Jordan McGillis: Welcome back to the 10 Blocks podcast. I’m Jordan McGillis, economics editor of City Journal. Joining me on the show today is Gary Leff. Gary is a world-renowned travel expert. His blog, View from The Wing, is among the internet’s most widely read on the topics of airlines, hotels, and credit cards. Like countless other millennials, I’ve used Gary’s View from The Wing and a few other publications to help optimize my travel strategy to make the most of my points and miles. But I think what sets View from The Wing apart is Gary’s insights on the travel industry itself, versus just the consumer experience, and his understanding of how politics and regulation affect that industry. Gary, thanks for joining us.
Gary Leff: Oh, thank you. Happy to be here and chat. And there’s a lot going on in aviation.
Jordan McGillis: Absolutely. First and foremost, we are recording this podcast just a couple of days after a frightening incident on an Alaska Airlines flight. There was a Boeing 737 MAX taking off from Portland, Oregon, and it experienced a blowout, as they’re calling it, with a door literally popping off of the airplane at about 16,000 feet. Gary, what’s going on here? What does this tell us about that airline? What does it tell us about Boeing? Give us the rundown.
Gary Leff: So, the challenging thing, of course, is that we are talking not that long after it happened, and by the time your listeners hear this, they may know more than we know today, because there’s certainly things in the investigation that haven’t been released yet. Just setting the stage, the 737 MAX 9 is a large aircraft that in some configurations fit a lot more passengers. And when you have a lot more passengers, in order to evacuate an aircraft quickly in an emergency, you need another exit door. Otherwise, you just get too much of a logjam in the aisle. And in the configuration that you’re going to find from a U.S. airline that has a first-class cabin, extra legroom seats, you’re not going to need that door, and you’re not going to want it, because otherwise, if you’re using it as an exit door, that interferes with the configuration of seats and how much room you need between them and parts of the plane. So, instead of an exit door, they had a plug, and that plug is bolted in. We know that those bolts were all loose.
Jordan McGillis: Let me intervene right here. So, when you say a plug, you mean like there’s a shape that could fit a door, but instead, there’s a non-door part that is placed to fill that gap, something along those lines?
Gary Leff: That’s accurate. Right. And so, we know that that’s what came out, and we know from inspections of other 737 MAX 9s that more similarly situated parts had loose bolts. And so, it appears, at this time, that there was something systematic in the way that it was put together that caused loose—that it wasn’t secured properly in multiple aircraft. And so, they’re still learning more, but that does seem to be a problem. That’s what grounded the aircraft. And in order to get the planes back into the sky, what has to happen is the manufacturer, in this case, Boeing, works with the FAA on a procedure for inspecting the aircraft. It’s called a Multi-Operator Message that’s going to go out from Boeing approved by the FAA to the aircraft operators. Then, with the FAA, there’s going to be a memo that details how the airline can comply with its airworthiness directive to ensure that it is safe to operate the aircraft.
So, they’re obviously going to be inspecting that issue. They’re going to learn whether there’s anything related to that issue that also needs to be inspected or modified. And there will be specific procedures undertaken to ensure that that does not replicate. And, of course, they’re not going to issue those memos until they’re confident that that is in fact the case, this isn’t going to happen again. So, by the time listeners will hear our discussion, the plane may be back in the sky.
Jordan McGillis: Okay. Then what about this aircraft and its operation with other airlines?
Gary Leff: Right. So, in the United States, we have Alaska Airlines, we have United, and they’re the two largest operators. But you have other airlines around the world that fly it.
Jordan McGillis: You’re referring to the largest operator of the 737 MAX 9?
Gary Leff: MAX 9, that’s correct. So, Delta and American Airlines, for instance, do not operate the MAX 9.
Jordan McGillis: I see.
Gary Leff: Southwest Airlines does not operate the MAX 9. American operates the MAX 8. Right, that was the one that was grounded, famously, after incidents a little over four years ago. But the MAX 9 is operated in the U.S. by Alaska and by United. It’s operated by other carriers around the world, but the number of them in use is much, much smaller. Each airline will comply with the rules of its own regulator, following the lead of the FAA here. But, generally speaking, I mean, these planes are grounded pending inspection and instruction from Boeing as signed off on by the regulator in terms of how to ensure that there’s not a problem again.
Jordan McGillis: I see. Okay. I didn’t realize that the MAX 9 was so distinct from the MAX 8 and the incidents a few years ago with Lion Air and Ethiopia Airlines. How different are these aircraft? Is this a newer iteration that has come in the aftermath of those previous incidents, or were they already out in the air as well?
Gary Leff: Well, so, it’s a newer iteration, but the primary difference is the length of the fuselage. It’s a larger version, and it’s because it’s the larger version that can fit more passengers in a dense configuration that in that dense configuration has this optional extra exit door. So if you had more passengers squeezed in, you’d need that extra exit door, but the Dash 8 is smaller and wouldn’t need it, so you don’t have that same plugged door. Now, another way to understand it, before the MAXes, the MAX is built on basically the same fuselage as the earlier 737 and the 737 Next Gen planes, the 737-700, -800, -900, and the 737-900 that predated the MAX has this same plugged-door configuration. So this is not new or unique to the MAX itself, but this issue has only surfaced in the MAX 9.
Jordan McGillis: Okay. I’m sure we’ll learn more when the reports begin to inform us on this particular incident as they took off from Portland, but I’m surprised no one was ripped out of that door by the depressurization. I don’t think you’re a physicist or anything like that, but can you explain how it is that a door can be off of a plane at over 10,000 feet and nobody is pulled out?
Gary Leff: Well, so first, I mean, we got lucky. So there were seven seats unoccupied on the aircraft, and you didn’t have anyone, it turns out, in the seat next to that right there. People wear seat belts. The pilots worked with air traffic control to descend rapidly once the plane depressurized. They wanted to get down to a lower altitude. People wear seat belts. So, most of the time, the seatbelt doesn’t super matter, but when it does matter, it matters a lot. There were things that flew out of the aircraft. There was a shirt that flew out of the aircraft. There were two iPhones that flew out of the aircraft. We found an iPhone on the grass that had fallen from about 16,000 feet, and amazingly—I mean, it had a phone case on it. Amazingly, it still worked. It was able to power up and had half its battery. They knew what it was.
Jordan McGillis: I need to know who made that phone case. I want it.
Gary Leff: Right? Yeah, we haven’t heard the result on the phone case that I’ve seen yet, but we probably will. But the phone had on it the baggage information for that flight. It was an airplane, so it was functional.
Jordan McGillis: That’s amazing.
Gary Leff: So, yes, this is dangerous. Yes, it could’ve been far worse.
Jordan McGillis: Let’s switch gears a little bit from airplanes to airports. We at the Manhattan Institute have a lot of our scholars in and out of the city, and we’ve all been quite impressed by the new terminal at LaGuardia. From the consumer standpoint, it is gleaming. It’s beautiful. It seems well-staffed. But you’ve told me offline that you’re not as impressed, perhaps, by the operational aspects of the terminal. Tell me why.
Gary Leff: So, I think it is a beautiful building, and the old central terminal was ugly. It had a leaky roof. I mean, there’s no question that the physical infrastructure of the airport was beyond its useful life. But in terms of what’s been done, I don’t feel like LaGuardia’s been revolutionized. I like it. I prefer it for trips to New York. But to me, the fundamental idea of an airport is to get somewhere quickly. And so, I judge an airport by how effectively it helps people to do that. You want to get to the airport quickly. You want to get through the airport quickly. And you want to get out of the air. And LaGuardia isn’t very good at that and hasn’t been made better at that. What we didn’t do is build a new runway. We didn’t do anything that improves airspace capacity. So we’re not really doing a whole lot that reduces delays in and out of LaGuardia. And, with this new terminal, look, there’s longer walks. It takes longer to go from curbside through security to the gate. Now, that makes a little bit of sense.
Jordan McGillis: Well, those are my opportunities for commerce and lounge stops, Gary.
Gary Leff: Well, see, here’s the thing. Commerce, I mean, nobody really says, “I want to go to the airport in order to engage in high-end retail shopping.” That’s not the purpose of the thing. But the reason that we have this high-end retail shopping is because air travel passengers skew higher-income. And airports and airlines take a percentage of the revenue that’s generated, and so you go through a maze of retail to get where you’re going in order for them to sell something to you. And what we’ve done basically with LaGuardia is the way that we finance this massive new construction is by engaging in public-private partnerships, and you sell, effectively, the future income stream off the terminals in exchange for getting folks to put up the money to build the thing.
Now, that’s great as far as it goes, but you can only sell that income stream once, and so, you want to make sure that you’re getting the best bang for the buck. And to me, best bang for the buck would’ve been things that improve getting to, through, and out of the airport quickly, rather than just having a nice facility. Now, in fairness, taxiways are somewhat improved there, but LaGuardia’s one of these places where you get very used to hearing, “Board the plane,” and you think you’re ready to go, and the pilot comes on, and you hear, “Well, ladies and gentlemen . . .” and that’s always the worst thing that you can hear, “Well, ladies and gentlemen, we are about number 35 for takeoff.” And we don’t have greater throughput for getting people in the air. And as I say, you now have longer walks even to get there. So, much prettier facility, like it, like the water feature aesthetically, but I’m not sure that it accomplishes very much.
Jordan McGillis: Okay. So, for someone such as myself who does not live in New York, flies there with some regularity, works in Manhattan, what do you think is the best airport for the efficiency metrics you’re looking for to get me from home through that airport to the office and then back out of town?
Gary Leff: Yeah. So, I mean, I’m a big fan of National Airport, Reagan National in DC. It’s close to the city center. It’s well connected. It is fairly short walks from the curbside to the gate, and, in fact, it turns out that it’s one of the least delayed airports in the country over the last year. So, I think it performs very well. I actually think that the recent changes that they’ve made, they call it Project Journey, have made it marginally worse, but it’s still quite good. So, that’s one of my favorites.
I think that one of the important things that you think about with airports is that, generally speaking, the airport doesn’t know who the people are that are going through it. You’re the airline’s customer, not the airport’s customer. The airport is trying, still, to maximize revenue for a variety of reasons. We’ve seen moving walkways removed from the Dallas-Fort Worth airport, from the Chicago O’Hare airport, because passengers were getting on those walkways, getting where they were going too quickly, and simply bypassing the shops.
Jordan McGillis: That’s interesting.
Gary Leff: The revenue generation was lost. The airport generates revenue off of it. The airlines can benefit from that as well. So, who is the customer? It’s not necessarily the passenger. And, in the U.S., airports are generally politically managed, so they’re often, frankly, not managed that well compared to in some other places. We’re somewhat of an aberration in how airports are owned and managed relative to the rest of the world. In the same way, we have much greater direct government control over security or traffic control than we do in much of the world.
Jordan McGillis: Back to New York City, though, are any of the three main airports better than the other two?
Gary Leff: Oh gosh. I mean, as a general proposition, anything managed by the Port Authority of New York or Jersey isn’t going to be very good.
Jordan McGillis: Mm-hmm. And is that the case for all three of them—Newark, JFK, and LaGuardia?
Gary Leff: Yes, yes, yes. Now, I will say that once you’re inside some of the terminals, again, they can be quite nice. And not everything that’s wrong with these airports is attributable to the airports or their management themselves. New York has some of the most challenging airspace to operate in. The FAA is short air traffic controllers in the New York area especially, and so they’ve asked airlines to cut back on their flying, because they just don’t have air traffic controllers to manage the airspace. And there’s a lot of reasons for that, and from FAA air traffic control hiring to the way that they allow people to transfer, it’s very cumbersome, to an insufficient geographically based pay structure, so you don’t make enough more in New York to make it worth living in New York as an air traffic controller. So they have a hard time recruiting there. They don’t have enough people. So you get delays. You get fewer flights than you should, for reasons having nothing to do with the airports themselves.
Yeah, I think that Newark, in some ways, is worse. The way their runways are configured, they just do not do as well during bad weather. United, which is by far the dominant carrier, they really suffered over the summer in its operation, because of weather.
Jordan McGillis: Explain to me how, could one airport in the same metropolitan area suffer worse because of weather?
Gary Leff: Well, so, they’re getting basically the same weather, but issues like the direction of runways, the spacing of runways. Look at San Francisco, for instance. They have two runways that are just . . . They’re simply too close together and that you don’t have the spacing when you get fog off the bay, and you get fog off the bay in San Francisco a lot. And so, you’re not able to take full advantage of the runway capacity that you have. And it’s really, really difficult to build new runways, even if you have the land, in many jurisdictions. It’s a time-consuming process. There’s a lot of veto points in the process. And so, we kind of get stuck with much of the infrastructure that we’ve got. And so, if I were looking to which airport is most likely to let me operate in bad weather, I’m probably going to prefer to be at JFK, of the three, but I’d prefer to go to LaGuardia most of the time.
Look, if I live on Staten Island, I’m going to go to Newark. It is clearly more accessible. United has cars all over the city telling you how Newark is more convenient to get to than any of the others. Most New Yorkers that I talk to don’t agree with that, but it’s really where you’re coming from. But in terms of how well it operates as an airport, I suppose maybe at some level, JFK is marginally better, but their terminals aren’t connected, so you don’t want to be trying to connect between airlines that operate out of different terminal.
Jordan McGillis: Okay, good to know. Changing gears again, there is chatter right now about credit card legislation that would significantly disrupt the points and miles game. What is going on in Washington? Why are these changes being proposed, and what exactly are they?
Gary Leff: So, Senators Dick Durbin from Illinois and Roger Marshall from Kansas have proposed legislation that they argue would create more competition in credit card processing. What they want to do is require larger banks, those with over $100 billion in assets, who are issuing credit cards to have those credit cards able to be processed on more than one network. Basically, you can’t just be a Visa or MasterCard. If you issue a Visa or MasterCard, you’re also going to either have to process on American Express or on the Discover Network, and so, the idea being that if you can’t be exclusive to a single network, that, they believe, there will be a competition that drives down the price to process. That’s the claim and the theory.
Now, this is something that’s being pushed for by large retail establishments, and small retail establishments, who are paying for credit card interchange. They, of course, argue that the benefit accrues to the consumer, which I don’t generally buy. What they want is for the government to require that a payment method cost them less. They want lower cost by law, effectively. Now, there’s a couple of arguments that they make. They say that, “Look, we have these higher costs, and so we pass these on to the consumer.” That doesn’t seem to make a lot of sense, because, generally speaking, it’s less expensive for many merchants to take credit cards than it is to take cash.
Jordan McGillis: Can you explain why that might be?
Gary Leff: Yeah. So, if you have a clerk at a register, that clerk may make incorrect change, give back too much to the customer. That clerk may stick some of the cash in their pocket. If you’re taking large amounts of cash, you may have higher insurance costs, because you’re also a target, potentially, for theft. And so, depending on the study and the industry, I mean, it’s very variable what cash may cost you, but it may be 4 percent. It may be 9 percent. It’s certainly not free to take cash. People bounce checks. You can pay to insure against bounced checks. So there are costs associated with any mechanism that you’re using to transact. And, roughly speaking, about 60 percent of interchange is rebated to the consumer in the form of rewards. What the legislation’s likely to do is redistribute income both from credit card processors and from consumers to retailers. And credit cards aren’t just a payment mechanism, and they bundle financing.
Jordan McGillis: They’re also a status symbol, of course.
Gary Leff: Yeah, oh, look, there’s status. There’s rewards. There’s also consumer protections. Consumers get the ability to dispute a charge when they’re paying by credit card. And you can also do that with debit, but the money’s already left your account, so you’ve got to rely on getting the money put back in, as opposed to never having paid it in the first place. There’s a lot of benefits to the consumer for paying by credit card, and benefits to the merchant too, not just in terms of the cost to accept card, but also that consumers who are paying by card and not constrained by the cash in their wallet tend to spend more. So, again, they tend to get higher-ticket purchases this way. And so there’s a benefit to this.
And the way that I think about it is, it’s an incredible innovation that you can take, whether it’s a piece of plastic or something electronic on your phone, and virtually wherever you go in the world, it’s interoperable, and you swipe a card or charge your card and get billed for it later, and the merchant gets funds deposited in their bank. That is a benefit all around to the economy. And I’m loathe to push the button and say we ought to substantially mess with that for the narrower, more provincial interest of retailers, who suggest consumers are going to benefit, but they have to benefit more than they’re benefitting from rewards, as those disappear, in order for the consumer benefit.
Jordan McGillis: I certainly would tend to agree with your perspective on that. All right, Gary, last question I’ve got for you. I believe you just got back from a trip to Europe. Where are you headed next?
Gary Leff: I mean, I’ve got Caribbean for warmth in the winter. Every year, I visit family in Australia. I did just come back a couple days ago from Europe. In November, I was in Dubai, and London as well. So, I sort of get around.
Jordan McGillis: Okay, I’m getting personal here. How many lifetime flight miles do you have?
Gary Leff: I don’t know, actually. I’m not one of those folks that tracks every flight and does a map of these sorts of things. I am almost going to hit my 4-million-mile status on American, but not all of those are flight miles, because until 12 years ago, you could accumulate miles for other things that would count towards it. And for a brief period of time, your credit card spending during the pandemic counted as well. I got lots of flight miles and lots of elite nights.
Jordan McGillis: Extraordinary, something for me to aspire to. I’ll never get to those heights, but it’s wonderful to know that someone is enjoying those perks. All right, Gary Leff, thank you so much for joining us today on 10 Blocks. Again, Gary’s blog is View from the Wing. You can follow him @garyleff on X. As always, you can follow City Journal on the website formerly known as Twitter @CityJournal and on Instagram @cityjournal_mi. And of course, if you enjoyed listening today, please like, rate, and subscribe. Thank you, listeners, and thank you, Gary Leff.
Gary Leff: Thank you.