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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“You know, they'll enter a port on the west coast. This is just a very typical pattern. The rail will bring it to Chicago, and from there they'll move on to distribution centers. There's also some of the boxes moved just domestically as well. So that business is very price competitive. But again, I think the important point to remember here is that railroads are extraordinarily profitable, which is very different from what we'll be talking about soon in the airlines, but we'll get 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
“You had a lot of consolidation. So now we're left with these six bigger railroads in North America, four in the US, and you have a bunch of smaller, like, you know, a couple hundred smaller railroads that cooperate with the big guys as well. But because of that consolidation, because of the structural nature of the industry, pricing power tends to be very, very strong. Now, it's going to be stronger for certain commodities than others. So for example, you know, chemicals is a very big business for railroads. That tends to be, you know, railroads have a lot of pricing power there because it's hard to move a lot of that on trucks or you kind of alternative forms of transportation. Same thing with coal, as we mentioned. Whereas maybe where they have the least pricing power would be the intermodal, the boxes. So this is the container boxes that are all standardized size. get shipped over from Asia.”
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 it's a very concentrated industry, and that's an important question you ask. So when I say that RHEL volumes are only up 2% so far this year and they were down last year, they're down from six, seven years ago. Do not be misled. Railroads, the big six that I mentioned, still extraordinarily profitable. Some of the highest margin companies you'll find throughout the US economy. I mean, routinely 35, 40% operating margins, which is, you know, Microsoft and Meta and Silicon Valley type type margins. So very profitable. And that has to do with, you know, certainly wasn't always that way in US history, but starting at about, well, in 1980 was kind of a seminal year because that's when they Congress passed basically restructured the industry through legislation over 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
“They do have exposure to the housing market. And although we've seen some activity pick up a little bit in housing construction, that's been very weak. And as you've discussed on your show many times, that has to do with higher interest rates and whatnot, the people just not taking mortgages anymore. That is another reason why rail traffic has been a little softer than maybe hoped for. And then as we said before, just manufacturing output, whether it be autos or whatever it is that railroads carry, has just been soft in the last couple years. Hasn't been a lot of growth.”
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
“Like it once did. They now use diesel fuel. But as customers, utilities, so power companies, they still very much use coal to produce electricity. We also use coal to make steel. So the only way to really move coal is by rail. So those are very important customers. However, as you know, because for environmental reasons, the US economy has moved away from coal. So we're just, you know, we're using a lot less coal than we used to. And so that has affected, you know, when you ask me why are rail volumes lower today than they were six years ago. The biggest reason is that coal's decline. Now there, you know, there are other areas too. I mean, right now, the railroads are experiencing”
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 just want to add one, I think, important point here. I don't want to mislead anyone to think that railroads are only exposed to the manufacturing economy. They are, to a large extent, they do have a lot of business on the consumer side as well. You mentioned those intermodal containers. Everything you walk into a Walmart, whatever's on the shelf probably arrived there somewhere along the journey from China to the port of Los Angeles to Chicago, somewhere along the journey involved a rail, you know, a railroad trip. So there is some definitely consumer oriented exposure there. Now the question, why are we down? Well, a very big reason is coal. So coal is, you know, coal largely, if you go back, you know, 100 years ago, 150 years ago, coal was just absolutely critical to the development of the railroads. Now, coal no longer powers the locomotives.”
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, maybe there was a time when the American economy was very dependent on manufacturing where the manufacturing economy and the rail freight economy was very representative of the overall economy. And Alan Greenspan paid a lot of attention to railcar freight loadings as a leading indicator. Now that's not the case. 80% of the economy is services, not manufacturing, not goods. So that's interesting. So volumes are down. Why are volumes down from 2018? The economy's grown so much since then.”
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
“Where rail freight would reflect broader economic trends, I think that's less true today because the manufacturing component of the economy is just less a percentage of the whole. We think about healthcare being so large and education and other services, even travel and tourism. Railroads largely don't touch those sectors. So be careful about me drawing any conclusions between Ralph Wright and what the overall US economy is doing. However, it does somewhat mirror what's going on in the manufacturing sector. And I think as you can see from any of your reports that published by the Federal Reserve or the ISM surveys, manufacturing has been rather weak over the coming out of the pandemic. I think that's railroads have felt that. So again, I mean, just to say, you know, the US economy grew at a very healthy clip last 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
“Freight demand for the first half of 2024 is about up about 2% across, yeah, that's across the US, maybe a little bit, yeah, roughly the same across if you include Canada and Mexico as well. Let's call it 2%. However, that 2% is off a rather easy comparison because in 2023 railroad freight was rather depressed for a variety of reasons and we're still not even back to where we were in 2018, which was we can call that sort of the high point, the recent high point. What does that say about the economy of the US? Well, you know, I hesitate to extrapolate too much about, you know, the U.S. economy from what's going on on the railroad side. You know, I think there was a time in American history.”
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, good question, Jack. So I'll start by saying that, yes, we are just focusing here on the freight railroads within North America. And we get, you asked about the US, we'll talk about the U.S. I do cover Canada and Mexico as well, so all of North America. Really, you can think of it. There are six big railroads in North America. There's two in the western U.S. two in the eastern US, two in Canada. So those are your six. And then there's another big one in Mexico, one of the Canadian Railroads owns a big railroad in Mexico. So that's just the structure of the industry. A little bit of background before I answer your question. So yeah, just to get right into it, the demand for freight railroads, it's unfortunately been, I guess the best word is mixed in one sense, it's, you know, freight demand is growing. So in volume terms.”
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