00:00Tom, to be clear, you don't cover directly Spirit since the bankruptcy, but you obviously have a view on the
00:06entire industry and the state of play.
00:10How do you see this? The president of the United States wants to help get the deal done. Is that
00:13going to spur some action?
00:16You know, it's impossible to say. I think, as someone once said, there's more rumors than airplanes on Sphere's fleet.
00:21But, you know, I don't think the government wants to get in the habit of bailing out industries and picking
00:26winners and losers.
00:26This government might want exactly to do that. And there's the affordability issue as well going into the midterms.
00:31But do you open up the door to other airlines, whether it's a JetBlue or some of the other ultra
00:35low cost carriers who are struggling?
00:36Will they also be seeking a bailout? It's a sticky situation.
00:40Well, there was this idea floated that by having Scott Kirby going to the White House and considering an American
00:46merger, that it opened the way for them to buy JetBlue.
00:49The president also saying on CNBC today that he doesn't want to tie up between United and American Airlines.
00:55Does that tell us anything about a potential JetBlue purchaser?
00:59It's definitely in the cards. I mean, there were there were articles last month about the company potentially hiring advisors.
01:05I think everyone can look at the leverage statistics. It feels only going to make their challenges worse.
01:10It would not be surprising to see the board try to look for a strategic solution.
01:13What's your take on the price increases that we've seen? I mean, a lot of it's through increased baggage charges,
01:21which to me, by the way, I know it's maybe a tangent, but it makes no sense.
01:25Right. If you raise the price on checked luggage, then people bring more stuff on board with them and there's
01:32no room for it.
01:33And you have to awkwardly wheel your suitcase up and down the aisle. Why do airlines do that, Tom?
01:37Yeah, it's a little easier. Looking for space.
01:39You know, base fairs tend to ebb and flow with the oil market on a lagged basis, but ancillary fees
01:44tend to be a little stickier.
01:45But why not charge people for carry-on luggage instead of checked? Then people would check everything, right?
01:50You don't want people bringing, you know, their entire, you know, life's assets on the plane with them.
01:58Yeah, well, sometimes it's for them to pack a lighter, so then you save on the fuel and you have
02:00the deplaning, so.
02:01Okay, well, beyond that itself, by the way, I've seen people bring, like, violins and precious things on board.
02:09You're not going to check that, you know?
02:10No, that makes a lot of sense.
02:11But they're, like, really awkward-shaped. Anyway, so Alaska Airs.
02:13I once brought a sword.
02:14No, you did not.
02:15With me, yeah.
02:16In what world are you allowed to bring a sword through security?
02:18Well, first of all, it was the late 90s.
02:20Okay, that makes sense.
02:21And secondly, the pilot actually saw me trying to get it on the plane.
02:24And then was he, like, sir, please come, please come fly this aircraft?
02:28He volunteered to carry it in the cockpit.
02:30But my question is really about the inflation and the pricing power that they have, because we hear so much
02:35about it,
02:36but airline prices don't seem to change that much in the last 20 years.
02:39So how do you view it?
02:40I think right now, as long as the labor market's hanging in, you still have the positive wealth effect from
02:45the equity markets hanging in,
02:46I think demand for air travel is going to be strong, and they should be able to pass through pricing.
02:50We'll see as the summer goes on if gas prices stay elevated for a longer time.
02:54I mean, there's a risk that the price-sensitive leisure starts to show some cracks.
02:57But right now, it's, you know, they're fine oil cylinders on the revenue front.
03:00Corporate seems to be very robust.
03:02I think the Delta print, the Alaska color last night, that bodes well for United after the close tonight.
03:06Well, I mean, given that Alaska suspended its 2026 guidance on those fuel costs specifically,
03:12is that an admission from them somewhat that there is a ceiling to how much that they can raise prices?
03:16Well, I think it's just harder to get, you know, a longer term,
03:20and they're always just trying to predict revenue, you know, 40, 60 days out.
03:23I think the other thing that Alaska is specifically grappling with is about 20% of their fuel is exposed
03:28to the Singapore benchmark,
03:29which is much more elevated than U.S. jet fuel benchmarks right now.
03:32All right.
03:33So what about the other big cost is the people, right?
03:38We're seeing big problems, and there's always big problems in German unions.
03:41But how about for U.S. carriers?
03:44Are they doing fine with staffing?
03:46Do they have enough labor, and are they able to keep costs down?
03:50Labor is okay in terms of staffing and attrition.
03:52It's been one of the stickier parts of inflation in the industry since the pandemic.
03:56We're not expecting...
03:57And is their second biggest cost or their first biggest cost?
03:59It depends on where fuel is, but it's either one or two, depending on the price of jet fuel.
04:03We're not expecting another big surge of labor inflation in the later part of the decade when the CBAs open
04:08up again.
04:09But it is, you know, United has a tentative agreement with their flight attendants out right now.
04:14That's going to drive inflation in the second quarter.
04:17And it's not just there.
04:18It's maintenance, airport infrastructure.
04:20There's a lot of, I mean, this secular cost convergence that's made a month more challenging in an operating environment
04:26and separated the wheat from the chaff.
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