Three years ago I outlined 11 Controversial Things I Believe. The predictions which have had time to come true or be proven false have actually borne out fairly well.
- The government’s anti-trust investigation of US airline pricing went nowhere
- Nothing substantive was done about flights to the U.S. by Emirates, Etihad, and Qatar
- There have been no terrorist attacks at US airports
- Citi Prestige benefits would be devalued
Some things are a matter of opinion, like not needing nicer airports. Some are long-term predictions such as the future of credit card merchant fees and air traffic control. And one I just got flat wrong — in Star Wars: The Force Awakens Luke didn’t turn out to be responsible for the revival of the Dark Side of the Force.
Here are 7 controversial things I currently believe. These aren’t predictions about the future, but descriptions of the world we live in today. Tell me that you think I’m wrong.
- You should take more shorter trips and work while you are on vacation. If you don’t work any relaxation benefits will be obliterated when you return to the office. Work can be relaxing if you do it for brief periods, stay caught up, and know you don’t have anything to worry about. Plus not everyone hates their jobs. Trip planning can be much of the fun, do it often, and staying connected can help you travel more. Have as many peak experiences during your trips as possible, don’t just sit there letting time pass, and leave wanting more rather than ‘being done’ with a trip.
- Basic economy isn’t working out that well for airlines as a price increase on leisure travelers. United lost $100 million when they launched it because they were offering a worse product than competitors who didn’t impose basic economy restrictions on the same fares. American dropped carry on restrictions from basic economy fares because customers were booking away on other airlines that provided value. Yet they hang on because of the business travel portals that won’t show basic economy fares. Basic economy is really the new Saturday night stay and 21 day advance purchase, a way to separate cheap leisure fares from expensive business fares.
- Checked bag fees aren’t largely about generating incremental fees from passengers as much as tax avoidance. Airlines raise bag fees but fares are falling, customers aren’t simply willing to spend more on air travel because airlines raise the price no matter how inelastic Scott Kirby thinks demand is. Ancillary fees aren’t subject to the 7.5% excise tax that’s imposed on domestic airfares. So moving a billion dollars out of the fare nets $75 million in tax savings.
By the way that’s why any politician who rails against bag fees but remains silent on this tax arbitrage is not serious.
- Revenue based mileage changes aren’t helping airlines but mileage sales to banks mask the deficiency. Devaluations are handing a competitive advantage to low cost carriers but there’s so much bank money sloshing around the airlines that they haven’t been paying attention.
- Airline cards are underperforming because of competition from bank cards and devaluations. In fact United MileagePlus owes all its revenue growth to points transfers from Chase Ultimate Rewards and their own co-brand credit card portfolio is underperforming.
- American Airlines loses money flying passengers, derives all their profit from selling miles. This actually shouldn’t be controversial, it’s right there in the financials, but I include it here as controversial or surprising because I haven’t seen this picked up by anyone else.
- Burgers should be on potato buns and not brioche and do not ever, ever put mayonnaisse on beef.
The bun needs to be big enough to contain the burger, but shouldn’t be so large that it overwhelms the contents – especially the meat. Everything you put on the burger needs to fit inside of the bun. You don’t want the burger to fall apart when you eat it, and it shouldn’t be overstuffed. You want cheese that melts well. The goal is a balance of flavors inside, getting a combination of everything with each bite rather than winding up with pieces of meat or pieces of bun leftover at the end.
Put another way, the United Polaris burger is gross.
These are all controversial ideas, so I expect vigorous disagreement. What do you think?
I don’t take these controversial but rather as insightful.
ask for pastrami on white with mayo at any respected deli in new york city and see what happens…
best case scenario you are thrown out, worst case scenario you are taken to the basement….
Gary, you have the best blog so I will believe everything you say.
Potato buns are best buns.
But you could not be more wrong about mayo.
Regarding mayo- Milton Berle, Mel Brooks, and Jackie Mason would all probably agree with you.
And Buzzfeed called it “the Devil’s condiment” 🙂
“Basic economy isn’t working out that well for airlines” when should we expect it to go away?
Amazon makes no money selling merchandise
Re: #3 — my thinking is this is at least partly about countering #5.
Co-brand cards (except for Southwest, of course) all tout including a free checked bag. None of the bank cards include checked bags on an airline of your choice (some higher end ones rebate airline fees, but most do not, and those that do cap the fee rebate amount).
I don’t know the numbers well enough to say whether moving more co-brand cards is more impactful than tax avoidance, but seems plausible considering how much of airline revenue comes from mileage sales.
I have done at least some work while on vacation throughout my career, though mostly felt that was a matter of necessity rather than a ‘best practice’ for relaxation benefit. I guess that’s pretty much another way of saying the same thing… doing what I thought was the necessary work kept me from being stressed out about problems to deal with when returning to the office.
I find no fault in your insights 2 through 6.
Burgers are good on a variety of buns (potato buns, sesame buns, Kaiser rolls, pretzel buns) – but most definitely not on brioche. Mayo/aioli/salad dressing is acceptable on a burger if (and only if) dressed with lettuce & tomato. The rest of your opinions about burgers are correct, in my opinion. I know that you’ve given this topic much thought 🙂
These are not all that controversial – so heres another one in the same vein……5/24 is a sub-standard tool to select customers, and will ultimately cost Chase more than the methods used by their competitors
@ Gary — You left off #8 — Donald Trump is an idiot.
@ doug — I’m sure they will happily take your money for whatever you want to eat, even if your tastes are unique.
@gene
not the proud ones..they won’t…
and for the record I am not the one who will ever ask for that….I am with Gary on Mayo and beef..
Mayo has it’s place, but not on any beef (MAYBE on cold leftover roast beef) and certainly not on any toast or hot item….
I agree with you on most of your points (though wholeheartedly disagree with you about the burger comment). What I find interesting about basic economy is that when it was introduced most of us assumed the BE prices were going to replace the economy prices and it was going to end up as an increase in the regular fare.
From what I have seen this really hasn’t been the case. Basic economy, if you can live with the the restrictions (which aren’t all that bad except on united who is terrible), has made it the cheapest time in recent memory to fly. I really never thought I would see the day when I can fly to europe R/T for around $300 from the west coast, but we see deals in the low $300s almost on a daily basis. Domestic flights also seem to get cheaper as we seem to have transcontinental flights show up for sub $200 on a regular basis now.
A hamburger without mayo is seriously deficient. Just like crab legs without ketchup…
I agree with all of Gary Leff’s points. Actually, not sure they are that controversial.
You left out one though, Gene is a moron and a jerky head. No reason to bring politics into this conversation.
@Doug and @ Gary Leff
I am not Dutch, but mayo is fantastic on fries. Probably the only good use for it other than tuna sandwiches.
#3 is right. The easy fix on this is to tax fees at twice the level of regular tickets.
#7 is more complex. Yes, mayonnaise is gross on a burger, but the bun thing is less important. Also, your foodie street cred took a massive hit when you said that you’re a Papa John’s fan.
@Christian I haven’t eaten Papa Johns in years but it was always far better than Dominos or Pizza Hut. My comparison was to large chains offering cheap pizza. Proper pizza is folded over and orange grease drips out. It can be found in only a few places outside of New York.
Except for #1 and the mayonnaise on beef comment, there is not much I find controversial in this post. Gary’s usual blog posts normally include statements that are more controversial than these.
Re #4: What does Gary think about Alaska’s ability to use its ff program as a competitive advantage.
From the 2015 post, not only was the Star Wars prediction wrong but ain’t no way ATC will be obsolete by 2035 and planes will be flying around like autonomous cars..
The potato bun comment is controversial and wrong. A pretzel bun is quite nice.
The mayonnaise comment is unfortunately controversial but correct. Same applies to a Rueben (a Rueben is wrong).
I disagree with the vacation aspect, it’s very situational. If it’s just keeping up with email, that’s fine. If you get dragged into an emergency and have to communicate from 12 time zones away, it’s a vacation killer.
And long vacations are better than short ones for relaxing. If you take a one week vacation, your staff will say “let’s wait until Gary gets back”. If you take a three week vacation, they will say “we can’t wait until Gary gets back, lets fix it”. It promotes action over inaction and is great for staff development. While they may not do the exact thing you would have done, they likely won’t do anything rash or problematic either.
Boneless wings are nuggets
I wouldn’t mind staying somewhat plugged in during vacay, but my employer requires at least two weeks no contact at all. Required by law for certain positions in the financial sector.
@ Other Just Saying — Politics belongs in everything until the traitor serving as our President is put in prison where he belongs. Just a matter of time.
Absolutely agree with #1, have been doing it for a few years.
Depending on the time zone I am in I may not answer the phone but will email at night to let clients know I am away and if they can’t wait, to email me.
Most of them understand and want to talk about my trip when I return.
The office emails as needed.
#9 People like @Gene who have to interject politics into every single aspect of life are idiots.
@beachfan +1
Gary’s point #1 is insightful: Do enough to keep yourself informed, but don’t get sucked into real substantive work.
Ixnay on mayo (though aioli would be a nice dip for @Too Much Flying’s fries).
I agree with most of this. I also think the bank/airline partnerships will be strained in 2020. During 2019 many folks with co-branded cards that allow for airline lounge access will see that devalue and dump high annual fee cards if they can’t access the lounge when flying on any airline they choose.
Mayo is for BLT’s and a few other sandwiches but not burgers in general. Also who decided that ALL people want cheese on hamburgers. Seems silly. First many don’t prefer cheese burgers and it cost the restaurants extra money for that cheese. I assume the original reason years ago was that the markup on a cheese slice makes up for it when you upgrade and “add” cheese. 2 cents vs. 20 cent upgrade. However now that most fast food restaurants almost require you to have cheese unless you request it not be on there it just cost them more money to automatically put cheese on all burgers. Oh and on BLT’s the mayo should be applied so that it is between the bread or other materials and the bacon and tomato. Not sealed to the bread by the lettuce. Trust me on this.
@Gary – Nice save.
Regarding Mayo, you are ALL wrong! Mayo is a condiment, should be served in a little packet as an OPTION for you to apply if you wish. ‘Nuff said.
I dislike mayo because I’m not a fan of eggy things in general. And I am convinced that a whole bunch of people in the supermarket and food service industry got together at a conference in early 2016 where the keynote speaker was all about how Americans loved sweet with their savory All The Time and that if you increased the sugar in standard white bread offerings fivefold and called them ‘brioche’ you could charge twice as much for the fancy French version of (shudder) Wonderbread.
My controversial thing: when the next recession hits in 12-24 months Chase is going to lose a bunch of co-brands due to 5/24.
Slow news day for Gary.
I get that work is hectic after a vacation, but I am totally against working while on vacation. I hate the precedent it sets, the expectation, and tone you get from bosses. If you work on one vacation then you get comments like your taking your computer with you the next time. Shorter trips so work does not get so backed up I can get on board with if it is an issue for you. You will not catch me working on vacation or eating burgers with mayo.
Gary is totally wrong trying to spread his nonsensical burger agenda here. That being said, I actually am a big fan of UA’s burgers and am a bit confused because regardless of the cabin I’ve been seated in, whenever I’ve gotten a burger the condiments have always all been on the side. So if you don’t like mayo, don’t use it.
The bigger issue I have is the introduction of Sir Kensington’s ketchup on UA flights…stop it. Its Heinz or nothing.
Also, I agree with the others here that Gene is an idiot.
#1 is how I’ve lived my whole life. Welcome to the club.
The reason nobody else has picked up on your idea that “American Airlines loses money flying passengers, derives all their profit from selling miles,” is because it is wrong.
The $2.4 billion in “revenue” they receive isn’t from selling miles, it’s from pax REDEEMING their miles. That’s basically an accounting fiction — no money actually flows into AA’s coffers when pax redeem their miles. At the same time they are ISSUING new miles, which are obviously a cost.
The second part of this revenue stream is somewhat more intellectually sound: they earned $1.8 billion in loyalty marketing revenue. I’d want to see real financial experts expound on this idea, but I assume a lot of that revenue is profit. But we’d have to again deduct the costs of obtaining that revenue. What are they? Do you know? Revenue is definitely NOT the same thing as profit.
Gene is an idiot.
No Mayo on anything, shit is nasty.
I have to disconnect on vacation, and I like my job. Like is not all about work.
@chopsticks – Roughly speaking American generates revenue from mileage sales and splits that revenue into two parts, marketing revenue which has a better than 90% margin and future travel liability. The profit on marketing revenue exceeds the net profit the airline has generated in the first three quarters. American does not deny this. Read the 8Ks.
@bob – the burger in question is the polaris lounge burger not the inflight burger
1 is probably the most controversial, but that’s because it really depends on how you feel about your job. I could imagine sharing your opinion if I had a job that I liked and/or could parse into smaller pieces that could be effectively done remotely. I don’t feel like I’m in that boat.
@Gary — Professional airline analyst Joseph DeNardi is one of the few people who has spent significant time trying to value the profitability of airline frequent flyer programs, and he essentially agrees with me that it’s the “loyalty marketing revenue” that is the real profit from the frequent flyer program. We can assume that about 90% of this $1.8 billion in revenue is profit. The other $2.4 billion line item isn’t profit: think of it as the cost of fulfilling mileage awards.
https://skift.com/2018/08/13/u-s-airlines-report-sky-high-profit-from-frequent-flyer-programs/
This is a somewhat odd year in the airline industry due to the skyrocketing fuel bills (which has now completely reversed course and will likely make the airlines very profitable for the next few quarters). But even with the high fuel bill, it is simply not true that all of AA’s profits are from their frequent flyer program. You could reasonably argue that, in 2018, the MAJORITY of AA’s profits are from their frequent flyer program. And for, 2019, it is likely that a SIGNIFICANT PERCENTAGE (but not majority) of AA’s profits will be from their frequent flyer program.
What’s wrong with actually stating the facts? They do support your view that frequent flyer programs are incredibly important to major airline profitability.
@chopsticks you do not seem to realize that you are agreeing with me.
Wading into the potato bun vs brioche controversy? You go Gary!
I agree your thoughts are not that controversial. BTW, the traitor left office on Jan. 20, 2017.
#1 depends on your job and temperament
#8 is proven fact, no contrversy
I like good mayo on my burger. The rest of the points piqued my interest.
You have exposed the real motivation for luggage fees . 7.5% is a significant savings .