family members stranded for days. When you're putting consumers through hell, that's when you really need to have some humble leadership that first and foremost focuses on the suffering of your customers. It took Delta four days to even come out with their consumer policy. And I think that's so wrong because think about it, especially consumers who don't have a lot of money. You're with your family. You're supposed to go to Orlando, the big Disney trip of the year.

14:23You scrounged your money to get to do it. You're at the airport. Delay, delay, cancel, cancel, cancel. The Department of Transportation says I'll get a refund. Great. But now I'm losing 2 ,000 in hotels, park tickets, et cetera. Do we fly on United at last minute a$500 a ticket for five people? In the end, Delta covered that, but not until I'm sure tons of people had to say, you know what, we're calling it quits, when they could have just rebooked themselves. And I think that's really lousy. So this is where I hope we can educate flyers like, hey, look, these meltdowns are going to continue happening.

14:59They happen every six months or so. Sometimes it's an airline. Sometimes the FAA systems, someone uploaded a bug and they shut down the whole US aviation system for a day. That was last year. So I just think we need clearer consumer guidelines when the airline goes wrong, that you're not having to wait in a hundred person line at a crowded airport with stressed out frontline employees who are essentially God in that situation and they get to decide what happens to you. It's a paradox that busier airports don't necessarily translate to flush times for airlines. But Brian's explanations about habits and pricing help connect the dots.

15:39As for his point about clear consumer guidelines, it's a good practice for any industry. After the break, Brian digs in about Southwest, JetBlue, plus shares his insider tips on how to best use rewards points. Stay with us.

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17:33So if you're scaling, make it simple with Deal. Go to deel.com slash MOS and get up to three months free. Before the break, travel expert Brian Kelly explained why this summer's travel boom hasn't necessarily helped airlines. Now he talks about Southwest's open seating pullback, why he loves JetBlue, and why he calls today the platinum age of travel. Let's dive back in. Southwest is giving up this sort of seat yourself model. It feels like the end of an era or the end of what defines Southwest. It's such a key part of their business model. What changed? I mean, the lagging of their competitors is the straw that broke the open seating back.

18:25They're not doing this because they did market research and all of a sudden they realized that everyone wants assigned seating. This is strictly a revenue play. Their model is a relic of a time that no longer exists, losing billions a year in seating fees. They also still give two free check bags, losing billions a year. Southwest for many years was the leader. They had the brand loyalty when airfares were higher, planes were fuller, less meltdowns. They got stuck with an$800 million fine for their fiasco in 2022. They also got dinged with the Boeing issues and delays of new aircraft. So they're struggling in a lot of different ways.

19:02So I think the culmination is we have to deliver to stockholders and let's do it by monetizing what every other airline does. What remains to be seen is will they still give away two free check bags? You would think that with the airline's emphasis on higher margin tickets and higher margin products overall, that it would kind of open the way for new budget airlines. But that doesn't seem to be happening. No. And I mean, that low cost carrier model is really, really tough. The ones that are doing well, Avello, Breeze, they're serving these new markets at the big airlines. They're small potatoes.

19:41goes. There's a lot of movement happening into the rust belt. There's people retiring into parts of the country that are not just Naples, Miami, Jacksonville. And some of these low-cost carriers are doing well serving those communities. Allegiant is a great example where they serve random airports on random flights. And the people who love it, it works. But I think the fact that our infrastructure in America, our airports are overcrowded, air traffic issues. There's also pilot shortages and aircraft shortages. And also the major airlines try to push you out. So they'll drop their prices to bleed you dry because they can do that a lot longer.

20:19And we see that happening. American Airlines is really trying to push out JSX, which is the semi-private airline that's starting to take market share in LA and Dallas. And you'll see the airlines start to really sue them in court and do whatever it takes to make sure that these low-cost competitors don't come in. earlier this year we had the jet blue spirit merger blocked what does that mean for the industry moving forward what does it mean for jet blue and spirit it's not great for them because all the other airlines merged during more friendly times and i you know i see their point of view saying it is really hard for us each individually to operate at scale at the size we are when this country has already allowed the top four airlines to i think it's over 80 market share you know you really gain efficiencies of scale when you merge and that's really how you become profitable in airlines.

21:08So basically they tried to do it at the wrong time, wrong president. Now, do I think mergers are good for consumers? In general, no. I mean, I actually like JetBlue. I fly JetBlue Mint. I'll even fly JetBlue Economy at six foot seven because they have really spacious seats, free snacks, free wifi, free Dunkin' Donuts. It's a great airline. So what would have happened in that merger is all Spirit planes would have become more premium JetBlue planes, which when you think about the market for cheap, bare bones flights, it would have dried up. So, you know, I see both sides of it, but in general, you know, the more consolidation, the less cheap fares in general, I don't think is great for consumers.

21:47Are there topics and issues beyond airlines, travel related, that you most have your eye on right now? Well, yeah. I mean, so clearly I'm the points guy and I call the current age of travel, we're in now the platinum age of travel. I mean, credit card points and loyalty when you know how to play it is incredibly lucrative. And we've had this boom in credit card and loyalty. And now more and more people are traveling, saving thousands of dollars using points. There's a piece of legislation called the Credit Card Competition Act, which was introduced last year, which people don't realize could fundamentally change travel and increase airfare and take away the ability to earn points.

22:27Which now, I mean, it's like an American rite of passage. Everyone has their points. It's credit card. There are airlines. Essentially, what the government's trying to do is, so say you have a Chase Sapphire visa. You pay$550 a year. You get triple points. You get your lounge access. You're happy. The government, if this bill passes, is going to force you to have essentially a debit card network. The government is going to give the right to retailers to choose which network to run. The retailers are salivating at this bill because it would. It would take billions of dollars in value and reduce processing fees.

23:05Consumers wouldn't get points or nearly as many, and it would put that into the bottom line. So basically, Bob, every time you want to use a credit card, you would need to negotiate, haggle, and argue. So if you had a restaurant, you would say, you better put it on the visa. Because the restaurant has the power. The retailer has the power to choose. And of course, they're going to choose what's in their best interest unless you negotiate. So every single time you use your credit card, you would have to negotiate to get the points that you want. So it's this law, and this is the one big thing that could, I think, cataclysmically impact travel.

23:38And the airlines, which make billions from their credit card co-brands, as we discussed, are going to lose billions of dollars. What do you think they're going to do? Oh, it's a shame. Let's just start losing money and keep flying planes at a loss. No. You know, like fares will rise. So consumers are going to get hit from multiple angles. I never really thought about that airline travel is basically being subsidized by credit cards. A million percent. People go on trips solely because they have enough points. Great. My flights to Hawaii are paid for. We're going to Hawaii. If you dramatically reduce the amount of points and earning, it will reduce commerce.

24:17It will reduce employment and, you know, leisure centers. Well, it reduces incentives for the airlines too, right? Like their business becomes different. Correct. They're going to make the money elsewhere. Trust, you know, the government, dear government, they're like, we got the banks this time. I'm like, you don't understand how business works. They're going to make it up. They're going to figure out and guess who's going to pay for it? Consumers. You're highly passionate about this. Yes. Can feel it. Can feel it. Before I let you go, best point tips for travelers right now? I would say here are my top points hacks.

24:50So since the pandemic, almost every loyalty program has waived the cancellation fees on award tickets. So I use my points like an insurance policy. So when I was flying Delta during the meltdown, I had a backup reservation on United using points. So if my Delta flight didn't go out, it was there. And get this, you can cancel your award tickets up until one second before departure. So if you've got a lot of points, I view my points as insurance policies. I don't buy travel insurance. That's the other tip. You want to have credit card transferable points. You don't want to just all have all Delta or American.