Economy Fares Up 21%: Price, Access, Identity

Eric Marketts

Welcome to the V1 Airline Retailing Report. I'm Eric Marketts.

Steph Nell

And I'm Steph Nell. Last week, every launch we covered came without terms. No fees, no volumes. Very mysterious.

Eric Marketts

This week, good news. We have numbers.

Steph Nell

And terms. You just have to go and read them, which apparently is an unusual hobby.

Eric Marketts

Three stories. First, price. In September, U-S travel agencies sold 18 percent more in airline tickets than a year earlier. The number of trips went up 2 percent.

Steph Nell

Eighteen and two. Hold on to those two numbers. They're the whole first story.

Eric Marketts

Two airlines just reported what that did to their quarter, and a third airline's finance chief told the Financial Times what comes next. Second, access. Five parties have now said how AI agents can come through the front door of travel.

Steph Nell

We read all five. Not one of the pages we read puts a price on a query. If you've been with us a while, that won't shock you.

Eric Marketts

Third, a short one. Delta and American Express Global Business Travel are piloting a way for corporate travelers to join Delta's loyalty program while they book.

Steph Nell

And we owe you a correction. Episode 20, our September episode on airline distribution, got a number wrong. We'll fix it at the end.

Eric Marketts

So, three questions this week. What does the traveler pay. Who gets in the door to sell. And who does the airline recognize once they're inside.

Steph Nell

Price, access, identity. Let's start with what everyone's paying.

Eric Marketts

Before the numbers, we need two scorecards. Steph, the travel agency one first.

Steph Nell

ARC, the Airlines Reporting Corporation. ARC settles ticket sales between airlines and travel agencies in the U-S, and every month it publishes what those agencies sold. Two limits. U-S only. And agency sales only. If you bought a ticket on an airline's own website or app, you're not in it.

Eric Marketts

So it's the agency channel, corporate travel agencies included. Not the whole market.

Steph Nell

Right. A good read on one channel. Not a census.

Eric Marketts

And the airline scorecard?

Steph Nell

Three terms, and then I promise we get to the news.

Eric Marketts

You always say that.

Steph Nell

And I always deliver. Eventually. Load factor is the share of seats that are filled. Yield is what each passenger pays per mile flown. And unit revenue is total revenue divided by the seats the airline flew, per mile. The industry calls it RASM.

Eric Marketts

Because nobody in this business can resist an acronym.

Steph Nell

Not one of us. Here's why the three matter together. If an airline flies the same seats, fills the same share of them, and revenue per seat mile still jumps, the extra money didn't come from selling more seats. It came from what each seat sold for.

Eric Marketts

So the test is simple. Did the seats move, or did the price?

Steph Nell

Let's find out.

Eric Marketts

ARC's September release came out this month. Agency air ticket sales were 10.2 billion dollars, up 18 percent from a year earlier. Passenger trips were 25.7 million, up 2 percent. For the third quarter as a whole, sales were 29.7 billion dollars, up from 25.1 billion, with trips up 3.5 percent.

Steph Nell

So in September, sales grew nine times faster than trips.

Eric Marketts

What did a ticket cost?

Steph Nell

The average economy ticket was 608 dollars, up 21 percent. The average premium ticket was 1,562 dollars, up 14 percent.

Eric Marketts

Economy went up faster than premium.

Steph Nell

In the agency channel, in September, yes. I wouldn't stretch that one any further than the data goes.

Eric Marketts

Fair. Now the airlines. Southwest first. Third quarter operating revenue was 8.42 billion dollars, up 21.2 percent. And capacity, the seats it flew, was actually down, by four tenths of a percent.

Steph Nell

Down.

Eric Marketts

Down. Load factor was 79.8 percent, flat from a year ago.

Steph Nell

So, the same seats, give or take, and the same share of them filled. And yield, what each passenger paid per mile, was up 23.3 percent. That's not more customers. That's price.

Eric Marketts

Southwest's fuel bill went up too. 3.92 dollars a gallon, against 2.40 a year ago. That's up 63 percent.

Steph Nell

And net income was 270 million dollars, against 54 million a year earlier. So whatever fuel took, price gave back more. At least at Southwest.

Eric Marketts

Delta's story is different. Quick note first. Delta reports two sets of numbers, reported and adjusted. Adjusted leaves out items Delta chooses to exclude. We're using adjusted, because it's the cleaner comparison.

Steph Nell

Every airline's favorite word. Adjusted.

Eric Marketts

On that basis, unit revenue was up 15 percent, with capacity flat. On the reported basis, it was up 21 percent. So again, price. But the adjusted operating margin went down, from 11.1 percent to 9.4. And adjusted earnings per share were 1.72 dollars, against 1.70. Basically flat.

Steph Nell

So price went up at both airlines, and the margin got wider at only one of them. Delta's fuel was up about 60 percent a gallon on its adjusted basis. How much of the margin drop was fuel, we can't tell from the release. We just know a 15 percent rise in unit revenue didn't hold the margin where it was.

Eric Marketts

And then there's American. We didn't find a unit revenue figure from American that we could verify. But its chief financial officer, Devon May, talked to the Financial Times, and AirlineGeeks reported what he said. If fuel comes down, he said, fares will probably stay largely where they are.

Steph Nell

Can you say that one more time? Slowly. For the corporate travel managers in the back.

Eric Marketts

If fuel falls, fares probably stay. He also said yields are back up to where they were seven years ago, in real terms. And AirlineGeeks reports American guiding to an adjusted loss for 2026, and slowing its network growth in 2027. That's a secondary source, so treat the loss figure as reported, not confirmed.

Steph Nell

Noted.

Eric Marketts

Okay. Make the case that this is all fine.

Steph Nell

The bull case. Demand held. Trips went up in September and in the quarter. Southwest's planes were just as full. Airlines took a fuel shock that, by one account, roughly doubled jet fuel since February, and people kept flying. Airlines for America says most carriers are absorbing the majority of the fuel increase. That's per AirlineGeeks, it's the industry's own claim, and we haven't tested it.

Eric Marketts

And the case that it's not fine.

Steph Nell

Volume is flat. Trips up 2 percent. Southwest flew fewer seats. When sales grow 18 percent and trips grow 2, price is carrying most of the load, and price only carries a market as long as travelers keep paying. American is slowing growth next year. And a CFO who says fares won't come down with fuel is telling you the ratchet only turns one way.

Eric Marketts

My expense report would like a word.

Steph Nell

Your expense report doesn't get a vote.

Eric Marketts

So what's the critical take?

Steph Nell

This is our read, and it's inference. For years, this show, and honestly this whole industry, has talked about better selling as the way to grow revenue. Offers. Bundles. Personalization. Selling by offer and managing each booking as an order. And this quarter's growth came from the oldest lever in the business. The base fare.

Eric Marketts

The one nobody gives a keynote about.

Steph Nell

Exactly. Now, nothing we read says retailing didn't help. But when the average economy fare moves 21 percent, it swamps whatever the retailing layer adds, and it makes any measure of retailing success hard to read this quarter. And if you run a corporate travel program, your baseline moved. Last year's average fare is not this year's budget.

Eric Marketts

Okay. Agents. Quick recap for anyone new. Two weeks ago, in Episode 25, we reported that American Airlines had written a rule about AI tools into its terms of use. Last week, in Episode 26, the one on Virgin and PROS, we went looking for an airline that had put a price on an AI query.

Steph Nell

And found none.

Eric Marketts

And found none. That's part of a watch item going back to Episode 8, our episode on unbounded search costs. When does an airline publish terms for AI agents? This week, five parties have something on the record. And one of them changed its terms without, as far as we can find, telling anyone.

Steph Nell

No press release. Just a quiet edit.

Eric Marketts

We'll get there. Setup first.

Steph Nell

An AI agent that books a flight needs three things from the airline. Permission to look at the fares. Permission to buy. And a way to pay. A gate is whatever the airline, or the card behind the purchase, requires before the agent gets any of those.

Eric Marketts

And you keep coming back to a price per query. Why that, specifically?

Steph Nell

Because every search costs the airline money. Before an airline returns an offer, its systems check live availability, fare rules and pricing. That's computing, and the airline pays for it. The economics of distribution rest on the look-to-book ratio, how many searches an airline answers for every ticket it sells. The bookings pay for all the looking. And that only works because people get tired and stop looking.

Eric Marketts

And AI agents don't get tired.

Steph Nell

They don't. Back in Episode 8, our search costs episode, one traveler pointed an AI tool at Etihad's website and pulled 881,076 fare options.

Eric Marketts

For one ticket.

Steph Nell

For one ticket. Then in Episode 15, we put a curve on it. An industry estimate, circulated by OAG, runs from 100 to 200 searches per ticket in the early online era, to 10,000 to 20,000 today, to as many as 200,000 when agents do the shopping. That's an estimate, not a measurement. The direction is the point.

Eric Marketts

And airlines already police this with people.

Steph Nell

At least one does, in writing. Lufthansa Group's terms for NDC, short for New Distribution Capability, the airline-built way of selling and servicing tickets. We covered them in Episode 17. They cover a seller's shopping costs up to a look-to-book ratio of 500 to 1. Above that, Lufthansa can take measures, up to cutting off access. It was written for travel agencies, in 2023, not for AI. Now put it next to that estimate. An AI agent shopping at 200,000 to 1 would be 400 times over the cap.

Eric Marketts

So where does a price come in?

Steph Nell

So far, the industry's answer has been to make each search cheaper to serve. Caches, and fares worked out in advance. In Episode 15 we called that an engineering answer to a commercial problem. A published limit, or a price per query, is the commercial answer. It turns free looking into a RELATIONSHIP WITH TERMS. And you can only meter, or price, an agent you can identify. Hold on to that, because identity is exactly what this week's gates check.

Eric Marketts

And there are two terms we'll lean on.

Steph Nell

Terms of use are the contract you accept when you use a website. Nobody reads them.

Eric Marketts

We read them.

Steph Nell

We read them. Living the dream... We really need to get a personal life...

Eric Marketts

WE DO!

Steph Nell

They say what software may do on the site. And accreditation. In the U-S, ARC credentials a company as a legitimate travel agency, and IATA does the same in many other markets. It's the badge that says a seller is a real agent.

Eric Marketts

Why should anybody care about this more than any other fine print?

Steph Nell

Because of how this industry got here. In the 1980s, airlines owned the computer reservation systems that travel agents used, and they put their own flights first on the screen. A federal study recorded that agents booked disproportionately on the owner's airline, which made that airline extra money. In 1984, the Civil Aeronautics Board required unbiased displays.

Eric Marketts

Problem solved.

Steph Nell

You'd think. The government's later analysis found the owner airlines were still earning 9 to 16 percent more than they would have without owning the system. The advantage moved off the screen and into the architecture. So the lesson is that the leverage was never the screen. It was deciding what the buyer gets to see. And today, who gets access, and on what terms, is the new screen position.

Eric Marketts

Alright. Five gates. American, quickly, since we covered it two weeks ago.

Steph Nell

American's terms, effective January 1, 2026. A third-party AI tool needs express written permission from American. We found no request limit and no price.

Eric Marketts

Delta. This is the new one.

Steph Nell

Delta's terms of use now have a clause on third-party agents, and it names AI assistants specifically. The customer takes the risk and indemnifies Delta, which means the customer agrees to cover Delta's losses.

Eric Marketts

So if your robot messes up, that's on you.

Steph Nell

That's the gist. Delta can also refuse to recognize or service any agent. The accreditation sentence now says an agent has to be ARC-accredited or IATA-accredited, and that covers servicing too. And robots and scrapers need written permission.

Eric Marketts

When did all that show up? Because I don't remember a press release.

Steph Nell

There wasn't one we could find. So we went to archived copies of the page. The April 17 snapshot has no third-party agent clause and no robots list, and its accreditation sentence just says a Delta-authorized general sales agent, travel agent or travel agency. Nothing about servicing. The October 13 snapshot has all three. So it landed somewhere between April and mid October, and we can't narrow it down further.

Eric Marketts

Does that mean Delta is blocking agents?

Steph Nell

No, and let's be careful here. Delta told TechCrunch on October 6 that it has no partnership or integration enabling third-party agents, and that it's evaluating. It didn't confirm that it blocks them. So nobody should walk away from this saying Delta blocks agents. Delta wrote a rule. That's what we know.

Eric Marketts

United.

Steph Nell

United's terms page has one general clause. No robot, spider or other automatic device, and no manual process, may be used to monitor or copy the site without United's prior written permission.

Eric Marketts

Spiders. That's a very early internet sentence.

Steph Nell

It's a classic. We found no wording about AI or agents. United pointed TechCrunch to those terms and didn't answer the question about blocking an agent.

Eric Marketts

Southwest.

Steph Nell

Southwest built its own door. On October 6, it announced a ChatGPT plugin. You can plan, search and compare fares inside ChatGPT, and then you finish on Southwest.com. Account access, payments and reservations stay on Southwest.com or the app.

Eric Marketts

So the agent can window shop, but it can't go to the register.

Steph Nell

Nicely put. Southwest calls it the first step in a phased AI-powered booking approach, with OpenAI and Amazon Web Services. One outlet reports that it covers cash fares only.

Eric Marketts

And the fifth gate isn't an airline at all.

Steph Nell

American Express. On October 13, Amex published a framework it calls Intent Intelligence. The idea is to capture and authenticate what a purchase is meant to be before the agent transacts, and then issue a token instead of the card number.

Eric Marketts

Is it live?

Steph Nell

No. Amex told Digital Commerce 360 that it has no live integrations, and that its protection for agent purchases isn't available yet.

Eric Marketts

So it's a blueprint.

Steph Nell

A very detailed blueprint. Then on its third quarter call, October 23, executives said agents come in through approved API or MCP channels, and that Amex plans to put its own agents inside AI platforms. MCP is the model context protocol, an open standard that lets an AI model call outside tools.

Eric Marketts

Okay. The optimistic version.

Steph Nell

The bull case is that this is an orderly start. Southwest and Amex are showing what a workable arrangement looks like, a door with defined limits. Delta says it's evaluating. And we found no airline that has said no outright.

Eric Marketts

And the pessimistic version.

Steph Nell

Every gate checks who the agent is. None of the pages we read states a request limit or a price per query. And the Amex pieces are frameworks, with nothing live. A gate that checks your ID and never names a price tells you who may enter. It doesn't tell you what entry costs. Identity is step one. Not one of the five has taken step two.

Eric Marketts

So what's the critical take?

Steph Nell

This is our inference. Nobody says no to agents. Each of them says yes, through a door it issued. American wants written permission. Delta wants the risk on the customer and a credential from ARC or IATA. Southwest ends the trip before checkout. Amex wants a token and an approved channel. Those are all ways of credentialing who comes in. And that's the 1980s lesson again. Whoever controls the front door controls what the buyer sees.

Eric Marketts

Unless somebody uses a different door.

Steph Nell

Unless somebody uses a different door. Booking Holdings, the parent company of Booking.com, announced Vayo on October 14. It's a personal travel agent, in private beta. According to its release, it reads the travel confirmations in your inbox, and it works across the industry, not just Booking brands.

Eric Marketts

It reads my email.

Steph Nell

With your permission. Yours. Not the airline's.

Eric Marketts

That's either very convenient or slightly unnerving.

Steph Nell

It can be both. Booking says it plans to invest 100 million dollars, depending on how the product develops and on market conditions. And for flights and hotels, it hands the booking off to the supplier, for now. So Vayo does not book flights today.

Eric Marketts

Then why does it belong in this story?

Steph Nell

Because, as described, Vayo goes through none of those five gates. It doesn't ask an airline's website for permission to look. It reads the confirmation email that shows up after you book. The airline's leverage is over its front door. The inbox is a side door.

Eric Marketts

And back in the 1980s...

Steph Nell

Regulators took away one form of control, and the control moved into the architecture. We can't say that's what happens here. We can say it's the place to watch.

Eric Marketts

Give us the watch item scorecard.

Steph Nell

Three things, ever since Episode 8. How an agent identifies itself. How many requests it gets. And what a query costs. On identity, Delta now says who counts, an ARC- or IATA-accredited agent, and American wants written permission. On limits, Lufthansa's 500 to 1 cap is still the only published one we know of, and it wasn't written for AI agents. None of this week's five adds one. On price, nothing.

Eric Marketts

So rules, yes. Limits, one. Prices...

Steph Nell

Still waiting. Lufthansa has a limit. American and Delta have rules. No airline we've read has published a price per query.

Eric Marketts

Last story. On October 14, Delta and American Express Global Business Travel said they're piloting one-click enrollment in two Delta programs, SkyMiles and Fast Track to Medallion Status. We found it in two trade outlets, Skift and the French business travel site Deplacements Pros. We didn't find a release from either company.

Steph Nell

Quick decoder. SkyMiles is Delta's loyalty program. Medallion is its elite status tier. Fast Track is an offer for employees of companies that have a corporate agreement with Delta. Take a business trip within six months, and you can reach Silver, Gold or Platinum Medallion by spending 2,500, 5,000 or 7,500 dollars on qualifying Delta travel. And the tickets have to be bought through the company's approved booking channel.

Eric Marketts

And until now, how did you get it?

Steph Nell

According to both reports, through a link your travel manager sent around.

Eric Marketts

The classic corporate email nobody opens.

Steph Nell

Second only to the expense policy update.

Eric Marketts

So what changes?

Steph Nell

Enrollment moves inside the booking tool. Egencia bookers can join SkyMiles. Bookers on Complete by SAP Concur and on Amex GBT's own platform can join Fast Track. Delta says Amex GBT is the first partner to test this, and the features are still in development. Skift quotes Delta saying travelers should sign up while they book, not after.

Eric Marketts

Here's what I want to know. Why does Delta care this much about getting a business traveler into SkyMiles? They're already flying Delta.

Steph Nell

Three reasons, and Delta's own third quarter call gives you most of them. First, the card. Delta expects more than 9 billion dollars from American Express this year, and its CEO, Ed Bastian, said on the call that it's on the way to 10 billion. Its chief commercial officer, Joe Esposito, said card acquisitions and card spend both grew double digits, and he expects a fifth straight year of about a million new cards.

Eric Marketts

Put that in proportion for me.

Steph Nell

This is our arithmetic, and it's rough. Nine billion dollars a year averages out to about 2.25 billion a quarter. Delta's adjusted operating profit for the whole third quarter was about 1.65 billion. That's revenue against profit, so it's not a like-for-like comparison. But it tells you where the weight sits. Our read is that a SkyMiles number is the front door to that card.

Eric Marketts

Second?

Steph Nell

Identity. A ticket bought through a travel management company already has the traveler's name on it. A SkyMiles number connects that name to a profile, a travel history and, eventually, a card offer. That's the same thread as the gates story. Identity comes first. And it lines up with Delta's NDC calendar, which we reported in Episode 24, the one on Delta's servicing calendar. Corporate loyalty identifiers are due in the second quarter of 2027. Neither article links the pilot to NDC, and we're not saying they're linked.

Eric Marketts

And third?

Steph Nell

Preference. A corporate agreement wins Delta share at the company level. Status works on the person. Once a traveler is chasing Gold, the next booking leans toward Delta. And remember, Fast Track only counts tickets bought through the company's approved channel.

Eric Marketts

Which is where Amex GBT comes in.

Steph Nell

Right. Deplacements Pros reports that Amex GBT wants to cut leakage, which is travelers booking outside the managed channel. So the travel management company keeps the booking in its channel. Delta gets an identified traveler with a reason to stay loyal. And the corporate buyer gets help meeting the share commitments in its Delta agreement.

Eric Marketts

So everybody wins.

Steph Nell

Everybody at the table. Our read, and it's inference. The airline that isn't at the table is the one flying the same route without a status offer inside the booking tool. And travel managers should notice something. A traveler chasing Gold has a reason to prefer one airline over the cheapest option the policy shows.

Eric Marketts

What's missing?

Steph Nell

Every number. No count of corporate customers or travelers. No start or end date. No markets. No economics. Both outlets are working from what the companies said, and we haven't seen the release itself.

Eric Marketts

And it fits the through-line.

Steph Nell

The third question. Who does the airline recognize. Delta wants to recognize the business traveler by name, by status and, eventually, by card.

Eric Marketts

Bottom line. Price carried the quarter. Sales up 18 percent, trips up 2, and an airline finance chief saying fares won't come down with fuel.

Steph Nell

Access is being credentialed. Five parties on the record, and none of the pages we read puts a limit or a price on an agent's query.

Eric Marketts

And identity is moving to the point of booking.

Steph Nell

Four things to watch. Whether any airline publishes a request limit or a price per agent query. Whether another airline ties agent access to accreditation, the way Delta now does. Whether fares hold in the fourth quarter if fuel moves, which is the real test of that CFO's comment. And a volume number from the Delta and Amex GBT pilot.

Eric Marketts

Any number at all.

Steph Nell

I'd take one.

Eric Marketts

Now the correction. This one's on us.

Steph Nell

In Episode 20, our September episode on airline distribution, we said NDC's share of ARC-settled transactions had stayed inside a band, roughly 19.6 to 21.6 percent, for two years. And we said the year-over-year moves were between two tenths and nine tenths of a point. That was wrong.

Eric Marketts

How wrong?

Steph Nell

ARC's own monthly releases show January 2025 at 16.5 percent, February 2025 at 19.1, and September 2024 at 18.6. All below that band. And September on its own went from 18.6, to 19.9, to 21.2. That's 1.3 points a year, two years running.

Eric Marketts

So, not a plateau.

Steph Nell

Not the plateau we described. The series is seasonal, and we read it as flat. We overstated it.

Eric Marketts

What still stands?

Steph Nell

ARC is still the series we trust, with the limits we keep repeating. We're now rebuilding the full series, month by month. And the argument we built in that episode on top of the flat reading waits for the rebuild before we repeat it.

Eric Marketts

Same standard we hold everyone else to.

Steph Nell

It would be awkward otherwise.

Eric Marketts

Sources for every story are in the show notes.

Steph Nell

The V1 Airline Retailing Report publishes every Monday. I'm Steph Nell.

Eric Marketts

And I'm Eric Marketts. Stay sharp out there.