WALTER ISAACSON: You may not have heard of Léon Delagrange , but everybody who’s ever flown as a passenger in an airplane shares a special bond with him. Somewhere in France, on a blustery day in March 1908, Delagrange wedged himself in beside the pilot in a Voisin biplane and a few minutes later became the first ever airplane passenger.
For Delagrange, the experience bore little similarity to what millions of travelers would come to know. The passenger lounge was any dry patch of grass he could find. There were no bags to check, no seat reservation or in-flight entertainment. Neither could he be picky about the destination. It had only been a few months since the first in-flight turn had ever been recorded. On that March day, straight ahead was as good a course as any.
Just six weeks later, on the dunes at Kitty Hawk, South Carolina, came another passenger first. But in this case, the motive went beyond mere discovery. For years, Wilbur and Orville Wright had been trying to sell an aircraft to the US Army. Finally, the Army agreed to buy one craft for $25,000 on the condition that it could carry a pilot and passenger.
The passenger would be Charles Furnas, a 28-year-old mechanic. Until then, the brothers had tested the craft with a sandbag in the second seat. But this would be the day the sandbag would become the first passenger ever bumped from a flight.
Wilbur piloted the flight a mere 800 feet. Then it was Orville’s turn to pilot, as he took Charles Furnas for a two-mile flight, making him one of the privileged few to fly separately with each of the Wright brothers. Soon after, the Wrights delivered the first ever military aircraft to Fort Myer, Virginia, where Orville remained to oversee its launch.
With their eyes on securing military contracts and finding ways to hold the mail, it was easy to miss these passenger firsts and the beginning of an era that would disrupt passenger shipping and rail, shape economies, and shrink the planet. Who would have foreseen that the evolution of passenger flight would be inextricably woven into our social history, or how airports would become technological and often architectural marvels? And no one would have imagined how dramatically information technology could drive transformation in the airline industry in what some are calling the Uberization of plane travel. I’m Walter Isaacson, and this is “Trailblazers,” an original podcast from Dell Technologies.
MAN: The passengers are all aboard. Their baggage is loaded.
MAN: Roger, Houston, 601 cleared for takeoff.
MAN: And we’re on our way.
MAN: Up here is where man conquers the clock and the calendar.
MAN: We’re gonna make flying better and faster.
MAN: You’ve heard the expression flying by the seat of your pants?
WALTER ISAACSON: The history of airline travel has been comprised of a ceaseless defining and redefining of the customer experience. By the 1930s, airline travel was modeled on what passengers had come to expect from ship and rail travel. There were coach seats, meals served on china, even sleeper planes with train-like berths.
One serious downside of air travel was noise. The decibel level at takeoff in a Ford trimotor aircraft could reach 120 decibels, about the same level as a chainsaw or ambulance siren. It was bad enough that during a flight, cabin crews would often use megaphones to communicate with the passengers.
Without pressurized cabins, an aircraft might fly at 13,000 feet, within the troposphere, which meant fighting weather and turbulence and made the use of bathrooms inadvisable.
During the 1930s, a New York to Los Angeles flight could take 25 hours, requiring at least two changes of planes with more than a dozen stops. A single airfare might run $300, well over $5,000 in today’s money and a king’s ransom for millions struggling through the Depression.
In 1935, Douglas introduced its DC-3, promising a smoother, quiet, more lavish experience. At the unveiling, 65-year-old Orville Wright would marvel that passengers could at last speak to each other without shouting.
Yet the train was still king and would continue to rule a while longer. Who knew that the future of passenger travel would be discovered at the bottom of a well in the German countryside? [MUSIC PLAYING]
MAN: The storm breaks in full final fury on the German Rhine, On the final mission of the great bombing fleet.
WALTER ISAACSON: By 1945, war brought massive advances in aircraft design and trained countless thousands of young people for work in aviation. And it was war that hastened the age of commercial jet travel. Russ Banham is a corporate historian.
RUSS BANHAM: The war was winding down. The end was near for the Nazis. Hitler was aware of this, and he ordered that all of the German secret aeronautical facilities– these were research facilities– be shut down, and all of the documents and research material be destroyed. Aware of this in the United States, General Hap Arnold, who was the commander-in-chief of the US Army Air Forces at the time, he put together a group of the country’s top aviation engineers and aerodynamicists.
You know the purpose of this group was to travel to Germany to find these secret aeronautical research facilities and see what they could learn. On this team that Hap Arnold put together was Theodore von Kármán, a renowned aeronautical engineer. He led the group.
WALTER ISAACSON: Von Karman’s team got intelligence reports of a secret aviation facility just north of the Harz mountains in a little town called Völkenrode.
RUSS BANHAM: They traveled to this facility. And they knock on the door. And the superintendent comes out. And it turns out von Karman knew the gentleman because in the world of, I guess you know, elite aviation engineering, there’s only so many people. They hugged each other. And it turned out that this fellow, this German engineer, he just didn’t have it in him to destroy the facility or all the work that was conducted there by his colleagues during the war.
So they invite everyone in from the US contingent. And the guy gives ’em a tour and happens to mention that in retreat, the Germans took all of their documents and threw it down this dry well on the perimeter of the facility. So they trooped outside. They were able to draw up these documents from the well. And in there were these drawings for a new-age jet.
WALTER ISAACSON: This new jet had a design unlike anything seen before. Hidden within the plans were results of a wind tunnel test proving its viability. Ever the sharp entrepreneur, George Schairer of Boeing sensed an opportunity.
RUSS BANHAM: He immediately– right there at this facility– dashed off a letter with his own little drawings of this plane, put it in an envelope marked “censored,” and had it sent to Boeing in Seattle. And essentially, it said, stop the presses. Do not conduct any more research on the XB-47. We’re going to build this jet instead.
WALTER ISAACSON: Using the design that Hitler had hoped to destroy, Boeing did stop the presses and, with some modifications, produced this new jet, the XB-47. The US Air Force ordered 5,000 of them. But then, Boeing CEO Bill Allen did something utterly audacious. He persuaded the board of Boeing to go all-in on a civilian commercial airliner version of the XB-47.
Allen knew that a jet aircraft with pressurized cabin could fly higher and faster, with less atmospheric drag and greater fuel economy. There was a potential for Boeing to lead the biggest leap in commercial air travel since Leon Delagrange was treated to the first airplane passenger ride in 1908. But the risk and the stakes would be enormous.
The company gambled and developed the civilian jet, designated the 707. The cost to Boeing was $17 million, or about $155 million in today’s money.
The Boeing 707 was introduced to the world in a flyover during a meeting of the Society of Aeronautical Engineers. It was also the time of the Gold Cup Hydroplane Races in Lake Washington, which drew a crowd of some 350,000 spectators. They wouldn’t forget what they saw. Boeing test pilot Alvin Melvin “Tex” Johnston made sure of that. Not only did Johnston provide the scheduled flypast, but he added an unscheduled barrel roll.
The next day, Boeing CEO Bill Allen called Johnston onto the carpet and asked what he thought he was doing with the company’s $16 million investment. Selling airplanes, he said.
And sell them they did. In 1958, Pan Am introduced 707 overseas service with smoother, faster flights. It was an instant hit. For millions of travelers, the ’50s had become the jet age. During the ’60s, airline travel was all about high fashion. Ladies wore the latest styles. Gentlemen wore jackets and ties. And if children flew, they wore their Sunday best. It was the age of the jet set, and the brand name for high-altitude fashion was Pan Am.
Tom Petzinger, formerly of “The Wall Street Journal,” is author of “Hard Landing– The Epic Contest for Power and Profits That Plunged the Airlines into Chaos.”
THOMAS PETZINGER: Pan American World Airlines– Pan Am– which in its heyday, right up through the 1970s, was one of the best-known brands in the world– it was really on a par with how we think about, for example, Google as a brand today. Pan Am was just simply ubiquitous. You know when the Beatles came to America, they posed in front of the Pan Am logo at their press conference. The Pan Am building in New York on Park Avenue was one of the most storied fixtures on the Upper East Side.
WALTER ISAACSON: As high fashion came to flight, a computerized reservation system was transforming the business. What prompted it was a chance meeting between a top IBM salesman and American Airlines president C.R. Smith, who found themselves seatmates on an American flight. Soon after, Smith was introduced to IBM President Thomas Watson, Jr. Robert Crandall is a retired American Airlines CEO who later built on the reservation system that Smith helped to launch.
ROBERT CRANDALL: Prior to that time, if you wanted to make an airline reservation, you’d call the res office. You’d talk to a reservationist. And she looked at a giant blackboard that was up at the front of the room to determine whether there was a seat available on the flight that you wanted to take. And if there was, she would write a slip of paper and put it on a moving belt that was very much like the checkout belts that you see at grocery stores these days. And the slip of paper would go down to a man or a woman at the front of the room. And he would mark that seat as sold up on the giant blackboard.
So Messieurs Watson and Smith decided that there must surely be some way to use computers to do better than that. And they– SABRE stands for Semi-Automated Business Information System, or words to that effect. That was the earliest application of computers to reservations.
WALTER ISAACSON: It may have been the golden age of air travel, but few had the means to afford it. That is, until a fishing trip that would change air travel forever. Russ Banham—
RUSS BANHAM: Bill Allen, the CEO of Boeing, and Juan Trippe, the CEO of Pan Am, were fishing buddies. And on this one fishing trip, Juan Trippe happens to mention to Bill Allen his interest in a much larger aircraft. More passengers would mean less fuel consumed. Then you could lower the airfare for passengers, get more of them onboard.
Now, he didn’t mean a slightly larger aircraft– say, going from 250 to 275 or 300 people. He meant a vastly larger aircraft, one that would transport 450 people. Now, of course, today we’re used to aircraft of that size. But back in the 1960s, this was a startling concept.
Anyway, Juan turned to Bill and said, what do you think? And Bill says, if you want to pay for an aircraft like that, I’ll build it. Juan turned to Bill and said, if you build it, I’ll pay for it. And they shook hands. That’s all it took.
WALTER ISAACSON: From that handshake came the jumbo jet, the Boeing 747. Today, they’re built in the Boeing facility in Everett, Washington, at 42 million cubic feet, the largest building by volume in the world. It was big enough to have its own weather systems. Until an air circulation system was installed, clouds would end up forming near the ceiling.
Today’s Boeing 747 has a maximum takeoff weight of 910,000 pounds with a wingspan longer than the Wright brothers’ first flight. And true to Juan Trippe’s hope, it became the Model T of commercial airliners. By taking in more passengers, it helped bring the cost of travel within reach for millions of travelers.
But by the early ’70s, that didn’t mean the skies were a friendly place for smaller, upstart airlines. Tom Petzinger—
THOMAS PETZINGER: There was a character who’s sort of an outlier among this group named Herb Kelleher, really the CEO that built Southwest Airlines. And Southwest is an interesting counterexample to all the major national carriers because even during the era of regulation, Southwest was strictly an instate carrier in Texas. They had a couple of planes, and they just ran among the three cities– San Antonio, Dallas, and Houston.
So as a result of being an intrastate airline, they were exempt from jurisdiction from the federal government. They could set their prices however they wanted. They could offer a level of service or have schedules however they wanted.
WALTER ISAACSON: And that didn’t sit well with some major competitors. Kevin Freiberg is the author of “Nuts!– Southwest Airlines’ Crazy Recipe for Business and Personal Success.”
KEVIN FREIBERG: They had 43 judicial and administrative proceedings all the way to the US Supreme Court before they really legitimately were in the air because Braniff, Continental, and Texas International colluded, really, to stomp on this little upstart. And they said, the market is very well served. We don’t need you. Thank you very much.
And so they colluded to bring all the economic and legal firepower they could to keep Southwest Airlines from getting in the air. So they’d go to these court hearings, and there’d be five lawyers from Braniff and 10 from Continental and a few from Texas International. And there’d be Herb. And at some point, they bled him dry, bled Southwest dry to about $143 in the bank.
And Herb said to the board– he was just legal counsel at the time. He said, gentlemen, let’s go one more round with these SOBs because this is an affront to the business of freedom. It’s an affront to our sense of egalitarianism. And let’s go one more round with them. And that was the birth of Southwest Airlines.
WALTER ISAACSON: A Southwest flight from San Antonio and Dallas might cost $18. And aside from low fares, the airline’s not-so-secret weapon was its attitude, which flowed naturally into its marketing. One promotion promised a fifth of whiskey with every booking. As a result, for a brief time, Southwest Airlines became the biggest liquor distributor in the state of Texas. Its unorthodox approach became a sneak preview of the deregulation that was about to disrupt air travel. Tom Petzinger—
THOMAS PETZINGER: Prior to deregulation, the airlines were regulated very ferociously by a government agency called the Civil Aeronautics Board. The CAB dictated which routes they flew, what their prices were, and even the level of service onboard So to be an airline executive prior to deregulation was really kind of like being a caretaker, collecting revenue that was dictated at levels set by the government. And really, it was not very controversial, not very interesting. And, of course, as a result, flying was actually very expensive.
WALTER ISAACSON: Enter the US Congress.
THOMAS PETZINGER: In fact, it was a liberal democratic senator, Teddy Kennedy, who was the principal architect of deregulation. It was not the industry. In fact, the industry fought it tooth and nail. The industry sort of had its country club status as a coddled industry that made money no matter what because the government made sure of that, no matter how much the passenger had to pay.
But Teddy Kennedy’s view was really a consumerist view, that air travel was prohibitively expensive. And for a Democrat, he brought a real free-market orientation to deregulation, which was that if we set these airlines free to compete, prices are gonna come down, and average Americans are going to be able to afford air travel.
WALTER ISAACSON: In 1978, the Airline Deregulation Act became law. The phrase “in order to compete” became an industry mantra. Airlines quickly learned that travelers were less interested in service than they were in lower fares. Service was cut back as fares plummeted. A coast-to-coast flight might cost less than $100.
THOMAS PETZINGER: Flying became so inexpensive in this hypercompetitive phase following deregulation that it became less expensive than driving an automobile, particularly as the oil shocks of the ’70s and then the ’90s drove energy prices much higher.
And interestingly, there came a time by the 1990s where more adult Americans had flown in airplanes than owned automobiles. So with that, the sort of culture of service diminished to the point where it was simply about moving human bodies from point A to point B and feebly attempting to maximize the revenue from each of those seats.
WALTER ISAACSON: As the price wars raged, a new idea emerged. Some airlines began exploring the idea of rewarding their frequent customers. And that gave one airline a distinct advantage. For Robert Crandall, by then the CEO of American Airlines, this was a chance to channel the computer-based marketing he’d first learned in the 1960s as an executive with Hallmark Cards.
ROBERT CRANDALL: Every Hallmark card shop in the United States at the time, you had a pocket. And in that pocket, for example, you had a four-line “Happy birthday, Granddad” card. And after you sold the first three cards, you came across what’s called a 51-column punch card. And you sent that into Hallmark. And we ran it through computers. And we kept track of four-line “Happy birthday, Granddad” cards, which were $0.25. And when it became apparent that the trend of a given store was towards more expensive cards, we would send back a four-line, $0.50 “Happy birthday, Granddad” card.
And at the time, that was quite a sophisticated use of computers because we kept track of income trends and sales trends store by store and and rack by rack. So at the time, I learned how to do some programming. And I ran the computer programming operation for Hallmark Cards for a while. And then after later, I became head of data processing for TWA. And that sort of gave me a basic knowledge of how to use the information technology. And we used it very widely at American Airlines.
WALTER ISAACSON: In 1981, Crandall oversaw the creation of American’s loyalty program. By rewarding frequent customers with unsold seats, the cost to the airline was nominal. Its secret sauce and competitive advantage was its ability to leverage the SABRE reservation system.
ROBERT CRANDALL: We came up with the idea of somehow linking, using the reservation system and linking it to a rewards program. And that was the unique feature of Advantage. There had been much smaller award programs of the same type in prior years. But nobody had ever linked the reservation system and the awards system.
We announced the award program. And we announced, also, that we would do all the record-keeping. You didn’t have to do any record-keeping. And that was what made the plan, I think, sort of an overnight success. Because within the next week, certainly– within a couple of days– our major competitors had announced comparable programs. But they were not set up to do the record-keeping. And that gave us a great advantage. And that advantage has persisted ever since.
WALTER ISAACSON: The American Airlines loyalty program was an instant hit and a lasting success. As recently as 2016, its membership is said to have topped 100 million.
Not only had Robert Crandall launched a winning promotion, but by tapping American’s customer database, he had given the airline industry a glimpse of its future. Today, big data and analytics have the airline industry on the brink of a major disruption. And, as in so many other businesses, the customer is driving the change. Nawal Taneja is an airline business strategist and the author of “21st Century Airlines– Connecting the Dots.”
NAWAL TANEJA: So the question that’s being raised is that, well, wait a minute. If I can do one-click shopping for some item that I want to buy from Amazon within seconds, and it’s done, why is it taking me hours to shop for air transportation and air travel? So in other words, what I’m saying is what consumers are seeing their behavior and their expectations in other business sectors, why can’t they get a similar type of experience in the airline industry?
WALTER ISAACSON: The key to that experience is information. An airline might have up to a terabyte of customer data at any one time. The trouble is all data is not created equal.
NAWAL TANEJA: All transactional data. But what they don’t have a very good handle on is the behavior. When she was shopping on the website of the airline, what was her behavior? Where did she go? From what page to the other page? Why didn’t she buy this? Did she scroll up and down? What was she looking at? So it’s the behavioral data they don’t have.
WALTER ISAACSON: Today’s abundance of data, analytics, and connectivity is already transforming air travel, providing airlines with greater insights into what their customers want. For instance, Fortune magazine reported on a company called Boxever, which uses an airline’s big data to generate marketing insights and strategies.
In one case, Boxever gathered data on clients who visited an airline’s website but without making a transaction. In marketing, these are called abandoned cart customers. That data helped build an understanding of why each customer left and helped shape the language of marketing emails to win them back. As a result, the airline was reportedly able to generate $1 million a week in bookings from abandoned cart customers.
In the more customer-facing side of the business, big data and analytics are making the process of booking and managing flights a whole lot easier. Nawal Taneja—
NAWAL TANEJA: So instead of me taking it out to go on the mobile website of an airline to see who’s flying where and what– I’ll just simply talk to this thing. And I’ll say, hey, I need to be in San Francisco next Thursday for a meeting at 2 o’clock. We’ll be spending the night there. That’s it. I’m done.
This little unit– I’m going to call it a unit or device. I don’t want to call it a phone– it knows my personality. It knows that Nawal does not like to go on connecting flights unless there are no choice. It knows that he prefers to go on airline A versus B unless there’s no choice. It knows that he wants to stay at the Westin Hotel. It knows he doesn’t take taxis. He takes Uber.
It knows all of that. So all the travel arrangements are gonna be made by this device that I have. You can call it chatbot or personal assistant or digital assistant.
WALTER ISAACSON: In the golden age of passenger flight, the passenger airline business was about planes and airports. With deregulation, it became a race to lower fares. But as airlines have locked their attention on the newest, best ways to sell seats, software giants are discovering new ways to use information and technology to reduce costs and win new customers. By studying customer behavior, they’re finding the buyers’ sweet spots and creating tools to reach those customers at the crucial moment of decision. The disruption has begun. But what will it ultimately look like? One futu re already taking shape is an Uberization of air travel, where the new giants of the industry might reside in Silicon Valley. And they might not even own aircraft at all. Nawal Taneja—
NAWAL TANEJA: Instead of Google or Amazon owning airplanes, it’s the opposite. Let’s go to two particular industries. Let’s talk about Uber. How many cars does Uber have? Zero. How many employees does Uber have? Zero Now, when I say employees, I’m talking about drivers, not people that work at the head office. I’m talking about drivers. So Uber has no cars and no drivers, and yet its market capitalization, as I saw a few months ago, was about $60 billion.
Let’s go to Airbnb. How many hotels do they have? Zero. How many employees do they have? Zero. So the issue is not that these new type of businesses coming in, that they would want to own physical assets. It’s the other way around. They don’t want to have physical assets. They want to leverage the assets that other people have.
So I see you know, a number of years from now, in fact the opposite, which is virtual airlines coming in. Virtual airlines would be airlines that’s started by a group of people they don’t own airplanes. They don’t have pilots. They don’t have maintenance people.
WALTER ISAACSON: Disruption to the airline industry isn’t all about apps and code. Aircraft design and manufacturing are undergoing constant innovation, from carbon fiber construction to the pending return of supersonic flights, advances Leon Delagrange probably did not imagine as he rose above that French meadow a century ago.
Despite all that, information is the new jet fuel shaking up the passenger travel industry. The aviation race today is about shaping the best consumer experience, as higher and faster gives way to easier and more user-friendly.
I’m Walter Isaacson, and this is “Trailblazers,” an original podcast from Dell Technologies. If you enjoyed the show, visit delltechnologies.com/trailblazers14. That’s “trailblazers,” then the number 14.
Next episode, we’ll be looking at the world of live events, from the early days of stadium concerts, where acts like the Beatles could barely be heard over the screaming crowd, to the immersive megarock tours of today, where technology has become as much of a star as the musical acts themselves.
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