00:00Joining us at the desk is Jeffrey's analyst Sheila Kiyoglu with coverage spanning aerospace defense and airlines. She's uniquely positioned
00:07to break down what's driving frenzy around SpaceX. And I wonder actually I wonder if you'll be covering this much
00:14longer because it's more of an AI company than a space company isn't it. Yeah there's lots going on at
00:19at SpaceX. It's it's about you know the rocket launches which coincides with our coverage of Firefly. Not a lot
00:25of people do rocket launches. SpaceX is 80 percent of it.
00:29So you know there's others getting into it. The rocket lab upgrade we don't cover rocket lab actually and Firefly
00:35are the only three U.S. players in that game. And then obviously AI is going to be the biggest
00:40driver of future revenues for SpaceX. And folks are making the bet that SpaceX could execute on getting the launches
00:47in the air. The data centers built and it all executed.
00:50How does the team even go about evaluating this to Matt to Matt's point. It's like just this you know
00:55Frankenstein of a company when you have X AI you have X itself that's also in there. You have the
01:01space you have the satellites all the hopes and dreams all the hopes and dreams. We're going to Mars a
01:0529 trillion Tam whatever whatever. How do you how do you even like begin to approach a beast like that.
01:10I don't envy the tech analyst because I feel like this is their entire coverage. It's like cursors worth trillion
01:15X is worth X billion. You know in aerospace and defense our multiples range in a more legitimate zone.
01:22And even that has increased lots of IPOs in the space and feeding off of what SpaceX is going to
01:28do in the space economy. A name we upgraded today on the sell off last week over the last two
01:33weeks is Hawkeye. It does signal intelligence in space. So that's a recent IPO over the last month as well.
01:39So lots of ways to play space. And yeah valuation is very difficult though. And that's what's feeling some of
01:46the retail interest.
01:46What I mean it's all it's also nebulous right. It's not even really worth talking about compared to something that
01:54you have a much firmer grasp over. And that's the airline industry and the oil input. Because over the weekend
02:00we got this agreement that there will be a signing of an agreement on Friday that extends the ceasefire 60
02:06days so they can make an agreement for later. But that's going to bring oil prices down already has significantly.
02:12Right. How good is that for your sector.
02:14That's the other side of the spectrum. It's like five times you know PE is where the airline names trade
02:19five to ten times if they get lucky. You know oil is huge. Right now we're assuming that price per
02:26jet fuel is above four dollars per gallon for the year. We assume some normalization in the second half but
02:32to see it at eighty two dollars a barrel is is very good.
02:35What I think the key point for twenty twenty seven for the airlines will be and we're hosting a conference
02:39in Nantucket today is how long does the pricing increase. So what we've seen is about six airline price increases
02:46give or take thirty percent increases through the year to secure you know where jet fuel is.
02:52Can they continue to increase price. Can they continue to increase price because airline ticket pricing has been deflationary so
02:56far. So airlines are finally taking advantage of it and they haven't seen a shift in load factors thus far
03:02which is great.
03:03So that means the consumer is able to take on that price increase. By the way is there just a
03:08sentiment shift that could also occur if you get a resolution especially on paths to the Middle East.
03:13Yeah there's some just you know there's there's two stories going on in airlines. One is fear of oil prices
03:19being too high and deteriorating demand across the board not only for jet fuel airline tickets but everything in the
03:25world. Right. Like it becomes too expensive.
03:27The second thesis in airlines which is what's fueling Delta and United specifically is that you have the removal of
03:33low cost carriers who are irrational players in the market.
03:36And when you know oil is a hundred dollars per barrel they can't fly those flights anymore. So they're removed.
03:42So it makes the winners even better like Delta and United because it allows them to increase price and essentially
03:48makes them the only players in the game.
03:50So Delta and United are the best ways to play this. Americans a far third and they're trying to U
03:56.S. right in the U.S. and they're trying to get into the network carrier game.
03:59But even with the European airlines Matt like I know you're focused on them too. We saw Lufthansa capacity but
04:05we see Ryanair actually increase in capacity.
04:08So the airline situation has been pretty healthy across the board.
04:11But I mean I only bring it up because we have this idea of energy independence here whereas they're rationing
04:18fuel in Asia. Right.
04:19So I wonder if you see a much bigger bounce in those names Asian airlines European airlines than you see
04:26in U.S. airlines.
04:27You might. I mean the U.S. airlines have been actually great stocks year to date relative to the commercial
04:31aero players. Look at Boeing. Look at GE. Look at Heiko. They're down on the year I think still.
04:36So these guys have been airlines have been good on thesis number two that there's only going to be two
04:42airlines in the U.S. that are going to take a majority of the share. They already represent about 50
04:47percent of share combined.
04:48And maybe there's no M&A left to be done at this point but are you expecting anything else?
04:51No because I think that airline CEOs are of the view except for Scott Kirby because he's looking to pick
04:57up assets on the cheap is that there could.
05:00If oil stayed higher there's probably likelihood of more airlines reducing capacity and essentially shutting down operations so you could
05:07buy them on the cheap.
05:09How are you getting to Nantucket?
05:11I'm flying Delta.
05:12Oh OK.
05:12So it's on them now.
05:13I thought you were going to say private you know.
05:15No.
05:16Or one of those little like taking off from Westchester and flying like JCX or whatever.
05:20Oh yeah.
05:20You get like you buy a leg of it or whatever.
05:22Yeah.
05:22Yeah.
05:23JCX is a great.
05:24It's private but it does a lot of private flights in that you could fly with 20 people to routes
05:29that are really hard to get to.
05:31But no Delta is flying there so I'm counting on them to get me there tonight.
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