YouSaid · the spoken record

Jay Shabat

lines on the record: 110
first: 2024-07-11
most recent: 2024-07-11
sittings or episodes: 1
sources: podcast

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“Big issues that local officials think about if you're in Vermont, you're wondering where you're going to find labor if you're pretty much everywhere in the US, where your housing shortage is a big thing. So I discuss issues like these city by city and a little bit about the history of how they became big cities and things like that. And finally, the Delta book, Gloria Lawson Found, which I co-wrote with Seth Kaplan, my old airlaw weekly colleague. That's about, yeah, the history of Delta Airlines. So if you're, you know, if you're interested in the airline business, you can, I'm sure you'll enjoy that.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, thanks. Thanks for that opportunity. So, yeah, so Skift, we can just go to airlineweekly.com and see our newsletter or skiff.com. That's the we like to think of ourselves the Bloomberg of Travel. We cover all aspects of the travel and tourism industry around the world. So Robert Weekly, it's on SubStack. It's just railroadweekly.substack.com. You can go check that out. And then yeah, my two books behind me. American Places. That is a book I did for a while. I had a newsletter about the US economy. And I took about 70 different places in the United States, tried to be as representative of possible, you know, big, big giant cities like Los Angeles, smaller towns like Lewiston, Maine, you know, just 70 of them. And I described very succinctly how their economies work. What are the bigger employers there? What's the labor market look like?”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“If oil prices stay high and there could be different kinds of recessions too. I mean, remember that we have had a manufacturer, railroads will tell you we've had kind of a manufacturing recession the last couple years, or at least a manufacturing economy that's kind of bounced along the bottom. But the reason why the US economy grew 3% in the last half of 2023 is because things like travel were booming and the service side of the economy is booming. So we don't know if that could switch back. Maybe people will stop buying, stop traveling and they'll start buying pelotons again. I don't know. Could have a recession that specifically disproportionately affects travel, we don't know. But that's, yeah, that's the stuff that we're always looking out for.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Bingo, that was going to be my answer. So, yeah, so demand is very sensitive to the macroeconomic situation if there is a recession, you can pretty much count on demand going down. But if there's a recession and that corresponds with lower fuel prices, airlines are going to be okay with that, depending on the degree to which each has happened. Now, there obviously have been situations before where fuel prices go up and you have a recession. But usually one goes with the other, so tends to be like good examples with the big, you know, the giant economic recession in 2008, 2009, oil prices went down to like $30 a barrel at one point. Even during COVID, oil prices went down to zero at one point, but that was kind of a weird thing. But that usually happens, so airlines can sort of manage that. But of course, you know, if”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“How would you say air fares and air volumes TSA throughput responds to economic weakness? There has not been a recession despite it being much anticipated for over two years, maybe close to three years and the airlines have done well. If we do, and obviously we will, but in short order, the US economy does enter a recession, how do you think that will impact pricing and volume? Like, is it much more sensitive to the cyclical factors or are there the structural tailwinds are more important as well as maybe a fuel costs go down? That could help”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Well, the international, that whole party is over. Summer's going to be, we've got all these people booked in the summer, but yeah, once we get into the fall, nobody's, you know, everybody's starting to take the message. Things like that are what we're going to be looking for.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so we expect the delta is always kind of, we talked about Singapore Airlines being the gold standard for Delta in some ways is that way in the US. They're kind of known for always, you know, beating everybody else on margin, at least the big guys. They're very, very strong customer service reputation. They've already guided to an operating margin of, I believe, 14 and 15 percent, which for an airline in the second quarter is very strong. I don't know off the top of my head what they did last year, but probably something similar. So what we're looking for now, for all these airlines is they start reporting, is are they seeing any cracks in this demand moon that I've been mentioning? You know, is anybody going to say, you know, well, things are okay for the summer, but we're, you know, the bookings for the fall are starting to weaken, you know, are they going to say.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“At Airline Weekly, we go around the world and we discuss the major trends for all the different airlines and different markets.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Say their costs have been depressed. India, there's really just it's a battle between two big airlines now Air India, which is reprivatized, and Indigo, which I mentioned before. Indigo is now, you know, the traditionally just domestic shirt haul international. They're going big now. Earlier this year, they said they're going to buy these big wide-body aircraft. They're going to have a business class. They're going to have a big loyalty program. So they're turning into an intercontinental carrier trying to, and again, I don't want to talk, you know. You can go on forever about this stuff, but right now a lot of India's intercontinental traffic travels through the Gulf on carriers like Emirates, Qatar Airways. Indigo wants that back. Air India wants it back too. They've traditionally stumbled because, you know, government bureaucracy, all this kind of stuff, but they're now private. Indigo is now going intercontinental. So we'll see what they're doing. So yeah, that's the kind of thing that we do.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Low, because largely because of capacity, just golf carriers and Chinese carriers and low-cost carriers and startup carriers, they were just kind of flooded like their roots just had too much capacity. That has all reversed post-COVID. Huge amount of capacity got weeded out during the COVID crisis. At the same time, these airlines cut their cost dramatically, very different in the US where you had like labor costs go up. In Asia, in many jurisdictions, labor costs have actually dropped sometimes, not in Singapore's case, but sometimes through bankruptcy proceedings. So you have a situation where Singapore Airlines is now doing better than ever. And that's true even from some of the carriers that traditionally lose money, like Thai Airways and Philippine Airlines and Malaysia Airlines. Those carriers are now performing extremely well. I don't know how long it will last, but let's.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Governments haven't been able to come to any kind of accord on normalizing the flight frequencies between those two markets. So it's a little bit about China. Japan, you have two major airlines. Both are doing fairly well. Obviously, the Chien is very instrumental in shaping some of the demand patterns that they're seeing and the cost patterns, you know, the cost challenges. A lot of people coming into Japan now, whereas fewer people going out because of the end. I'll skip over to Southeast Asia, Singapore, Airlines is a prominent airline that everyone would know. Singapore Airlines traditionally has been a very, very profitable, successful carrier, kind of the gold standard for, you know, good quality and service. They actually did profit-wise, have a very difficult 2010s. They always made money, but just the margins are very.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Sure. Yeah, so big, we'll even narrow it down. Obviously, Asia can be anything from India to Singapore to China. So let's just in pieces. So in Northeast Asia, which is China, Japan, Korea, you have a couple things going on. So the Chinese market actually doing rather well domestically. It's very, very busy, you know, all-time traffic highs domestically. Internationally has been, should I use the words disaster? It's been very depressed, particularly the long haul stuff. So the US, the China, non-stops between the two markets, I mean, barely exists anymore. There's just a handful of flights where that was very much not the case in 2019. And the reason has to do with basically the Russia-Ukraine war. So the U.S. Airlines are not allowed to fly over Russian airspace. The Chinese Airlines can. The US guys, you can imagine, say that's an unfair advantage.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Well, they'll tell you that it's going to be years, that it's, you know, we're looking 2029, 2030 before all these supply chain problems get ironed out. So it's something that we're going to have to live with for a while. Airlines are going to have to live with for a while. As I said at the outset, it's a little bit of a blessing in disguise, though, because it's kept capacity, it's kept a lid on capacity, which has kept the floor on fairs, you can say. And that's been helping, you know, we didn't get a chance to talk too much about airlines abroad, but if you speak about, you know, the industry at large globally, it's been 2024. It's been a very good year so far for the airline industry. Profitable year. And I think part of it is because supply has been suppressed. Of course, demand pretty strong as well.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“You're just strictly buying airplanes if you're an airline, and you know, it's a very expensive market right now. If you're a leasing company, it is expensive to buy, although if you have a nice fleet of aircraft ready to be rented out, you're in a really nice position because the supply is so tight. So, you know, you're probably getting calls 10 times a day from different airlines, 100 times a day from different airlines like, hey, do you have, I need a 737 available for next summer. It's my peak season. I just been told that the, you know, the engines going to be in the shop for longer than expected. It's not, you know, I need it by July because that's my peak season. Can you get me? So there's, I think, the leasing companies are sitting in a pretty good position right now.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“It's only going to go so far for Airbus in winning new business from what's happening at Boeing. So yeah, it's. It's a duopoly. I mean, that's the bottom line. And, you know, Boeing is, like I said, I mean, their planes, they're good planes. They're economic. I'm speaking obviously just economically here, this safety issues. I have no comment on that. I'm not an expert in any of that. But the 787s that they produce that can take you from the United States to any point pretty much on the planet, those are really excellent field efficient airlines that people like. So, you know, and there's not that much, not many other options. Airbus has a competing product called the A350, but you're not going to really get it any sooner. And it has difference. It's not exactly the same. It might be, you know, depending on the model, it might be a little smaller, a little larger. So you've got to factor in all these things.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“A certain extent, they are winning business. There was an example recently, I believe, of a Korean air order that might have went to Boeing, probably likely would have gone to Boeing, that instead went to Airbus. However, Airbus is having their own supply problem. So if you're an airline and Boeing tells you, well, I can't get a plane for the next five years. And Airbus says, well, we can't get the plane to you next five years either. I mean, what are you going to do? Or, you know, there are some cases where Boeing may be able to get a plane to earlier, you know, just there may be specific examples. So you're really, the airlines are dealing with very limited flexibility in switching back and forth. Also, too, you know, it's not easy if you have an all-Boeing fleet. You can't just suddenly, you can, but it's costly to suddenly switch to Airbus. The pilots have to have a different tree. You have to have a whole different maintenance operation. You have to so.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Boeing has just been a disaster, so much tragedy, poorly built planes. But interestingly, people are still buying them. How come Airbus isn't just making handover fist money? I mean, I'm sure there are, but just looking at the stock price and the profits, it could be a little bit better. How come Airbus isn't differentiating itself and saying a duopoly and our competitor is going through a lot of stuff to put it mildly? So we basically have a monopoly and we're going to just kill it.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Airlines are buying them in the hundreds. They're still selling like hotcakes is a very, very economic aircraft. And those are powered by CFM engines, which is a consortium that involves GE engines. So there's an example. GE also builds engines for this dreamliner plane that's very popular. So yeah, that's GE. Now, one interesting question going forward is not about engine makers specifically, but about the airframe manufacturers. Will Boeing and Airbus ever get a competitor? Will there ever be a third competitor? There's talk about China. Perhaps they do have a company called CalMac that's starting to build airplanes of similar size, but they're very, very far behind. And they are very, very dependent on West.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“What do you make of? Sure. So those guys make the engines. So there's, yeah, they are one of a couple of big engine suppliers, Rolls-Royce is another. Rolls-Royce is only doing the wide bodies, the real big ones. And then the other real big one is Pratt& Whitney, which we talked about, they're owned by what was Raytheon. So yeah, and they're very successful engine maker. This max plane that you hear about in the news a lot that Boeing me. And I want to say this about the max despite, you know, it obviously had those two awful crashes. As a commercially speaking, I mean, the max is still a very, very successful plane.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“The accounts have been okay with many things with past decades have doctored economic reality. So just because doesn't mean it. Good point. What do you make of, I think General Electric recently spun out or split up its company into GE Aviation, it's his own company now. What do they do and what do you think about it?”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Frontier goal in Brazil is another one. They're in bankruptcy now, but they've done a lot. WizAir in Europe, that's a European airline. There's probably not fair to just single out, but those are a couple of indigo airlines in India. And some of these are very strong, you know, indigo is a extremely well-run airline. In fact, the founder was just appointed to the southwest board just this week. So there's some connection there. But yeah, indigo, very well-run airline in India, very profitable. They absolutely dominate the domestic Indian landscape now. But they, but yeah, they goose the numbers. They goose the profit figures. And I, you know, I use that term kiddingly. Accountants obviously, you know, are okay with it. But accounts have been.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Playing this game where they'll book a bunch of profits from their sale ESPEC deals and they'll include that in their operating results. The analysts go after them all the time. Every earnings quarter, there's an argument between Frontier Airlines and the JP Morgan Atlas, whoever I don't have an opinion either way. I'm not an accountant. Is that fair is unfair? Other than to say, you know, I make sure we at Skift every quarter we run sort of our profit rankings, you know, the most profitable airlines in the world. We run a table. And, you know, I'm always careful to, you know, if there's an airline that's clearly goosing their numbers with sell lease pack deals.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so air cap to clarify is the largest aircraft leasing company in the world. They were never part of GE, but they actually bought GE's leasing company. So they bought, yeah, just a cut. So they bought GCAS was, and they purchased that. So they're huge or giant. And yeah, so airlines are, in fact,”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“We will see. Very, very interesting take. You mentioned the sale leaseback model of selling your airplanes and then leasing them back. I think one company involved on the other side of that transaction is AirCap. The ticker is AER used to be part of GE. What's going on there because, you know, that could be a little bit of a dodgy way maybe to show profit is just to sell your aircraft and then lease it back. Yeah, just tell us more about that.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Lagging behind in their technology. And I think that's a little bit unfair because they did invest in this new system. But it's harder to apply this off-the-shelf system to Southwest. I mean, everything is just a little more difficult. So I always keep that in the back of my mind when you see, you know, when you see the criticism from companies like Elliot. So I don't want to dismiss Elliot entirely. I mean, it is true that there are areas of Southwest certainly I personally would have questions about why are they losing a ton of money in Hawaii, for example, like flying intra-Hawaiian routes. Just a very small example of maybe they do need new thinking on that. I don't know, but I'm giving you a very long answer here. But in general, I think the Elliott argument maybe needs to be a little bit firmer to. Convince investors, but we'll see”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“That the other guys use, so everything is very unique, and that incidentally makes it difficult for them to buy off the shelf software. So there are a couple, you know, you can imagine just developing software in-house is very, very difficult. And they've tried that in the past for certain functions. So what airlines typically do is they go to, you know, there's a handful of like really big software companies that provide aircraft scheduling software, route planning software, operational software, you know, airport gate manager, all that. Saber is one big one in Dallas. I'm a deas. They're based in Spain. So, you know, they wound up southwest a couple years ago. They wound up investing a lot of money in Amadeus, the Spanish company. They bought their software. And it's, you know, they get criticized. Southwest gets criticized.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Yep, that's a great history, by the way. So, history, Southwest Airlines, Herb Kelleher, very famous American entrepreneur. But exactly, yeah, I mean, it's a very unique business model, even from the other low-cost carriers. They're the largest domestic Southwest. It's the largest domestic airline in the U.S. They're absolutely giant. They dominate many small business markets. So if you think about, I'm just Kansas City to Amarillo, Texas, or Kansas City to Phoenix. I mean, if you've got to go between those two cities and there's hundreds of them, Southwest is often going to be, you know, they're going to offer the most frequencies, you know, the most optionality. Two free bags is part of their, you know, it's very controversial should they charge for bags. It's just a very unique. And the way they schedule, it's hard to get into this in detail, but the way they schedule their aircraft are very, very different. They don't use the same sort of hub and spoke type route network.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“It was founded by a lawyer who just started chartering planes from one part of Texas to the other part, right? Like it's a very direct. Business model. It's go here, go here, no frills. We're not going to take you to Sao Paulo. Just get in the plane and get out.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“I don't think it's fair, and I'm going to tell you why. Elliot, if you look through their, you know, they put a big little presentation together. And this is why very detailed reasons of why we think it's time for our management change. Very central to their premise or their thesis. It's very much built upon comparing southwest to United Delta and American. And I think that's unfair, particularly because they don't have the premium. They don't have the international stuff. So, okay, maybe you can argue Southwest management should have had a premium class. Okay, fair criticism. No one argues that they should be flying to Argentina or France or Japan. They don't have that section of the market that's been really booming. I mean, in all fairness, Southwest last year, you know,”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Elliott Management, of course, a very well established, successful, and large activist investor, notable for suing Argentina to get paid on their bonds. Jay, the Elliott Management's critique of, oh, hey, Southwest, not only did you have this hugely expensive operational mishap or disaster a few years back, but also your margins are much, much lower than United. They're much lower than American Delta. Do you think that that is a fair critique or not? And why?”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Expensive operational mishap in the history of the U.S. airline industry. I mean, excess of a billion dollars lost. So this company is saying, look, it's time for a change. And one giant question hanging over Southwest is will they kind of break with the pattern and offer some sort of premium seats? You know, maybe it's a premium economy or I don't know. They're going to be holding a big investor day event in September, so all eyes are on that. And of course, you know, what happens at that event may ultimately or likely ultimately influence the outcome of whether this activist investor is successful or not.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Yep, nothing. It's all seen. So, you know, they've kind of on the edges. They've said, okay, well, you could pay a little extra. We'll board you first. We'll give you like a privileged boarding thing, whatever. So there's a little bit, but for the most part, so they haven't been able to participate in this upsurge of premium demand. And that is one reason why Elliot Management, this activist investor, a couple weeks ago or whenever it was a month ago, they're now trying to get rid of Southwest. I talked about how Ancora was trying to get rid of Norfolk Southern's management in the railroad industry. Same thing is happening at Southwest in the airline industry. They're saying, look, you keep missing your revenue guidance. Your earnings are down. You're not, you know, they had Southwest had this very giant operational blow up in, I think, the winter of 2022 it was, maybe I think it was 22, where they just lost huge amount of money. It was probably the most.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Obviously, if you're southwest, Southwest doesn't have a premium class, so they get a lot of business traffic, but it tends to be small, medium. But if you're Alaska Airlines in Seattle, Microsoft is one of your biggest customers. You know, Amazon is one of this is a big tailwind. And if you're United, if you're Delta. So that's been helpful. Now, premium in general has been very, very strong, as I mentioned earlier. But a lot of that has been just premium leisure, you know, people paying out of their pocket. I just retired. I'm going taking the family to Europe. And let's do it right. Let's sit in first class. A ton of that. So that has been interesting that Southwest has always, you know, very, I don't want to say hard-headed because that's, but they've been very wetted to this idea, like let's keep.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Maybe not false. I mean, there are definitely patterns have changed since COVID, and you know, people are zooming more for sure. But we have seen very recently, I'd say just in the past, you know, during first quarter earnings season, airlines started saying that some of the big corporate business has come back. So this is the smaller business travel to medium enterprises. That stuff has been pretty strong throughout starting in 2022, coming out of COVID, maybe 23. The stuff that was really depressed were just a big, you know, the very large companies that spend hundreds of millions of dollars on travel. Microsoft was actually, they would say especially the West Coast tech companies. And maybe because they were, you know, they're on the forefront of this video conferencing technology. But no, that stuff is coming back now. So that's been kind of an added tailwind for the airlines that provide that service.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Thank you. And then just on the topic of coach, business class first class, I imagine that a lot of the profitability comes from that business class and especially first class market share. How are those types of premium seats, premium revenue for available seat mile going? And because I know there was a time, let's say 2021 when people would say, okay, the flights will come back, but everything is conducted over Zoom. So the time that you fly business class down to Georgia to shake someone's hand, those days are over. Has that narrative kind of been proven false?”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Is paying down all that debt, which we'll see, as you mentioned, we're talking on Wednesday, July 10th. Tomorrow is the day when Delta is going to report their earnings. They kind of kick off the earnings season for second quarter. And I suspect they're going to say what they always say, you know, a very, very high priority for our cash is, you know, get that debt down, get the investment grade credit rating back and take it from there, maybe down the road we could do some stock buybacks. But I think that's where we're at right now in 2024.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Well, that was very controversial. And there are some people who argued that I think this is a little bit of a stretch, but they said that, you know, the reason why airlines were so unprepared for COVID is because they used all their cash to buy back stock. I think if they did zero buybacks, the COVID crisis would have wiped them out of cash no matter regardless of that. Now, it is still, you know, it's obviously still something that they would like to do. There were some I believe provisions in the government assistance programs that prevented airlines that basically banned them from doing stock buybacks. But there were conditions, you know, may have been for a certain number of years, maybe until they paid back, whatever. So they may be getting into the position where they are able to do that coming up. As you alluded to, though, I think probably the biggest priority for free cash flow right now.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“About structuring them in the way that they'll never lose control over it. But you do see more of that now. There's a famous case of like Air Canada. They sold their loyalty program 20 years ago, 25 years ago, and they just regretted it ever since. And then maybe 2018, 20, I can't remember exactly, late 2010s, they bought it back, but it took a lot of effort. They had to pay a lot of money. So you want to keep them in-house. You want to be careful about never losing control of them. But you do see more of that now. So aircraft financing, it hasn't been like, you know, I can't say that higher interest rates, of course, it's especially when we're talking globally. It has been a cost challenge for the industry. But I think in the US, it's not the”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Right now, particularly because of the supply shortage, that this is a very valuable collateral. So you can go into a leasing company and say, hey, we'll sell you this plane and lease it back to us. So it won't affect our operations, but they'll give you a ton of cash for it. That's been very popular around the world right now, these sale leaseback transactions. Yeah, and the same thing with their different investment companies or whatever that will do this kind of thing. Now, they also, in addition to the aircraft, some of the bigger airlines also have these frequent flyer programs, these loyalty programs. And airlines have been using those as collateral as well. They've been very careful because they don't want to sell them. They're very strategically important. Just think of all the data that they have on customers. So they had to be very careful.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Those lines. So they are still very much paying those back today. An airline like American has their balance sheet, there's a lot of debt. I mean, it's not pretty. Whereas Southwest is still an investment grade, you know, investment grade credit. So it can vary a lot. I believe Delta was investment grade. I don't think they're back yet, but they're kind of moving. So they're actively paying down debt. I mean, they are making money, you know, the deltas of the world anyway. Even Southwest made money last year. Be clear about that. Not as much as they're accustomed to making, but they did make money last year. So they have been, you know, servicing their debts. Now, the other important thing to remember when we're talking about financing an airline is that the assets that it's a very asset heavy industry. So these aircraft are so valuable.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“It was almost like a jobs protection program. And if that has any bad connotation, it shouldn't because in a good way. I mean, can you imagine if suddenly every pilot was out of a job and then six months later, one year later, two years later, demand suddenly comes back and you can't just take a pilot off the street and say, oh, get back in the cockpit, you know, you got to recertify them. You've got to have this very strict training standards. So you wanted to keep, you know, the aviation ecosystem, the aviation labor supply fresh and active. And, you know, you just, it was sort of an emergency situation. They kind of had to step in to keep, you know, keep these things. So that was a situation with that. Now, yeah, absolutely. I mean, airlines are still, they also very heavily borrowed in private markets. And a lot of them, luckily, like they had credit lines, they were open to them that were left over from pre-COVID and they tapped pretty much everything that they had from.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“I believe there are some warrants issues. So I think there was some equity claim. At this point, I don't think that the government holds any equity position in any airline. If they did, it's not a big one. So, yeah, don't think of like, you know, what happened with Citigroup where the government literally took a chunk of or AIG or whatever. It's not like that at all. These are still private sector companies. There's, yeah, so I the government, the big thing to know about the governments, and apologize for not knowing some of the details, but the big thing to know is the reason why the government felt very compelled to step in is because airlines were in a situation where they would have had a layoff just basically everybody. I mean, they just had no revenue coming in.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“And Jay, sorry, we see term bailout like in 2008, the bailout of the banks. It was the Federal Reserve lending. It was the government making loans, the fiscal government, as well as the government injecting equity capital. I know for the airlines that they injected a bunch of debt capital loaning money. Did they also inject equity capital or was it just those loans?”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Government bailout during COVID was basically it was either that or pretty much every airline would have went bankrupt. I mean, there was no, there was no revenues for a period or insignificant amount of revenues. And JS.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Got it. And then, what do the airlines' balance sheets look like? I know COVID was just such, so, so bad for them. Traffic went to nearly zero that they dealt American. They issued a ton of debt, some of which was bought by the government or the government loaned the money at very, very favorable rates. So there definitely was a bailout. Perhaps some companies would have gone bankrupt if it weren't for that. And then the capital markets were very open in 2020. So they issued a ton of debt. How have they been managing those large debt loads? Have they been attempting to pay them down? And how have they been impacted by the dramatic rise in interest rates, which of course, if you locked in low long-term rates, you're not impacted by as much.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“If you go international, there's some places where the taxes are very high. So there's could be, but I think Delta is right now they're probably getting a little bit of benefit from the refinery, but it's not, you know, I think it's a very big topic in the media. Like, wow, an airline buys a, you know, this is a huge business model change, but it's more much to do about nothing, I think.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“More as an insurance to you know let's let's keep the supply you know let's let's hedge our bets here out of concern that that we might have an issue with supply in the northeast very important region for our eyes they've had years where the refinery loses money they've had years where the refinery makes a little bit of money it's i've never seen it have any material impact on their ovar margins or anything like that i mean i can yeah just just look real quickly so delta like in 2023 They paid $2.83 per gallon on average for fuel, whereas United paid $3 in a penny, $301. So you can see, and that actually kind of a big difference there, but not all of that is a refinery, but some of it is. So I think they get a little bit of a benefit there. Now, airlines will pay different average fuel prices based on also where they fuel up. West Coast tends to be more expensive than East Coast, things like that.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's to lean more towards peanuts. It's not that big of an overall picture. So back in whenever it was in the 2010s, sometime mid-2010s, I think it was, there was a real concern that about the supply of Jeff Fuel in the northeast of the United States. There was this big Philadelphia refinery that they believe it was going to close or I don't know if I'd go through some heavy maintenance or something.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Delta, I don't know how much they hedge in the trading, but they do own a oil refinery which produces jet fuel. How big is that relative to their jet fuel that they actually use, or is that just kind of a nice thing, but not, you know, it's peanuts. It's not that big”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, you're getting it, and their balance sheet was like completely, it almost caused them to go bankrupt again. I don't think it was dealt in this case, but their Air Canada, this just what came popped into my head, they almost had to go bankrupt because of their mark-to-market, you know, their balance sheet was just all scarred by these, you know, really, and I don't understand all the details about that, but it can be very dangerous if you get involved in these contracts. So now I should say, you know, we're talking about this conversation has been very U.S. centric. I do cover airlines around the world. The airlines outside of the US, typically more active hedgers, they also don't only hedge their fuel, but they'll also hedge their exchange rate exposure as well typically. Sometimes their interest rate risk, but yeah, but Fuel's the big one.”
2024-07-11 · Forward Guidance · Airline Revenues Are Soaring. Their Profits Are Not | Planes And Trains Expert Jay Shabat on Depressed Railroad Volumes And Global Air Traffic · IDENTIFIED FROM THE TRANSCRIPT