Plain English with Derek Thompson - Why Air Travel Is a Hot Mess Right Now

Episode Date: June 24, 2022

Lately, it feels like we’re surrounded by systems and industries that aren’t working the way they should. There's an oil shortage, and a baby formula shortage, and a used car shortage, and a microchip shortage. Now, here comes the airline industry shortage. This past weekend, thousands of flights were cancelled because airlines didn't have enough pilots, grounds crew, or planes. People were stranded in airports for eight hours or longer. JetBlue, American, and Delta collectively canceled about 9-10 percent of their flights—between five and 10 times higher than their historical average. And some experts say that if you’re planning to fly at all this summer, things will only get worse. How did this happen? When will it end? Today’s guest is Scott Keyes. He is the founder of Scott's Cheap Flights, a newsletter and business with more than 2 million members. We talk about the origins of the crisis, the economics of the airline industry, and why the decline of business travel is a cannonball in a lake whose ripple effects are wreaking all sorts of havoc. Host: Derek Thompson Guest: Scott Keyes Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

From the host that brought you to Coding Westworld. And Westworld, the recapables. Comes the Ringer Prestige TV podcast on Westworld. I'm Joanna Robinson. I'm Danny Heifitz. And I'm David Shoemaker. Welcome to Westworld Season 4 in the Prestige TV podcast feed, where we're going to break down every episode of Westworld season four.

Every Monday, the day after the show comes out on the Prestige TV podcast feed. Wherever we get your podcast, but get them on Spotify. I don't want to be dramatic. but lately doesn't it feel like everything is just sort of falling apart? Like not catastrophically. Things aren't entirely miserable. It just feels like we're surrounded by systems that aren't working the way they should be working. And we've done episodes on some of these systems.

Oil markets are completely screwed up right now. Prices are skyrocketing. Production is lagging. We've had a baby formula shortage. And before that, a used car shortage. And before that, a microchip shortage. And before that, a supply chain gunk up. It just feels like every industry you turn to.

It's a big, hot mess. The latest example I've noticed is the airline industry and air travel. This past weekend, thousands of flights were canceled in the U.S., and people were stranded in airports for eight hours or longer. This happened in Chicago, in D.C., Atlanta. In Canada, I don't know how many listeners we have in Toronto. The news makes it sound like you guys are going to storm Pearson International, like it's the Bastille.

Like the weights have been so bad, so infamously bad, I read they've had a call to police on some occasions to deal with the mayhem. In Amsterdam, Sheppel Airport reportedly had a six-hour security line. Imagine what it's like to be in a six-hour security line. You're in line for three hours, and you're halfway to the gate. Now, if you're a statistically-minded person, you might be thinking, all right, Derek, you can do this forever. I mean, these are just random sob stories.

With flying, there are always random sob stories. Where's the data? Where's the meat? Okay, here's the data. On a typical day, about 1 in 100 flights are canceled. 1% cancellation rate. Last week, JetBlue, American, and Delta collectively canceled about 9% to 10% of their flights between Thursday and Saturday. One in 10 of their flights canceled on major carriers.

And some experts say, if you're planning to fly at all this summer, things will only get worse. Today's guest, today's economic explainer in residence, is Scott Kyes. He is the founder of Scott's Cheap Flights, a newsletter in business with more than 2 million members. And in this episode, we talk about the economics of airlines, why the major carriers are having the summer from hell, and why the decline of business travel is like a cannonball in a line. lake whose ripple effects are wrecking all sorts of havoc. So in the biggest picture, no, it's not just you. A lot of things really are falling apart. Air travel this summer really is a mess. I want to know why. And I want to know when does this hell stop. I'm Derek Thompson. This is plain

English. Scott Kyes, welcome to the podcast. Thanks for having me, Derek. Scott, there are so many moving pieces here. And we're going to get into every single moving piece. But I want to kick us off with a clear thesis statement. So like, imagine you're having dinner with an old friend, you order drinks, and he's telling you about all these stories he's reading about this summer turning into a season of hell in air travel. Thousands of canceled flights over the weekend. Friends stranded for hours in airports in the U.S. and Canada and Europe. And he says, Scott, you're an expert here. Big, big picture. What the hell is going on? What is your 60s? second answer to that question? My 60 second answer is that the amount of turmoil in the airline

industry and the overall travel industry over the past two years is unlike anything we've ever seen in modern travel. Even the 9-11 attacks, you know, airplane base caused so much turmoil across the world and across the globe caused a 5%, 7% drop in overall travel, whereas when you look at 2020 travel figures down 70% and has still had ramifications since then. And so when you rewind to where airlines were looking down the barrel in March of 2020, they weren't worried that this was going to turn a profitable year to an unprofitable year. They were worried about surviving into 2021. They were worried, where were we going to be around? And so many of the decisions that they were making in March and April of 2020 were in that mindset of how can we batten down the head?

hatches to make sure that we come out of this thing alive as a company rather than one that is being sold off for parts. And so that, you know, laying off folks where necessary, doing these sorts of employee buyouts, offering early retirement, shedding pilots, selling airplanes, retiring aircraft, all sorts of decisions to try to make sure that they come out the other end. But now with the benefit of hindsight and seeing the rapid travel rebound, we, are now paying the price for those sorts of decisions. They sort of wrote the check back then, thinking that they would really be facing a dire situation. But when it turned out to be not as bad for a travel industry perspective, we're now struggling to try to rebound and fill that

capacity as the demand really spied. This is the story of the pandemic. I mean, in industry after industry, it's so fascinating that the pandemic hits, everyone thinks the world is going to implode, and in fact, much of the world does implode. People cut back massively, whether it's retailers or the oil industry or here, the airline industry. And then for a variety of reasons, when demand surges, a year later, a year and a half, two years later, the supply demand imbalance is so janky that there's all sorts of problems with the service.

Oil prices skyrocket. There's an inventory crisis in retail. And there's a travel snafu just all over the place in air travel. It sounds like what we have to do now is go back to 2020. I want you to tell me how the airlines responded to the economic crisis of the pandemic in terms of pilots, ground crew, and planes. What did they do in those three categories that has essentially made the bed that we're sleeping in today? That's right.

So across the board, Aaron's, you know, Delta shedding 30% of their employees, you know, almost 30,000 people from their staff, American. laying off 30% of their staff, or, you know, whether it's through buyouts, earlier retirements, or otherwise, airlines were really trying to cut and become as lean as possible to reduce those operating expenses with the anticipation that they were not going to be making much money over the next however many years. They took it in terms of aircraft, you know, retiring many of the older gas-guzzling planes using this as an opportunity to try to reduce their fleets. In many cases, either to stop having to pay upkeep and operating expenses on them or to be

able to sell them elsewhere and again get some kind of petty cash for those older planes. And those types of things, you know, certainly helped improve the balance sheet throughout 2020, but with the benefit of hindsight, would they have made the same decision if they had known how quickly travel demand would rebound. If they had known how quickly folks would want to get back out and start traveling again, almost certainly not, almost certainly not, because they assumed that this was going to be a four or five, six year recovery period, not the sort of 12 to 18 month recovery period that ended up coming to pass. And so when travel demand started rebounding much quicker than they anticipated, the airlines were caught flat-footed and trying to then play catch-up.

make it clear for me, why is it so hard to hire pilots? Why is it so hard to bring more airplanes online? Why is that a rudder that just takes a long time to turn? Yeah, there are a few things that make it difficult to be able to hire pilots and rebound quickly. First is the fact that it's not an entry-level job. It takes years of training, and many airlines stopped, in addition to shedding existing pilots, stopped hiring early in the pandemic. And so then been trying to play catch-up since then, seeing that travel demand rebound. Second, the fact that there are many regulatory requirements around being a pilot that constrict the supply. For instance, there's a mandatory retirement age for pilots, 65 years old. There are mandatory training

and requirements for U.S.-based pilots. They have to fly 1,500 hours before they're allowed to fly those commercial planes that do not apply, for instance, for international pilots. So if you're an international pilot flying a flight into JFK, you do not have to have that 15-100-hour requirement the way you do if you're a pilot for American or Delta. Ditto, similar story with aircraft where Boeing doesn't have just tons of 787s or 737 sitting in a warehouse waiting for airlines to come pick them up or put in their orders. They have a years-long delay in that manufacturing process that is plagued with the same sort of supply chain disruptions that so many other parts of the economy are.

So I think I get everything that you're saying. There's not enough planes. There's not enough grounds crew. There's not enough pilots. The entire service model is woefully understaffed so that whenever there's a storm or a cancellation, there's no redundancy or resiliency in the system, and so you get these cascading cancellations.

I think I get all of that. Here's my question. Why is this happening now? Like, wasn't all this obvious 18 months ago that we'd have vaccines? Wasn't it obvious six, 12 months ago that Americans were like, okay, I'm done with this, get me the hell out of my house? Why does it feel like this mayhem is coming to a head now? It's a labor supply issue.

It's a labor shortage issue in large part because airlines are not immune to the same sort of hiring challenges that every single sector of the economy is currently facing. You know, and it's not just airlines. It's TSA, it's the government employees at the airports. If you live in Milwaukee and you're looking for an entry-level job, you could go and you could become a transportation security officer. Right now, there's a job posting in Milwaukee. The pay says it starts at $19.41.

Or you could go on Amazon's website and see that there's also a job starting in the Milwaukee area at $19.50. So the exact same pay for two very different jobs. Now, if you're talking about working a job in January in Milwaukee, would you rather be helping unload and load bags in the dead of winter in Milwaukee or in a climate-controlled environment in a warehouse working for Amazon? That's the type of trade-off and decision that a lot of folks are having to make and why airlines are finding it difficult to try to hire up in this sort of strong labor environment. And so the lack of, you know, the airline still down a significant number of employees compared to where they were in 2019.

TSA is still working on trying to hire up. Those labor shortages are causing the types of delays and cancellations. Now, even take something like the pilots where when there are these sorts of cancellations that occur, when there's bad weather, in normal times, they might have a reserve crew of pilots or flight attendants that they can call in, that they can. and fill in to be able to bridge that gap. But when you don't have enough pilots to be able to meet those sorts of demands, in normal times things operate great. But as soon as the cancellation start, as soon as a few pilots call in sick, as soon as there's a wave of COVID that causes a lot of people to call in sick, all of a sudden there is not the reserve in place to be able to bridge that gap. And the result is a huge swath of delays and cancellations.

like we've been seeing recently. People that were paying attention in 2020 to some of the federal bailouts might be screaming at the back of their head. The airlines shouldn't be in this position because they got $50 billion from the Treasury Department. Gary Leff, who writes about the airline industry at the website View from the Wing,

has been very critical of the airlines for shedding staff despite getting this bailout. And I want you to respond to something that he wrote. He wrote, quote, The airlines pocketed these subsidies and found mostly, but not, entirely legal ways to still drop employees. Delta actually reduced employee headcount 31%. Now they're hiring back people, but on the non-union management side, many are green. It's not just

number of employees, but experience. They lost a lot of people who knew how to run airlines, end quote. To what extent do you hold the airlines similarly at fault, as Gary does here, in terms of taking $50 billion, still shedding all this workforce, and leaving them in a situation where, I mean, I suppose they're relatively profitable now. Demand is really strong, but they aren't nearly in a position to satisfy it. Look, I'm sympathetic to the view that airlines should have done a better job of retaining the sorts of employees that they were supposed to be retaining as a result of receiving those bailouts. But where I sort of have a slightly different view is just viewing how existential the potential threat was going back to March and April of 2020.

It is very easy to look in hindsight to see how the course of the pandemic played out and how the travel demand rebounded far quicker than anybody expected. But when you go back and read the sort of not only the outlook on the course of the pandemic, but the outlook on the course of the airline industry, it was going to be a five, six, decade-long slog to get back to any sense of normalcy. Not the two-year, you know, 24-month slog to get back to profitability as basically every airline now is currently profitable. So that's an interesting defense. I think I fall somewhere between you and Gary Leff on this one. I take your point that the airlines in 2020 thought they were looking at an extinction-level event,

but so did the government. That's why we bailed them out. It's why they got a $54 billion lifeline. And they still let all these people go. And now they're basically outsourcing their pain onto consumers in the form of cancellations and delays. So speaking of the consumers, what about us, the flyers? Are we doing anything different in 2022 that is contributing to these delays and cancellations? Yeah, absolutely.

So the number of people traveling today is still down about 10% from what. where it was pre-pendemic. But that belies a sort of make-up a change that's happened where leisure travel is almost fully rebounded today compared to pre-pendemic, whereas business travel is still down 30%. Now, why does that matter? It matters because leisure travelers tend to be, A, more inexperienced when it comes to travel. They might need more support from the airlines, you know, handling their itinerary ahead of time than the season business travel. They might need more time going through security. don't remember to, you know, take their shoes off or to take their laptop out or, oh, you can't actually bring that water bottle through security. They might need more help, you know, time getting onto the plane boarding.

All these sort of little micro events that at grand scale start to really impact when you see these sorts of lines at many airports through security, that's a result of each person maybe taking an extra 10, 15, 20 seconds than you would expect multiplied by 1,000, 2,000, 3,000. thousand passengers. So even though demand, leisure travel demand, people taking vacations is almost fully rebounded, the fact that there aren't enough flights on the schedule to meet that demand, the fact that the schedule is still down 15, 20 percent because the airlines don't have enough pilots, planes, and crew means that high demand, low supply, high airfares.

And so when folks see these extraordinarily high summer airfares, when they go to search for their flights, that is a direct result of the fact that planes, that airlines don't have enough aircraft and pilots to operate. And so we're seeing higher fares today than we would have if those sorts of decisions had been different in 2020. Someone else that I talked to this week about the air travel mess was Lori Garrow, who's a professor at Georgia Tech, who writes and talks a lot about the airline industry. And she directed me to Flight Aware, which is a website that tracks these statistics of the airline industry. So for a Sabermetrics nerd like me,

this was a very, very fun three hours spent looking at calculating flight cancellation rates. I want to share with you some data that I found from Flight Aware, because this is really, really interesting. So on a typical day, about one in 100 flights are canceled. 1%. Last Thursday, JetBlue canceled 14% of its flights. On Thursday and Friday, American canceled 10% of its flights.

On Friday, Saturday, Sunday, Delta canceled 8% of its flights. So those major carriers collectively canceled nearly one in 10 of their flights last Friday. Like, my prayers to you, if you were flying Delta American or JetBlue last weekend because it was an absolute nightmare. Now, here's the weird part. Frontier, Spirit. Not a lot of people's favorite airlines that they travel a lot. Frontier canceled 1% of their flights. Spirit canceled 1% of their flights.

Southwest also canceled 1% of their flights. only 1% of their flights. Why are the major carriers having the major problems, while the budget carriers seem to, at least according to the flight of our data, basically be operating as normal? Yeah, so there are few things happening here. First is that today's airline gloating about not having cancellations is going to be tomorrow's airline that is experiencing its own meltdown.

I am not representing the company of Frontier's spirit, that's for sure. Exactly. I don't want to pretend as though Spirit and Frontier don't ever experience their own waves of meltdowns. They absolutely do. That having been said, there are a few factors, I think, why we're seeing more higher rates of cancellations among these sort of legacy full-service airlines than the budget airlines. First is the fact that many of the budget airlines like Spirit and others have already trimmed their summer schedules. You know, Spirit, JetBlue, Alaska. many of these months ago realized we are facing a summer schedule right now where we don't have enough pilots to operate the schedule that we had planned. We don't have enough crew, even though the demand is there and we schedule these flights in anticipation that we'd be

able to sell them. We just don't have enough capacity to operate them. So we better cancel them months in advance rather than having to have the day of cancellation that causes all sorts of headaches, not only for travelers, but for the airline as well. And so they did a little bit more advanced preparation than some of the legacy full-service airlines, which I think can suffer sometimes from hubris thinking Delta, for instance, has told a story about itself for years, that it was the operational airline. It was the one with operational excellence. It didn't have these sorts of meltdowns that would plague other airlines, and I think is now paying a little bit of a price for that hubris. Second, many of the legacy airlines have hubs that tend to be in crowded, especially northeast corridors,

New York area, Chicago area, Boston, that can suffer from more of these sort of compounding cancellations when things go bad. So maybe it's a thunderstorm where all of a sudden flights not only out of Newark, a United Hub or JFK, you know, Delta and historically an American hub is all of a sudden impact. in a major way. And those cancellations tend to be get more cancellations. It doesn't tend to be a one-off event because a flight from JFK to Miami that gets canceled, all of a sudden results in a further cancellation for that flight that was supposed to fly out of Miami afterwards. It tends to have a cascading effect. The other thing that you're making me think of is that I asked the question a few minutes ago, why is this happening now? Well, look at the calendar. It is late June. When do

thunderstorms peak in America right around now, right, in June and July. So you don't even have to go into a full thing about climate change to, you know, you don't want to necessarily point to every lightning bolt and say, that's climate change, that's climate change. But generally speaking, global warming should increase the frequency and ferocity of storms. And we're just seeing a lot of storms in last few weeks that when they hit Chicago, when they hit Atlanta, when they hit some major hub that the major carriers are flying through, it absolutely devastates the entire schedule and you end up with a situation where one in ten of the flights are canceled. Another point that I want to go back to is that you were talking about some of the changes

between business travel and leisure travel. Does that shift affect where people are flying as well? Like, for example, when you have a business travel situation, you have a lot of people that are connecting through maybe Dallas or Chicago, maybe flying into San Francisco. But isn't the case that today you have many more flights that are going to beach destinations because you have fewer people going to conferences and more people going to beaches. How does that affect the big picture here? Absolutely right. Look, the two airports with the biggest growth in the amount of

available seat miles to those airports since summer of 2019 are Miami up 17 percent and Las Vegas up 10 percent. Some of the airports with the biggest declines in the number of of flights and available seats to those cities. San Francisco, down 26%, Detroit, down 25%, Chicago O'Hare, down 18%. These are really business-heavy destinations. And so while leisure travel is fully rebounded, a business travel is still down anywhere between 25 and 30%. And there are huge knock-on effects for those disparities, because historically, the budget airlines have had, the leisure traveler as their bread and butter. Spirit Airlines does not have any sort of significant amount of business travel within its portfolio. It is serving those customers who want to fly to

Miami and get there as cheap as possible. American Airlines, Delta United, sure, they fly plenty of leisure travelers, but at the end of the day, where they're making the most amount of money is with those business travelers. They are, you know, four, five, six, seven times more profitable on a per person basis than a leisure traveler. And they orient their entire operation around serving those business travelers. So that's not only where they fly, flying more to Chicago, San Francisco, New York, historically, but also in terms of how they construct the plane, you know, having these larger business class cabins, having more lounges at the airport, having more service and corporate contracts

in service of those business passengers. And so when a global pandemic comes along that causes business travel to reduce significantly, but causes leisure travel to only dip and then come back much more quickly, all of us, the airlines across the board realize the name of the game, the battle right now for travel is among attracting those leisure travelers. And so in a sense, the full-service airlines, Delta and American and United, are playing away games. The budget airlines have home field advantage because the market for travel right now is almost purely among those leisure travelers, and they've been serving them for years. And so whether it's adding capacity or flying those types of flights to those leisure destination favorites, Miami, Cancun, Hawaii, Las Vegas, budget airlines know how to do it.

And this is why you've seen budget airlines have basically eating all the growth over the past three years, a Legion, up 17% in their schedule since 2019. Spirit, up 7%. Frontier up 6%. Whereas Delta, down 18%. United American, each down, you know, 8, 9, 10%. And this is both a short-term trend as a result of the pandemic, but also a long-term trend that over the past 20, 25 years, almost all the growth in the airline industry has gone to those leisure airlines, those budget airlines, whereas every single year the legacy airlines lose about a percentage point of market share. And this has been something that's been going on over the years. And this is why you see the full-service airlines try to compete by offering, for instance, basic economy seats. You know, when Delta first launched basic economy a

decade ago, they called them spirit match fairs. This was their way of trying to compete with spirit airlines for those leisure travelers who don't care about the experience, who don't care about being pampered, they just want the cheapest flight possible. This is so interesting. I feel like I could do like a whole segment or a whole episode and just the spillover effects of the decline of business travel. Because I've been writing things down as you've been talking, and it seems to me that it has several effects.

I just want to list them all here and make sure that I have the entire sort of second order effect named. Number one, historically business class has subsidized economy. So as business class has eroded, as it's declined by 30%, that probably puts upward pressure on prices for economy, all things equal. Number two, it probably also means slightly lower prices for business class, right? If demand for business class seats is eroding, then it probably means that you're going to price those lower in order to attract people that are merely rich rather than rich and spending

money that's actually belonging to their company. Number three, fewer flights to Chicago, San Francisco, New York City, places where there are lots of business travel, lots of conferences, and more flights to places like Miami and Vegas where people more purely go for leisure. Number four, big advantage for the budget carriers and more chaos for the major carriers. The major carriers have to do an adjustment because their business models relied on a healthy business class economy, whereas it's the budget airlines that are like, oh, the economy is moving into exactly the sort of consumer demographic that we have always served.

So we don't have to do very many adjustments at all. Is that the full picture? you say of the spillover effects, the decline of business, or is there something else? Absolutely. Look, and it's a whole scale upheaval in how airlines approach pricing of fares. Because historically, what they've tried to do is to price their tickets depending on who they think was buying that ticket. If they thought it was going to be a business traveler buying this ticket, they wanted the price to be quite a bit higher because that business traveler doesn't care what it costs. It's their company paying. Whereas if they're selling it to a leisure traveler, they want to bring the price down because

they know an expensive ticket is going to mean that purchase isn't going to happen versus a lower price means they'll actually make the sale. Let me give you one quick illustrative example here. Take a last minute flight. Many people have it in their heads that when an airline has a plane that's about to depart and there are 10 seats unsold on that plane, the airline in the last week or two before that flight should, to try to fill those seats, probably slash the price to try to sell as many of those 10 seats as possible, right? And that's what airlines historically did. They would cut the price on last minute tickets to try to fill those seats. But there was a famous research paper done in, I believe, the 1970s that looked at who was actually buying these last

minute tickets. And it turned out it didn't tend to be leisure travelers, vacationers. You and I tended to be business travelers who didn't make their plans until the last minute and who didn't care what the price cost. And so from an airline perspective, they thought their game they were playing was trying to sell the most seats possible. But the game they realized they ought to be playing was trying to make the most money possible. And to make the most money, they, instead of slashing the price on those last-minute tickets

to fill as many seats as possible, they should actually raise the price on those last-minute tickets to try to extract as much money as possible from those business traveler. And this is why even today, last-minute flights tend to be quite a bit more expensive than flights booked even a month or two ahead of time. Those types of ramifications.

of airlines trying to differentiate between leisure travelers and business travelers has been the name of the game for airline pricing for decades. That's so interesting. I've always wondered that. I've always wondered why our last minute ticket so expensive. The seat is going to go unfilled. If I give you 50 cents, you would make 50 cents more than you would otherwise make if I didn't put my butt in that seat. But you're saying, don't think about it as an empty seat. Think about it with the price sensitivity of the kind of person who's likely to buy that empty seed. And they tend to be pretty price and sensitive because they're business travelers. Let me give you one other example. So many folks, you know, see, we saw a deal at discussion flights just a day ago that was flights to Paris for $340 round trip this fall.

And people would say, you know, see that. I mean, how the heck can airlines even afford to sell a ticket to Paris for $340 round trip? And the reason why is to take a, you know, a 10,000 foot view of the airline industry, just a 30 second overview. decades ago, the airline industry relied almost exclusively on economy airfare to fund their operations, to make their money. Today, airlines actually make, in many cases, the majority of their revenue on things other than economy airfare. They make it on selling premium seats, you know, premium economy, business class, first class.

They've gotten much better at actually selling those seats. You know, a decade ago, Delta only sold 13% of their first class. seats. Today, they sell over 60% of them. So they make more money from that. Their credit card game is so strong. American Airlines lost money flying on every plane that they flew in 2018, but the reason why they turned a profit on the year was billions and billions of dollars in credit card contracts and frequent flyer miles sales. They make it on selling cargo and on selling corporate contracts, on selling commissions when you book a flight and they say, do you want a car rental? Do you want a hotel? That's all free money for the airlines. There's so many revenue streams now for

airlines that make it that your economy airfare just isn't nearly as important to them as it historically had been. And this is why that sort of diversification of revenue streams has caused us to see the types of cheaper fares in economy today than we had seen historically. It's absolutely fascinating. And I truly had no idea. I'm so interested in company. that nominally appear to be in the business of like the name on the tin, but it turns out that their business is really in something that's only tangentially related and what they're actually selling is essentially a loss leader or at least just a minority item on their earnings report. This is absolutely fascinating. The last thing I wanted to ask you

about possible reasons why we're in this mess is about competition and regulatory policy. So U.S. law prevents foreign carriers from operating on domestic routes. And so as demand for domestic routes surges from a pandemic low to a current high, you're in a situation where you don't have the capacity from domestic carriers themselves. And you've also told all the foreign airlines that you don't even want them to try to fly from, you know, Pittsburgh to Oklahoma City. And this is going to have all the effects that you would typically expect to have from protectionism, higher prices, more consolidation. Less competition, a little bit less innovation. We just had an episode a few weeks ago about the ways this can go wrong when one node in the domestic system fails in baby formula. For example, we have a protectionist system when it comes to baby formula. Abbott Labs collapses in Chicago, or, I'm sorry, Michigan. Their lab turns out to have a terrible bacterial infection and it's shut down. And as a result, there's this awful baby formula shortage.

And Torda said, have you done any thinking about the degree to which regulatory policy and protectionism makes America's airlines particularly unresilient, particularly fragile to the sort of problems that we're currently experiencing? Yeah. So one of the most kind of front and center issues being discussed in the airline industry right now is this question of pilot training. Is 1,500 hours the proper amount of air time we should. be expecting from pilots before we certify them to fly commercial jets. And on the one hand, it's easy to say, well, you know, you can't be too careful.

Yeah, on the one hand, I don't want to die. Right. Exactly. Exactly. Exactly. And you can just imagine the attack ads and somebody votes to decrease that requirement and then all of a sudden there's one crash and it just, you know, the optics

are horrendous. On the other hand, the U.S. is a bit of an outlier on this issue. Most other countries do not require anything near that level of training ahead of being certified. The U.S. historically has not required that level of training. Air travel is incredibly safe compared to virtually every other mode of transportation. I mean, you look at the number of your per mile risk of death in flying versus driving or anything else. It is just a totally, totally different. ball wax. And so they're, I think, real legitimate questions, is that the proper amount, especially considering that foreign pilots are allowed to operate foreign airlines flying to JFK, flying to San Francisco, flying to LAX without having that same level of requirement. That having been said, it's hard to find a quick overnight fix that will result in more more flights, more pilots, more just overall supply of air travel, because these sorts of things

tend to take months to years to unfurl. I mean, airlines are already putting these sorts of investments in training of new pilots. But again, that's something that pays dividends months to years down the line. So the billion-dollar question at long last, when does this end? When can we expect traveling to feel a bit more normal? Yeah. What I like to say is that cheap flights aren't gone forever. They're just gone for this summer. And I think that's actually true as well for the types of travel chaos we've seen recently, that the types of rolling, delays, cancellations is predominantly a side effect of the fact of the amount of demand for travel right now. And the reason why it's so high right now is not just because so many folks are making up for trips they haven't been able to take over the past couple of years, excited. to get back out and travel again, but also because summer is always the most popular time of year to travel. And that's a story both of good weather, but also primarily one of the academic calendar. So many parents, families, students, teachers can only travel during these three months.

And so when you have that funneling effect, not only is demand a lot higher, but it really kind of strains the system. It adds a lot of pressure to the system where you don't, you know, when one flight gets canceled and then has a cascading effect, there's not much slack in the system to be able to cut that off. And so it tends to ripple a lot quicker. Think of it as a slack line, you know, when it's really taught, one wave is going to really go a long way when there's a little bit more slack. It tends to peter out much quicker.

And so I think when you're talking about when will these things start to ease? When will we see fares get quite a bit cheaper? When will we see fewer cancellations and delays and craziness? I think it's going to be after Labor Day. I think we're talking about flights in mid-September and beyond, and that's just a function of travel demands starting to decrease, and then you have fewer lines at security. You have less people traveling, causing these sorts of high fares.

You have more pilots and planes in reserve to be able to come in when there is a thunderstorm, when there is a IT meltdown, when there is the type of thing that those sorts of reserves can help prevent a catatine. astrophic wave of cancellations and delays. And so bad news for the short term, good news for the fall and beyond. So everything you're describing is, I've compared it to the pinched hose economy. Like the economy shut down in 2020. Demand plummeted. Supply was taken offline. But then demand came roaring back in 2021 and 2022 and supply couldn't keep up. And as a result, you just get chaos down the line. And I call it the pinched hose effect because it's like if you pinched

pinch a hose in the garden, all this water gets blocked. That's demand. And then you release it. And the hose goes haywire. It's flopping all over the place. You don't know where it's going to flop. You just definitely know that the flopping is going to happen. It's just pure chaos. And at the end of the day, I just think the entire economy is just one pinched hose after another. Look, the inventory overhang in retail, oil markets being screwy, baby formula shortage, airline mess. It's all the same story. It's all demand outstripping supply, creating weirdness. So I feel bad for listeners who come to this show to hear stories that aren't basically, hey, demand is outshipping supply again. We have no capacity to fulfill that which people want to

buy. But in mystery after mystery, it is notable that it all comes down to this. Demand is outrunning supply. So, Scott, thank you again for walking us through this incredibly interesting, incredibly frustrating subject telling me about business travel. That part in particular was really fascinating. I really appreciate it. Thanks, man. My pleasure. Thank you so much for having me, Derek. Thank you very much for listening. Plain English is produced by Devin Manzi. If you have a comment, a concern, a question, an idea for a future show, please email us at plain English at Spotify.com.

That's plain, no space, English at Spotify.com.