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View From The Wing's Gary Leff

• Jeff Borman and Matt Brown

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When people say that someone needs no introduction, we think they're talking about View From The Wing's Gary Leff. He is one of the world's foremost experts in miles, points, and frequent business travel. 

Gary talks with us about the math behind airline loyalty programs, how he comes across the strangest stories in travel, the differences between airlines and hotels when they start co-branding with partners, how airlines define their "best customers" and way, way more.

https://viewfromthewing.com/

Matt Brown:

When people say that someone needs no introduction, I think they're talking about Gary Leff, our guest today. I'm going to give it a shot anyway. You've seen Gary's name in the New York Times, rolling Stone, coddington's Traveler, wsj, and he's been on the Today Show, abc, world News Tonight, Good Morning America, cnn and countless others For over 20 years. His site View from the Wing has dispensed indispensable for anyone looking to understand the travel business and make their own travel experience a little better. He's been described as quote a travel industry blogger with a specialty in spanking companies that devalue their loyalty programs. Yes, I love that, but he's more than that, way more. He's a champion of good customer service, good deals and good times. Gary Leff, oh my gosh, welcome to no Show.

Gary Leff:

Incredibly and probably way too generous, but thank you for having me Happy to chat with you guys today.

Jeff Borman:

Now we're interviewing Gary Leff, but please clarify for us is this the real Gary Leff and what the heck is the fake Gary Leff?

Gary Leff:

There's a certain stature in having your own parody account on Twitter that intends to troll you. Look, I've been a denizen of the Internet for 35 years. In some dimension or another, I've got a pretty thick skin. I have an open commenting forum on my blog. People can criticize me at will. I genuinely don't mind. In fact, I love my trolls. But yes, there is apparently a Twitter account dedicated to parodying me.

Jeff Borman:

Yeah, you have such an unusual mix of content, right. The deepest understanding of the mechanics of loyalty programs, the economics of card schemes, credit card schemes right. And then straight up tabloids, right, Like a Southwest flight attendant who was fired for twerking and feces in the aisle and who has to pick up a customer's garbage. Do you have a most favorite? You've been doing this a long time. Is there a favorite outrageous airplane story that just you can't stop telling at a cocktail party or with friends? It comes up all the time.

Gary Leff:

Well, I mean, you know, there's always going to be the JetBlue flight attendant, steve Slater, 15 years ago, who decided to peace out from his job by grabbing a beer, popping the slide, sliding you know, sliding off right, and that probably you know more than any.

Gary Leff:

On the other hand, though, you know, I think, the series of incidents in China where people would throw coins into the plane engines for luck or mistake the exit door, and then they're looking for the lavatory. The reason that these are favorites is that they stand for an idea of this rapid modernization and development in China. That's sort of bringing people out of this clash of modernity with a much lower standard of living, and so people are having access for the first time to flying and encountering these experiences, and they hadn't been part of the culture, and so their own idea of how they interact with things clashes with modernity in a way, and so, through the prism of these experiences that look so strange to us because we're used to air travel, they give us an insight into how things are developing in some really small way.

Matt Brown:

When it comes to credit cards, everybody wants my loyalty these days. Hotels want my loyalty, airlines want my loyalty, amex and Chase want it, and they're all offering a slice of ever-changing and, I fear, ever-diminishing incentives and rewards for my fealty. Across all these players, who's winning the loyalty wars in 2025?

Gary Leff:

I mean, in some sense, it depends on what you mean by winning, right? So there's a dimension in which you have to give Delta credit for winning if their co-brand relationship with Delta, with American Express, is generating $7.4 billion in a year, with American Express is generating $7.4 billion in a year. On the other hand, though and they don't tell you this, but it's actually underperforming expectation. So when they re-upped their American Express co-brand in 2019 in a 10-year deal, they had projected that 2023 would hit $7 billion. Now it hit $6.9 billion. It's pretty close, but what we forget is that that was before 20% inflation, right? So knock 20% off that. You're really looking at like they hit, basically, you know five and a half billion, not you know, not the seven. And so what's going on there? And then you start to understand some of the things that they're doing, like their free Wi-Fi, which you have to register for the loyalty program in order to get. What are they doing there? They're looking to grow the member base, because they're kind of topped out. They're looking for new people that they can market the co-brand credit card to so that they can kind of get back, hopefully, to some of that growth, and we don't know yet the extent to which and they don't really reveal the data at this kind of granular level those customers that they're acquiring through these new methods. How much do they convert? So are they winning because they have the most gross revenue off their co-brand deal?

Gary Leff:

Then, in terms of winning consumers, the bank proprietary programs have really demonstrated. So after Costco left American Express 10 and a half years ago, there was an incredible rush for banks to bid up the co-brand partnerships. First, american Express locked in their second biggest co-brand, which was Delta, at a previously unheard of level and that set a new bar for the co-brand negotiations, for a consolidated airline industry where there were fewer players and you had increasingly high levels of co-brand remuneration. But that also kind of left a little bit less money on the table to reward the customer with. Some of those programs became a bit less valuable to the consumer because they're so expensive. What the banks have really done is demonstrated that it's possible for them to acquire customers without the co-brand partnerships through their I mean American Express membership rewards. Obviously you know dates back over three decades. But you know Chase built their ultimate rewards and Citi has their thank you rewards.

Gary Leff:

But we've seen Capital One, you know, go beyond just the you know points as rebate where you, you know, buy our fare. But they built up their travel partnerships in the you know. Venture became convertible to miles, built up their travel partnerships, venture became convertible to miles, they built VentureX and the business equivalent and they've gotten into premium travel perks. Wells Fargo has their autographed journey and other surrounding cards. We've seen big players enter this space because it is a very lucrative place and that they can acquire customers without paying those you know, paying the airlines, paying the hotels as the gatekeeper, and then what they've done is they've basically been more rewarding.

Gary Leff:

So at this point you know you don't want to put spending on an airline credit card unless you're spending for status contribution in that airline program. If what you even say what you want, are Delta miles, for some reason I mean they're generally less valuable than other currencies. But if you want them, you'd be better off getting an American Express card whose points transfer to Delta, for two reasons. One is those cards can generally earn points at a faster rate than the Delta co-brands can. So you'd be earning more Delta miles and you have the option of doing more things, transferring them to more places than spending on the Delta card right, and the same is true for Chase's cards with United.

Matt Brown:

I wonder if anybody in loyalty programs? Probably not, but I wonder if anybody who runs these programs thinks about what I think of as this existential conundrum. They exist, especially these days. To expand, we have to expand, we have to get more people involved in this program and as more people come in, the incentives that they get for coming in can diminish, or at least it feels like they can diminish. I think the New York Times ran a piece that spotlight Delta the issues that a long time loyal Delta customer had, because they raised a lot of requirements for her to get some of the perks and benefits she'd been enjoying for years. I just see there being kind of a mathematical oddity at work here. You've got these loyalty programs sold on customer service but as they grow and grow and grow, it's impossible to provide that level of customer service that they started with and I don't know if there's a solution to that.

Gary Leff:

Well. So there's a lot of things embedded in this. First, I think well, I mean Delta, the idea that they're trying to provide customer service through their loyalty program. Their base redemptions now are for basic economy tickets.

Gary Leff:

It used to be that when you were redeeming points, you are having this, you know, a true reward. And you were an honored guest, you know recognized for having achieved some milestone, and now, if you don't want to spend extra points, you get the least. You know good experience that the airline has to offer when it comes to Delta and they're pretty unique in doing that. That having been said, the programs are, you know, fundamentally they are mass market tools and they bundle different things. I mean recognition and reward are two different components of the same loyalty program. So for most members it's really just a rebate program, right, you're earning points, you're going to redeem them and it's not getting you much, although as a tool to encourage people to join, there have been increasingly ways of making the travel experience better, just as a member. So the program wants the members, so they have that marketing relationship, not just to market the co-brand, but certainly also so American Airlines will give you earlier boarding as a member.

Gary Leff:

And so you're less likely to have to gate check your bag just by being a member. So in some sense the treatment has gotten better. You get your free Wi-Fi as a Delta SkyMals member versus having to pay. So there's some elements in which that's gotten better. But I think we separate out the treatment of best customers from the most members of the program, so call it the 95% 5% different buckets, and so you want the rebate component on the one hand and then the recognition or elite program on the other. And how do you treat those folks? And how do you treat those folks?

Gary Leff:

Look, delta's basically made a decision that the people they consider to be their best customers are different than who they used to consider them to be, and that is always a painful transition, and they're not the first ones to do it. I mean, think back seven years to when, you know, hyatt changed their program from Hyatt Gold Passport to World of Hyatt. There was nothing at all that changed in the rebate portion, the earning and burning portion of that program. It was only the elite program. But the biggest thing was they no longer earned top-tier status with 25 stays rather than based on nights, and so they fired, as it were these people who stay, you know, did 25 one night stays who were getting kind of outsized value relative to um. You know what they were putting in. The people who were displaced or getting less were incredibly vocal. Like, as I mentioned, there were problems with um, the the program as it rolled out, and there were messaging problems, but fundamentally there were a bunch of things that were cost cuts in it, even for those people who were achieving at the new levels that they said were necessary in order to achieve status. So there were a bunch of people who were unhappy, but the biggest thing was just the changing who it is that matters, and people.

Gary Leff:

Oh well, it's about avoiding the crowd. No, it's actually about driving as much spend to the co-brand as possible, because that's where the money is right. It's not just a lot of revenue, it is incredibly high margin revenue. So an airline might be making, you know, margins of, you know, 2% to 10% or 12%, depending on the carrier, right, but the loyalty program revenue and the accounting here is a little bit tricky and each airline accounts for it a little bit differently.

Gary Leff:

So these aren't directly comparable but based on disclosures that airlines made around 2021 when they were raising, the three largest airlines raised $6.5 to ten billion dollars a piece against the future revenue streams of their loyalty programs. They were disclosing Margins in their loyalty programs your Delta at 38%, american advantage at 52%. Not actually the case that Advantage has that much higher margin. They're just accounting for some of the internal transfers differently. But the point remains that these are very high margin dollars that are coming in and so they're kind of shifting the behavior of consumers and rewarding those consumers differently, recognizing that buying an airline ticket is not the same thing, even for that matter, as buying ancillaries. The margin on seat fees and bag fees is a lot higher than on the base ticket, upgrade fees a lot higher than on the base ticket. So how do we reward the kind of behavior that's not just looking at total revenue but that's actually profitable in terms of that customer?

Jeff Borman:

You mentioned. A lot of this is also just the accounting of it, right? You did a study concluding the American Airlines is actually losing money flying and the only value, the only profit that they make is really from the loyalty program, and I think that's because of the credit card reimbursement or the relationship that their credit card partners send to them, right? Can you explain the math on that? How is it that they make money on credit cards but not the actual business they're in?

Gary Leff:

And so, first to be clear, they would not be in a position to generate the credit card revenue if it weren't for the flying. Okay, so it's not the suggestion that they should just like ground their planes, lay off everyone who you know flies the planes right, and just sell a credit, you know, as they used to. You know, cut the middleman, like that doesn't work. So I mean, american discloses all the airlines, disclose what their, what their operating costs are per seat mile. Right, so you take the costs of, you know, of running the airline, their personnel, their fuel depreciation, amortization on aircraft gates, all of those kinds of expenses that they have, maintenance, and dividing that by the seat miles that they're flying, and they'll take the passenger revenue and disclose that across their, you know, the seat miles they fly and in their financials it's simply the case that the operating cost per seat mile is higher than the revenue that they're earning from passengers per mile. You know they're not earning a profit on moving planes from one place to another, and so it's this other activity, which is largely selling miles, which is largely selling miles to banks, is where the profit comes from. So American disclosed $6.1 billion in sales that's not actually all from consumer activity in 2024, because it included a bonus for signing their new 10-year agreement, exclusive with Citi. But still it gives you the idea. You know order of magnitude. It's probably you know it's over $5.5 billion on an ongoing basis and they see that growing in this new deal and that's high margin. And then you say, okay, if they're calling it a 52% margin at five and a half to $6 billion and they've made less than 1 billion for the year, you know where it's coming from. And, to be fair, they're not the only one earning a lot of high margin revenue, but their more profitable peers are also sort of still earning from the flying that they do. But the implication of it there's a couple of things. When they decide what is and isn't profitable flying, you need to do a really good job of factoring in how it affects that credit card business.

Gary Leff:

So I had a conversation six years ago with one of the senior executives at American who was talking about the reason for their cuts in New York and it was basically these flights were not profitable and they hadn't really been integrating at the time the sales of credit card acquisitions and then spend on the card into their thinking about their route planning and just the way people were rewarded within the business didn't factor that. And he said okay, this is crazy, because if you're cutting back in New York, what you're doing is you're cutting the relevance of your card product in the most important spend market in the country and you're going to lose out on the spend. I'm like this is crazy. Well, they began to realize as they, you know too, began to better integrate revenue across the company into their thinking and into their org chart and as they had, you know, until the government fought to break it up, as they had this partnership with JetBlue that really bolstered their presence in New York. They started to see more acquisition in the Advantage program and more card conversions and realized that that does factor into the profitability.

Gary Leff:

If you go back six, seven years, american Airlines actually had more charge volume on its co-brand than any of the other airlines and at last year's Investor Day they disclosed that now they're at number three. So they're behind Delta and United now and they've lost relevance in the Los Angeles market. They've lost relevance to United in the Chicago market, they've pulled back in New York, and so it's not really a surprise that in these and they don't have the significance in the Bay Area that say United has and so they're not seeing. You know they focused on the Sunbelt, which is growing, but it doesn't have the same concentrations of wealth. It is important to think about the business in a very integrated way and do the accounting correctly, as it were, to understand how the decisions you're making actually influence your bottom line no-transcript.

Jeff Borman:

When I look at the model that the largest hotel companies are creating, they're modeling themselves very much after airlines with the credit card partners and how that works. The difference is airlines own their airplanes. If they didn't, this is my fear. Hotel owners are the airplane owner in this situation and they're not making as much money because it's all going to the program and it's all hitting a corporate P&L. The revenue boost that you get in those partnerships isn't making its way to the airplane or, in my example, to the hotel, because you've got a different ownership model involved. I think it's a real existential issue for the hotel world.

Gary Leff:

So a little bit of agreement, a little bit of pushback I mean just on the on the accounting there First of all but is going to at least be something on the order of magnitude of your average daily rate. On the order of magnitude of your average daily rate. So more of it flows back to the owners in the hotel co-brand model. Nonetheless, there is a huge disconnect between the airline model, where they own the planes as well as the marketing, and the hotel model, where, on the one hand, you have this marketing company, on the other hand, you have the service delivery, and that creates a tremendous amount of tensions in a variety of dimensions, especially for, you know, the customer experience and the benefit on property versus the promises that are getting made.

Gary Leff:

You know, ultimately, the hotel brand really only that's all they have is their brand. It's the reason why the customers come to them and they can deliver those customers to the hotel owners, and why you want to say, you know, fly the flag of the brand is to attract those customers. The problem, then, is that there is obviously a different than incentive. Ideally, the brand owner wants to protect the value of the brand because, in the long run, otherwise they have nothing. But the individual hotel wants to benefit from those customers without spending as much, maybe even spending as much on their customer who's going to be repeat guests with them, but not rewarding someone else's customer in the same way, and so there's going to be a tension over what that brand looks like over time.

Jeff Borman:

I think there are two fundamental parts of the structure that are being challenged right now because of the growth of loyalty programs. You look at the biggest programs that have gone from $50 million to to 200 million in a six-year, seven-year span. What you see there? Because of the model, they tax the reservation, essentially right. So what used to be 30% of people in a hotel? Well, those 30, you know, as a part of a loyalty program, those 30% got taxed by the program 3%, 4%, 5% of the reservation value. Now, instead of 30% being loyalty members, you've got 70%. I think Hilton just said on a recent earnings call right so that tax, the model hasn't changed, but you're taxing two, three times as many of the guests at a time when occupancy has not grown. You've just increased the tax base.

Gary Leff:

But what you're doing is also just shifting the customer acquisition channel. Right, so you're, maybe you're not, depending on the hotel.

Gary Leff:

You may be paying Expedia less, right, and so you know, there's a customer acquisition cost, whether it's through the chain or through other channels, then are you discounting as much? What's your relative room rate In each property? You're going to have to figure out because it's a very competitive market with a bunch of different chains and you can flag different ways. Even Marriott has newer for some of their limited service, newer, lower cost flags. And how much are those worth Right?

Jeff Borman:

The mix of third party booking sources like Expedia that are really high cost to hotel. Had the mix of that decreased as the loyalty program grew, then I think that was the business case. But that hasn't happened is the problem. The other real economics here that are kind of coming to a head is that as people have more and more points, they spend more points than cash. In the past people were doling out cash or putting on credit cards or paying with dollars. Now, more often than ever they're using their points because they're earning so many through the banking system that rewards them and gives them good travel options. When that happens a guest, instead of paying $100 out of pocket they tend to get reimbursed at a hotel level $50 to that $100 instead To the guest it may seem the same To the hotel it's a significant shave off the actual revenue you receive.

Gary Leff:

Yeah, and so then the question is, what would your occupancy be without that? I mean, so is this marginal room nights because of the earn? In this way it's filling empty rooms, or is this actually displacing? And all this matters? But I think what's really important to understand about where this growth in loyalty program members comes from. Is it driving people to be members? Not that they have any particular loyalty to a program. These are no longer frequent travelers.

Gary Leff:

And so programs talk about the total number of people in their database as their loyalty program numbers, and that is not the same as active members. So you know having some transactions zero to 18 months, but more importantly, you know more than one transaction zero to 18 months. In some way you want to really understand the program. You want to strip out all the people who joined one time in order to get the lower rate and then never transact again or transact like three years. You know, oh, I forgot, I'll join again because I don't even remember my number, like to get the lower rate. And it's very rare that the loyalty executives talk about the actual number of engaged members, let alone define what they mean by engaged, if they do.

Matt Brown:

Time for the lightning round, gary, the airline amenity or loyalty perk you most treasure.

Gary Leff:

So at the end of the day, like while I you know well, it's tempting to say you know upgrades and obviously that matters from an elite perspective you know what I want to do more you know upgrades and obviously that matters from a from an elite perspective. You know what I want to do more than anything else is get where I'm going, when I want to be there, or as early as possible, as quickly as possible. So you know, I would say the ability to have priority in confirming standby, to get on an earlier flight if my meetings end early. And then number two, when things go wrong, better irregular operations protection.

Jeff Borman:

Should pilots be upgraded to first class before high-ranking loyalty members?

Gary Leff:

Many years ago, if you go back a quarter century, it was generally the case that a pilot who was deadheading so that means that they're actually working. They're flying to their duty assignment from where they're based to, or from where they've flown to that means that they're actually working. They're flying to their duty assignment from where they're based to, or from where they've flown to, the next city. They're going to fly, not commuting pilots. They'd be able to fly in first class. Back then, only 10% or so 10 to 12% of domestic first class seats were being sold to customers. There were plenty of extra seats. It wasn't that big a deal.

Gary Leff:

In 2020, united Airlines made a big change where they didn't want to furlough pilots during the pandemic. They worked out a deal with their pilot union to be able to basically schedule all their pilots despite seniority, so that they could stay current and they'd keep flying, and so they had to bribe their union basically to allow them not to furlough pilots, and part of what they did, part of what they gave up, was saying that pilots would have this priority when they weren't already in first class on a deadhead trip. They would get these confirmed seats and, having won that at United American Airlines pilots about a year and a half ago got that in their new contract. So if they're not confirmed in first and there's a first class seat still available, they'll be in front of all of the customers at the gate on day of departure. A lot of customers are saying, well, I'm sympathetic, like I want my pilot to be well-rested, it's not a problem with this. You have to understand that this is actually. These hours commuting as a deadhead are part of their duty day. So it's hours that there would otherwise be in a less comfortable seat in the cockpit and actually flying. So it's not and it's not like they're getting so much rest in, you know, domestic first class either.

Gary Leff:

I'm not sure that it meaningfully makes a difference or that anybody could credibly say prior to these recent changes there was a safety concern with they're not commuting in first class. I do think that when you see this happening at the gate, it suggests that the relative power of employees at the company has risen relative to customers. I think it becomes an especially bad look at American Airlines, where they are financially underperforming. Employees are making as much or more than they are at counterpart airlines but aren't generating a return in nearly the same way and it becomes, I think, symbolic or this really bad look to say okay, you know, I'm this loyal customer. I've been, I'm staying loyal. I've been promised for that loyalty the upgrade. And I see, when I'm hoping for the upgrade at the gate, it's not going to me, it's going to the employee. You know it doesn't look so great and if they're going to do it, maybe not do it in uniform. I don't know.

Jeff Borman:

I thought this would be the fastest question in the conversation. The answer is just no. To me, the loyalty perk that I care about most by far is the upgrade, and it is infuriating as the highest level one can achieve at American Airlines by earning that. I get on a plane and there's a couple pilots sitting where I believe I should be, but anyway, that's just my take on it, and yours is much more elegant.

Gary Leff:

I thought it was important to sort of give the context of what's going on.

Matt Brown:

Of course, of course.

Gary Leff:

But yeah, look, I think it's awkward at best and I think it's a terrible look for customers and I think that that's a problem for an airline that is financially underperforming.

Matt Brown:

Gary, how does somebody acquire concierge key status?

Gary Leff:

I was a concierge key member of American Airlines at one point. So concierge key is the criteria for qualifying is not published. It's the level above Executive Platinum. It gets you really personalized service in a lot of ways. I mean you may get a golf cart ride between flights and a quick connection. You might get a car transfer on the tarmac. You're often met at the gate just to thank you for your business. On domestic flights you get access to flagship business class lounges. You're top of the upgrade list and, most importantly to me, you get what they call next flight guarantee.

Gary Leff:

So if your flight is canceled and the next flight to where you're going is sold out, they will still confirm you on it. They're willing to bump another passenger. They're willing to pay deny boarding compensation to someone if necessary to get you where you're it. They're willing to bump another passenger. They're willing to you know, pay. You know deny boarding compensation to someone if necessary to get you where you're going.

Gary Leff:

Depending on where you live and the margin of tickets you're buying, it's not strictly just a straight dollars but you know roughly if you're spending about $60,000 a year on airline tickets, that'll get it for you. If you have a big corporate contract, you may get a handful of concierge key memberships that you hand out to your travelers or your top executives. The most important influencers of travel spend at the biggest companies will get concierge key. In fact, the most important customers of the airline might even be tagged do not miss among concierge key members, so they're always getting the in-airport treatment. And American Airlines, though, does factor now more than just dollars spent on tickets, and that's actually how I wound up as a concierge key member for a little while.

Matt Brown:

Gary, this is tremendous. Thank you so much for being a guest, highly informative.

Gary Leff:

Pleasure to play, to chat with you both, gentlemen.