FAA Trims 10% Flight Capacity Across 40 Domestic Airports

Bloomberg

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00:00George, there you are. You just flew in, right?

00:03How are you doing?

00:03Hi.

00:04I did. I just came in. Hello. I just came in from Miami.

00:07Yes.

00:07How did it go?

00:09Yeah, it was pretty smooth.

00:11I would expect when they knocked down, you know, the initial call was 10%.

00:16Norma Linda said maybe less than that of flights to the 40 most important airports.

00:22I'd expect that things would run a little easier.

00:25I feel bad for people that had their flights canceled,

00:29but I think if you're going to a core market for an airline,

00:34and I was coming up from Miami, that's pretty core for United.

00:37Airplane was absolutely full.

00:39I don't think there was another seat empty on it.

00:42They're going to get that traffic through, right?

00:45Because they're going to look at the most efficient and best profit making flights

00:53and make sure they push them through.

00:54George, we are less than three weeks away from one of the busiest travel days of the year.

01:00That would be the time around Thanksgiving.

01:02And I'm wondering if we do see continued government shutdown,

01:07these workers not getting paid, if indeed what happens comes true,

01:10what Transportation Secretary Sean Duffy said earlier,

01:12that we could see up to 20% disruption.

01:14What does the holiday season look like for these air carriers?

01:17Yeah, I mean, that's what we're concerned about, right?

01:20So we have a report that will go out Monday on the Bloomberg terminal.

01:25You know, look, we were looking at sort of total seats put into the market during 4Q.

01:294Q isn't typically a very busy time for the business, right?

01:33It's not a high profit season for them.

01:35And November is actually the lowest of that season.

01:39It's got the least number of seats flown.

01:41But it's deceiving because, you know, November is when the business traveler kind of stops, right?

01:47I was just down at a conference in Miami.

01:49That's about the last conference I think you'll see before we roll into Thanksgiving here in the U.S.

01:55So business kind of rolls off here in the middle of the month,

01:58and leisure picks up very big in a big way by the end of the month.

02:03So I think if we don't have the government shutdown stopped, Thanksgiving will be an absolute mess

02:09because I would expect there'll be even more cancellations.

02:12And then you get another ebb between Thanksgiving and Christmas.

02:16Hopefully we're not talking about sort of Christmas year-end sort of celebrations,

02:21you know, having the government still out by then.

02:23I don't think they can make it that long.

02:25Hey, George, just real quickly, you know,

02:27when do you start to, like, kind of rewrite some of your, you know,

02:30expectations in terms of earnings or revenues, you know, the balance sheets,

02:34the financials for the airlines, does this have to go on for several days,

02:38for several weeks before it becomes something material for the big airlines and all of them, really?

02:45Yeah, I think you're right on it, right?

02:46I think if we get into Thanksgiving and this is still going on, we're cutting back capacity,

02:53then we're going to start to get much more concerned to start rethinking about

02:56where profitability, profits, cash flow go for 4Q.

03:00Right now, this could even be a slight pickup where airlines sort of knock down

03:04their least-performing flights and get maybe a little bit of a margin pickup,

03:09maybe profit ebbs a little bit on it.

03:11But right now, it's not major.

03:13Get into Thanksgiving and we've got an issue on it.

03:15George, before we go, let you go, you were down in Miami.

03:18You were there for a conference on corporate jet travel.

03:21Just give us an update there.

03:22It's an area that certainly you and other analysts watch.

03:25Those flights, not disrupted right now?

03:27No, and that's an advantage of having your own airplane, private aviation.

03:34And one of the reasons people go there is because of that, less security issues.

03:39That market continues to stay strong.

03:41I'm pretty impressed.

03:42We've had earnings this week from Bombardier and Embraer.

03:45The backlogs continue.

03:47They're steady.

03:48They're not declining, even as those manufacturers increase the number of airplanes they build.

03:53And there's been a number of people that came to private aviation after the pandemic.

03:58And it appears they've stuck around.

04:00And so that market doing pretty good.

04:03It stayed pretty nicely.

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