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

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Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. Boeing's actions are extremely concerning from like a corporate governance perspective, from do they really have the safety you know protocols in place. That being said, I've 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 CDO 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 Sapphian. 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 in Notten Airport. Yeah, I was I was wondering whether you'd be uh dialing in from a plane. I try to minimize it. Well,

This summer travel season has been Quite dramatic. And uh 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 plane 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 what's that disconnect? It's really interesting because I'm actually uh I I've researched the fear of flying and it's so fascinating. Twenty twenty three was the safest year on record. Twine million flights.

And not a single 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. So I do think there's this sense like flying's more dangerous. Now, certainly Boeing's actions are extremely concerning from like a corporate governance perspective, from do they really have the safety, you know, protocols in place. And I did recommend people to avoid the seven thirty seven nine Max, not for safety reasons necessarily.

Although if we do remember, you know, the b Boeing seven thirty seven Max crashes, there were several of them. I was doing it more out of like consumer'cause the airlines are gonna ground this for who knows how many months. So if if you book this aircraft, it's probably gonna get canceled. And some people were like, You're being over the top, but lo and behold, United Alaska, people who were booked on Max Nine flights They got you know, rebooked on on alternate flights that were far less appealing. So that was my take on it. Overall travel 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, you know, I've 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've built a narrative When in fact like

You know, you're on a plane with trained professionals. They check each other, they make sure they're sober. I mean, you go on the L I in New York and or ninety five in Miami. Jesus take the wheel. I mean, there are people on the road that probably haven't slept in days, so I'm a clearly an advocate for flying and I don't think people should be nervous necessarily Well and you know, 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. Cause 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 prices going down. I'm getting pressure from all angles.

And uh hopefully they put And listen to more engineers and And certainly protect the whistleblowers who seem to be dropping like flies, but I guess that's a story for another podcast. Well, I I I mean Prone to conspiracy theories. There is a A Boeing whistleblower who committed suicide. So you you just

You know. One had a random, what, a MRSA infection that took him out in twenty four hours. That was an interesting one. And you know, this isn't just the seven thirty seven Max Nine. Boeing has had these issues, you know, a couple years ago there was a New York Times expose on their Charleston factory with the seven eighty seven 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 gonna fly Airbus in the US, you're gonna 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 gonna 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 a 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 twenty twenty two, we saw this insane spike month over month 20% increases in airfare. I remember looking trying to go to a last minute trip to Europe, and it was like 7,500 in business class to every major capital. You know, there were no deals to be had. And so over the 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 twenty nineteen dollars, fares are cheaper. today, even with record numbers of people traveling. You know, I'm going to Europe, I'm I got a award ticket for fifty thousand Air France miles one way. Business class. Going to Spain later this summer, first class on British Airways, four thousand dollars. 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 pack more packed today than they've ever been. The airports are running pretty smoothly, barring one off meltdowns, but you know, the T SA in general, like they're Two summers ago, even last summer, there were meltdowns at Amsterdam. I remember

Twenty thousand 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 the planes are more full today, right? That's how we hit the three million passengers screened on TSA, but they're filled at cheaper fares.

The airlines are still making money, but not Thank you. And also I would say too, we don't have the full numbers about business travel. But fair pricing has completely changed

Верс при пандемік ферст клас, бізнес клас юсто в примім. That barring, you know, Jet Blue coming onto a route and kind of stabilizing fares, that the major airlines were just charging seven thousand dollars 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 four thousand dollar 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 class. It's not mostly businesses or even points. Correct. That is the biggest trend that came out. As the pandemic was hitting, it most airlines were also launching premium economy. So consumers got used to easing into premium economy versus just the cheapest fare. Cause 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 of the life in the front of the plane and realize, wait a minute, as economy has stagnated, economy hasn't changed really in 40 years. It's still a tiny C 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 eighty percent of its first class domestic cabins to elite travelers. And twenty percent were paid. Now it's flipped. Eighty percent are paying and only twenty percent are given to those upgrading.

It does seem like business class keeps getting better, coach keeps getting worse. And it's like it's confusing because there's there's economy light and economy classic and economy. It'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. Like buying that cheapest fare doesn't make sense, especially for those travelers who want frequent flyer miles. You know, the the evolution of all the major frequent flyer programs now. They're not frequent flyer programs. They're frequent buyer programs. You gotta 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 yeah, it's 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 co branded credit cards, they would be In a really bad spot. They make more money on their carts than they make on their flights. Airlines are really flying banks these days. One percent 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's getting a cut of that.

Let's talk about CrowdStrike. The crowd strike 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's 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 it think about it. They I think they have nine hundred 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 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

Back up. 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 kinda slipped here. Consumers are so willing and love when c 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.

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 two thousand in hotels, park tickets, et cetera. Do we Fly on United at last minute of five hundred dollars 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 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 the hey look. These meltdowns are gonna continue happening. They happen every six months or so. Sometimes it's an airline. Sometimes the you know, the FAA systems someone uploaded a bug and they shut down the whole, you know, US aviation system for a day. That was last year. So

I just think we need clearer comp like consumer guidelines when the airline goes wrong, that you're not having to wait in a hundred person line at a crowd 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.

As for his point about clear consumer guidelines, it's a good practice for any industry. After the break, Brian digs in about Southwest Jet Blue, plus shares his insider tips on how to best use rewards points. Stay with us. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious.

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I hope to see you there. 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 Jet Blue, and why he calls today the platinum age of travel. Let's dive back in.

Southwest is Giving up this sort of seat yourself modeling. It feels like The end of an arrow or the end of what defines Southwest. I know such a it's such a key part of their business model. What What changed?

I mean the the lagging of their competitors is the straw that broke the open seating back. Uh You know, they're not doing this because they did mu market research and all of a sudden they realize 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 give 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, you know, they got stuck with an eight hundred million dollar fine for their fiasco in 2022. They also got dinged with the Boeing issues and 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 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 that I mean that That low cost carrier model is really, really tough. The ones that are doing well, Avelo,

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 belt. You know, 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. So I but I think the fact that our infrastructure in America, our airports are overcrowded, air traffic Issues. Um there's also pilot.

delay, you know, 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. And we see that happening American Airlines is 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 airline 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. Block. 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 I, you know, I 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 eighty percent market share. You know, you really gain efficiencies of scale. When you merge and that's really how you become profitable on airlines. So Basically they 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 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 have happened in that merger is all spear planes would have 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 fare is it it in general I don't think is 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 and I 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. But 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 rite of passage. Everyone has their 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 five hundred fifty a year, you get triple points, you get your lounge access, you're happy. The government, if this bill passes, is gonna force you to have Essentially a debit card network.

The government is gonna give the right to retailers to choose. Which network to run. The retailers are are salivating at this bill because it it would. It would take billions of dollar in value. And reduce processing fees. Consumers wouldn't get points or nearly as many and it 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're at a restaurant, you would say you better. Put it on the visa. 'Cause the restaurant has the power. The retailer has the power to choose. And of course they're gonna 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 and This is the one big thing that could I think cataclysmically impact travel and The airlines, which make billions from their credit card co brands, as we discussed.

are gonna lose billions of dollars. What do you think they're gonna 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 gonna get hit from multiple angles. I never really thought about that.

Airline travel is basically being subsidized. Bye. Credit cards. A million percent. People go on trips solely because they have enough points. Great, my flights to Hawaii are are paid for. We're going to Hawaii. If you dramatically reduce the amount of points and earning, it will reduce commerce, it will reduce employment and You know, leisure centers. Well, it reduces incentives for the airlines too, right? Like they're

Their business becomes becomes different. Correct. They're gonna make the money. 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 gonna make it up. They're gonna figure out and guess who's gonna pay for it? Consumers.

You're highly passionate about it. Yes. 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. So 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 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 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. You want to have Amex points, Chase Built. Capital one. Those points allow you to trans 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 a 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 you're getting to where you go. Um and my other tip would say the US programs have increased the amount of miles you need for tickets. You know, you look at Delta going to Europe. Three hundred seventy five thousand miles each way. Seven hundred fifty thousand miles for a business class ticket.

That same flight. If you transferred Amex or chase points To Air France, their partner. As low as fifty thousand each way. So the deals are with foreign frequent flyer programs. Cause once again, in France, they don't have hundred thousand point offers, bonanzas like we do here. So we're seeing

Inflation in the amount of Award tickets for US programs. But not nearly the amount for the foreign programs. Cause if they did that in France, where their French members can't earn points like we do, there would be a riot. Well, I gotta get off'cause I I gotta go jump on and make some reservations. I'm here to help. Well, Brian, this has been great. Thanks for doing it.

Thanks so much for having me, safe 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 toward safety, aging infrastructure, vulnerable tech systems. Then again.

A few more inches of leg room. I don't know, it sounds pretty good. I'm Bob Safian. Thanks for listening.

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