Tech Won't Save Us - How Data Is Changing Air Travel w/ Amanda Mull

Episode Date: December 12, 2024

Paris Marx is joined by Amanda Mull to discuss the data-informed decisions that are changing the way we all experience air travel, mostly for the worse. Amanda Mull is a senior reporter and Buying Power columnist at Bloomberg Businessweek.Tech Won’t Save Us offers a critical perspective on tech, its worldview, and wider society with the goal of inspiring people to demand better tech and a better world. Support the show on Patreon.The podcast is made in partnership with The Nation. Production is by Eric Wickham. Transcripts are by Brigitte Pawliw-Fry.Also mentioned in this episode:Amanda wrote about the changing flying experience for Bloomberg and the big investments being made in airport lounges for The Atlantic.Legacy airlines are taking budget customers with the ultracheap fares.In the US, budget airlines are beginning to offer premium seats and other amenities to attract more premium customers.Support the show

The frequent flyer programs and all of the data collection and analysis they enable is why everything on the inside of an airplane is like it is right now. Hello and welcome to Tech Won't Save Us, made in partnership with The Nation magazine. I'm your host, Paris Marks, and this week my guest is Amanda Mull. Amanda is a senior reporter and buying power columnist at Bloomberg Businessweek. Amanda was on the show last year to talk about e-commerce. It was fascinating, and we dug into the history of consumerism much more broadly. And more recently, Amanda has been looking into airlines and flights and how they are changing in particular in the past few years

as, you know, more passengers seem to be buying premium seats as airlines are investing more in those like premium experiences and in their lounges as well. And at the same time, how it feels like the experience of other passengers keeps getting worse. And at the same time, how it feels like the experience of other passengers keeps getting worse. And so, you know, this is a time of year as we head into the holidays where a lot of people are flying, a lot of people need to get home. So, you know, airlines and flights are on a lot of people's minds for that reason. And so I figured what a good opportunity to have Amanda back on the show to dig into this issue that so many of us deal with, because so many of us do take at least one flight a year, and to explore not just why that is changing and the consequences of how the experience

of flying is changing, but also, you know, we talk about the tech angle as well, right? And how tech and data collection in particular has helped to inform some of these changes, has helped to make it so that airlines can push more of these premium seats onto their passengers to try to get more people upgrading and paying for higher fares so that they can make more profits from these seats and how that differs from the way that business class seats, first class seats used to be treated in the past. So I found this to be a really fascinating conversation with Amanda, because flying and airlines are, you know, an industry that I have paid a lot of attention to over the years, you know, in particular, because I used to be much more focused on travel and that kind of writing before I started writing, you know, about technology

much more often and the politics of technology in particular. So I have continued to keep an eye on those things over the years. And I figured what a good opportunity to bring those two interests and those two interesting topics together for a conversation with Amanda at a time of year when so many people are thinking about this. I think in general, just people have a general interest in what is going on with air travel, because it is something that we love to talk about, that we love to complain about, that so many of us need to rely on, you know, for going on vacation or traveling for work or what have you. So yeah, I hope you enjoy this conversation with Amanda. And I will just say as well, you know, if you're listening to this on Thursday or Friday,

on Friday, December 13th, we are having our end of year live stream where we'll be talking about the biggest stories of the year, where we'll be talking about the biggest stories of the year, what we're looking forward to in 2025, and you know, other things that might come up. That is for our Patreon supporters. So you can go to patreon.com slash tech won't save us to become a supporter to, you know, join that live to see the video. If you are not a Patreon supporter, you'll be able to find the audio of that on our main feed next week as our podcast episode. And then as we kind of roll into the holidays, the last episode of the year and the first episode of January will be some of the premium episodes that we've been releasing for Patreon supporters,

but we'll be making those public so that there's still interesting conversations for you to listen to over the holidays, but so that Eric, our show's producer, and I can take a bit of a break over the holidays. I'm sure that you understand, but there will still be very interesting content for you to engage with and listen to during that time. So with that said, I hope you enjoy this episode with Amanda. I hope you enjoy the holidays as well. If this is the last one you listen to before all of that happens, but if not, hey, you know, there'll still be plenty more to listen to and to enjoy over the holidays as well. So if you do like this episode, make sure to leave a five-star review on your podcast platform of choice. You can share the show on social media

or with any friends or colleagues who you think would learn from it. And if you do want to support the work that goes into making the show every single week and to get access to that end of year live stream on December 13th, you can join supporters like Sal Al-Rashid from New York City, Kate in Amsterdam, Ed in Manchester, and Tony from Berlin by going to patreon.com slash techwontsaveus where you can become a supporter as well. Thanks so much and enjoy this week's conversation. Amanda, welcome back to Tech Won't Save Us. Thank you so much for having me. Last time you were on the show, we talked about like e-commerce and the whole world of that and

the listeners really loved it, found it fascinating. So I'm excited to have you on the show for that reason. But also because what we're talking about this week is like, you know, maybe not so techie, but I think a lot of people will be interested in it regardless. And there's still some tech elements to it. There's always a tech angle. We can find the tech angle. Totally. We'll find something in there. But you have been writing for a while now at Bloomberg Business Week, where you are now, and at The Atlantic before about, you know, kind of the changing nature of flying and the experience of flying. Why was that on your radar? Why was that something that you decided you wanted to dig into with all the options that you have available to you to research?

Airlines and air travel are just a good example, I think, of this huge system that mostly hides in plain sight that everybody has to deal with at some point. Most Americans at this point have flown on a plane and about half of people in North America fly on a plane at least once a year. So it is an enormous globe-spanning industry that employs millions of people, that extract a lot of money, both from people and from governments. And most people have just no idea how it operates, why things cost as much as they do, why things happen like they do, why airlines make certain choices about their offerings, about their routes, about their prices. It is just a big opaque thing that exists in front of all of our eyes that people don't really understand. Totally. You know, everyone has opinions about these things as well, right? Because it is this topic, as you're saying, that is so common for people to experience and often to experience in

a particular kind of way. And, you know, I have been watching the airline industry for a long time. Like 10 years ago, I kind of started as a bit of like a travel blogger before I pivoted into tech and got bored with like the whole travel world and how a lot of it felt very like advertorial and stuff like that. You know, the writing in that area, no criticism of the travel writers out there. But I feel like when we talk about flying and when we talk about people's experience of flying, it's usually like the tickets are expensive. They're nickel and diming me for all these different things that I have to get, whether

it's the baggage or the different things on the flight. You know, I need to wait all this time to go through security. Like, you know, all of these frustrations that people have with this experience of flying that we have been used to for a while now. But as you've been writing, that experience does seem to be changing in certain ways, or at least how some people fly is changing a lot. What is the shift that we're seeing there? And is this solely a post-pandemic thing, or is it reflective of a broader trend over a longer period of time? Well, I think that with air travel, as with a lot of other areas of society in general, but specifically like the consumer system, the pandemic had the effect

of really like accelerating trends that were already sort of bubbling under the surface and picking up some steam. The airline industry, because it's so huge and so intractable, like it is like turning a cruise ship to change something about how airlines work, about how even a single airline works. It happens very slowly and over a large amount of space and time. But the pandemic had some effects on it that were able to sort of shorten some of those spans of time and distance, because it effectively ended air travel for a lot of people in a lot of like types of air travel for a long enough period of time that airlines got an opportunity to sort of step back from some of the things that they had been doing and decide that they wanted to make particular choices

about changes, about policies. And it gave them an opportunity to experiment with some of the things that maybe they in better times would have had to experiment with over like years. What happened during the pandemic in North America, at least, is that air travel of all kinds went like not to zero, but like as close as you can get to zero while still basically functioning as a system. A lot of airline employees were laid off, a lot of, like, airline lounges closed, a lot of planes were decommissioned for a period of time because there was just not a lot of people in the air. That's true of leisure travel. It's especially true of business travel. And although North Americans do more leisure travel than they have in, like, generations past, business travel still makes up a disproportionate amount of people on airlines.

And particularly for my interest in this story, they make up a really disproportionate amount of premium flyers, which is people who fly in international business class, first class, and also things like Delta's Premium Select or Comfort Plus. You get these premium economy and economy plus classes, especially across North American airlines. And you really saw a decline in business travel because not only were people not like volunteering to go places, companies had a real, you know, set of questions about liability, about the wisdom of sending people around. So you had these flyers that make up, about the wisdom of sending people around.

So you had these flyers that make up a disproportionate amount of not just like headcount on airplanes, but an even more disproportionate amount of revenue on airplanes because seats at the front of the plane are worth anywhere from like three to like probably 10 or 15 times as much as a seat in the back of the plane. So you had these travelers that were just gone. And like they are like so much of your business plan. If you're an airline, they're regular, predictable, high revenue, high margin customers. And they vanished overnight. So airlines had to pull back and go, okay, we have like a set of products on our planes. We have types of customers, we have cohorts set of products on our planes. We have types of customers. We have cohorts of customers that we've sort of demographically defined over time

through age, location, travel purpose, socioeconomic status, things like that. We need to figure out who is flying and how we move them into the highest margin products available. So what they did is they discounted a lot of those premium cabin tickets. And even if you take, you know, an international first class or international business class or a domestic first class ticket and cut it in half, or more even 60%, 65% off, you're still going to be a more profitable sale than if you sell to the same customer sitting in coach for like $175 or $250. So you had people who were still flying for leisure during this period of time, and then some people who are flying out of necessity. And those customers, a lot of them got like a really hard sell about upgrading. And there was a lot of upgrades available. So a lot of people who had maybe never flown in the front

of the plane, tried it out. And airlines got really, really good. They got a real set of data on figuring out how to talk to regular customers about premium products. Because for a long time, these products had sort of sold themselves to the people most likely to buy them. And airlines had been curious for a while about how to bring more revenue forward on the plane, about how to speak to more types of travelers about upgrading. And they got like sort of a laboratory condition in which to figure that out. That's so fascinating. And there are multiple aspects of that that I want to explore with you. But I think I'll just stick on like, you know, the very central thing that you identified there, because in the piece that you wrote for Bloomberg, you were talking about how even like before the pandemic happened, if we're looking back to the early 2010s, but even through much of the 2010s,

not a lot of those first class fares are actually being bought. Regular listeners who don't travel a lot might not realize that a lot of those people often sitting in the front, at least traditionally used to be people who were like upgraded their things like that because they have status with the airline or whatnot, right? And they're kind of rewarding those regular customers. But that doesn't mean that everyone who's up there is actually paying cash for that ticket. Some of them are, but a lot of them weren't. And now, you know, according to your reporting, you're seeing a lot more of those tickets actually being purchased rather than just people being upgraded. What does that mean for the change there? And is that reflected in what

you're talking about where all of a sudden you have these people who, you know, were never even really sold on going into these premium cabins, whether it's premium economy or first class, all of a sudden, you know, being made this pitch that they weren't being made in the past. And the airlines are finding that like, wow, a lot more people than just our business customers are finding this attractive. Yeah. What you see basically is in the past, like you were saying, the airlines gave away a lot of their premium class seats. A lot of those upgrades were given away to frequent flyers to people with high medallion status or loyalty program hierarchy.

Airlines tend to be sort of a test kitchen for a lot of the marketing and pricing dynamics that then proliferate through a lot of the marketing and pricing dynamics that then proliferate through the rest of the consumer system. And airlines were the first loyalty programs, frequent flyer miles. And in those programs, every company has a version of that. Now, every grocery store, every gas station, every whatever has like what is essentially a frequent flyer program. But airlines pioneered that in the late 1970s, early 1980s, when the US government deregulated the airlines. So suddenly, you had a lot of price competition, you had a lot of new people into the market. And that meant that, you know, established airlines

suddenly had to compete for customers that they had wrapped up before, because the roots and prices were all set centrally prior to 1977. So you get these loyalty programs to try to consolidate the highest value travelers, which are usually business travelers at a particular airline and sort of lock them in to continuing to fly that airline over time. Because airlines, they're huge businesses, but they are very volatile. So what you're trying to do if you're an airline is to make your revenue as stable and predictable as possible. And the best way to do that is with like a thick layer of business travelers. So and one way to do that, like once you create a loyalty program, you have to create rewards for loyalty. And one way to do that is by giving out seat upgrades. You see both the proliferation of first class seats and airport

lounges happening sort of at the same time. First class existed before this, but you really see airlines start to look at it as like something that is meaningful to like a particular set of customers. Because during this era, too, you see a lot more leisure travelers coming in. So you've got different customer segments like throughout the plane. And this is only going to be more true over time, where you get more and more vacation travelers in the back and more and more business travelers in the front. So a lot of those tickets for decades were given away for free at the front of the plane, like you company bought you a coach ticket. And because your company buys you a ticket every week, you eventually, you know, over time amass enough airline clout to get free upgrades. So it wasn't necessarily like when this is introduced, we're trying to make all this

additional revenue. It's more like these people who are our customers that we can rely on, we want to make sure that they stick with us. So we're going to offer these nicer perks with lounges and seats at the front that give you these extra amenities rather than saying, oh, this is our way to charge you a lot more to make more money. Like that piece of it comes along later. Before the deregulation of airlines, first class tickets were things that were bought. To the extent that they existed,

they were things that were bought and sold for cash because the concept of the upgrade didn't really exist in the same way that it does now. But you end up with a set of seats that is basically an incentive product instead of a cash sale product. And for decades, this was true. For decades, airlines did not sell for cash most of their premium seats. And then in the United States, at least Delta has been the biggest pioneer of sort of changing the state of affairs. Between the early 2010s and 2023, the proportion of tickets in premium cabins that Delta sold for cash went from, I believe it's 14% to like more than 75%. So that's a really short timescale on which to change something about the airline industry, change something about customer behavior on a really mass scale. And it is indicative of how much emphasis airlines have put on moving people into their

highest margin, highest cost products. And they've been really effective at that. The extent to which they've been effective varies airline to airline. Delta and United in the United States are the two most successful. And what that's done for these airlines is really increase their revenue, increase their general margin. It's made them much more stable, much more profitable businesses because those tickets at the front are just much more profitable.

There's a couple of ways that they've done this that don't involve the pandemic, that don't involve this sort of reset in how people think about travel and how airlines think about us. A big part of it is the financialization of these frequent flyer programs. The credit card partnerships that major airlines have in North America are extraordinarily lucrative for them. American Express, their Delta cards put literally billions of dollars per year in Delta's pocket. There is like a single digit percentage of the US GDP that gets charged on Delta Amex's every year. It is either six or nine percent. I can't remember exactly. That's absolutely wild though still. Yeah, those credit card programs are really,

really valuable for airlines and they're really, really valuable for credit card issuers. This is where you get the outgrowth of all of these airport lounges that are being built in airports across the country. Those lounge networks have expanded so much, not just the ones that are airline branded, but also like the Amex Centurion lounges, the Chase Sapphire Reserve lounges. They're getting bigger, they're getting more luxurious. And a lot of that is because of these partnerships between card issuers and airlines. And when you buy into that sort of relationship with an airline, you are buying into the sort of loyalty game, the frequent flyer mile game, getting free flights. Yes. But also getting upgrades like that is one of the perks that is dangled most centrally in access to these cards. You usually will get like a status boost of some sort for signing up for a card. The cards all have annual fees. It depends on what like level of boost you're getting and what airline you're

with as to how much they cost, but they can cost up to like $700 a year. They get pretty expensive. So when you do that, as literally millions of Americans have, you get invested in the idea of getting an upgrade. And the best way to position yourself well for an upgrade is to buy more expensive plane tickets, to put more things on that credit card, to buy more expensive plane tickets, to book more types of travel through the airline that you've pledged your loyalty to. And that sort of like the logic of the loyalty game incentivizes people to buy more expensive plane tickets. It enables people to get like a taste of what it's like at the front of the plane

without necessarily having to pay the full cost the first time. And then once you get used to flying, not being quite as onerous as it is for like the general public, it can be like really hard to go back. Even if you consider yourself a man of the people, like once you've had like a more comfortable

seven hour flight or eight hour flight, it is really hard to go. Oh no, the middle seat in the back is totally fine for the next one. Yeah. You know, like we were talking about before we started recording, like I very much relate to what you are talking about because before a number of years ago, I was the type of person who just looked for the cheapest flight I could get. I didn't care about the airline. Like, none of that stuff really mattered to me. But now that I do more, like, travel for work, whether it's for speaking engagements and things like that, you know, I have the Air Canada loyalty program. I have the status.

I like getting my upgrades. I go to the lounges. Like, all of this stuff you're talking about is like something that I totally relate to. And I can notice myself that it has had an effect on how I think about flying and the times when I am back in a middle seat, like you're saying, I'm like, man, this is so annoying, right? Like, why didn't I get my upgrade this time? So you can definitely see like how they hook you on it, how they get you into it. I wanted to ask a couple questions about what you were saying before, though, you mentioned that the airlines were targeting particular customers based on data that they had or had built up quite a bit of data on particular customers because of experiences

during the pandemic and who might be interested in this. And you also mentioned that the cost of these tickets were discounted during the pandemic. I guess my questions are this. Where did all this data come from? How did they start to learn which customers would be more likely to buy these tickets? And now that we have returned to like a lot of people traveling again, you know, kind of more normal airline volumes. Are those tickets still getting discounted to get people upgrading to them who are not business class travelers? Or had the prices increase back to where they were before, but you're still seeing people buy them because

they're used to doing so because of a few years ago? I'll answer the second question first, so I don't forget it. Prices are back where they were before. And that happened in pretty short order, like once, you know, sort of a critical mass of the population was vaccinated. People who were, you know, at home during the pandemic, working from home, still getting their regular paycheck, but not going on vacations that they might have otherwise, not going out to dinner at the rate that they might have otherwise, we're just sitting on like a lot of savings,

that savings has largely been depleted over time, that has mostly shaken out of the consumer economy. And plane tickets and travel of all kinds is back to pre-pandemic levels as far as price, as far as volume. The price of every brick has gone up. In particular, when it comes to travel, because that was something people were so hungry for when they came back that there was a real, I think, demand shock for airlines who were trying to get decommissioned planes back into service, trying to rehire, to reopen lounges, to do all of these things in very short order for a very like big and complicated system.

Yeah, I remember those stories, what, a couple of years ago now about how all these airports were like losing all these bags because they didn't have enough workers, you know, planes were being delayed and all this kind of stuff. And like people were really frustrated about it. But it was like it was because we went from this airline system where you had so few people traveling and all of these companies had so many workers, whether it's the airports or the airlines laid off to then having to like turn around so quickly to, okay, people are getting back on the planes again.

People are traveling again. Now we need to like restaff this whole system, you know, that we basically laid off like because of this world changing event. Yeah. Yeah. It was for a system as large and difficult to change as air travel, commercial air travel, the real sudden drop off in demand, and then the huge surge of return to demand was very, very hard to absorb on both ends. But that is like largely shaken out

now. There's still a bit of a supply and demand mismatch on both ends that sometimes I think that we're still getting used to like what the especially leisure travel looks like post pandemic. Business travel is a little bit more predictable, and it hasn't quite returned to pre pandemic levels. But leisure travel is highly variable and depends on a lot of economic and geopolitical concerns. And I think that airlines are still trying to figure out like what to do and like where the new demand is and how durable it is and how quickly it can change again and like what to do about the fact that like Boeing is not really making so many airplanes these days.

There's a real supply issue on like the plane front because there are only two giant companies in the world that make passenger jets. Do you know if Airbus is like growing its market share because of all the problems at Boeing? Or was that a bit outside of what you've been looking at? I haven't looked at that directly. But my understanding just from like stuff I've read as an interested party is that it

would be hard for them to gain like a ton of advantage right now because their sales books are so far booked out that like, meaningfully increasing capacity would be how they would capture more market share. And it's just like very difficult to do that for them. Yeah. So I think that they have probably gained a significant public perception advantage, but it's going to be hard for them to turn that into a durable like economic advantage, I think, especially if Boeing gets its shit together anytime soon. As a person who is pretty visible and opinionated online, I'm hyper aware of safety and security. I think, especially if Boeing gets its shit together anytime soon. Delete.me is a subscription service that removes your personal info from the largest people search databases on the web and in the process helps prevent potential ID theft, doxing and phishing scams. To put it simply, Delete.me does all of the hard work of wiping you and your family's personal info off the web.

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You know, all this data about the customers. I know that in one of your pieces, you were talking about, you know, how these companies were also increasingly using these technologies to like predict demand, to try to see or to try to predict how many seats they need and all this kind of stuff. Like, where does this come from? And how are they planning out these systems and trying to get people to upgrade to these higher fares? Right. The first place that this comes from is those frequent flyer programs. When the airlines came up with that, they didn't, I don't think at the time, realize exactly how much they had

changed the world, honestly, because that is how companies of all types gather meaningful, robust data on their customers at this point is you lock them into a loyalty program where you can sort of assimilate a profile on them and their behavior and their likely behavior. And that would often be based off of like their shopping history and things like that because of the purchases that they're making. Yes, it would be based off purchase history. It would be based off the types of for airlines, like the types of destinations these people book, whether they have their frequent flyer program link concur is the system that like companies use to book out business travel, but it's hard to say.

Yes. So airlines are able to create these like really robust profiles of data on people, not just on like what they spend and how they spend, but on in the case of airlines, like the types of destinations a person is choosing, the flight times a person is choosing, how they're booking, whether it's through a travel agent, whether it's through, you know, a discount reservation portal, whether it's through the airlines app, whether it's through concur, which is a platform that a lot of large companies use to book business travel for workers. So you get like really, really fine grained data on people because you are asking them to make all of their purchases under a specific unique identifier. In the case of

airlines, it is a frequent flyer number. So you are able to establish these really like lengthy, detailed, granular data profiles on who you're talking about. And then once you do that, you begin to like segment your customer market, you find, you know, types of business travelers, types of leisure travelers, people who are price sensitive, people who are not price sensitive, and you're able to create profiles of like the types of customers that you are most likely to have, and then create products and offerings and discounts and incentive programs that are targeted toward people with particular characteristics based on these profiles. And what economists call that is price discrimination.

Which they mean in a good way, right? Yes, they mean in a good way. But it is one of those phrases that when put before the general public, I think the general public has enough information just from that phrase to have some insight on what's going on in a way that economists that sort of betrays what they're doing, I think, that maybe they didn't intend. So what that means is using all of this data, using all of this information you have using the information about your own like yield management systems, which airlines have developed very, very complicated ways of trying to get as many butts in seats as possible and for the maximum price per butt, depending on the profile of that butt. And so you are trying to create a system of price discrimination in which you have determined the maximum amount that you can charge a particular person for a

particular product and always charge that price. And data is what makes it possible to do that. These sort of granular information that you have on people, on types of customers, on destinations, on times of year, things like that. Every company wants to price discriminate as well as possible because that is how you extract additional margin and additional revenue. The airlines do it better than anybody. They have gotten as close to genuine, true, perfect price discrimination as any industry in the consumer market, in large part because of the very complex data analysis that they are able to do because they collect so much on us. The frequent flyer programs and all of the data collection and analysis that they are able to do because they collect so much on us. The frequent flyer programs and all

of the data collection and analysis they enable is why everything on the inside of an airplane is like it is right now. Yeah. As you describe all those things, I'm just thinking about like my own practices and like relating them back to myself, you know, I guess because that's what we do. But like, you know, just thinking about in the past how I would go to those discount platforms and try to seek out the cheapest fare, regardless of what kind of fare it was just to get to where I was going. And now like, because I'm in this loyalty program system, because I have this loyalty credit card, because I'm hoping to get an upgrade on all these sorts of things, like I'll buy a very specific fare that might cost a little bit more, just to make sure it's like, you know, serving this other goal that I guess I have as being part of this system.

You know, one of the things that you mentioned in your writing was how within the plane itself, there is also, you know, more of a division between, you know, the people who are sitting in different areas. I know, like I watch Air Canada quite closely because I'm in Canada and that's, you know, the airline I tend to use. And just the other day they announced that their basic fare is now losing even a carry-on bag, right? You know, you don't get a check bag anyway, but now you're even losing the ability to do that. And, you know, based on what you were writing, it's, you know, you're seeing this across many major airlines where you have this increasing differentiation between the different types of fares you can buy, but you also have more and more of a focus on offering different types of

kind of premium seats there as well. Can you talk about that breakdown and what that looks like even within the plane where you have this growing kind of price discrimination that's happening in there and what that looks like materially? Yeah, I think that like it follows sort of logically that once airlines had figured out these different segments of their customer base, and had figured out these different segments want different things from them. If you're an airline, then you go, okay, so how do I make that happen on the planes I have? retrofitting an airplane is very, very expensive. New airplanes, they only make so many of them, as far as passenger jets go. So you try to figure out ways to tweak the inventory you have to fill the plane with as many people as possible at the best rates possible most consistently. And even like 10 years ago, like when I first moved to New York, I am

originally from suburban Atlanta. So I would fly Delta back and forth from New York to Atlanta several times a year. And I would often end up sitting next to an empty seat. 10 years ago, 15 years ago, it was extremely common, no matter what airline you were on, that if you bought like a $200 regular coach fare, you could like reasonably often end up sitting next to an open seat because nobody likes sitting in the middle seats. That has gone by the wayside. And the reason it has gone by the wayside is the sort of like opposite side of the premiumization coin. Just like airlines have figured out what people want and figured out how to price those things at the front of the plane and figured out how to pull people from the sort of like

median baseline coach fare that was basically how everybody, almost everybody flew 20, 30 years ago and pull some people up to the front of the plane by offering particular things for a higher price. They've also figured out how to price the things at the back of the plane to make sure all those middle seats are filled. A lot of what they have done, the major North American airlines, is take the model that low-cost carriers, your Spirits, your Frontiers, your Ryanair's in Europe, things like that, take the models that they created in the proof of concept that there are people who will just forego everything if it means saving $45 on this ticket, sometimes because they need to, sometimes because some people are just cheap. And they said, well, we don't have to redo

the entire interior of the airline to capture this business. We just need to price like the low cost carriers price. So what that means is that fares have become sort of unbundled. That is usually the term that's applied to it, which means that the fare that you pay, the fare that you see when you look up on Google, how much is it going to cost me to go wherever or on your app of choice for your airline of choice, if you're in the airline clout game, what you usually see is what's called a basic economy fare. And that means with most airlines, what that price gets you is a seat. It doesn't get you a seat of your choosing. It doesn't get you a seat with the people on your itinerary. It doesn't get you a carry-on bag. In a lot of cases, it certainly does not get you a checked bag. It gets you a seat, it gets you air. Air is good.

Yes, you get to breathe in that seat. And then everything from there is an add on. So if you if if you want to go on vacation, and it's spring break, and you're in college, and truly you don't care, all you want to do is pay $149 to get to Panama City Beach from your state school of choice, not speaking from personal experience or anything, with, you know, 14 of your closest friends and also some people you hate. So you can all pile into four hotel rooms together. You are going to say, okay, I'll pay the $149 and sit in the middle seat and shove everything I own into a backpack. And it'll be fine. You know, my back hasn't stopped working yet. I am 22 years old. So you capture the revenue from those flyers who might have booked with Spirit or who might have booked with Frontier. And those middle seats

that used to be empty, and the people who spent more for their tickets on either side of that middle seat, who used to enjoy the extra, you know, elbow room of that empty seat, suddenly, there's a 22 year old going on spring break next to them, taking up that elbow room. That's a really good way to describe it. Yeah. And the promised amenities given to the people on either side of that person may not have really changed. They bought the main cabin fare, so they get to bring a carry-on suitcase with no extra charge. Like everybody else, they are paying to check a bag unless they have an airline credit card, then it's probably for free. You know, they have been given everything that they were always promised, basically. But suddenly, there's somebody taking up that space that they used to

not realize they were sort of getting for free. And because airlines have gotten a lot more efficient at their sales tactics, like throughout the cabin of an airplane, they've found more people to put in more types of seats. That makes flying feel worse for the people who are paying the $250 sitting on either side of the person paying the $149. Even though like technically they're getting the same thing that they were always being sold. It's the inefficiency that made the airlines a little bit more hospitable to human life previously, they've become more efficient. And efficiency is great for airlines. It is sometimes great for consumers.

It is not always great for extra elbow room on a flight. Yeah, I always love the flights where I have that empty seat next to me. Like, it's just wonderful, right? Yeah. It's incredible. It never happens anymore. Like, I've lived here for over 13 years, have flown the same routes to and from Atlanta and like Atlanta is Delta's global hub.

It is a very busy airport. LaGuardia to Atlanta is like one of the most basic flight-ass flights you can possibly take. It's two hours. It's like getting on a bus. They run them every 45 minutes. And I used to get that empty seat almost every single time. If you chose correctly in like where you were in the cabin, it was very easy to get an open

seat next to you. I can't tell you the last time I had an open seat next to me. It doesn't happen anymore. Even though those flights happen every 45 minutes out of both JFK and LaGuardia, they're full. That's so wild. Like, as you say that, my first thought is why can't there be a high speed train? But that's a whole other topic of conversation. There should be a high

speed train. Yeah, that we don't need to get into that I'm sure will be the topic of some other episode. But no, I completely agree with you. And I luckily have gotten some on Air Canada recently, you know, the empty seat next to me, which has been really nice. But I feel like on those like kind of key routes, like you're saying that they run all the time, like it's far less common to get it there because they are really managing it for demand. I was fascinated in one of your pieces that you said, how removing the check bag and creating this expectation that you're going to try to cram everything into a carry on or even a backpack increasingly actually frees up room underneath the plane that these

airlines are also using for more cargo. So like another kind of revenue opportunity there created by nickel and diming or, you know, making things more restrictive on the fares that the economy passengers have. Yeah, the fees serve many masters in the airline industry and commercial air travel. They are straightforwardly a source of revenue. They are very good for airlines in the math of where your money is coming from. But they also like in any consumer market, in any consumer industry, how you apply friction to consumers as a business, how you apply friction to consumers is going to determine a lot about how that market functions, about how your customers function, about what they expect. Friction is a very useful tool. Like where you remove it and where you add

it can change people's behavior in pretty short order on a pretty grand scale. In the case of airlines, it's on a population level. What fees do beyond provide revenue is they change behavior. Like people hate fees in a way that is not at all related to their material reality. Rich people hate fees. Poor people hate fees. Everybody hates fees. You feel like you are being taken, even if it's for $15. And even if $15 falls out of your pocket every time you leave your house, like you hate knowing that you're being charged $15. Yeah. You know, it feels like, okay, I'm buying this thing, but now I need to pay a little bit more for this thing I just bought.

Like, you know, what is up with that? Yeah. Right. People hate fees. So add-on fees are a great way to change behavior. And airlines use them for that. Airlines have a lot of different like revenue streams. Like that's another way that they make the revenue more stable and more predictable.

So a lot of airlines will have extra cargo space under the cabin, and will sell that cargo space to shippers of various types. That is a very good revenue stream. That is a very expensive way to be moving your cargo around the country, but people will pay for it if it's, you know, last minute, an emergency. It's a premium service in a lot of cases. So airlines want to sell that cargo room as much as possible because it is extra revenue every dollar of it on top of what they've already taken from the ticket operation. So a great way to free up that cargo space is to make it sort of like annoying psychologically to check a bag. And they do that by charging for the bags. So they make that 45 bucks on charging for the bag.

And for every person who decides not to pay it, who decides to carry on, they get that space back to sell again. And it also has the added advantage of providing another perk for the higher loyalty members and incentivizing people to open the credit cards. Because, you know, a free check bag is a sort of baseline promise for a lot of the airline credit cards for a lot of the loyalty systems. So you provide yourself with a the fee revenue, be the behavior change that that friction causes as a result of that fee and see something that you can like give back for a quote unquote free to people who behave in ways that are like ultimately very beneficial to you as a business. So fees are very good for airlines in that way. But then you create like other problems. There's lots of like bang on consequences when you change customer behavior on like a population level. So that means that everybody

wants to carry on. We all know that if you've taken a flight in the past, like 10 years, you know that there's a real issue with like, everybody's got a carry on suitcase, and there's not enough room for all the carry on suitcases on the plane, which is why like Air Canada in the United States, United has started with their basic economy fees. Now you cannot even bring a carry-on suitcase with you onto the plane on one of those fares. There is a fee. I think it might be like $15. And I think if memory serves with United, how early you declare that you're going to bring that carry-on bag changes what your fee is going to be. If you tell them immediately when you buy the ticket, the fee

is lower. If you decide at the end that actually all your stuff isn't going to fit into your backpack, the fee is higher. So what they are doing there is incentivizing to make their logistics planning easier, to declare your intentions upfront so that they have a better idea of how to load manage. You can see airlines sort of tinkering with this in real time over the time span of like months and years. But the bang on consequences of selling that cargo space is that the space under the seat in front of you is for some flyers, the only thing they're guaranteed. That's so wild. Yeah. You don't like to see it, but you also understand like from the economic perspective, why they are doing these types of things.

Oh yeah. I love reporting airline stories. I think the airlines are fascinating. And it's often because like the things that airlines do are like a hundred percent fully explicable. As a journalist, if you write a lot of airline stories and you publish them, you tweet them out, you post them on blue sky, people are like, oh, it's because the airlines are greedy. And it's like, read the details. It's so much more interesting than just the airlines are greedy. All businesses are greedy. The sort of like cold rationality of this, I think is totally fascinating because there's a real understandable explanation for every tiny thing that airlines change. Yeah, absolutely. And you mentioned how the credit card will give you the free check bag. It's like, okay, then you're not paying the bag fee, but they're getting all this data and,

you know, all this revenue that comes from the credit card partnership from that as well. So like, you know, it pays off in many other ways for them. In your Bloomberg story, you talked about how as these airlines, in particular in the United States, have seen this shift toward regular, like vacation travelers and stuff buying a lot more of these premium seats that they're planning this big overhaul of their fleets to make sure that the way that their cabins are arranged is different so that there are more premium options for people. I feel like, you know, when we think about like the Middle Eastern airlines, we know that, oh, they have all these like fancy luxuries and stuff like that, that

we're used to hearing about that sounds like, you know, completely unattainable to the vast majority of people. But it's like, wow, that sounds wild. But now it seems like a lot of these North American airlines are increasingly looking to do at least some degree of like revamps to their cabins to have the premium part of the plane take up more of the space in there to try to extract more revenue. What are we actually seeing there? What are the airlines doing in the revamping of their planes there and their fleets? Yeah. I talked to one airline industry consultant who said that to revamp the interior of a single passenger jet is like an eight-figure investment. It is an extraordinarily expensive and very time-consuming pursuit. You have to take that jet out of commission for a while to redo the interior, which means that there's routes you're not flying that perhaps you could be capturing revenue that way. The actual labor and costs itself around the revamp are very, very expensive. But airlines are like really committing themselves to this. They have run the numbers and said, the money that we can make based on the sort of increasing demand for these premium

products is worth the investment. And you don't see airlines making that type of decision on that scale a whole lot. A few years ago, United announced a plan to across their fleet, increase their premium offerings by 75%. That means like 75% more seats across their fleet. A lot of that is going to be focused on your like wide body long haul jets. It is a lot easier to upsell somebody on a ticket for a flight that's going to be over five or six hours than it is to upsell somebody on a flight that's going to be two hours. But even in like the sort of like regional jet market that these airlines serve, you're seeing them step back and go, OK, like we can move some more people up. We can expand what we're doing here. And and I think an important part of all this is that it doesn't just include like more first class seats or more like big suites or things like that.

That includes like sort of a middle class of premium seat. This gets called across the industry premium economy and economy plus. Premium economy is you're mostly going to find it on like long haul flights. It is going to be similar to what a domestic first class offering is. The seat's bigger, it tilts back further, like it's a little cushier. You probably have like a better tray table. You might have like a little bit more like stuff around you to give you like a little bit more privacy, your economy plus offering is going to be a little bit more legroom, largely, the seats overall are going to be like a very similar form factor, you're going to get like a free alcoholic beverage, you're going to get a better snack selection. So you have like a lot of introduction of those types of classes on more flights and or

expanding them to more rows. And then at the very front of the planes, you do get the expansion of these like ultra premium first class and international business class offerings where depending on the airline and the route, you can get some like truly wild things up front. The Middle Eastern airlines sort of like lead the way on the ultra premium. It's either Emirates or Etihad that there are some air buses that have like showers on them. If you are in one of those like $25,000 first class suites, you can shower before you get off the plane in whatever your destination is. That's so wild. Especially when you think of like all the additional water that needs to be carried to like enable that to happen. And like, you know, and the booze you give them and the space they're taking up, there's not like a ton of additional costs associated with transporting a first class passenger or an international business class passenger versus the cost of transporting someone who spent $200 to sit near the bathroom at the back.

Like there are most of the costs of running a flight are fixed. So you are just adding margin. You can add a lot of like ridiculous, like little touches, you can add like a designer toiletry kit or something like that, because like nowhere in any of that way, you touch the margin that you've added onto that flight. And so airlines don't want to put fewer people on planes, even if doing so enables them to extract the sort of like pure margin out of people at the front of the plane to an extent that they wouldn't otherwise. So at the back of the plane, that means that like lavatories are going to get smaller, galleys are going to get a little bit smaller.

And the things that have really shrunk over time on airplanes, as far as it goes for like regular passengers, seats haven't really gotten more narrow. Like I think the math on that that is out there is like, as far as I could tell while I was reporting this piece, like not very good because airplanes haven't gotten more narrow and like aisles haven't gotten wider. So like airlines have been putting three seats across in the same amount of space for like a very long time. But what has really shrunk is the space between you and the seat in front of you. And that continues to decline. There are real measurable declines there that people do not dispute.

And over time, you've lost a good three or four inches of legroom that might have been free otherwise. That now, in order to regain that legroom that you've lost over the past couple of decades, you are going to have to buy an Economy Plus ticket that gets you the better snack and the free booze as well. And like that fee for a lot of flights is not very much. I was looking at my flight home for Christmas today, and it's like $63 for me to get

that to fly to Atlanta around Christmas, which is like not a huge upcharge. And like the sort of like weird thing that you do sort of have to account for the extra baggage fees, like the fees that people at the back of the plane are most likely to pay on top of whatever their fare was. Fares have declined a lot in cost over time. Like this has been bad in a lot of ways for people at the back of the plane, but it hasn't really become more expensive, even though it feels more expensive. In real dollars, fares have declined a lot since the 1980s. Even since we unbundled those baggage fees, average fare has declined on planes. Even as more premium seats have gotten added,

average fares have declined. When you look at spending $63 to get that space back and to get a free cocktail and some cookies. Like, it feels bad to pay it. It's frustrating to have to pay it. But it's like not the most terrible deal. Like when you look at the economics of it over time, it's frustrating that it's like unbundled. People hate unbundled pricing, but people need to buy plane tickets. People want to go on vacation. People want to go visit their families. People have to go on business trips. People have to travel for certain things. So airlines can like pretty effectively do the things that like you hate because you have to buy the ticket anyway. And it's like a really effective way to change consumer behavior, to move people around in a way

that like they think they're making choices, but like you have actually helped them make that choice. So things are getting worse in a lot of ways at the back of the plane, but like you have actually helped them make that choice. So things are getting worse in a lot of ways at the back of the plane. But I think they're not all worse. And things are getting better at the front of the plane, but I think it's not all better. One of the big things that has like a lot of low cost carriers, sort of on the ropes right now, a lot of them are trying to consolidate, they're trying to file for bankruptcy, things like that. Because the mainstream airlines, the full service airlines have just really effectively sort of eaten their lunch. These low cost carriers proved the existence of a type of customer that I think mainline airlines didn't believe existed. And they've pretty effectively captured those customers

because in the back of the plane, if you fly Delta or United, you get the free Wi-Fi that they offer. You get the entertainment system that they've installed on every seat. Whereas if you paid the same fare for the same sort of like unbundled ticket that doesn't come with anything on a low cost carrier, you're not getting the free Wi-Fi. You're not getting that sort of like high end entertainment system. And you're not getting the free Wi-Fi. You're not getting that sort of like high-end entertainment system. And you're not getting as many flights. Those airlines don't have as many gates. They don't have all of the sort of advantages of scale that these sort of like very consolidated major airlines have. And I think that that's pulled a lot of customers toward these airlines to the point where they

sort of run several different airlines on the same plane a zillion times a day. Yeah, that makes so much sense. And I completely hear you on like how the prices are lower, but it doesn't feel that way because of the way that things have evolved. I had a couple of final questions for you before we end this off. Through this conversation, we've been talking about how, you know, the experience of flying and the experience of going to an airport is changing, right? You have more people buying these premium fares, you have more people going inside these airport lounges, which is, you know, a whole other discussion that we could talk a lot more about. But you have the credit card companies and the airlines were investing a lot more in

these premium customers and these premium experiences. Do you think there's a risk that, you know, in the same way that a lot of companies made some decisions during, say, the first couple of years of COVID that ended up not being reflective of how people are going to act after that, that maybe there's an adjustment or a way that people are acting right now that might not still be the way that they're acting in a few years from now that all these companies are adjusting to right now, but that might end up being like the wrong decision down the road. And, you know, everyone's not going to be flying premium or searching for this premium stuff forever. Do you have any insight into that side of it? Yeah, I talked to a bunch of airline

consultants about this. And I think there is some sort of ambient anxiety in the industry that like, it's not a flash in the pan, because it's pretty, pretty durable, like after the pent up demand for travel was depleted. But there is anxiety that it's more of a flash in the pan than they've priced in at this point. So the behavior of travelers, and especially leisure travelers, is like very much dependent on, you know, a lot of economic and geopolitical factors, how much people want to travel internationally, how much people want to travel at all, how much people are going on vacation and where they're going and why they're going and what they're willing to spend on those vacations is very

much subject to a lot of the material conditions of everyday life and how they fluctuate in ways that don't directly have anything to do with like air travel. So as the world is more uncertain, as people are uncertain about the economy, about the nature of their jobs going forward, the nature of government oversight of lots of different things going forward, I think there is the potential that something happens and the demand for these premium services collapses or partially collapses. Because a lot of these sort of like, especially the middle class premium services are not being bought by people who are like one percenters. They are being bought by people who are disproportionately young, disproportionately female, is what Delta told me.

And it is like a way to get like a little taste of the good life, a little taste of like sort of a nicer, more luxurious way of doing something that we all do eventually. And aspirational customers, whether it's in fashion or travel or food or whatever, are like especially disproportionately sensitive to economic fluctuations and things like that. So if this middle class aspirational set of customers doesn't like what they're seeing from the Trump administration, doesn't like how things change if inflation kicks back up after the tariffs are implemented to whatever extent they end up being implemented, I think that that set of consumers, and I think a lot of sort of

premium purveyors across types of markets are nervous about this right now. I know fashion is nervous about this right now. You do have like a little bit of like, okay, we hope that these buyers continue buying. I think that the travel industry is doing a little bit better than fashion on this because fashion prices have gotten so insane that a lot of people who might their little treat might have been a handbag a few years ago but actually it's going to be a vacation now people you know switch across consumer categories in that way and i think that the sort of popularity of travel among young people has shored up the airline's position a little bit in this way. But yeah, there is sort of a

nervousness, I think, that something could pop this bubble. It could be a bubble, it could pop. But it has already proved more durable than airlines first expected, I think, which is why you see airlines making like a real investment in changing the interiors of their planes. And even low-cost carriers have started doing this now. Southwest at a recent investor day told shareholders that our most loyal customers want an opportunity to buy a nicer ticket. They want more legroom. They want seats that are more comfortable. They want an opportunity to upgrade. And that low cost carriers even are seeing this sort of stratification of demand in their cabins is really, really interesting, I think, because

like the low cost carrier ideal was that like, no must no fuss, don't worry about it, just buy a ticket, we'll get you there, you'll sit somewhere, and you'll sit somewhere for the lowest cost possible to actually run the plane safely. Even those airlines are like Southwest for a long time, you know, didn't have like boarding groups, like it was every man for themselves, no assigned seats, everybody on the plane, good luck. And they announced that they were changing that now. So there could be like priority boarding because the people who are spending a disproportionate amount of money with them have said, hey, if you don't do this, we're going to go to Delta or we're going to go to United or whoever will give us a better experience for our money. And that even discounters are having to price in some premium features, I think,

is an indicator of just how durable this demand could be. But as with anything with airlines, like there's a precarity in the business model that I don't envy about people who have to figure out how to make these businesses stable. Historically, airlines not stable. Airlines do a lot of stuff that is very manipulative and very annoying and very much intended to take advantage of people who are sort of at their mercy. But historically, the other way to have an airline is to have an airline that closes because the level and type of regulation that we have sort of requires them to function this way. When routes and ticket prices were set centrally, the airlines were extremely stable. They didn't really have to worry about all of this little

stuff. Flying was also a lot more expensive. People didn't really leisure travel that way. But there are trade-offs in all of these regulatory decisions, trade-offs in all of these pricing decisions. And with the sort of like pullback in regulation that we had in the 80s, sort of guaranteed that this would happen eventually. That's all so fascinating to hear, right? You know, seeing the low-cost carrier become more like a traditional carrier and the traditional carrier having like built in the business model basically of the low-cost carrier into its planes. But picking up on that last comment that you were making, right? You know, you mentioned this earlier, but you were saying that airlines are, you know, kind of like an indication of what is happening more broadly, right? As they experiment with this dynamic pricing and these different pricing models and all this sort of stuff. As you have been seeing these changes in the airline industry, do you think that that gives any signals to what we're going to see in the broader consumer market going forward?

Absolutely. Every consumer business, if they had their druthers, would price whatever they're selling, like airlines price tickets. It is it is the, you know, the most efficient way, efficient, you know, brackets, derogatory way to sell whatever it is you're selling. If you can understand your customers and the types of customers you have, and what it is they value and what it is they pay for, and when you expect to see them and what you'll expect them to do. And as granular a way as airlines do, that is something that's the dream for any consumer business to be able to look at someone's unique identifier that you've assigned to them and all of their purchase history and go,

I bet I can get another $15 out of them for this. Oh my God, like it turns my stomach, but it makes total sense that they would do that. The economy we have is set up to incentivize businesses to run this way. And if you won't do it, then one of your competitors will. And that is bad in a lot of ways, but it is a rational decision on business's part to do this because there's nothing stopping them. The types and amounts of data that businesses can use to make pricing decisions, there's not like a great deal of restriction on that. We don't really have very good privacy laws in the US. So if businesses can use to make pricing decisions. There's not like a great deal of restriction on that. We don't really have very good privacy laws in the US. So if businesses can figure out a way to collect this data

and then use it effectively to price, they are allowed. There's nothing stopping them except their own good conscience. And so we know what that means when we're dealing with businesses. And other types of companies are getting better and better and better at collecting and crunching this data. Most of them are never going to have the data to the extent and to the reliability that airlines have because of the nature of the airline business.

The airlines see your ID. They know what the government thinks about you. They have all of this stuff that allows them to create really robust profiles. But loyalty programs of any type are designed to help businesses create these profiles. It is much easier for online businesses to construct them than it is for brick and mortar businesses. But the sort of proliferation of checkout technology and ordering technology at brick and mortar businesses is making it easier and easier too. And especially if you're a person who like uses the same card for everything, then any way that companies can use to sort of like tie your, you know, discrete instances of behavior together across time, they will do that. Sometimes that's the you putting your phone number in to make sure you get your points for your purchase so you can

get a free coffee later. Sometimes that is all the unique credit card swipes, but whatever it is, companies are working to create these profiles and working with technology vendors that allow them to sort of collect this data ambiently in a way that you probably don't notice it. Anytime you have like swiped a card to the new coffee shop or tapped a card, I guess, showing my age here. Anytime you tap a card at a new coffee shop, and then that's the only interaction you have with the coffee shop. And then you get a text saying that like, oh, you've earned seven points, come back and redeem them for something eventually. That is an indicator that the company is building a data profile on you. And those third party vendors are also building data profiles. They have a lot of touch points across the economy. So there are more and more and more ways for other businesses to do this and more and more interest in dynamic pricing across the economy. Any company

that has an app that doesn't really seem like it needs to have an app, but that will let you like pre order and stuff like that. That's all data collection. That is all the exchange of convenience for data. Companies like absolutely are going to use that to price. They are absolutely going to use that to change prices, to target prices, to maybe it's to send you a coupon. Maybe it's to do something that you will like less than being sent a coupon. It depends on what kinds of strategies these companies decide they want to implement and what they think they can get away with. Yeah, it makes me so annoyed to hear that. And I'm like, our regulators going to rein this in, but like, probably not. But you were saying about tapping your card and whatnot.

I remember the first time I went to like one of those Stripe payment machines and use my credit card and put in my email address to get the receipt, and then went to another one and swipe my card. And then it recognized that I had used the same card and already have my email address to like prompt me to receive the receipt by email. And I was like, oh, like it's keeping track of the fact that I have used this credit card and that this credit card is linked to this email address, you know, across these like multiple stores or whatever. And that like kind of blew my mind, just that small like realization. Amanda, it's always fascinating to talk to you,

to learn about these different industries. I think you have such an interesting beat and I love reading your work. Thanks so much for coming back on the show. Thank you so much for having me. I love talking about this stuff and I always love coming on the show. Amanda Mo is a senior reporter

and buying power columnist at Bloomberg Businessweek. Tech Won't Save Us is made in partnership with The Nation Magazine and is hosted by me, Paris Marks. Production is by Eric Wickham and transcripts are by Bridget Palou Fry. Tech Won't Save Us relies on the support of listeners like you to keep providing critical perspectives on the tech industry. You can join hundreds of other supporters by going to patreon.com slash tech won't save us and making a pledge of your own. Thanks for listening and make sure to come back next week. Thank you.