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

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“And then you said Delta started to hedge just at the Great Financial Crisis, but then prices collapsed. So they had to pay a lot higher price. Another way of saying that, because you're locking in a higher price and that if the price falls, is that they paid the spot price of collapsed, but then they had a locked in huge mark-to-market loss that they owed to a bank.”
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
“Yes, if I may, I've got my two books back here American Places and Glory Lost and Found is about Delta. And very prominent in that story during the 2000s, Southwest basically avoided the very dismal fate of the rest of the industry by very actively hedging their fuel. I would say luckily hedging their fuel. So they were kind of, when fuel started spiking after 9-11, after the Iraq War of 2003, whatever it was, Southwest was protected. And they were, that basically changed the course. They were able to attack different hubs and grow and the other guy. So Southwest was in a very enviable position, but that was, you know, 20 years ago. But they are still hedging. They are still active hedgers.”
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
“Of fuel going up is through fares and through capacity cuts. So when fares, if fares go up 20%, we're going to start cutting capacity. We're going to do our best to lift fares and handle it that way. This way we can avoid all the risk of a sudden, you know, first of all, all the, you know, the expensive premiums, but then also the risk of fuel prices just collapsing overnight. And then we're uncompetitive with our rivals that didn't hedge. Now Southwest has They have quite an amazing record and if you I did if I if I may say I did write a history book about Delta Airlines and and one of”
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
“So, Southwest is the really probably the only airline left in the US that hedges a very substantial portion of our fuel. I might be wrong. There may be some others, but certainly like American has moved away from that. I don't believe United does any hedging anymore, maybe a little bit here and there. But it's just expensive. I mean, it's buying insurance and the premiums are very high. And airlines in the past have been burned by it. I mean, I remember Delta in right before the big recession in 2008, 2009. They had a lot of their fuel hedged. And then suddenly the price collapsed and they were paying really high fuel fares. And so it can be dangerous. I think airlines ultimately have concluded that the best way to manage the risk”
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
“Then tell us about how airlines are hedging their fuel costs as fuel costs go up, that their costs go up, so it's really bad for them, but they can hedge some of that risk out. But then if it costs of fuel doesn't go up, you wish you didn't hedge. So it's a double-edged sword. How many of the airlines hedge, how much do they hedge, and how successful are they at 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
“Hence, the Hawaiian transaction. And this is a rather bold move because for the first time they're actually going to be flying these large twin aisle jets. So when we talk about aircraft, we talk about we divide it into two types. So narrow bodies, which are the single aisles, A320 family, B737, like the Max, which is the one that Boeing's had problems with. That's the single aisle. And then we have the wide bodies, the two, the ones that tend to go international. So for the first time, you know, Alaska is going to be going to have these big giant planes that they're going to be flying to Japan and they're going to be flying. We'll see. Maybe they do Europe. I don't know. But will be a challenge for them, but it's a good company. So, you know, well run.”
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
“Back in 2016, I want to say they purchased another line called Virgin America because they were realizing it's a little bit dangerous to be too Seattle centric. So they purchased Virgin America, which was big in California. They had a lot of cross-country routes, New York to LA, that kind of stuff. San Francisco to LA. They've had issues integrating that. And it was, you know, we'll call it a semi-success. But they're running into that same growth problem again where Seattle, there's only so much juice to squeeze out of that orange. The airport is becoming very congested also. So they're looking for more growth opportunities.”
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
“No. So many years ago, like right after the Cold War ended, I think they experimented with a couple of, but no, nothing Russia. So they are a very Alaska, very, very successful airline. They are based in Seattle, as you mentioned. Alaska, the state of Alaska is an important market for them. There's not a lot of good roads in Alaska, so you can imagine people have to travel from one small city to another. So that's a nice little business for them. But what really has really driven their success over the past 20 years or so has been the incredible growth of Seattle's economy and you just think of the companies that are based there, Amazon and Microsoft. And you can go on and on. It's just been population growth, economic growth. They've been in the right place, the right time. They're also very well run company. The customers really liked them. They have a good loyalty program, et cetera. So I don't want to say that it's just coincidence, but certainly Seattle's helped them a lot. The problem.”
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
“Since we're talking about that, outside of the US, the strong dollar is usually a very bad thing. And if you're in, let's say, Europe or Asia or whatever, what it means is that so most of your costs are going to be in dollars, your fuel, your aircraft, your, you know, just a lot of equipment. So that when the dollar is strong, that's really bad.”
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 that business is suffering because of the yen is so weak. It's so expensive now for Japanese travelers to go to Hawaii. It's the yen. It's also the fact that I think Hawaii is just hotels there have become really expensive. My colleagues at Skiff, who we have some people who cover hotels and tourism, and they all tell me that just have a very pricey place to be. They're an exception. Interestingly enough, so Hawaiian Airlines, because they're having so many issues with this, their stock price went down so much that Alaska Airlines last year came in and purchased them. They got them on the cheap. And that merger is still pending regulatory review. It's question mark whether or not will happen. I kind of think it will, but there's that one more statement about foreign exchange since we're”
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, I would say domestic oriented carriers don't really have too much of a dog in that fight. I mean, there's really, they don't have too much foreign exchange exposure. Now, the U.S. Airlines, as you correctly said, the big guys, the United Delta, to a lesser extent American, they're very much benefiting from the strong US dollar because it empowers Americans to go abroad. If you go to Japan right now, everything is cheap if you're an American, even Europe, Australia is another place. huge volumes of Americans are going there. It's amazing, you know, one time people viewing this, you know, take a look at how many flights, non-stop flights exist now between the United States and New Zealand and Australia. It's quite remarkable. Now, the exception to that among US airlines is Hawaiian Airlines. It's a little bit of a niche discussion here, but it's interesting enough to mention. So Hawaiian Airlines, a big part of their business is bringing Jeff.”
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
“Back to the episode. Right, so a lot of U.S. companies are hurt by a strong dollar. You think of, for example, Netflix, most of their costs. They produce it in Hollywood. They pay people in dollars. And they sell the content to Americans, but also to everyone around the world. So if you're a Japanese consumer and you're paying in yen the strong dollar really, really hurts you, so you're less inclined to purchase that. Interestingly though, you said that a lot of American Not a lot, but the big three or really big two, Delta and United, they have a lot of international business people flying to Japan, people flying to Europe, Americans, and they're more inclined to do that because the dollar is a strong currency, so they're getting more for bang for their buck. And so that's really benefiting them. However, domestic only or mostly domestic carriers such as Southwest or American, even though America does do international, they are.”
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
“Because they're not doing so well. And we can talk about that a little bit. And then American Airlines, which is the third of the big three. So when I say the big three U.S. airlines, Delta, United, American, those are the guys who are going all over the world. American is least exposed international. They're also the one that are, you know, as you might expect from that performing or posting the lowest margins. Now it's their problems are go beyond that, but we'll leave it to that, you know, leave it there.”
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, yeah, exactly. So those particular engines power one of the most popular aircraft right now called the A321 NEO. Those engines, they found some potential manufacturing flaw or engineering flaw that's over my head, but they had to basically all those engines have to go back to the shop. And it's taking like more than a year to get through them all because or to get through each and every one because there's so many of these out there and there's only so many so much maintenance capacity that exists around the world. But yeah, long story short, that's a big reason why some of these low cost carriers are really having a hard time. I gave you a couple of reasons. There are others. You know, fare wars, we can go on. But there is a bit of a dichotomy going on. You know, Delton United are kind of doing rather well, the low-cost carriers, not so well. In fact, an activist investor is now attacking Southwest.”
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 the way I like this, or the example I use is if you rent a gate at an airport, if you fly seven times a day from that gate or 10 flights a day from that gate, you're still going to pay the same lease cost or whatever it is. So you get the economies of scale by growing. Same thing with, you know, you're spreading fixed labor costs over more units, whatever. So that's very, very, you know, when you look at a company like Spirit, very, very low cost care, it's not that they pay their pilots like peanuts or anything like that. That's not how they get their low cost. They do it through just these efficiencies of growth. But what happens when Airbus and Boeing are not delivering your planes? You can't grow as much. So that's been a real constraint. There's a very specific problem with these one type of engines that are built by Pratt& Whitney, U.S. engine maker is owned by, I think RTX is the company has been a lot of consolidation.”
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 that has to do, you know, I think it would be more helpful to go airline by airline, which you probably don't have time for. But as I mentioned, some of these domestic carriers are like Southwest and Like Spirit and Like JetBlue are having a problem. I hesitate to overgeneralize. But certainly these carriers, for one, they depend on domestic. And with the dollar being very strong, a lot of Americans are opting to go to Europe, you know, let's go to Portugal and hang out in Lisbon this summer instead of, you know, last year we did Los Angeles. So there's a lot of that. So I think the domestic oriented carriers are suffering from that. At the same time, these aircraft delivery delays, I think, are really, really hurting the low-cost carriers, especially because they depend heavily on growth. So sort of a cardinal rule of airline economics is that as you grow, you gain economies of scale.”
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
“Know that own stocks that own houses that feel wealthy enough to travel. So it kind of makes sense that the volumes would be there. Now, as I mentioned though, the profit margin of the US airline industry today”
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
“So, yes, there's a 2020 2021, we're lost years. Those were greatest crisis the airline industry has ever faced, whether that's US or global, it doesn't matter. Now, in terms of volume, yes, in the US, we are now all-time record volumes. The transportation security administrative TSA, they publish numbers on this stuff. You can look exactly how many people fly and they're very timely about those numbers. I think they just reported their July 4th holiday numbers and they all, you know, just record high. So the volumes are way up there. And that speaks to the health of the US economy, I think, to a large degree too. You know, we know that the job market is still pretty strong. We know that stock prices are up. We know that housing prices are still high. We know that people are earning income on their savings accounts now. And we have this just large, you know, retiree population that's, you know, large.”
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
“So it sounds like what I'm looking at for the Bureau of Labor Statistics of the Consumer Price Index for airline fares, it may not give the entire picture because a lot of the pricing comes from ancillary fees, as you said. So you've got to look at revenue per available. And that is down, but not nearly as much as the chart that I'm looking at from the BLS would suggest. So it sounds like things are overall quite healthy. Would you say that the era of COVID-induced recession in airlines, and it was, I mean, depression in 2020, I mean, no other words about it, worse history, that is very well over. And in terms of overall how many people are on a plane every day for the US, that is at all time highs, right?”
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
“These Boeing and Airbus supply chain issues, we'd have more capacity in the US market. You know, these airlines are itching to grow. But in a way, it's kind of a blessing in disguise for them. I always call it that because the fact that supply is sort of artificially constrained, it has sort of kept the lid on discounting. And that's been helpful globally.”
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 not cheap, it's not as cheap as it was in 2019, but it's manageable. So, you know, it's like everything kind of reset upwards, the airlines, their cost base went way up from 2019, but their fares went way up from 2019 as well. So that's kind of where we are. And don't forget to, I guess the last thing I should add is that because of the supply shortages, that's putting upward pressure on wages. I'm sorry, on fares also. So if we didn't have.”
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 fares, sure enough, they dropped because airline costs dropped dramatically and they could, you know, they can go in. They can afford to go in and cut their fares and still make money. So what we've seen in 2022, you mentioned how fares, whoever, whether it's BLS or you could whatever you look at, fares actually did rise in 2022. That's true. But remember what happened in 2022? We had Russia invasion of Ukraine, oil prices spike. you know airlines will react to that by raising prices now since then fuel prices have come down that's been kind of the saving grace for the for the u.s airlines in 2023 anyway was the fact that fuel prices did moderate a lot and they've held steady so year over year they're they're still roughly you know i think i think there there hasn't been too much movement so when people ask me you know is fuel expensive right now is it for airlines i would say it's mass”
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
“Through a whole bunch of seats into those markets at the same time. And yes, their labor costs are way up, but they had no choice but to lower their fares. And what do we see? We see these carriers losing money. So you do have, you know, it's not the railroads anymore. This is the airlines. It's like hyper competitive. They'll go into markets. They'll have fare wars. So that's one reason why you'll see some downward pressure. The other thing, and I think I may have mentioned this last time when we talked, anytime you're talking about air fares, you also have to consider the price of fuel. So fuel can be 40%, sometimes even 50% of an entire cost base of an airline. So, you know, 2015, for example, sorry, late 2014 into 2015, global oil prices crashed and fuel prices, that was party time for the global airline industry.”
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
“So it's basically recording on average what people are paying for flying one basically one seat one mile or you can sorry yield is one passenger one mile we have another thing called rasm revenue prevailable seat mile which is the total revenue you're getting for one seat per mile okay so there's passenger per mile seat per mile don't worry about all that just say in general that's a good proxy for you know what the fare levels are fares are way up from where they were in 2019 there's no two ways about that now they have dipped down a little bit from 2023 to 2024 that is true on average some of that has to do with you know again you have to go airline by airline some of that has to do that there were a few fare wars going on in orlando for example florida and more broadly las vegas a bunch of you know low cost carriers just”
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 compare average prices, and you have to be really careful with average fares because are we talking about all the spirit airlines 50% of their revenue comes from ancillary charges where the bag fees and food, all this kind of fees and things like that. So you have to be careful. Now, a very good kind of a good indication to look at rather than I kind of, you know, with all due respect to the Department of Labor and the Bureau of Labor Statistics, BLS, you know, the airlines will tell you you have to be careful with those. It's a very difficult sample to try to, because of these ants surface, you know, there's first class, there's business class, there's basic economic. But a very, you know, a better way to do it is just look at an airline's yields. We call it yields.”
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
“Labor cost inflation in the airline as well as the pricing of just airfare exploded in 2022 up as much September 2022 up 42% but there's been deflation for close to a year, actually yeah over a year in terms of just the actual overall index if demand is so strong supply is constrained and the airline's costs are going up okay we get it they squeezed everyone in 2022 but why have they lowered their costs somewhat over the past year?”
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
“Healthy contracts. I mean, from the airline point of view, they're rather expensive. And so there's still flight attendance too or some of the flight attendant contracts are open right now as we speak. Mechanics. So yeah, I would say the labor cost inflation in the airline business definitely exceeded that of the economy as a whole.”
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
“Senior pilots basically took early retirement packages. So there's just a lot of constraints on pilot supply. And then suddenly in 2022, about the spring of 2022 was when demand in the US really started surging back rather quickly. And there were a couple false starts. I don't know if you remember like the Delta virus or delta variant of the COVID virus. Everybody, you know, thought that, oh, yeah, things are going to get back to now. And then the delta thing came. And then the Omicron variant and whenever that was late 2022 or can't remember. But there was all these false stars finally spring of 2022 when things just kind of took off, particularly in the domestic side. And there was this sudden, you can see the confluence of events.”
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, well, I think it is very specific. Now, as you mentioned, labor cost inflation has been an issue across the economy, although that's somewhat quelled a bit. Now, you have to remember with airlines, these are very heavily unionized companies. So the pilots are in terms of just total cost, pilots are your most important costs centered, let's call it, all of the major pilot contracts just came up for renegotiation over the past two, three years. And it was a market where a lot of pilots retired early or during COVID. In some cases, companies, they didn't know if they would ever need these pilots again. They were because, you know, there was basically two years of dormancy. There was not much going on because of COVID. So a lot of”
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 in a better position to recoup those higher labor costs with higher fares, or let's call it higher yields, you know, fares on average. So those guys have tended to do, they're doing much better than, let's say, the domestic oriented low-cost carriers, your southwest, your spirit, spirits of the world, you know, your frontier airlines, JetBlue. Those airlines are struggling. Some of them even losing money. Some of them even losing quite a lot of money. Largely, I'd say not only there are other reasons. And, you know, you have to look at each year airline by airline, but the labor cost inflation is a very, very big issue. And it's very US specific. You won't see it elsewhere in the world 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
“A very quick number here. So Southwest Airlines. Since 2019, they've grown their capacity by about 12%, which is, you know, not a lot for five years worth of time. So 12% growth, but their labor costs have increased 49%. And Delta, a very similar situation, they've increased their capacity just 5%, but their labor costs are up 44%. So you can see the big challenge here. If your delta, if you're United, to a lesser extent American because they're more domestic heavy, but if you're united in Delta and you have those overseas routes, a lot of those premium seats, these giant loyalty programs”
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
“But even more broadly than that, Airbus has issues as well. Some of the engine makers are having issues, just getting planes delivered on time. So you have a situation of rather strong demand, very constricted supply, but the airline profits are down from 2019. If you look at 2023 versus 2019, every single US airline, their margins are down with one very minor exception, a small airline called Sun Country. They're up, but let's keep them. Yeah, we could talk about them if you want, but they're very much an outlier. So I said demand good, supply constraint, profits down. So what gives? The very, very biggest challenge that the US Airlines face right now is very serious cost inflation, particularly on the labor side, not just on the labor side, but particularly on the labor side. And I'll give you just.”
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
“Travel. So for the airlines that are exposed to, you know, let's say they fly to Europe, they fly to Asia, they fly to, you know, deep into Latin America. That's the stuff that's really, really doing well now. And that's true all over the world. So if you're Singapore Airlines and you're flying all over the world, if you're Japan Airlines, whatever, this long haul intercontinental travel, particularly in the premium side, is doing very well. So now at the same time, we have on the supply side, we have a supply shortage. an aircraft shortage. And that has to do with a very serious supply chain issues for both Boeing and Airbus. I think everybody, I think, watching will be familiar with some of Boeing's problems on the safety side, management side. It's broader than just that. Yeah, it's maybe euphemistic to say that, but problems on the safety side. It's very serious. But they are, you know, hopefully getting their hands around that 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
“Yeah, sure. And it's kind of, you know, I said before that if you look at just the railroads nowadays, it won't give you a great picture of the overall economy because the service sector is so large these days. But if you combine railroads and airlines, I think you get closer, closer to your answers. So that is a benefit. I'll say this. Whereas railroads are struggling to grow. They're struggling not to make money, but they're struggling to grow. Airlines are seeing very, very, very healthy demand. And that continues. That was true when we last spoke about a year ago. It was true coming out of the pandemic. It's still true today. Now, it's especially true for the, I would say, more premium end of the market, so people traveling in business class or first class. It's also particularly true for international and even more specific overseas.”
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
“Out of the water now. Now, if you listen to some trucking analysts, they'll say, okay, we're getting to that point where there's going to be some disoveracity situation has to resolve itself. There's going to be more companies going out of business. There's going to be pricing increases, but nothing yet. No, we're on the eve of second quarter earnings season here. So maybe in a couple, you know, over the next couple of weeks, we'll have a better idea if perhaps finally this trucking quote-unquote recession is over. Now, I guess it's important to say that if you look at the trucking volumes, I mean, yes, they're down, but historically speaking, it's not at a very, you know, don't think of them as a depressed level. There's still a lot of goods being moved around, as you might surmise based on the fact that consumer spending is very strong or has been held up anyway. But yeah, it's a direct.”
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 a good question. I think every earnings call that the railroads do and also their railroads have close partners that they conduct this intermodal transport with. So a good example is BNSF, Berkshire Hathaways Company. They work very closely with JB Hunt, which is the largest intermodal trucking company. So they're like, you know, later we can talk about how Delta and American Express are like brother and sister very, very closely aligned. similar situation with BNSF and JB Hunt work closely together. And if you listen to either one of those companies, you know, the last couple of quarters, they all say, well, we're seeing a few green shoots here. We think maybe it's getting a little better, but it just doesn't. It just hasn't. So there's really no, nothing that I've seen to this point that says we're kind of out of.”
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, because of the overcapacity in trucks. So that's, you know, everybody's kind of waiting and waiting and waiting for that market to revive. And hopefully from the railroad's perspective, that will be the domestic intermodal will be an important growth generator going forward. And by the way, and not to go, you know, I don't want to go too often on a tangent here, but this Ankora investment, the activist investor at Norfolk Southern that we were just talking about, a lot of that dispute was had at least partly had something to do with Norfolk Southern being heavily exposed to this price sensitive intermodal market and wanting to go after more of it. And I think Ancora was like, no, we can get the margins higher if we kind of do less of that. Now, the trade-off is that you don't get the growth and, you know, there'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
“Truck, or I could do it by rail. Now that business for the railroads is hurting right now. And the reason why is because there's just too much truck capacity. So about Thanksgiving, little after Thanksgiving 2022, the trucking market just suddenly found itself with way too much capacity. And again, like I don't follow the trucking market nearly as closely, but to the extent that it affects railroads, it's affecting them a lot now because it's very hard to be, you know, railroads, they'll sell themselves, you know, they'll advertise the fact that, hey, we are very cost efficient. We're very environmentally friendly compared to trucks. We don't put as much stress on the national infrastructure, the highways. There's a lot of reasons why a lot of selling points that railroads can present to their customers, but it's just very hard on price.”
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
“Rather briskly, and that reflects, I think, a couple things. One, it reflects consumer ongoing strength and consumer spending. We've seen the retail sales reports and things like that. It also, I think, reflects some, you have to always be careful with import numbers. So there are disruptions with shipping in the Red Sea, the Panama Canal, and that tends to that sometimes shipments that might have gone to a port over in this part of the world now goes to this part of the world. So there are things like that that I'm not an expert in, but there's a little bit, you have to always think about that when you're looking at the numbers. So there's that. Now, on the domestic side, that's strictly, I've got a factory, I've got to move some stuff into a container from here to there, and I have an option. I can do it by.”
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
“So let's start by just talking about intermodal market, which is now about half of all the volume that the class one, when I say class one railroads, I'm talking about the big six, it's about half the volume that they now carry. Now it's not half the revenue because I said the pricing power is a little bit less, but it's still very, very substantial part of the business. Now, there is you can divide that into international intermodal. That's the stuff that comes over from, you know, very typical is coming over from China, produced at a produce some toys at a Chinese factory. It comes into the port of Los Angeles or Long Beach or, you know, Seattle, wherever, and gets put onto a railroad, a train, and goes to Chicago. And then that's a very typical pattern. That business, the international business is actually that's been picking up this year, particularly in volume terms. It's been picking up rather.”
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 let's talk about the container market, the intermodal market, which has a lot of things. If you buy a Walmart or Target, as you said, it comes from a freight container, which is either What are you seeing there in the pricing power? How are rail cars in the intermodal market competing against trucking? And then what's the health of the trucking economy, which I don't know how close that you follow, but it's very adjacent to the rails.”
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
“City. And it's an airport that's Mexico City badly needs a new airport. And they just overnight canceled it. I mean, it was already under construction. So I just use that as an example where, you know, there could be some political decisions that perhaps cause Mexico to not be able to realize this potential. We don't know. But there's definitely a lot of activity and a lot of enthusiasm.”
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 you do see if you look at Mexican rail traffic, it is up, it's not double digits, but it is up year over year. There is growth there. The important thing, though, is it's still early. So I think a lot of these near-shoring initiatives, a lot of them are sort of just getting started. there's hope that there'll just be more and more of this in the coming years There are some questions. I mean, there are some skeptics about whether or not just how big the Mexican market can grow for the railroads. It's a lot of it comes down to just some macroeconomic issues. Can Mexico even provide enough electricity to support all of these new factories? Just labor laws can be a little bit iffy. You know, over on the airline side, I know we'll get there. The outgoing Mexican government a couple years ago, they canceled a very large airport project for Mexico.”
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 that enthusiasm matched by the results that you're seeing? What kind of growth are you seeing in volumes and in pricing in Mexico? Because that is a hotbud of industrial manufacturing activity, especially with nearshoring, as you said.”
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
“Help supply, and you know, a lot of parts going back and forth work with Detroit's big three and the Asian manufacturers. So that's a very active market. Mexican RAL market is actually growing quite healthily, still much smaller than the US market, of course. But it is, you'll hear people talk with a lot of enthusiasm about Mexico, the railroad's very enthusiastic 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
“So, moving on, there's, we said Norfolk, they're based in Atlanta, CSX based in Jacksonville, Florida. And then the two Canadian ones are interesting, Canadian National based in Montreal. And then you have Canadian Pacific, which is based in Calgary, the western half. Now they last year completed a takeover of Kansas City Southern. So they're now called CPKC, Canadian Pacific, Kansas City Southern. They are now one company. And what's interesting about Kansas City Southern is that they have control over one of Mexico's largest railroads. And Mexico is a very hot market right now because of all the near shoring, the investment in very, very large auto, many auto plants down there that'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
“So they had activist investor, they staged a proxy fight, they nominated their own board directors, they even proposed their own new CEO, new chief operating officer. They very bitter fight the existing management defended constantly on CNBC and all the media just defending themselves. Ultimately, management, they retain their jobs. So the activists invested called Ancora. They're based in Ohio. They wound up losing the battle. They did, however, win three board seats and management did have to, I don't know what the right word is, accommodate them to a certain extent, maybe made some changes they might not made some new hires that they might not otherwise would have, if not for the proxy fight. So I wouldn't say Ancora totally lost, but management did keep their jobs.”
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
“Had the best profit margins of any of the big six. And we can get into that, but that partially, all these companies that I'm going to mention, they're all extraordinarily profitable. And the difference is not that big between margins. But usually the differential comes down to sort of the mix of what they carry. So Union Pacific tends to carry less of these price sensitive boxes as a percentage of their revenue. So that kind of helps them. Moving on. So over on the East Coast, we have CSX and Norfolk Southern, also two publicly traded companies. Now, Norfolk Southern was in the news a lot during the first half of this year because of an investor that basically wanted to get rid of, they wanted to get rid of management.”
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, sure. So we'll start in the West because they tend to be the US West because they tend to be the biggest, they are the biggest. So the two biggest ones are BNSF. And again, these are all the ones I'm going to mention are products of multiple mergers over the past couple decades. So BNSF is owned by Berkshire Hathaway, which is, you know, Warren Buffett's company, of course. So they are privately held. They do report, they disclose their financial results each quarter. So we can give a good sense of how they're doing. They don't do earnings calls like the other guys. And so it's a little bit less transparent because Berkshire Hathaway just, they have their own way of doing things. But so that's probably the biggest. Then there's Union Pacific, which competes with them in the West. That's a publicly traded company. They happen to, I believe, last year and maybe even last quarter, if I recall, they actually.”
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
“Yes, and the airline's much less profitable railroads because they're concentrated are very profitable. But it's my understanding, they didn't always used to be that way when the railers were first started, very capital intensive, and there was tons of competition, so very common for railroads to go bankrupt. Can you just take us a quick tour through the six North American rail lines? Who owns them? Which are the two ones in Canada, and which are the biggest and the strongest?”
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