YouSaid · the spoken record

Jake Smith

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12
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2021-02-12
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2021-02-12
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  1. “Of older aircraft to help bridge this gap versus solely looking to cancel or push back delivery of new aircraft. In fact, my team and I recently completed an analysis that shows that the U.S. Airlines have retired 8% of their 2019 fleet, but by the end of 2021 are taking deliveries of new aircraft to the extent where the year-end 2021 fleet will only be 2% smaller than the year-end 2019 fleet. So really leaning on retirement of older aircraft to help rightsize that U.S. fleet versus necessarily pushing back deliveries of new aircraft, although there has been some right sizing of order books.”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  2. “Yeah, so that's right. So back in mid November of 2020, the FAA lifted the grounding that had been in place since March 2019. And back when we spoke last year, I would have thought that would have been a much more momentous occasion in the airline industry had it not occurred in the midst of a global pandemic. then looking forward, my colleagues in the global investment research department that cover Boeing recently published that the backlog of orders for the MAX was only down 13% from the pre-grounding high. And then looking at the US airlines that I cover, while some have pushed out delivery dates for the Max and other aircraft types due to COVID, none have canceled MAX orders. And in fact, we recently saw Alaska add to its MAX order. And then high level, you know, you're right, while demand is lower and the airlines therefore need fewer aircraft over the short to medium term, we have seen many airlines in the US look to speed up retirement.”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  3. “So, Katie, we don't usually talk individual companies here, but it's hard to talk about the airline industry without talking about the Boeing 737 Max. What's the latest there? Who's grounded for a bit last year but has been approved to fly again? What do you see for the future given the demand dynamics that we've been talking about?”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  4. “The outlook for the industry more medium and longer term if we look ahead. Will things go back to normal or do you think we'll see a significant shift in business models and the services and products that the airlines are offering?”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  5. “Yes, fingers crossed. So we are forecasting that demand for 2021 will still be about one third less than what we saw in 2019. However, that's a function of lower first half of 2021 demand while the population is still in the midst of being vaccinated with a sharper recovery in the second half of the year. Our current forecast for the fourth quarter exit rate of 2021 is that demand will be down a lesser 20% versus the same period in 2019.”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  6. “So, since we spoke last year, there haven't been any incremental attempts at consolidating the industry, even driven by the negative impact of COVID on the industry. Just as a reminder, the last merger we had between the publicly traded U.S. airlines was back at the end of 2016 when Alaska acquired Virgin America. haven't really heard any rumbling since that's not to say there couldn't be future opportunities for further consolidation although i suspect it would likely be amongst some of the smaller airlines as the top four players already hold over 80 of the domestic market so might be tougher to get done from a regulatory standpoint”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  7. “Most airlines adopted a blocked middle seat strategy as an added precaution, now that institutions like the Department of Defense, among others, have published research on COVID and flying, most U.S. airlines have actually stopped blocking the middle seat, except Delta, which continues to do so. In terms of effectiveness, it's hard to say what is built consumer confidence because at the same time they've been rolling out some of these efforts in terms of new cleaning, media blitzes, et cetera. We've also had cases rising in the US. But I would highlight that we have seen passenger demand in the US improve, albeit modestly, from September to today, even as COVID cases continue to hit new highs.”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  8. “So, all the airlines have stepped up their cleaning protocol, adding elements that I've never heard of before until this year, like spraying the interior of the aircraft with antimicrobial mist, in addition to just their normal cleaning procedures, and the airline teams have been working to educate the public on the high level of cleanliness they held themselves to even prior to COVID. So, for example, airlines have always had HEPA filters ward. That means the air in the cabin is completely refreshed every two to three minutes. This hasn't been something you would typically hear on an earnings call from airline management teams, but over the last nine months it has. Additionally, many airlines have new safety and cleaning information available on their websites. Many have made efforts to spread the word through media outlets like Good Morning America, for example. And then I should also add that while the scientific community was still in the process of doing research on the spread of COVID,”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  9. “Yeah, so under the CARES Act in 2020, the airlines received $25 billion under the payroll support program, 70% of those funds were in the form of grants that do not need to be repaid, but the remaining 30% in the form of low-interest long-term unsecured loans. And then also under the 2020 CARES Act, the airlines were able to apply to a five-year secured loan program that had pretty attractive rates versus the prevailing market rates. The government made an additional $25 billion available to the industry under this program, but not all airlines ultimately decide to participate. Now, roll forward to this year, the government has once again allocated the airline's additional funds under the broader relief act with the government allocating $15 billion in payroll support to the airline industry this year. This comes with the condition that airlines need to call back employees that were furloughed after the expiration of the first”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  10. “Yeah, so the airlines have received substantial government aid to offset losses, both in the form of grants to pay employees and the option to apply to a secure loan program, but have actually raised even more cash through the capital markets. Since March, the airlines have raised $54 billion via the public debt capital markets in just under $7 billion from new equity issuance”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  11. “Sure, yes. So the lack of demand in 2020, not surprisingly, has had a very adverse impact on airline financials. So as of third quarter 2020 actuals, revenue was down just over 60% year over year, similar to the year-to-date decline in demand. The impact of profits was even greater as the airlines are still relatively high fixed cost businesses, even though, as we talked about the last time was on your podcast, Jake, the proportion of fixed costs pre-COVID were lower than it was historically for the industry, but still fairly high level of fixed cost. So the combined result was that year-to-date through the third quarter of 2020, the airlines lost just over $24 billion on an adjusted basis, and that compares to net income of over $11 billion for the first three quarters of 2019.”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT

  12. “Yeah, sure. So COVID has had the largest impact on air travel we have on record across the different data sets that we look at. So turning back to last year, demand essentially fell off a cliff as COVID cases started to rise in the US with passengers going from down 30% year over year in mid-March to the down mid 90% range by the beginning of April. The bottom then lasted through the end of May with the month of June while a little better was still down 80%. And just for some context, Jake, in the months following September 11th, demand in North America was down about 30%. So a much more material impact in the wake of COVID-19. And turning to today, demand has recovered further, but the recovery remains fairly muted, with passengers down to just under 60% over the last week.”

    2021-02-12 · Goldman Sachs Exchanges · The Outlook for Airlines in 2021 · IDENTIFIED FROM THE TRANSCRIPT