Despite a chaotic year of summer travel, including Boeing’s struggles, CrowdStrike’s outage, and more, airlines are experiencing record numbers of travelers. The Points Guy’s Brian Kelly explains why, and shares the airline industry’s best-kept secrets and insider deals right now.
This is an abridged transcript of an interview from Rapid Response, hosted by Bob Safian, a former editor-in-chief of Fast Company. From the team behind the Masters of Scale podcast, Rapid Response features candid conversations with today’s top business leaders navigating real-time challenges. Subscribe to Rapid Response wherever you get your podcasts to ensure you never miss an episode.
Air travel is at really high levels. Do you have an understanding or an explanation about why we are at these record levels?
The first thing is, fares have dropped. In 2022, we saw this insane spike, month over month, 20% increases in airfare.
I remember looking, trying to go on 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; when you peg to 2019 dollars, fares are cheaper today, even with record numbers of people traveling.
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. The TSA in general, like two summers ago, there were meltdowns at Amsterdam. I remember 20,000 bags lost at Heathrow. Huge lines. Things are actually running pretty smoothly. It’s a great time to be flying, in my opinion.
The volume of travelers is at record high numbers. So why are the airline businesses struggling as businesses?
The planes are more full today. Three million passengers screened on TSA, but they’re filled at cheaper fares. The airlines are still making money, but not bank.
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 $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 they used to. 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.”
It does seem like business class keeps getting better, and coach keeps getting worse. It’s confusing because there’s economy light and economy classic and economy. There are all these categories.
It can be confusing to know what you’re exactly buying. And I think consumers are realizing cheap is expensive. Like buying that cheapest fare, it doesn’t make sense, especially for those travelers who own frequent flyer miles.
The evolution of all the major frequent flyer programs: Now they’re not frequent flyer programs or rather frequent buyer programs. You’ve got to spend, baby. You know, the airlines don’t care how many flights you take. How much money are you spending?
They make more money on their cards than they make on their flights.
People joke that airlines are really flying banks these days. One percent of total U.S. 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. 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. It was very concerning to see this complete and utter meltdown. Delta had poor systems in place and did not have backups for their crew scheduling.
It’s interesting. Delta was so, I felt like during the pandemic in some ways, ahead of other airlines, better at communication, and they just kind of slipped here.
Consumers are so willing and love when companies can just own their mistakes. 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. 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 a ticket for five people? In the end, Delta covered that but not until I’m sure tons of people had to say, 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 the flyers, like—”Hey, look, these meltdowns 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, you know, 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.
Before I let you go, best point tips for travelers right now?
Here are my top points hacks: Since the pandemic, almost every loyalty program has waived the cancellation fees on award tickets. So, I use my points like an insurance policy. 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, 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 have all Delta or American. You want to have Amex points, Chase, Built, Capital One—those points allow you to transfer, allow you to transfer to a number of different partners.
So when I’m sitting there at the airport and I see there’s one flight on United on the other L.A. flight, I think mine’s going to get canceled. Bam. I just make a points reservation. If my original flight goes out, I cancel and I get all my miles in 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 where you want to go.
And my other tip would be, say the U.S. programs have increased the amount of miles you need for tickets. You look at Delta going to Europe—375,000 miles each way, 750,000 miles for a business-class ticket. That same flight, if you transferred Amex or Chase points to Air France, their partner, as low as 50,000 each way. So the deals are with foreign frequent flyer programs. Because once again, in France, they don’t have a hundred-thousand point offer-bonanzas like we do here. So we’re seeing inflation in 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.
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