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Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show, because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely, from Ford's CEO to NASA's administrator to the lessons from the Devil Wears Prada. It takes about 10 seconds to find.
Just search Rapid Response wherever you listen to podcasts, and hit follow to make sure you never miss an episode. I hope to see you there. Boeing's actions are extremely concerning, from a corporate governance perspective, from do they really have the safety protocols in place. That 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.
That'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, and 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. I'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. Are people really nervous? Are there things to be nervous about? Like, 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 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 picked up because it wasn't filmed on camera. So I do think there's a sense that flying is more dangerous. Now, certainly, Boeing's actions are extremely concerning from 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, although if we do remember the Boeing 737 MAX crashes, there were several of them. I was doing it more out of consumer because 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.
But lo and behold, United, Alaska, people 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 safe, but certainly Boeing needs to get a sack 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, and 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.
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. So I think that's really where they lost course. They 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 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. Boeing has had these issues. You know, a couple years ago, there was a New York Times expose on the 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, like if you're only going to fly Airbus in the U.S., you're going to dramatically have to change your patterns. And who really, 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.
I 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. You know, in 2022, we saw this insane spike. Month over month, 20% increases in airfare. I remember looking, trying to go to the last minute trip to Europe.
It was like 7,500 in business class every major capital. You know, there were no deals to be had. And so over the next few years, airlines have added tons of European capacity, which has resulted actually in fares coming down quite a bit. When 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 number to share was $4,000 first. You know, those were tripled 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, you know, the TSA in general, like two summers ago, even last summer, there were meltdowns at Amsterdam. I 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're 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. And 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, you know, JetBlue coming onto a route and kind of stabilizing fares, that the major airlines were just charging $7,000 business class pretty much across the board.
So they were gouging last minute and business travelers. Now it's more leisure travelers. So 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.
So individuals are paying for business classes, not mostly businesses or even points. Correct. That is the biggest trend that came up. 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, you know, 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.
It's still a tiny seat. You might get free Wi-Fi if you're lucky, but economy sucks. You know, but where the real innovation has happened is in the front of the plane. So most people know the feeling of once you start flying first class, it's really hard to go back.
20% are given to those upgrading. It does seem like business class keeps getting better and coach keeps getting worse. And it's like, it's confusing because there's economy light and economy classic. It's like, there are 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. Like buying that cheap is fair.
It doesn't make sense, especially for those travelers who want frequent flyer miles. You know, the evolution of all the major flyer programs. They're not frequent flyer programs. They're frequent buyer programs.
You got to spend, baby. You know, the airlines don't care how many flights you take. Who cares? You know, how much money are you spending?
But yes, there's definitely been these tectonic shifts in behavior and travel. Loyalty is still as important as ever. And the credit card industry is really still fueling the growth and revenue and profits with airlines. If the airlines didn't have their corporate credit cards, they would be in a really bad spot.
They make more money on their cars than they make on their flyers. 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.
Every time you spend a dollar at a grocery store, Delta's getting a cut of that. Let's talk about CrowdStrike. The CrowdStrike network outages really hammered the airlines. Delta worse than others.
My 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. So United and Delta have invested a lot.
So it was very concerning to see this complete matter meltdown. Delta had poor systems in place, did not have backups for their crew scheduling. So essentially for several days, their system attracts. 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?
I 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 is 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 totally, you know, better communication. And they just kind of slipped here.
Consumers are so willing and love when companies can just own their mistake. I mean, when people have weddings canceled, people can 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. You 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 at $500 to take it 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 mountains are going to continue happening.
They 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 U.S. 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 time for airlines. But Brian's explanations about habits and pricing help connect the dots. As for his point about clearer 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 reward points. Stay with us. The very best founders I know are brilliant at building systems. They connect teams, they remove bottlenecks, and they eliminate single points of failure.
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There's going to be two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future that is human-centered? I'm Rana Elkaliubi, and on my podcast, Pioneers of AI, we answer that question and so many more.
As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future, and we take you behind the scenes of the AI that's transforming our lives. Find Pioneers of AI wherever you tune in. 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. You know, they're not doing this because they did market research, and all of a sudden they realized that everyone wants, you know, 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 checkbacks, 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. You know, they got stuck with an $800 million fine for their fiasco in 2022. They also got a thing with the Boeing issues and delays of new aircraft. So they're struggling in a lot of different ways.
So 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 checkbacks? 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 one- that are doing well a velo breeze they're serving these new markets at the big airlines they're small potatoes there's a lot of movement happening into the rust belts you know there's people retiring into parts of the country that are not just naples miami jacksonville and some of these local cars are doing well serving those communities allegiant is a great example where they serve random airports on random flights and people love it it works so i think the fact that our infrastructure in america our airports are overcrowded air traffic issues um there's also pilot you know shortages and aircraft shortages and also the major airlines try to push you out so they'll drop their prices to bleed dry because they can do that a lot longer and we see that happening american airlines really trying to push out jsx which is a 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 merge during more friendly times and 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 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 so basically they try 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 jet blue i fly jet blue mint i'll even fly jet blue economy at six foot seven because they have really spacious seats free snacks free wi-fi free dunkin donuts it's a great airline so what would happen that mergers all sphere planes would become more premium jet blue 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 uh the less cheap fares in general i don't think it's great for consumers are 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 it the current age of travel we're now the platinum age of travel i mean credit card points and loyalty when you know how to play it is incredibly lucrative 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 which now i mean it's like an american right of passage everyone has a right their points credit card their 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 take billions of dollars in value and reduce processing fees consumers wouldn't get points or nearly as many and would put that into the bottom line so basically bob every time you went 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 i could i think cataclysmically impact travel and 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 you know 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 hawai are paid for we're going to hawai if you dramatically reduce the amount of points and earning it will reduce commerce it will reduce employment and you know leisure centers reduces incentives for the airlines too right like their their business becomes 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 guess who's going to pay for it consumers you're highly passionate yes i can feel it before i let you go best point tips for travelers right now i would say here are my top points packs so since the pandemic almost every loyalty program has waived the cancellation fees on award tickets so i use my points like insurance policy so when i was flying delta during the meltdown i had a backup reservation on united using points so my delta flight didn't go out it was there and you 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 policy i don't buy travel insurance that's the other tip you want to have credit card transferable points you don't just have all delta american you want to have amex points chase built capital one those ones allow you to transfer a number of different partners so when i'm sitting at the airport and i see there's one flight on united on the other la flight i think mine's gonna get canceled bam i just make a points reservation if my original flight goes out cancel and i get all my miles and cash back zero fees that's what people don't realize like you can use your points as insurance policies to make sure you're getting to where you go um and my other tip would say the u.s programs have increased the amount of miles you need for tickets you know you look at delta going to europe 375,000 miles each way 750,000 miles for business class ticket that same flight if you transfer amex or chase points to air france their partner there's less 50,000 each way so the deals are with foreign frequent flyer programs because once again in france they don't have 100,000 point offers bonanzas like we do here so we're seeing inflation the amount of award tickets for u.s programs but not nearly the amount for the foreign programs because if they did that in france where their french members can't earn points like we do there would be a riot but i gotta get off because i gotta go jump on and make some reservations i'm here to help well bryde this has been great thanks for doing it thanks so much for having me say travels the platinum age of travel sounds pretty good for business travelers but less so for those in economy the upside maybe economy will be upgraded to grab a competitive advantage or maybe airlines are too obsessed with higher profits for that and i guess if i had to choose i'd rather put the incremental investment towards safety aging infrastructure vulnerable tech systems then again a few more inches of legroom i don't know it sounds pretty good i'm bob sapien thanks for listening rapid response is a wait what original i'm bob sapien our executive producer is eve tro our producer is alex morris assistant producer is masha macutonina mixing and mastering by aaron bastinelli theme music by ryan holiday our head of podcast is leetal malad for more visit rapidresponse show.com