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WSJ Your Money Briefing
Airline CEOs Defend Coach Seats
00:07:47
The leaders of Delta and American have defended the tightest sections of their planes -- while sitting in them. The Wall Street Journal's Middle Seat columnist Scott McCartney has more.
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Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries operate like a local everywhere. Visit deel.com WSJ your money briefing Money
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in Market Stories from the Wall Street Journal. I'm Tanya Bustos in New York. Have you ever been vacuum packed into a shrunken coach seat? Wishing in the airline CEO had to endure the same discomfort. The Journal did that for you? Sort of. The middle seat asked the chief execs of the three big US Airlines to have a seat and see if they think the skimpy confines of coach today are acceptable. First, these money headlines. The US Is set to start promise talks with the European Union. Larry Kudlow, President Trump's chief economic adviser, said that talks to forge trade agreements on farm and energy products would begin right away. Mr. Trump agreed with European Commission President Jean Claude Juncker last week to bring a truce to a trade dispute that had erupted after Mr. Trump imposed tariffs on steel and aluminum. Speaking of US tariffs are carving up the meat industry. Tyson Foods in particular shaved its profit outlook due to trade tensions. The Journal writes that this week it lowered its earnings projections for fiscal year 2018 by 10% to 13%, citing uncertainty in trade policies and increased tariffs. Tyson is directly impacted by China's 25% tariffs on beef, chicken and pork imports and Mexico's 20% pork tariff, both levied in retaliation against U.S. trade actions. And Goldman Sachs last batch of crisis era stock options will have earned top current or former execs at least $3 billion by the time they expire later this year. Review of regulatory filings by the Wall Street Journal shows how far Wall street firms have come since the crisis. Case in point, shares of JP Morgan Chase continue to see new heights. And while Goldman Sachs is less profitable than it was a decade ago, its share price last year surpassed the previous high set in 2006. This Is yous Money Briefing from the Wall Street Journal. Welcome back. When airline CEOs try the cheap seats, the leaders of major US airlines, Delta and American, they've defended the tightest sections of their planes. This is after actually sitting in them. The Wall Street Journal's middle seat, columnist Scott McCartney, tells us all about it. He joins us from Dallas via Skype right now. Hi, Scott.
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Good to be with you.
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So before we get into the CEO experiment, let's just confirm the consensus. Coach is awful, right? Lots of things on airlines have certainly improved. I don't think a lot of people list coach among the improvements. Am I wrong?
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No, you're Spot on. Correct. It's a huge frustration for people. The seat rows have shrunk, bathrooms have shrunk, the fees have increased. It's one of the most common complaints I get from people. There are just more bodies in the same confined space. For some people, it's even claustrophobic. It produces all kinds of anxiety just being that close to the person in front of you who's sneezing and coughing.
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How true it is. So you invited three. Three of the top execs from the top US Airlines. Who was up for the challenge and what transpired?
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C
Yeah, I thought this would be pretty simple. I just wanted to interview them about coach in their coach cabins and have them explain to travelers why they thought this was a good product. The CEO of Delta, Ed Bastian, agreed to do it. After he agreed, the CEO of American, Doug Parker, agreed he would do it, but the CEO of United, Oscar Munoz, wouldn't do it.
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Okay, well, we were able to get two in the hot seat. Now, there was clearly no way they were gonna dress this up right. So they're not apologizing. It seems like they get it. But, you know, their stance is, yeah, we know, but you can always pay more. Is that kind of the gist of their response?
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C
Yeah, I think so. I mean, you know, to sort of put it in a global context, this is an industry that for decades lost money regularly. These guys have worked very hard to come up with a business model that works. They're making lots of money now. Their companies are more like industrial companies. They're putting up good profit margins. They're able to borrow money a lot cheaper than they used to. All kinds of benefits, certainly with stability for employees and for customers, too. Part of that strategy really is shrinking coach down and then offering opportunities to pay more if you're able. And certainly in this economy, many people are able. You know, it was kind of funny, and it's not funny, but a lot of travelers say to me, well, they made coach so unbearable, they're forcing you to pay more. And what these guys said essentially is, hey, if you don't like it, you can pay more. And so kind of, you know, both sides are saying the same thing. They're offering extra legroom coach rows on international trips. The US Airlines are finally coming to the realization that premium economy, which is usually a little bit wider seat and more legroom, is very popular with people who don't want to pay for business class, which, with a lie flat bed and now some with a private suite, has become quite luxurious and quite expensive. So on a typical international flight now you're going to find four different seating options at four different price points. And the CEOs would say a choice for everyone.
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And like I mentioned earlier, things have certainly improved. Things are always happening in the airline business. So were you able to get a sense of what fliers can maybe expect? Where can we see our money going when we fly?
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I think what you're going to see is more expansion of the current seat squeeze. So the retrofitting is ongoing. The new airplane orders all come in with squeeze down coach. What they promised is they're not going any smaller, but they are in the sense that there are planes out there with more room that are going to be converted into planes with less room in coach. So I think that that part of it is going to continue. They've taken a bit of attitude and we've seen this with international airlines who were quite successful offering satellite Wi fi, much faster WI fi experience. You can download video and things like that. Much more reliable than the Go Go that we're, you know, in the land based system. We're used to offering entertainment that you can use on your own iPad or phone or and on some planes with screens offering bigger overhead bins where you can turn your bags on their side. And they are trying to do things to make that experience better. It's interesting what you find with international airlines is sometimes you can really squeeze down the space. But if you give people entertainment or you give them friendly service or you give them even a little bit of food or drink, they feel much better about the coach experience. And so I think there's a bit of that strategy going on as well.
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B
Middle seat columnist, Scott McCartney, thanks very much.
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C
Good to be with you, Tanya.
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And that is your money briefing.
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I'm Tanya Bustos deal replaces fragmented Payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit De l. Com WSJ.